Competition for deposits ‘more intense than ever’

Many banks serving Northern Colorado have seen their deposits drop slightly since the pandemic hit four years ago, but the loss of pandemic relief funds isn’t the only reason for that phenomenon. Higher interest rates and increased competition have also had an impact.

Banks in Boulder, Broomfield, Larimer and Weld counties recorded $30.8 billion in deposits as of June 30, according to data from the Federal Deposit Insurance Corp., down slightly from $30.9 billion a year ago, and down from $34 billion two years ago.

“Competition for deposits is more intense than it has ever been,” said John Creighton, CEO of High Plains Bank. “It is not just a banking issue. People store their money in a wider variety of places than we ever imagined they might. For instance, if Starbucks was a bank, it would be one of the top 10 banks in America from a deposit perspective.”

Consumers store their money in many different places, including payment apps such as PayPal, Venmo and Cash App, and gambling app DraftKings.

Banks are competing with all of these forms of payment.

Young people in particular are driving this move to other — some might say, more convenient — forms of payment than what happened historically, which has forced banks to try and compete in this area.

“It’s not just ‘do you have the highest rate, or the best rate compared to other banks?’ That is one factor. But are you able to participate in the seamless movement of money? If banks don’t have the digital tools, at some point they won’t be relevant,” Creighton said.

High Plains Bank has invested heavily in technology “to stay relevant for the long-term without losing the personal touch,” Creighton said. 

The bank’s banking app allows customers to live chat with human beings and is part of a national network so if someone takes cash out of an ATM, it is fee-free anywhere in the world, he said.

Because of internet and mobile banking and online bill pay, Mark Brase, CEO of Points West Community Bank, believes there isn’t a need for more brick-and-mortar banks in the area. He does believe that consumers and small- to medium-sized businesses still want that personal connection when they make a loan request or open an account and that is where smaller community banks can fill that niche.

Points West Community Bank has been in Colorado since 1997 and has seven locations in Northern Colorado: two in Greeley, two in Windsor, and one each in Wellington, Fort Collins and Loveland. The bank’s Weld County and Larimer County deposits have increased slightly from June 2023.

In contrast, the two largest banks in the country, Wells Fargo Bank and JPMorgan Chase Bank, have both seen their deposits and market share decrease in Northern Colorado in the past year. First National Bank of Omaha, which operates as FNBO, holds the largest market share in Larimer County with $2.38 billion in deposits and is the second-largest bank in Weld County with $953 million in deposits. It also has increased its deposits in Broomfield and Boulder counties.

Creighton says High Plains Bank’s real competitive advantage is that its staff has time for its customers and offers that human touch that is so lacking in many other customer service situations. 

“I think people have come to accept poor customer service. It is almost a challenge to get people to believe there can be anything but mediocre customer service, so they don’t really look for it anymore,” he said.

High Plains Bank does more than just process transactions or respond to customer requests, he added, “we are collaborating with our customers.” 

High Plains’ Weld County deposits grew from $18.4 million in June 2023 to $27.7 million this year. Boulder County deposits total $101.7 million, compared with $97.9 million a year ago.

Banking is also impacted by the perception of higher interest rates, said Susan Moratelli, vice president of MidFirst Bank, which has locations in Denver, Boulder and Vail. The bank saw a small decrease in deposits at its Boulder branch from June 2023 to June 2024.

“In my opinion, as a consumer and a banker, these rates aren’t outrageous. They are above the very low rates we experienced three and four years ago, certainly, but my parents’ mortgage rate in the ‘60s was higher than it is now,” she said.

The perception of higher interest rates does impact the pace of what consumer and business customers are willing to dive into, she added. That could mean a residential mortgage, commercial property, expansion projects or equipment purchases.

Lending has slowed, she said, but deals are still going on “because life happens. We’re all feeling the pinch with deposits because we were flush with deposits during COVID and thereafter with some of the policies and programs that were enacted. But those deposits have been spent. Now that rates are a little higher, people are more tuned into leveraging the beauty of interest-earning deposits.”

The Fed raised interest rates by 550 basis points about two years ago, Brase said, “which seemed to be overnight.” Because of that, bank deposits went up just as fast.

“When deposit costs go up faster than loan and investment rates, all of our net interest margins were squeezed significantly for a year or two. Fortunately, we’ve had a little time to catch our breath,” he said. “The Fed dropped rates by 50 basis points, and I think the margin compression for most banks, at least for our bank, has subsided. Hopefully that is over. We are starting to see a little improvement. We are not back to where we were, but we are seeing improvement.”

Moratelli added that in this type of business environment, banks have to “pay attention to the margins of profitability. How you price your loans and deposits matters.”

The housing market has also been a challenge. Home prices continue to increase, but with 6.5% mortgage rates, many people who would like to upgrade to a bigger house have remained out of the market. For first time home buyers, it is nearly impossible to afford to purchase a home. 

“So many homeowners are sitting on a 3.5% interest rate. They may want to move but they are having a hard time giving up that 3.5% rate to pay 6.5%,” Brase said.

Boulder, Broomfield, Larimer and Weld counties have always been attractive locations for people wanting to open a business or take advantage of all that the Colorado Front Range has to offer. 

Because of that, Northern Colorado continues to grow in population … and lending institutions. 

“We have seen such an inflow of banks and credit unions over the last five to 10 years. The number of financial institutions in Larimer and Weld counties, that number seems like it is much higher and outweighs what the population growth has been for 5 to 10 years,” he said. “I don’t see a need for another bank or credit union on another corner. Maybe someone’s math says it is needed.”

Moratelli added that she believes new banks, credit unions and other lending institutions will continue to open offices in the region, especially with the area’s recent designation as a quantum computing hub and its “huge economic potential.”

Bank consolidation has impacted the industry as a whole, with some of the Wall Street banks closing some of their locations.

“Even in a community the size of Longmont, with rapid bank consolidation there are fewer and fewer community banks to provide services to small and medium-size businesses,” Creighton said. “I would suggest that it is actually going to become a public policy concern. There are so few smaller banks left.”

High Plains Bank serves Wiggins and Keenesburg in Weld County and has locations in Longmont, Morgan County and Bennett.

“There are many communities on the eastern plains where the community banks were taken over by banks in Texas and Orlando that don’t do ag lending,” Creighton said. Those communities are suffering because they don’t have many options for that type of service. 

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