Short answer: The 2006 interagency CRE guidance sets two screening criteria. The famous one is 300% of total risk-based capital in total CRE with 50% growth over 36 months. The other is construction and land development at 100% of total risk-based capital, and it is a single test with no growth condition, so the ratio alone decides it. As of June 30, 2026 the median US bank carried 29.1% of capital in construction, with the middle half between 10.3% and 55.5%. The 100% line sits above the top quartile in every asset band, which makes this a tail exposure rather than a common one.
The criterion nobody plans around
Ask a commercial banker what the CRE guidance says and you will almost always get the 300% number. It is the one that appears in earnings calls, in analyst notes, and in the trade press every time the office market wobbles. The construction criterion is in the same paragraph of the same 2006 document, it is tested at every exam, and it is the half that most boards have never seen charted.
The guidance says a bank warrants closer supervisory attention if loans for construction, land development, and other land represent 100% or more of total risk-based capital. That is the entire criterion. There is no second condition, no lookback, and no allowance for a portfolio that has been the same size for a decade. If the ratio prints at 101%, the criterion is met.
That asymmetry is the whole point of reading the two tests separately, and it is why this article is a companion to what CRE concentration ratio triggers regulatory scrutiny rather than a restatement of it. The 300% test can be sat above without being met. The 100% test cannot.
What counts as construction and land development
The numerator is the construction and land development line of the call report, and it is broader than most people assume. It captures one-to-four family residential construction, all other construction, land acquisition and development, improved and unimproved lot loans, and raw land held for future development. A speculative tract of forty finished lots and a build-to-suit distribution center sit in the same bucket.
The defining feature is the stage of the project rather than the property type or the eventual occupant. A loan enters the bucket when the money is committed to build and leaves it when it converts to permanent financing, which is why the balance can move sharply in a quarter with no change in strategy. It also means the line does not split by owner occupancy the way the permanent CRE categories do. The 300% test drops owner-occupied commercial mortgages because the repayment source is an operating business. The construction line carries the whole bucket, so a bank that lends to local businesses building their own facilities will show up in this ratio even though the same relationships largely disappear from the CRE one.
Construction also appears in both numerators. It is counted in the construction test and again inside total CRE for the 300% test, which is why a bank whose growth is concentrated in construction moves toward both lines at once, just at different speeds.
Where US banks sit in 2026
Here is the full distribution of construction and land development as a percentage of capital, by bank size, for the quarter ending June 30, 2026.
| Bank size (total assets) | Banks | Bottom quartile | Median | Top quartile |
|---|---|---|---|---|
| All banks | 4,238 | 10.3% | 29.1% | 55.5% |
| Under $100M | 543 | 0.0% | 5.2% | 20.2% |
| $100M - $300M | 1,214 | 8.1% | 21.6% | 44.1% |
| $300M - $1B | 1,433 | 17.4% | 37.4% | 65.0% |
| $1B - $3B | 626 | 25.4% | 45.3% | 70.7% |
| $3B - $10B | 264 | 23.6% | 40.6% | 58.5% |
| $10B - $100B | 126 | 10.1% | 34.1% | 50.9% |
| Over $100B | 32 | 0.5% | 6.3% | 14.6% |
Source: BankingLens, computed from FFIEC call reports for the quarter ending June 30, 2026. Quartiles are calculated across the full population of filing banks in each size band, not sampled. Non-insured non-deposit trust companies are left out of every statistic: they take no deposits and make no loans, so a margin or a funding cost computed for them has no meaning.
Three things fall out of the table. First, the 100% line sits above the top quartile in every band, the highest being 70.7% among banks from $1 billion to $3 billion. Because the file behind this page reports quartiles rather than a count, that is an inference from where the quartile boundaries sit rather than a tally of banks: it tells you the share above 100% is well under one in four in every size band, and it does not tell you what the share is.
Second, the shape is a hump, not a ramp. Construction concentration rises from a 5.2% median under $100 million to a 45.3% median between $1 billion and $3 billion, then falls away, to 6.3% at the banks over $100 billion. The $1 billion to $10 billion range is where construction lending is a stated business line with dedicated staff and a draw administration function. Below it, many banks simply do not do the work. Above it, construction is a rounding error on a diversified balance sheet.
Third, the dispersion inside a band is enormous. In the $300 million to $1 billion band the top quartile carries nearly four times the bottom quartile, 65.0% against 17.4%. Peer median comparisons hide that. Two banks of identical size in the same market can be running completely different books, and only the quartile position tells you which one you are looking at.
Why this test binds sooner than the 300% one
Measured against its own threshold, the median bank is further along on the CRE test than the construction test. The median CRE ratio of 129.8% of capital is about 43% of the way to 300%, while the median construction ratio of 29.1% is about 29% of the way to 100%. Read naively, that says CRE is the nearer risk.
It is the wrong read for two reasons. The 300% criterion has a growth test welded onto it, and a bank carrying a large, seasoned, flat CRE book does not meet the criterion no matter how high the ratio goes. The construction criterion has no such release. It also moves faster. A construction portfolio is mostly commitments, and outstanding balances rise as projects draw, so the ratio can climb for four straight quarters on loans that were approved two years ago. A bank can tighten origination policy completely and still watch the number go up.
The denominator moves too, and in the wrong direction at the wrong time. Total risk-based capital grows with retained earnings, so a quarter with an elevated provision slows capital growth exactly when the construction book is least likely to be amortizing. The ratio is a quotient of two things that both deteriorate in the same scenario.
The practical consequence is that the construction ratio needs to be forecast, not just reported. A board that sees 78% this quarter and no projection does not know whether it is looking at a number that stabilizes or one that crosses in two quarters on commitments already signed.
What crossing it actually means in an exam
Nothing automatic, and that is the part worth being precise about. Meeting a screening criterion is not a violation, it does not cap lending, and it does not appear in an enforcement action as a breach, because there is nothing to breach. What it does is change the depth of the examination.
Examiners at a bank above the line work through the risk management elements the guidance names: board and management oversight, board-approved portfolio limits with a real exception process, management information systems that can stratify the book by project type, market, and sponsor, underwriting standards including loan-to-cost and pre-sale or pre-lease requirements, an independent credit risk review function, and portfolio stress testing that models a downturn rather than a shock to one input. The last one is where thin banks usually get found out.
The outcome depends entirely on what that work turns up. A bank at 120% with granular reporting, tested limits, a credible stress scenario, and capital sized for the exposure typically gets a comment and continues. A bank at 105% whose board packet shows one line for construction and whose limits were last revisited in 2019 gets matters requiring attention, pressure to hold more capital against the concentration, and a harder conversation about growth. The ratio determines whether the questions get asked. The answers determine the outcome.
This is also why most banks set an internal ceiling below 100% and manage to it. The internal limit is the thing that actually constrains lending. The guidance figure just tells you roughly where peers set theirs.
The denominator is not the same for every bank
Both criteria are written against total risk-based capital, and a large share of banks do not report it. A bank that has elected the community bank leverage ratio framework is exempt from the risk-based capital calculation entirely, which is most of the appeal of electing it. For those banks any concentration ratio has to be computed on a substitute capital measure.
That matters for how you read the table above. The quartiles are computed across every filing bank, which means they mix banks whose denominator is total risk-based capital with banks whose denominator is something else. The benchmark file behind this page does not carry a field recording which basis was used for each bank, so this page cannot tell you how the two groups compare or how much of the spread inside a band comes from the denominator rather than the loan book. The substitute measures generally run smaller than total risk-based capital, which would push a CBLR filer's ratio marginally high against a guidance figure written for the other basis, but that is a direction, not a correction you should apply.
BankingLens records the basis used for each bank in a capital_basis field on the bank's own report. Before you read a single bank against these quartiles, check which basis its ratio uses. A bank comparing a leverage-based numerator against a risk-based quartile is not comparing the same thing, and the error runs in the direction of looking more concentrated than it is.
Read it with capital and credit, not alone
A concentration ratio is a measure of exposure relative to loss absorption, so the capital side deserves as much attention as the loan side. The median bank ran a tier 1 leverage ratio of 10.96% in the quarter ending June 30, 2026, with the bottom quartile at 9.70% and the top at 13.00%. Two banks carrying identical construction books at identical size can be a full third apart on capital, and the one at 9.70% is carrying the same projects with substantially less room. In the $1 billion to $3 billion band, where construction concentration peaks, the median tier 1 leverage ratio is 10.54%, below the all-bank median. The segment with the most construction is not the segment with the most capital.
Credit quality currently says nothing is wrong, which is exactly what you would expect it to say. Nonperforming loans ran at 0.47% of total loans for the median bank, with the top quartile at 1.17%. In the $1 billion to $3 billion band the median is 0.48%. Construction is normally the first book to deteriorate in a downturn and it deteriorates quickly, but it does so after absorption stalls and interest reserves exhaust, not before. A benign nonperforming ratio alongside a rising construction concentration is the ordinary condition of a portfolio that has not been tested yet. It is not evidence the concentration is safe, and reading it that way is the mistake this metric is designed to prevent.
What a board should be asking when the ratio climbs
The useful questions are the ones management cannot answer from the ratio itself.
What does the ratio look like fully funded? Outstanding balances understate the commitment. Ask for the ratio recomputed as if every unfunded construction commitment were drawn, and ask for the quarter it would happen in. That is the number that tells you whether you have already decided to cross.
Where is the internal limit, and who granted the exceptions? A board limit that has been raised twice in eighteen months is not a limit. Ask for the exception log, not the policy document.
How much of the book is speculative? Pre-sold single-family under construction with a committed take-out and raw land held for a development that has not been entitled are the same line on the call report and completely different credits. Ask for the split by project type, by speculative versus committed, and by sponsor.
How many projects are current only because of an interest reserve? Interest reserves mask deterioration by design. The question is how many reserves run out in the next four quarters and what the borrower does then.
What is the take-out assumption? Every construction loan is underwritten to a permanent source. Ask what rate and what debt service coverage the take-out assumed, then ask what share of the book still clears at today's rates. Loans that were fine at underwriting and do not clear now are the ones that extend.
What does absorption look like in our markets? Concentration risk is local. Months of inventory, permit volume, and competing deliveries in the specific submarkets the bank lends in are more informative than anything at a national level.
What happens to the denominator? Ask for the ratio projected under a slower earnings scenario. Capital growth is the quiet half of the ratio and the half nobody models.
None of these are answerable from a peer table, which is the point. The quartiles tell a board whether its bank is unusual. They do not tell it whether the book is sound, and a bank in the top quartile of a band with disciplined pre-leasing may well be carrying less risk than a median bank with none.
Frequently asked questions
What is the 100% construction concentration threshold?
It is the first of the two screening criteria in the 2006 interagency guidance on commercial real estate concentrations. A bank warrants closer supervisory attention if loans for construction, land development, and other land are 100% or more of total risk-based capital. Unlike the 300% total CRE criterion, it has no growth condition attached, so the ratio alone decides it.
What counts as construction and land development?
The construction and land development line of the call report: one-to-four family residential construction, all other construction, land acquisition and development, improved and unimproved lot loans, and raw land held for development. It is defined by the stage of the project rather than the property type, so a loan moves out of the bucket when it converts to permanent financing.
How much construction concentration do US banks actually carry?
As of the quarter ending June 30, 2026, the median FDIC-insured bank carried 29.1% of capital in construction and land development, with the middle half between 10.3% and 55.5%. Concentration peaks in the $1 billion to $3 billion band, where the median is 45.3% and the top quartile is 70.7%. The 100% line sits above the top quartile in every asset band.
Is 100% construction concentration a hard limit?
No. It is a screening criterion that identifies banks for heightened supervisory review of risk management practices, not a cap on lending. A bank above it has violated nothing. What changes is the depth of examiner work on board-approved limits, portfolio stress testing, management information systems, underwriting standards, and whether capital is adequate for the concentration being carried.
Why does the construction criterion bind sooner than the 300% CRE test?
Because it is a single test. The 300% criterion requires both the ratio and 50% growth in the CRE book over the prior 36 months, so a bank with a large but flat portfolio can sit above 300% without meeting the criterion. There is no equivalent escape on the construction side: crossing 100% is meeting the criterion. Construction balances also move faster, because draws on existing commitments raise the ratio without a single new loan being approved.
How is the construction concentration ratio calculated?
Construction, land development, and other land loans divided by total risk-based capital. Banks that have elected the community bank leverage ratio framework do not report total risk-based capital, so their ratio has to be computed on a substitute capital measure. That makes the denominator inconsistent across the industry, and a bank should confirm which basis its own figure uses before reading it against a peer quartile.
Where these numbers come from
Every figure on this page is computed from the FFIEC call reports that all 4,296 FDIC-insured banks file each quarter, for the quarter ending June 30, 2026. The quartiles above are computed across 4,238 of those 4,296 filings: the other 58 are non-insured non-deposit trust companies, which take no deposits and make no loans, so a concentration ratio computed for one has no meaning, and they are left out of every statistic on this site. Nothing here is modeled, estimated, or sampled. You can pull any individual bank behind these distributions, including the capital basis used for its concentration ratios, on Bank Peer Intel or in the dashboard, see what access costs on pricing, or, if you are trying to borrow rather than benchmark, see which lenders these numbers point to on Borrower Assist.