CEO Roundtable: Bankers watching interest rates, hoping for ‘soft landing’

WINDSOR — Like most in the country, local bankers are watching interest rates, the election and inflation with a keen eye. All three together and individually affect their daily business, and they’ve been waiting a while now for business to go back to normal.

Of course, normal to many out there is not so normal to longtime bankers, who have watched interest rates rise and fall and rise again. Today, “prime” rates are hovering at 8.5%, and while the rest of America wishes that number would slide back down a few percentage points — back to the days of 3.25% or even a steady 5% — those days are over, bankers say.

Every month, BizWest brings industry leaders to talk shop and the challenges they face as an industry. This month, it was the bankers’ turn.

At a morning roundtable Tuesday with banking CEOs from Wyoming to Northern Colorado, banking CEOs pontificated a future on unknowns with BizWest and forum sponsors Plante Moran, Elevations Credit Union and Berg Hill Greenleaf Ruscitti.

Will the Fed reduce rates? Some predict rates will go down a full percentage point by the end of the year. Will inflation have an effect on borrowing? Some say yes; others say it’s already hurting many first-time borrowers.

The Fed is due to meet again on Sept. 17-18, and this bunch will be paying attention.

“We’ve been through 12 recessions since World War II and I truly believe it’s going to be a soft landing,” said Tim Croissant, president for Bank of Colorado’s Greeley and Eaton markets.

Banks make their money on lending, and interest rates have not been appealing.

“On commercial loans, there has been more tepidness overall,” said Ryan Cassidy, Northern Colorado market president for First Western Trust Bank. “Bank balance sheets have been under pressure in the last couple of years. Assets have not increased as quickly as deposit costs have increased. That has put pressure on earnings, so you may be sitting on unrealized losses.”

So far, however, inflation has hurt the average consumer, and bankers are starting to see the pain as liquidity dwindles, deposit rates drop and fewer loans are made.

Contractors are complaining about the length of time it takes to get paid, and many commercial loans that businesses took out at variable rates three to five years ago are coming back up for repricing. There will be pain, they said.

“It’s good to see interest rates soften, because we do have a lot of commercial loans repricing in ‘25 and ’26,” Croissant said. “Now, cap rates haven’t changed, and interest rates have gone up significantly, requiring people to put more money down into a project to get the loan down to where it will cash flow.”

Croissant said a lot of borrowers shelved projects because interest rates and cap rates were too far apart.

Charlie Pepin, manager of commercial banking for FNBO, said interest rates will help spur projects and growth: “As rates come down, some commercial companies will get back into doing projects. We’ll see that turn back on.”

“The stress on the consumer is real,” said Matthew Pope, market president of First Interstate Bank’s Northern Colorado market. “For the first time, homebuyers are really having a difficult time.”

David Fritzler, Northern Colorado regional president of Collegiate Peaks Bank, recalled a story in which a client couldn’t qualify even a handful of applicants for apartment rentals because of bad credit.

Brian Kayton, vice president for center operations for Ent Credit Union agreed: “Maybe we’re on a ledge. People are feeling a little more of a pinch, and we’re seeing it in the credit quality through applications. We haven’t made changes in underwriting standards, but we’re seeing higher decline rates on loans, and it goes even beyond the inflation side, which is pretty hefty. … We seem to have some control for a softer landing, but we’re seeing now where that credit quality is deteriorating.”

There will continue to be challenges on the consumer, even with a drop in rates. Mark Brase, president and CEO of Points West Community Bank, said several concerns can shake up the markets.

“Liquidity is coming out of the market, people are more concerned about their jobs, where before it was definitely a workers market, now it’s turned into an employer’s market,” Brase said. “We still have an election, this newer modified work-from-home thing, what’s that going to look like over the next 5-10 years? There are still a lot of changing dynamics and wars. There are a lot of things to deal with.”

Elections always signal a time of change that the CEOs welcome in the market.

“We’re coming into a presidential election, so usually we see not much activity before the election,” said John Berkhausen, president of commercial banking for Adams Bank & Trust. “People wait, and it doesn’t matter who wins. People just like certainty. We usually see more activity in first quarter the following year.”

For Tom Chesney, president and CEO of AMG National Trust Bank, the election this year is signaling uncertainty about a break from the status quo.

“I have a couple clients concerned about tax policy, so they’re trying to get projects closed this year. Depending on how the election goes, they’re not at risk of the capital gains treatment they’re comfortable with today. It’s more of a generic issue that takes away some of the uncertainty and gives people the confidence to move forward.”

Northern Colorado has been pretty insulated from the market pain, said Darin Atteberry, market president for Elevations Credit Union, a sponsor of the CEO Roundtables.

“I’m usually a broken record about Northern Colorado,” Atteberry said. “Looking at Northern Colorado in the next 30 to 50 years, there’s nothing but upside in this region. Fifty percent of last year’s growth in the state happened in Larimer and Weld counties.”

He said this is the market to be in. “If you’re looking at this as a good market to be in… I wouldn’t call it a frenzy, but there’s very significant activity that’s going to be happening up here and there’s a lot of panning that is going on.”

Gerard Nalezny, CEO of Verus Bank of Commerce, was in more of a position to grow after the wild swings in the market before the Fed began ratcheting up historically low rates. So while other banks found ways to make those low interest rates work, his bank shrunk, he said.

“In our situation, we couldn’t even make sense of the 3% stuff, so we shrank,” he said. “For some, you have to work through legacy issues. It will be an interesting time.”