17 Winter | 2021 Ease into innovative payment products at icba.org/bancard Ease into modern payments with the comfort of ICBA Bancard. High quality, innovative payment products, including mobile card apps. Backup support for your community bank in negotiating with payments providers. Letting your customers sit back and use payment solutions from anywhere. A strong foundation in thought leadership in payments and ongoing personalized support. offer credit mitigants to loan prospects who, because of COVID-19, are at approval levels below banks’ traditional standards. • Given ever-present perils of concentrations, choose a lending niche where your bank has both a firm grasp of the market and the talent and reserves required to manage the risks. Some banks develop these capabilities in disparate industries, ranging from hospitality venues to veterinarian practices. One of the growing challenges for community banks is the impulse to be all things to all prospective borrowers. Know your own bank’s strengths — and weaknesses. • Actively pursue purchased loan participations through resources such as correspondent bank networks for bankers, state trade groups and trusted peers. • Look for prospects that previously have been less traditional, such as creditworthy providers of services or products that cannot be obtained online. • Remember that as society and technology change, new products and services will emerge. Banks must embrace new lending opportunities that accompany these developments, even if they may have been perceived as rooted in alternative lifestyles. • In robust growth markets, shed the reluctance to provide — selectively and sanely — some construction lending to help right the out-ofbalance supply and demand currently affecting 1 to 4 family housing. No one suggests repeating the excesses of a decade ago. However, limited supply and avoidance of any speculative lending in this segment have created a huge value inflation that is excluding bankers from legitimate lending opportunities at a time when these would be welcomed. Bankers must remember the lesson from the last banking crisis: Chasing growth using loans made during a competitive environment of lower credit standards always leads to eventual problems when economic stress increases. This is the “lesson on vintages” truism. A July 2019 study from the Federal Deposit Insurance Corp. on failed banks during the Great Recession revealed that loans made under these circumstances were critical contributors to insolvency. Whatever strategies the industry uses to reverse declining loan demand must be matched by vigilant risk management techniques, utilizing the best technology to highlight early warnings within the new subsets of the loan portfolio, a more effective syncing of portfolio analytics, stress testing and even loan review. David Ruffin is a principal at IntelliCredit, A Division of QwickRate. He has extensive experience in the financial industry including a long and pronounced emphasis on credit risk in a variety of roles that range from bank lender and senior credit officer to co-founder of the successful Credit Risk Management, LLC consultancy and professor at several banking schools.
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