U.S. Banks Increase Volume of High-Volatility CRE Loans

U.S. banks reported a 20% sequential increase in total high-volatility commercial real estate (HVCRE) loans in the second quarter of 2024 following a four-year low balance in Q1, according to S&P Global Market Intelligence. The aggregate HVCRE loan balance for US banks stood at $34.93 billion during the quarter, up from $29.11 billion in Q1 but down 5.2% from $36.83 billion a year ago 

HVCRE loans in the second quarter accounted for 0.24% of the sector’s total risk-weighted assets, up four basis points from a quarter earlier. 

Dublin, GA-based Morris Bank reported the highest ratio of HVCRE loans to risk-weighted assets among top-tier US banks with at least $1 billion in total assets. The Morris State Bancshares Inc. subsidiary reported $265.3 million in total HVCRE loans during the quarter, or 19.9% of its risk-weighted assets, S&P Global said. 

With $2.09 billion in total HVCRE loans as of June 30, Goldman Sachs retained its position as the top HVCRE lender for the third consecutive quarter. The total loan balance represented a 1.0% quarter-over-quarter increase and accounted for 0.3% of the company’s risk-weighted assets. 

Regulators define high-volatility commercial real estate ADC loans as credit facilities that primarily finance or refinance acquisition, developments or constructions of real properties. They’re used to provide financing to acquire, develop or improve properties into income-producing ones that are dependent on future income, sales or refinancing for repayments. 

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