Small Banks Hold A Lot Of CRE Debt, But Not 70%
Smaller banks have increased their lending to the commercial real estate sector, and hold a good chunk of CRE debt, but their exposure is less than previously thought in some sectors of the financial world, according to a new analysis from Bloomberg.
Specifically, the report pushes back against the calculation that regional banks hold 70% of CRE loans, a statistic that alarmed many in the aftermath of regional bank failures this spring.
Small banks, defined as those not among the top 25 banks, do hold 69% of CRE loans on the balance sheets of domestically chartered commercial banks, Bloomberg reports, but that statistic alone overlooks that domestically chartered commercial banks are not the only entities that lend to commercial real estate.
As of the end of March, domestic banks large and small held 47% of all CRE loans, according to data from the Federal Reserve. By Bloomberg's math, that means about 32% of all CRE debt is held by those small banks outside of the top 25.
Data released Tuesday by the Federal Deposit Insurance Corp. found similarly that community banks — banks with assets in the $100M to $10B range — hold $865B, or 28%, of the CRE loans on bank balance sheets.
Bank-held CRE loans totaled more than $3T at the end of Q1 2023, according to the FDIC. Data from the FDIC also shows that the concentration of CRE loans is highest for community banks and has been on the rise since before the pandemic.
The share of CRE loans originated by local and regional banks has risen from 15% in late 2018 to 31%, according to data from MSCI Real Capital Analytics.
