CEO Roundtable: Banking industry changes likely to be permanent
WINDSOR — Northern Colorado bankers, while a varied lot based on size of operations and areas of focus, are of one mind on this: The pandemic has changed the industry, and it’s not likely to return.
Bankers gathered today at the Windsor office of the Better Business Bureau Serving Northern Colorado and Wyoming for BizWest’s Northern Colorado CEO Roundtable on banking.
Like every other industry, banks have had difficulty hiring and retaining employees. In many cases, they need fewer staff members because of the accelerated use of online and automated practices. And many employees have a different work ethic than what might have been the case pre-pandemic.
Speaking of the so-called “great resignation” and “quiet quitting” phenomena, Nicole Staudinger, Northern Colorado president for FirstBank, said, “We’re seeing the ‘call-in culture,’” where employees are not afraid to call in on Fridays or Mondays to say they won’t be in for work. “It’s almost the norm now for people to take Monday off,” she said.
Sean Nohavec, an executive with accounting firm Plante Moran, said “people are starting the work clock when they leave the house, not when they arrive at work.”
Staudinger said banks that permit some employees to work from home are experiencing equity issues between workers who have to be in the office versus those who can work from home. “There’s a tug, so there’s a response,” she said.
While numbers of applicants for open jobs may be ticking up from what it was, recruiting remains a major issue for bankers, the same as executives have expressed in other industries.
Child care is an issue, Staudinger said. With schools back in session with in-person classes, families are seeing greater stability, and that is propelling a return to the workforce for some. Lack of child care, however, remains a limiting factor for younger families.
Darin Atteberry, Northern Colorado market president for Elevations Credit Union, said many people left the workforce because they couldn’t do both parenting and work.
Mark Brase, market president for Points West Community Bank, said finding people has meant increasing pay levels. “Go to indeed.com a year ago and look at starting teller positions and you’ll see at least a $5 lift in starting wage,” he said. “When people are calling in on Monday or Friday [to take a day off], all of a sudden a $100,000 machine makes sense.”
Bankers are paying more attention to career paths as a result of the shortage of workers. They want to make sure that the people hired can move into higher positions as they open up. “We’re not just hiring a teller anymore,” Staudinger said.
Dan Spoelma, senior vice president of First Western Trust Bank, said hiring pools have changed. “Our last two hires were not from the banking sector,” he said.
Bankers are still aggressive in establishing branch locations, but they invariably will be smaller than in the past. Many bankers look for locations that might have housed a bank in the past to avoid the costs of new construction.
Scott Peterson, retail banking president for Adams Bank & Trust, opened two branches in the past year. “We’ve seen pretty good growth in those locations, one of which is in Greeley. … You have to be more things to more people, and be mobile,” he said. The Greeley branch was created in an existing bank building; some of the space was rented to a title company.
“People bank with people, not with a building,” he said. “You have to hire people who can drive people to the bank,” he said of the hiring strategy for Adams.
Nathan Ewert, Colorado market president for First National Bank of Omaha, said banking is competitive in Northern Colorado, but it also is in Nebraska and Wyoming. “If you take care of your customers, don’t worry about the competition. Focus on what you do well and take care of your customers,” he said.
FNBO is still creating new branches, the newest of which is under construction in north Loveland. That branch will be between 1,200 and 1,500 square feet. It looks like a coffee shop more than a bank, he said.
“The days of columns and lions at the entrance to the bank are gone,” he said.
Staudinger said banks still look at locations and determine whether some are still needed. “Which ones do you still need in order to still serve the client base,” she said.
More and more customers are choosing to bank electronically and not enter the branch location anymore. That also means that branches can employ fewer people, but more likely those employees will be cross trained to handle multiple functions, the bankers said.
Brase said Points West opened in downtown Greeley in an old bookstore and opened two other branches in former financial institutions.
“The days of 5, 7 or 12,000-square-foot buildings with eight lanes of drive-thru are not necessary any more,” he said. “People want to work from home; fewer people are coming in. We need tech-savvy people who can help with transactions.”
He said that the pandemic accelerated use of technology.
“When banks closed their doors for 30, 60 or 90 days while trying to administer PPP loans, our industry changed,” he said. “The customers found a new way to bank.”
The pace of banking acquisitions may be slowed a bit, but it’s still happening to a great degree with banks of all sizes.
“Size matters,” said Luis Ramirez, director of business banking in Colorado for banking giant Huntington Bank, a $190 billion financial institution.
“It doesn’t matter what size you are, you’re a target,” he said. “Our CEO talks about wanting to be a $400 billion bank soon,” which it can accomplish through acquisitions.
“The U.S. has a crazy number of banks,” he said.
Brase said the region is a desirable place to live and grow. “So you’re in western Nebraska or Kansas. If you want to grow, you come to the Front Range. That’s on the community banking level. If you’re larger, you look at Denver, and they [Denver banks] have branches in Northern Colorado.”
Spoelma said bankers see business success in the market, “and that means success for us, too.”
A tale of two years, in one
Bankers said in describing 2022 that the year has been almost like two, in that the first half more closely resembled 2019 and the second half is shaping up to be much more difficult.
Christian Bordewick, market president for Bank of Colorado in Johnstown, said customers are starting to get skittish about interest rates. “Customers don’t like when the interest rates are going up,” he said. Those with floating interest rates are now seeing the impacts of rising rates and the costs could be affecting operations, with businesses starting to shorten hours of operation, for example.
Ray Lindley, chief operating officer of Elevations Credit Union, said “on the commercial side, a lot of developers are rethinking projects. A lot of good projects are getting tossed. On the mortgage side, refinancing is pretty much dead. We’re lucky to be a portfolio lender; there’s a lot of liquidity so we can do a lot of portfolio lending.”
He acknowledged that the mortgage business is down significantly. He said the credit union, one of the largest mortgage lenders in the state, did $2.3 billion last year and this year will end up at about $1.6 billion in mortgage loans. “That’s a pretty good haircut,” he said.
Ewert said FNBO is experiencing a similar downturn in mortgage lending, about half of what it was a year ago.
Ewert said deposits at the bank are up “three times of what they are in normal years.”
Said Staudinger, “More clients are amassing a war chest” and waiting for an opportunity.”
Brase expects a recession, if the region is not already in one. “We’ll see a slowdown. Question is how deep and how long. We were overheated. … We have enjoyed a great economy,” he said.
Lindley said perspective is needed. “This [the current residential marketplace] is traditionally a good real estate market still. It might not be like 2021 but it’s still hot,” he said.
Ewert said consumers are still spending and still paying their bills.
Lindley said the credit union has been surprised that it hasn’t seen more delinquencies on mortgages. They’re “remarkably low,” he said.
Overall, Bordewick said, the “foreclosure list is longer than it was a year ago. I’d argue that low- and middle-income people have been in a recession for a year.”
Staudinger said FirstBank has nothing in foreclosure now. “We have almost nonexistent collection issues. Most have worked through the COVID forbearance.”
She said “people won’t go into foreclosure on houses; they’ll sell,” in reference to the demand in the region for residential properties.
If the downturn comes, “I don’t think it will be anything like 2007, 8 and 9,” Ewert said.
Peterson said he’s starting to see cracks in the economy.
Spoelma at First Western Trust said the bank is seeing “some runoff on deposits” as people look for higher yield investments.
“That’s exactly right,” said Ramirez. “People with money are tired of the low returns” [on deposits,] so people are investing elsewhere.
“It’s kind of a different animal now. Inflation is a real risk. We’re a little isolated here in Colorado,” he said of the usual phenomenon of Colorado falling into a recession later than the country as a whole.
“People probably are starting to push limits on credit-card spending. We’re going to see a slowdown.”
Ewert said commercial lending was “really solid” in the first half of the year and slowing in the second. “We’ve become more cautious on certain categories” [of business] He cited hospitality and office commercial as examples.
“We’re just looking at performance and underwriting them more,” Staudinger said. Developers may have to put up more of their own money in order to qualify for loans, she said.
When it comes to rental properties, “we’re not putting a lot of faith in three-year appreciation rates. Banks are still actively lending; just a bit more caution.”
Ramirez cited a small commercial property — an apartment complex — in Loveland that doubled in sale price in a year. “That appreciation makes no sense,” he said.
Lindley said the deals today are likely to look different than in the past. “If we were to re-underwrite some of the deals we did three or five years ago, they’d look a lot different.”
The BizWest CEO Roundtables in Northern Colorado are sponsored by Plante Moran, Berg Hill Greenleaf Ruscitti law firm and Elevations Credit Union. Nohavec represented Plante Moran, Ashley Cawthorn represented Berg Hill Greenleaf Ruscitti and Atteberry represented Elevations.