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3 Charts showing the state of CRE lending standards

Mary Ellen Biery
November 16, 2016
Read Time: 0 min

Bank regulators for many quarters have expressed concern about easing underwriting standards in commercial real estate lending, especially as examiners have noticed increased concentrations of CRE loans in financial institutions’ portfolios. Even so, a recent survey by Sageworks found that 42 percent of bankers identify CRE as the primary focus for loan portfolio growth, highlighting the tension that institutions face when it comes to growing CRE while keeping risk in check.

The Federal Reserve’s latest Senior Lending Officer Opinion Survey should provide some comfort to regulators as CRE standards tightened for the fifth quarter in a row, especially among multifamily residential loans.

Join the Sageworks webinar: “Commercial Real Estate Lending Best Practices

The charts below show how large ($20 billion or more in domestic assets) banks and those under that size reportedly have adjusted credit standards. The Fed noted that “a moderate net fraction of banks reported tightening standards for loans secured by nonfarm nonresidential properties, whereas significant net fractions of banks reported tightening standards for construction and land development loans and loans secured by multifamily residential properties.” This net fraction is found by subtracting the percentage of banks that eased standards from the percent that tightened them.

Demand, meanwhile, was stronger for construction and loan development loans and basically unchanged on net for other types of CRE loans, the Fed said.

Learn how banks and credit unions can continue to grow the CRE portfolio while keeping risk in check by joining the Sageworks webinar, “Commercial Real Estate Lending Best Practices,” on Nov. 17 at 2 p.m. ET.

Or, learn more about Sageworks Credit Risk Management Solution to book the right loans at the right price and manage the relationship to mitigate risk.

 

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How have your credit standards change graph

How have your credit standards changed over past 3 months for approving loans secured by multifamily residential properties graph
How have your credit standards changed over past 3 months for approving loans secured by nonfarm nonresidential properties graph

About the Author

Mary Ellen Biery

Senior Strategist & Content Manager
Mary Ellen Biery is Senior Strategist & Content Manager at Abrigo, where she works with advisors and other experts to develop whitepapers, original research, and other resources that help financial institutions drive growth and manage risk. A former equities reporter for Dow Jones Newswires whose work has been published in

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About Abrigo

Abrigo enables U.S. financial institutions to support their communities through technology that fights financial crime, grows loans and deposits, and optimizes risk. Abrigo's platform centralizes the institution's data, creates a digital user experience, ensures compliance, and delivers efficiency for scale and profitable growth.

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