After strong 2018, bankers cautiously optimistic about 2019

Editor’s note: An earlier version of this story misidentified Susan Graf’s position.

BOULDER — As Boulder-area bankers shift their attention from a successful 2018 toward the new year, they say they’re feeling mostly optimistic about 2019 despite the specter of a few potential stumbling blocks on the horizon.

“Obviously we are concerned about getting too far out over our skis,” Shawn Osthoff, president of Bank of Colorado, said Tuesday during BizWest’s Banking CEO Roundtable in Boulder. “… But, in general, we have a very optimistic outlook.”

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Last year banks saw “enormous growth” in deposits, according to Amalgamated Bank senior vice president and regional development manager Susan Graf. “We’re cautiously optimistic, but we have started getting more conservative in our underwriting on loans, and we’re looking at how companies can weather the potential softening in their markets.”

Bonifacio Sandoval, commercial market manager for First National Bank, agreed that banks “had a great 2018 with a diverse revenue base.”

But, he added, “we’re expecting a bit more conservative outlook in 2019 from a growth standpoint.”

Running with the big dogs

As banking has evolved with changes in technology and consumer demands, local and regional banks have had to adapt to keep pace with giant financial institutions such as Wells Fargo and JPMorgan Chase.

“We aren’t going to be able to compete nationally,” Osthoff said. “But we compete very well with the national banks on a local basis. Our customers value the relationship, the responsiveness, people who are knowledgeable about the market and local decision-making; that’s where we see our niche.”

Gretchen Wahl, senior vice president of MidFirst Bank, said smaller banks can differentiate themselves by providing a more personalized experience to commercial borrowers.

Community bankers, according to AMG National Trust Bank commercial banking division president Thomas Chesney, “excel at being the go-to person who can make decisions locally about paying overdrafts or waving charges or to affect the underwriting on a credit request.”

“There are fewer constraints than you might get from a Wall Street bank” that has weaker connections to the community and its customers, he said.

Branches evolving

As mobile banking has gained traction, fewer customers are visiting bank branches to deposit checks or withdraw cash.

That doesn’t mean branches are obsolete, but it does mean they are evolving.

“How consumers and small business use the branch is vastly different” than it was in past eras, Elevations Credit Union CEO Gerry Agnes said. “We’ve completely flipped the allocation of real estate from transaction space to a consultative space.”

In other words, space in branches that used to house tellers are now home to loan officers.

A new kind of bank robber

As banks have become more reliant on technology, they’ve also become more susceptible to hacking operations and digital fraudsters.

“Of all of the different types of fraud, wire fraud is probably unmatched,” Graf said. “It happens every single day … and because hackers are constantly innovating, we have to be constantly innovating.”

Chris McVay, Longmont market president with High Plains Bank, noted that there is a push-pull relationship between convenience and security. As customers demand more and more technology to make banking more convenient, more hacking opportunities arise.

“It’s always an ongoing challenge that we have,” he said.

Continued consolidation?

Last year there were several high-profile mergers and acquisitions of banks with ties to Boulder Valley and Northern Colorado. Bankers joked Tuesday that big institutions are running out of local or regional banks to absorb, but acknowledged that acquisitions are not likely to dry up completely in 2019.

Kevin Classen, Boulder market president for FirstBank, said regulatory changes have opened up the possibility of more banks to grow through acquisitions than was previously permitted.

Aaron Spear, vice president of commercial banking for Community Banks of Colorado, said Colorado’s strong financial sector “puts us on the map more so than (banks in other parts of the country) for out-of-state buyers.”

Labor crunch

Like many industries, banks are struggling with staffing in an extremely tight labor market.

As a result, banks have adopted new techniques to recruit talent such as looking outside of the industry for new employees.

“We talk a lot about customer service and technology,” McVay said, “and we actually recently hired someone who worked for Netflix.”

Graf stressed the importance of “creating a culture where employees want to work.” Banks that achieve a good company culture will be better able to lure talent away from other financial institutions, she said.