Independent Banker - June 2023 - 49

other community banks on funding
larger loan commitments, which
creates lending opportunities outside
of its footprint in northern Iowa.
One of the ways that the
$1.6 billion-asset community bank
manages loan risk is to make sure it
understands the credit basics. The
pandemic exacerbated inflation, the
supply chain and material costs.
" We're migrating back to the basics
to make sure we understand what
projects we're getting into up front,
identifying those risks early and
making sure we understand them in
our underwriting risks, " says Kevin
Meyer, chief credit officer at First
Citizens. The bank also makes sure it
understands who it's doing business
with in terms of the builder, general
contractor and subcontractors
involved with a project.
Over the past year, First Citizens
Bank has also added staff to increase
its focus on concentration analysis
and risk analysis within the portfolio.
" That has really opened doors for
us to know what we have and where
we're going, " Meyer says.
That analysis involves looking at
how much of the portfolio is in active
construction, how much has ramped
up into cash flow and how much is
now stabilized assets as that loan
moves through its lifecycle. " So, we've
really tried to focus in on where our
loan portfolio is at today and where
we see it going in the future, whether
it is organic or loan participations, "
he adds.
Construction loan risk is
often magnified on larger-dollar
multifamily and commercial real
estate construction loans. In addition
to underwriting the borrower and/
or developer or general contractor
doing the work and project feasibility,
lenders proving loans to commercial
real estate and apartment developers
are paying close attention to local
market conditions and how different
property sectors are performing.
Community banks are also
crunching the numbers to make
Rachael Brown
sure numbers
pencil out on
new construction
projects. " Just as
it's harder for our
equity partners
to make the deals
work with their
underwriting, we're
tightening up our
requirements in
terms of lower
LTVs, higher debt
service coverage
ratios, stronger
guarantees and
bigger escrows, "
says Rachael
Brown, commercial
real estate
 The Bank of Tampa helped
finance this new construction, multifamily
building in Sarasota, Fla.
director at The
Bank of Tampa, a
$3.4 billion-asset
bank in Tampa,
Fla. Banks don't
want to end up in a
position where the
loan can't be taken
out because of the
rate environment
or because cash
flows on the project
aren't strong
enough, she adds.
Although banks
are keenly focused
on both managing risk and optimizing
profitability, not everyone views the
" GENERALLY, THE
BEST ADVICE IS TO
MAKE SURE THAT
YOU'RE DOING
WHAT'S RIGHT FOR
YOUR BANK, YOUR
CLIENTS AND YOUR
COMMUNITY. "
-RACHAEL BROWN,
THE BANK OF TAMPA
two equally.
" As a community bank, it's easy to
sit and look at what everyone that's
bigger than you is doing and say, 'XYZ
bank is doing this, that and the other,
so we should get into that space, too.'
That's not always the best solution, "
says Brown. " Generally, the best
advice is to make sure that you're
doing what's right for your bank, your
clients and your community, and not
just following what everyone else
is doing. " 
Beth Mattson-Teig is a writer
in Minnesota.
independentbanker.org // 49
Photos courtesy: The Bank of Tampa
http://www.independentbanker.org
Independent Banker - June 2023

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