Written by: Bhavna Goyal, Senior Director of Credit Risk Management and Zachary Halpern, Managing Director, Head of Portfolio Management and Capital Markets, Real Estate Investment Strategies
This paper examines the current commercial real estate credit cycle across U.S. depository institutions by analyzing trends in noncurrent commercial real estate (CRE) loans. An analysis of peer-group data segmented by institution type — commercial banks versus savings institutions and federal versus state charters — reveals not only a broad-based deterioration in asset quality since late 2023, but also meaningful divergences in the severity and composition of credit stress.
We used data from the Federal Deposit Insurance Corp.’s BankFind Suite for the following institution types:
- Commercial bank: A national- or state-chartered institution that accepts deposits and makes loans, as defined under the Federal Deposit Insurance Act.
- Savings institution: A depository institution primarily focused on mortgage and consumer lending and treated separately by the FDIC.
- Federal charter versus state charter: A classification based on the institution’s chartering authority — federal regulators or state banking authorities.
All charts and tables in this article were created using loan data published by the FDIC. The data was retrieved using the Customized Comparisons module in the Reports and Comparisons section of the FDIC’s BankFind Suite (https://banks.data.fdic.gov/bankfind-suite/peergroup/customized). Fannie Mae and Freddie Mac loss-rate data was retrieved from Bloomberg as of April 10, 2026.
System-level trends: A broad but uneven deterioration
Although noncurrent loan ratios — defined as loans 90 days or more past due or in nonaccrual status — have increased across all major institution types, confirming a systemwide weakening in credit quality, the magnitude of the deterioration varies significantly.
Commercial banks have experienced a sharper increase in noncurrent ratios than savings institutions, which could be attributed to differences in portfolio composition and regulatory mandates. For example, savings institutions have a lower allocation to commercial loans and a higher allocation to multifamily loans than commercial banks. Federally chartered institutions, meanwhile, have experienced more pronounced credit stress than state-chartered institutions. This could reflect differences in loan size, with federally chartered banks likely issuing larger loans, as well as underwriting practices, with state-chartered institutions potentially relying more heavily on relationship-driven lending in local markets.
This divergence suggests that although macroeconomic pressures, such as higher-for-longer interest rates and tighter financial conditions, are affecting all lenders, differences in institutional exposure, underwriting practices and portfolio composition are driving varying outcomes.
A closer look at commercial banks and savings institutions highlights a stark contrast in both the magnitude and consistency of credit deterioration.
Commercial banks have experienced a systematic and sustained increase in noncurrent loans across all major commercial real estate asset classes since 2022. Noncurrent ratios in commercial real estate portfolios have risen steadily. This trend appears consistent with a combination of factors, including declining property values, weak office fundamentals and refinancing constraints.
Multifamily loans have shown particularly notable deterioration, likely driven by higher interest rates since 2022, cap-rate expansion, slowing rent growth and increasing delinquencies following the expiration of government assistance programs introduced during the COVID-19 pandemic. Construction lending also weakened in a measured but persistent manner, consistent with the sector’s sensitivity to financing costs and takeout risk.
In contrast, savings institutions displayed a more muted and uneven pattern, particularly in their commercial and multifamily portfolios. Although noncurrent ratios have trended upward, the magnitude of the increase has been smaller, except in construction lending, where the deterioration outpaced that of commercial banks.
This could be because savings institutions have much smaller construction portfolios than commercial banks, making their ratios more susceptible to a few outsized loans or concentrations in particular geographic areas. Although noncurrent loans increased as a percentage of savings institutions’ commercial and multifamily portfolios, the increases were not as pronounced as those at commercial banks.
This likely reflects savings institutions’ greater focus on households and local community lending, which tends to be less exposed to large, cyclical economic shocks than the commercial bank model, which is centered on larger commercial relationships.
Overall, the evidence points to commercial banks as the primary carriers of commercial real estate-related credit risk in the current cycle, while savings institutions appear comparatively insulated, although not immune.
A divergent pattern emerged when federally and state-chartered institutions were compared after 2023. Federally chartered institutions consistently exhibited more severe deterioration in noncurrent loan ratios across commercial and multifamily asset classes.
The divergence between federal and state charters was less pronounced in construction loans, however. This could be at least partially attributable to a denominator effect, as the balance of construction loans held by federally chartered institutions declined after 2023 while balances held by state-chartered institutions increased.
Federally chartered institutions experienced a pronounced increase in nonperforming commercial assets, outpacing state-chartered peers by a wide margin. This could reflect greater exposure to structurally challenged segments, such as office or transitional properties.
Multifamily loans showed an even sharper divergence, with federally chartered institutions experiencing a rapid escalation in noncurrent ratios while state-chartered institutions demonstrated a more gradual and contained increase. In recent quarters, however, noncurrent ratios for both commercial and multifamily loans have improved within federally chartered institutions’ portfolios.
Construction lending has followed a similar pattern, but conditions at federally chartered institutions deteriorated more quickly and have continued to worsen in recent quarters.
These differences likely reflect variations in portfolio composition and risk appetite. Federally chartered institutions, which are often larger and more active in capital markets, may have greater exposure to complex or highly leveraged transactions, as well as transitional assets that are more vulnerable to refinancing risk. State-chartered institutions, by contrast, may benefit from more localized lending strategies and more conservative underwriting.
For multifamily loans, we also overlaid agency delinquency rates with noncurrent loan ratios for federally and state-chartered institutions. The comparison between federally chartered institutions and Fannie Mae and Freddie Mac provides additional context for the observed trends.
Delinquency rates for both government-sponsored enterprises trended upward during the same period, confirming that multifamily stress has not been isolated to bank balance sheets. The magnitude of the deterioration, however, was significantly lower in Fannie Mae and Freddie Mac portfolios.
Although multifamily delinquency rates at federally chartered institutions rose sharply to more than 1.5 percent, rates for Fannie Mae and Freddie Mac remained below 0.7 percent, less than half the rate reported by federally chartered institutions.
This divergence suggests Fannie Mae and Freddie Mac portfolios benefited from stronger credit characteristics, including lower leverage, stabilized assets and more disciplined underwriting standards. These characteristics can be seen in bridge-to-agency lending, as applications for agency loans are generally submitted after properties have stabilized and demonstrated consistent performance that meets agency criteria.
Bank portfolios, particularly those held by federally chartered institutions, likely included a higher proportion of bridge loans, transitional properties and loans originated using more aggressive assumptions during the low-interest-rate environment.
Taken together, the data paints a picture of a lagged commercial real estate credit cycle that began to materialize in late 2023 and has since broadened across institutions and asset classes. The deterioration is most acute in multifamily and commercial real estate, while construction lending has exhibited the greatest volatility.
The cycle, however, is far from uniform. Commercial banks and federally chartered institutions are at the epicenter of credit stress, reflecting both greater exposure and greater sensitivity to changing financial conditions. Savings institutions and state-chartered banks, although still affected, have demonstrated greater resilience, likely because of differences in scale, strategy, localized lending practices and underwriting discipline.
As the cycle progresses, these divergences will be critical to assessing not only the trajectory of commercial real estate credit performance, but also the relative vulnerability of different segments of the banking system.
The same data that showed broad-based deterioration also indicated that stress is concentrated among specific lender groups — particularly commercial banks and federally chartered institutions — rather than evenly distributed throughout the system.
For private capital, this dispersion matters. It suggests the opportunity set is not simply broad exposure to commercial real estate, but targeted lending to address refinancing and transitional needs that traditional balance-sheet lenders are increasingly de-emphasizing.
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