November 8, 2013

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Industry Professionals Discuss National, Local Economy’s Impact on Banks

By Rachel Madison

November 8, 2013

An uncertain national economy and a state economy that seems to be on the uptick were major talking points for industry professionals during Utah Business’ banking and finance roundtable Thursday.

Many agreed that the national economy has long been in an age of uncertainty. And while that uncertainty hasn’t hit Utah as hard as other states, a common sentiment was that things like political unrest, the government shutdown and the national debt have each affected banks, specifically when it comes to businesses applying for loans.

Robert Bowen, president and COO at Brighton Bank, said even though Utah’s faring well, the state is still hitched to the national economy and banks need to be cautious.

“We’re not insulated,” he said. “If the national economy fails, we’ll follow. Banks are being cautious and can’t get caught up in the positive numbers. We’re seeing loan demand increasing and it’s healthy. It’s not as strong as it has been, but there is an increase. A lot of it is on the residential real estate side.”

Dean Luikart, senior vice president at Wells Fargo Bank, said the fact that Utah has one of the most diverse economies in terms of variety of businesses has kept the state’s economy afloat, but not many businesses are looking for lending thanks to the national economy.

“The demand is just not there on lending,” he said. “The dollars are just sitting there waiting to be used. If you lend a business a million dollars, they would historically use 60 percent. After 2008, that dropped to 30 percent. The commitments are still there, but there’s no demand. Today we see about 45 to 50 percent, so it’s on its way back. Economic growth and development are what makes a business want to borrow money, not a low rate. They certainly want the best rate they can get, but the rate doesn’t determine what a business owner will do when it comes to expanding a business or something like that. Businesses aren’t driven to borrow when there are low rates like a consumer is.”

Heidi Bleggi, executive vice president at American Bank of Commerce, said she’s noticed that the younger generation—people between the ages of 20 and 35—don’t feel the same about the economy as older people do. In recent years, she’s witnessed several young entrepreneurs take out loans to start successful businesses.

“They don’t have that trepidation,” she said. “They haven’t gone through the good times a lot of us went through.”

Mark Howell, president at AmericanWest Bank, said in terms of growth and unemployment, Utah is one of the best-looking states in the country. Companies are attracted to the state because of its growth and hard-working population. However, that doesn’t mean challenges for banks are over, especially when it comes to housing.

“Companies are continuing to move to Utah, and that’ll help the housing issue,” he said. “That’s very rate sensitive. If rates move up, mortgage production stops. That’s the same case across the country. However, the general mood in Utah should be positive.”

Sheila Camarella, senior vice president at Key Bank, said when people look at Utah, they are able to see an example of what can happen when government, businesses and public and private sectors work together.

“It’s helped us sustain a positive and vibrant economic status for years,” she said.

Camarella said overall, the state of Utah and its banks are tied to the national economy, including all the constraints and regulations that come out of Washington. Until the national economy and the disarray in Washington improve, banks may not see any big changes on the loan front.

The banking and finance roundtable will appear in the January issue of Utah Business magazine.


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