Managing Maturing CRE Loans: A Guide for CFIs

In the early 1990s, the Resolution Trust Corporation spent six years and roughly $130B unwinding failed savings institutions whose commercial real estate (CRE) loan books soured after the ‘80s real estate boom. It wasn't that bankers failed to recognize the risks, but that many of them waited too long to act on what they already knew. Loans were extended, appraisals weren't refreshed, and workout frameworks weren't built. Then the examiners showed up.The circumstances today are different, yet the pattern of delay is familiar. According to The Kaplan Group, $957B in commercial real estate loans matured in 2025, 300% higher than the 20Y historical average. A large portion of those loans received extensions rather than payoffs, because borrowers couldn't refinance into a rate environment roughly 200bp higher than the debt coming due.Unfortunately, that extended debt is now crowding into 2026, with S&P projecting another $936B in maturities this year alone, or 19% more than originally estimated. Currently, banks and thrifts hold around 60% of near-term maturing CRE loans.For community financial institutions (CFIs), this is not a macro story to observe from a safe distance, but an active portfolio management challenge. It rewards early, disciplined action and may punish those who wait too long. Here are the most important questions to consider as you navigate maturing CRE loans in today’s market.1. Have We Audited Our Extension Pipeline?The practice of extending and modifying CRE loans rather than forcing distressed sales made sense in 2023 and 2024, when lenders expected rate cuts and conditions to improve. For some, that patience paid off, but for many more, extensions bought time without improving the underlying economics.Distressed CRE asset sales rose to a rolling 12-month high of $13.8B by mid-2025, according to MMG Real Estate Advisors, up from roughly $1.1B in early 2020. The critical distinction now is between loans extended because the borrower had a credible path forward — improving occupancy, a pending refinance, or a capital injection — and loans extended because neither party wanted to recognize a loss. Examiners are trained to tell the difference.2. How Do We Treat Office vs. Non-Office CRE?The national headlines about CRE distress are overwhelmingly driven by office assets. Large urban towers continue to struggle with remote work, lease expirations, and collapsing valuations. CMBS delinquency rates on office loans were approaching 8% in late 2025, according to CoStar, with 83.7% of CMBS office loans with outstanding balances (that matured before 2026) now showing delinquencies.This is a genuine concern, but it may not be truly representative of the actual CRE risk profile at most financial institutions. CFIs are typically far more exposed to owner-occupied suburban commercial, grocery-anchored retail, light industrial, and owner-operated hospitality than to Class A urban office.These CRE categories are performing very differently. Grocery-anchored retail has held up particularly well. Industrial remains strong. Owner-occupied CRE, where the borrower's business is the tenant, has shown more resilience than investor-owned properties. S&P Global's analysis noted that delinquency spikes have been most pronounced at banks with over $100B in assets. In other words, those with large urban office exposure. One way to assess where the concerns actually lie in your portfolio is to disaggregate it by property type, occupancy structure (owner-occupied vs. investor-owned), and geography. Using this data, you can then build internal risk tiers that reflect actual performance divergence rather than treating all CRE as a single category. If your internal reporting still groups office, retail, industrial, and multifamily under one bucket without subtype breakdowns, that's the first thing to fix.3. Do We Stress Test Current Valuations or Origination Appraisals?One of the most consequential risks in today's CRE portfolios is the gap between origination appraisals and current market values. When cap rates rise, property values fall. For CFIs, using stale appraisals as the basis for stress testing is not conservative underwriting.For example, a property that supported a $5MM loan at a 4.5% cap rate in 2021 may only support $3.5MM to $4MM today, depending on the asset type and market. If the loan was underwritten at a 70% loan-to-value (LTV) ratio at origination, the actual LTV today may be much higher, and the equity cushion protecting the lender may be much thinner than it appears on paper.According to MSCI, the total volume of distressed CRE assets reached $116B in Q1 2025, up 23% from 2024 — and many of these assets are working through valuations that bear little resemblance to where they were underwritten. The MBA has flagged that the path through 2026 maturities "will remain challenging" given that long-term rates have not fallen nearly as much as borrowers anticipated.4: Do We Have Go-To Workout Frameworks?There is a meaningful difference between a CFI that encounters a distressed CRE borrower with a documented workout policy, pre-established modification criteria, and a clear decision-making process, and one that improvises. The first institution can demonstrate to examiners a highly disciplined, consistent approach to troubled debt. The second has documentation gaps, shows inconsistent treatment across similar credits, and appears to defer hard decisions.A proactive workout framework doesn't require anticipating every scenario, but it does require clear policies that answer key questions, such as: What criteria must a borrower meet to qualify for a modification? What documentation is needed? Who has the authority to approve loan term changes, and at what dollar thresholds? How will modified loans be classified and reported? How often will borrower performance be re-evaluated?CFIs that have worked through these questions in advance move through distressed credit situations faster, with less examiner friction, and with better outcomes for both the institution and its borrowers.5: Do We Know Exactly What to Say to Regulators?Regulators are paying close attention to CRE concentration levels and extension activity across the community banking sector. The OCC, FDIC, and Federal Reserve have all issued guidance in recent years on CRE concentration risk management, but the volume of maturing loans in 2026 brings heightened scrutiny.CFIs that exceed the regulatory concentration thresholds of 300% of capital for total CRE or 100% of capital for construction and land development loans should expect examiner questions about their concentration management strategy, their stress testing methodology, and their allowance for credit loss adequacy — otherwise known as their Current Expected Credit Loss (CECL) calculations.The best position is to have answered those questions before the examiner asks them. That means preparing a clear, documented narrative: here is our CRE portfolio composition; here is how we've segmented and stress-tested it; here is what we've found in our extension pipeline review; here is our workout framework; and here is why our reserve levels are appropriate given current conditions.Regulators generally respond well to institutions that demonstrate forward-looking, disciplined self-assessment, and less well to those that appear to be flying by the seat of their pants.The Wall Is Here. Time to Act Accordingly.The 1990s CRE crisis didn't catch prepared bankers by surprise. It caught those who knew what was coming yet still waited too long to act.Today's maturity wall is well-documented, the data is publicly available, and the regulatory expectations are clearly stated. CFIs that sharpen their internal processes are the ones that are in the best position to come through 2026 with their portfolios, examiner relationships, and credibility all achieving high marks.Simply put, the wall is already here. The real question is whether your institution is already on the other side of it. For CFIs, here are some next steps worth considering: