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ABA: The American Bankers Association
Industry Insight

Complacency creep in lending: The subtle erosion of credit discipline in community banking

  • Brought to you by Elliott Davis LLC
  • Published July 21, 2026

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Since the Great Recession, marked by widespread losses and bank failures, most institutions have operated in a prolonged period of relative stability. While risk management practices have improved, many professionals lack firsthand experience with sustained credit stress, leading to an underestimation of how quickly conditions can deteriorate.

That environment is beginning to change. Early indicators in 2026 show rising delinquencies and increasing levels of non-performing loans, alongside weakening reserve coverage, particularly among community banks. In the wake of the 2023 bank failures, regulators and investors are on high alert, with an increased focus on how quickly institutions identify and address risk. For community banks, disciplined credit administration is especially important as economic conditions change.

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Elliott Davis is one of the largest accounting, tax and consulting services firms in the southeast and ranks among the top 50 CPA firms in the U.S. With offices in Georgia, North Carolina, South Carolina and Virginia, the firm provides a wide range of accounting, tax, assurance and consulting solutions, concentrating on core industries, niche areas and emerging business sectors. Growing since 1925, Elliott Davis is a member of The Leading Edge Alliance, an international professional association of independently owned accounting firms. More than 100 banks in the Southeast, large and small, depend on Elliott Davis’ Financial Services Practice for personal attention, industry experience and services including external and internal audit, SEC reporting, taxation and compliance. With a 60-year reputation and a team of 90 professionals serving financial institutions, we help banks operate stronger, wiser, better.

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