After fifteen years of calm, credit risk in a K-shaped economy is back

Fifteen years without a real downturn is about to end, and most portfolios aren't built to see it coming. Real net worth is up more than 25% since 2023 for the top income earners, while the middle 40% has grown less than 10%. That gap is showing up in commercial portfolios now, not just consumer books — any borrower whose revenue depends on a stretched customer base is carrying it too. And the FDIC's latest Quarterly Banking Profile says community banks are seeing more credit stress than the industry overall.

David Ruffin has been underwriting and reviewing credit for 53 years. Here's how he puts it:
"It's been my experience: early detection minimizes or reduces losses. But ignoring problems… they always get much, much bigger."

Call reports won't catch this early. Risk-grade migration, payment timing drift, credit utilization acceleration; these show up 60 to 90 days before anything hits your standard reporting.

This report gets into where the stress is concentrating, what to watch for, and the hard questions your board should be asking before the next exam.