How To Calculate Your CRE Concentration Ratio

The regulatory guidance says banks are subject to extra regulatory scrutiny if they are above two key concentration ratios for commercial real estate:

• Ratio of construction loans to risk-based capital exceeding 100%
• Ratio of total CRE loans to risk-based capital exceeding 300%

Calculating these ratios is not difficult, but there are some caveats. First, you need to put together these three numbers:

• Construction Total
  This is the sum of Schedule RC-C Part I 1a from your call report. You need to include both line items.
• CRE Total
  This is the sum of Schedule RC-C Part 1 1a, 1d, and 1e2. Make sure not to include 1e1 (owner-occupied). While the footnote in the regulatory guidance explaining how to calculate these ratios says that you should include 1e1, the whole rest of the guidance is very clear that owner-occupied CRE loans need not be included when analyzing your CRE loan concentrations.
• Risk-based Capital
  You can find this in Schedule RC-R 21 (if you don’t know it already).

After you have these three numbers, the calculations are easy:

• Ratio of construction loans to risk-based capital: Construction Total / Risk-based Capital Total
• Ratio of total CRE loans to risk-based capital: CRE Total / Risk-based Capital Total