CEO Roundtable: Banking sector retains strong footing despite economic turmoil

Lucas High

BOULDER — One of the biggest differences between the ongoing COVID-19-induced economic downturn and the Great Recession is the role of banks.

In 2008, banks and financial institutions were the cause of much of the turmoil. In 2020 and beyond, banks have served as a key conduit between government stimulus dollars and local businesses scaping by to make rent and payroll. 

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Given these circumstances, the banking sector in the Boulder Valley is faring relatively well compared to some other industries, executives of local institutions reported during BizWest’s Banking CEO Roundtable held virtually Tuesday. 

“We’re in a great position to help jumpstart this economy” by helping get the second round of Payroll Protection Program funds into the hands of business operators, High Plains Bank CEO John Creighton said.

Elevations Credit Union CEO Gerry Agnes agreed, saying, “The industry is quite prepared from a capital standpoint to weather this storm.”

One challenge of the current ultra-low interest rate environment is dwindled net interest margins. 

Agnes said margins in 2020 were off by about 25%, “but we’re still able to operate quite well.”

Shrinking margins mean banks must spend more time thinking about “diversifying sources of revenue” and “become more efficient in our daily operations,” Alpine Banks regional president Chris Maughan said.

Flatirons Bank president Kyle Heckman said that although it can be “hard to forecast interest rates,” it’s reasonable to expect tightness through 2022 and 2023. 

Low interest rates can be a blessing and a curse for banking clients, executives said Tuesday.

“Consumers don’t understand why we aren’t paying any interest on deposits but they love their 2% mortgage rates,” High Country Bank branch president Lisa Hamilton said. 

Because rates are so low, banks must do more to “differentiate yourself and attract deposits in a really flat market,” MidFirst Bank vice president Susan Moratelli said. 

The COVID-19 pandemic has wreaked havoc on certain subsectors of the commercial real estate market, namely retail and office spaces. But despite the downstream turmoil, banks have yet to be hit with a tidal wave of foreclosures. 

“I’m not going to sound any alarms,” Community Banks of Colorado vice president Ryan Lee said.

Bank of Colorado branch president Aaron Spear credits the PPP program with providing some breathing room for business owners who otherwise may have had to choose between paying rent and paying their workers. 

The rollout of the second round of PPP has proven to be a bit different than the first, bankers said.

“The rules of the road are much more cemented, but also more intensive,” Spear said. 

Increased scrutiny has resulted in 30 to 40% of applications being returned for amendments or corrections, making the process of getting money to business owners a bit more time consuming, according to Lee.

The pandemic has forced employees to abandon the office in favor of working from home, but this isn’t a trend that bankers expect to be permanent.

“People are going to want to get back into offices,” First National Bank of Omaha senior director Gretchen Wahl said “… The question is how long it will take for that to happen.”

Loan modifications, AMG National Trust Bank president Tom Chesney said, have proven effective against protecting tenants from foreclosure or default. 

“We’re not seeing a lot of loss exposure,” he said. 

Demand for residential mortgages remains sky high, but inventory tightness has ensured the market continues to favor sellers. 

“Builders have not been building to its capacity and there has been a shortage for years,” Agnes said. 

Ent Credit Union CEO Chad Graves said he’s “bullish on the future” of the Front Range housing market due to the area’s diverse economy and high standard of living. But he added, if inventory remains low “hopefully it doesn’t price out our core membership.”

The CEO Roundtable is sponsored by Berg Hill Greenleaf Ruscitti, Plante Moran and Bank of Colorado. Attending were Jim Cowgill, Jeremy Wilson and Sean Nohavec, Plante Moran; Aaron Spear, Bank of Colorado; and Ashley Cawthorn, Berg Hill Greenleaf Ruscitti.

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