Federal officials are worrying that as interest rates rise and the housing market cools, some banks are carrying a heavier concentration of real estate loans than in the 1980s, a sign that could spell trouble for some banks in Southern California.

Rising interest rates typically hammer banks that are top-heavy with residential real estate loans. Many banks have diversified into commercial loans as a critical source of earnings, only to find they are just as susceptible to rising interest rates.

"As interest rates go up, we could see some borrowers having trouble paying their loans, especially if the terms of the loan are at variable rates," said Steven Wollum, an analyst at insurance rating service A.M. Best Co.

Federal regulators have proposed setting new guidelines for real estate lenders because of the high concentration of commercial loans that could expose banks to unanticipated earnings volatility. The focus is on construction and development loans, in which the primary source of repayment is dependent on the sale or refinancing of a property.

A.M. Best recently reviewed regulatory findings of 8,900 U.S. banks and found that 22 percent have construction loan-to-total capital ratios a key measure of lending activity above 100 percent. Of those, 20 U.S. banks had total commercial lending-to-total capital exposure above 800 percent, with 14 of them based in California. Those with the highest concentrations included Pacific Premier Bank in Costa Mesa; Luther Burbank Savings in Santa Rosa, Malaga Bank in Palos Verdes Estates and Sonoma National Bank in Sonoma.

Randy Bowers, an executive vice president and chief lending officer at Malaga Bank, said regulators are particularly concerned about speculative construction lending. Energy costs are driving up the prices of raw materials, making it more expensive to build a project within budget, and then to sell a property a year from now, when the market is soft.

"Their concern is that the market will dry up for speculators who have constructed a building with the intention of selling it," he said.

Malaga Bank cut back on its construction lending in the past year but continues to have a strong portfolio of apartment loans. Bowers believes apartments are "a very safe product" because of supply-and-demand for housing in Los Angeles.

Too broad a brush?

Small banks tend to have a higher concentration of construction, multi-family and income-property loans. Many bankers have written in public comments to regulators that banks should not be painted with such a broad brush.

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