Loan Underwriting Issues in a Shrinking Market

March 28, 2023

By: Ollie Sutherin, Principal, Y&A Credit Services, LLC

It is no secret that community banking is shrinking at an increasing rate across the entire United States. At the close of Q4 2022, there were approximately 4,548 community banks across all 50 states. This is a net decrease of about 200 active charters since the FDIC completed their Community Banking Study in 2020. Of these 4,548 active charters, nearly 50% of the community banks are in counties with a population of 50,000 individuals or less, and all these institutions combined make up about 97% of the banking industry as a whole.

Challenges for Community-Focused Lenders

Despite their market share, the fact that nearly 50% of the community banks serve counties with less than 50,000 people presents risks and difficulties for them to continue their missions as community-centered institutions.

One of the primary difficulties is the ability to hire and retain quality talent needed to maintain good practices and good standing with regulatory bodies. This is especially evident in the banks that serve 50,000 people or less, as populations in rural areas continue to decrease.

Furthermore, the increasing burden of inflation and wages adds another layer of complexity to the mix. Many community-focused institutions are not willing or able to pay top rate for talent, which is understandable given the need and focus to remain competitive among the larger regional and national banks that continue to acquire and/or out-compete them.

Outsource Excellence for Your Credit Underwriting

One of Young & Associates, Inc.’s primary missions is to serve community financial institutions across the country. Recognizing the risks and difficulties stated above, we have formed an independent affiliate, Y&A Credit Services, LLC.

As an independent entity, Y&A Credit Services offers the same exceptional service, expertise, and integrity you’ve learned to expect from Young & Associates, Inc. Our team members are experts in credit services and the financial industry and include former chief credit officers and senior credit analysts from both community and regional banks and provide full outsourced credit department services to our clients, keeping their costs low so they can remain competitive in their markets. This creates less risk with respect to the regulatory bodies as our seasoned credit professionals boast a combined 100+ years of experience in credit administration.

Finding talent is one issue, but affording it is another issue. By outsourcing credit responsibilities such as underwriting, annual reviews, and spreading financials, Y&A Credit Services can complete the work of several full-time employees at rates far less than the bank’s full-time employee.

In summary, you can trust Y&A Credit Services to handle all your credit needs, ranging from simple commercial real estate transactions to the most complex C&I deals. Furthermore, Y&A Credit Services can complete this work in your preferred format using our advanced credit software. We recognize the risk of deviating from years of good practice and strive to ensure that we are meeting your standards. We also recognize that we are here to assist you in every way possible and will provide you with recommendations and good practices gleaned from extensive experience dealing with credit departments across the entire country and the regulatory bodies overseeing them.

For more information on Y&A Credit Services and how we can assist you with your credit underwriting needs, contact me at [email protected] or 330. 422.3453. I look forward to discussing how we can assist your organization with your credit underwriting needs.

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