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Looking at CRE concentration leaders

SNL Report: Improving picture in once-troubled sector

Looking at CRE concentration leaders

By Divya Lulla and Hina Nawaz, SNL Financial staff writers

The number of banks with commercial real estate concentration above 300% of risk-based capital or with negative risk-based capital stands at 358 in the first quarter, amid improving credit quality and a decline in undercapitalized institutions.

Aggregate commercial real estate loans hit $1.202 trillion at U.S. commercial and savings banks at March 31, up 1.67% since year-end 2013. Total CRE loans accounted for 15.16% of loans at U.S. commercial and savings banks at the end of the first quarter, up from 14.98% a quarter earlier and the fifth consecutive quarter of growth.

Meanwhile, total risk-based capital at U.S. commercial and savings banks increased by $25.99 billion quarter over quarter and $68.53 billion year over year, ending the first quarter at $1.548 trillion. a larger version, click on the image.

As of March 31, 238 of the commercial and savings banks that reported CRE exposure in excess of 300% of risk-based capital or negative risk-based capital were less than $500 million in asset size, while only 1.40% of the companies held over $10 billion in assets.

For this analysis, SNL defines CRE loans as construction and land development loans, loans secured by multifamily property, non-owner-occupied nonfarm nonresidential property loans, and loans for nonresidential nonfarm property secured by assets other than real estate. The definition is consistent with the interagency CRE guidance issued by the OCC, the Federal Reserve, and FDIC in 2006.

Regulators created guidance on CRE lending in 2006 to focus on the risks of high concentration and set three supervisory criteria: construction and development loan concentration above 100% and CRE concentration above 300% with a 50% or more increase in total CRE balances over the preceding 36 months. These criteria are not meant to set CRE lending limits on banks but to define the CRE concentration levels beyond which banks should enhance credit risk controls, including the stress testing of CRE portfolios. Only 28 companies exceeded that threshold as of March 31. a larger version, click on the image.

The largest bank by total assets among the 28, Bethesda, Md.-based Eagle Bancorp Inc., grew its CRE loans by 75.26% over the last 36 months and just announced that it will acquire Vienna, Va.-based Virginia Heritage Bank, another bank that meets the CRE guidance criteria.

Bloomington, Minn.-based Bridgewater Bank continued to hold the highest CRE concentration among institutions above the threshold, at 509.92%. The company's 36-month CRE loan growth hit 118.37% at March 31, up from at the end of 2013.

Core Bank of Omaha, Neb., decelerated its 36-month CRE loan growth to 1,764.95% at March 31, down from 1,896.40% at the end of 2013, but it still boasted the highest growth rate on the list. Core Bank's growth was helped by the merger of Centennial Bank and Omaha State Bank into one entity, the newly named Core Bank, in mid-2013. a larger version, click on the image.

SNL Financial

SNL Financial, now part of S&P Global Market Intelligence, is the premier provider of breaking news, financial data, and expert analysis on business sectors critical to the global economy: Banking, Insurance, Financial Services, Real Estate, Energy, Media & Communications and Metals & Mining. SNL's business intelligence service provides investment professionals, from leading Wall Street institutions to top corporate management, with access to an in-depth electronic database, available online and updated 24/7. This article originally appeared on the subscriber side of SNL Financial's website in slightly different form and appears on as part of a cooperative venture. Each week a selected SNL article will be brought to our readers. Click here to learn more about SNL Financial and to obtain a free trial subscription. 

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