The US banking industry's exposure to high-volatility commercial real estate loans inched up in the second quarter following a sharp decline in the first quarter, but remained lower than a year earlier.

The aggregate high-volatility commercial real estate (HVCRE) loan balance of US banks stood at $36.85 billion at the end of the second quarter, up 13.8% from the end of the prior quarter but down 10.4% from the year-ago total, according to S&P Global Market Intelligence data.

Risk-weighted HVCRE loans amounted to 0.25% of the sector's total risk-weighted assets, up from 0.22% in the first quarter and down from 0.28% a year earlier.

Regulators define HVCRE acquisition, development and construction (ADC) loans as credit facilities that primarily finance or refinance acquisitions, developments or constructions of real properties and are used to provide financing to acquire, develop or improve properties into income-producing ones that are dependent on future income, sales or refinancing of such real properties for repayments.

These exclude one- to four-family residential properties, community development projects, agricultural land, existing income-producing property secured by permanent financings, certain commercial real property projects, real property where the loan has been reclassified as a non-HVCRE ADC loan, and real estate where the loan was made before Jan. 1, 2015.

The rule is not applicable to qualifying community banking organizations that elected to use the community bank leverage ratio framework.

Goldman Sachs reduces HVCRE exposure, remains top lender

Goldman Sachs Group Inc. remained the top HVCRE lender in the second quarter. However, the institution reduced its exposure to such loans by 36.4% during the period, the highest reduction among the 20 US banks with the largest HVCRE loan balances at June 30.

The analysis was limited to top-tier institutions with at least $1 billion in assets that did not opt into the community bank leverage ratio framework, based on regulatory filings as of June 30.

Goldman Sachs' total HVCRE loan balance of $2.15 billion at the end of June represented 0.33% of the institution's risk-weighted assets.

Houston-based Prosperity Bancshares Inc. retained the No. 2 position, increasing its HVCRE loan balance by 14.6% during the second quarter to $1.96 billion.

The institution completed its previously announced acquisition of Midland, Texas-based First Bancshares of Texas Inc. on May 1.

The largest increase in HVCRE loans during the second quarter was registered by Raleigh, NC-based First Citizens BancShares Inc., which grew such loans by 29.3% to $500.9 million.

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Bank of Commerce has highest ratio of HVCRE loans to risk-weighted assets

Ammon, Idaho-based Bank of Commerce recorded the highest ratio of HVCRE loans to risk-weighted assets. The bank ended the second quarter with its HVCRE loan balance at $322.0 million, or 18.72% of risk-weighted assets.