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Utah Business

Our experts got together to discuss what's new this year in banking and finance.

How Millennials Are Changing Banking (According To Banking Professionals)

This month, Utah Business partnered with Holland & Hart to host a roundtable event featuring banking leaders to discuss the impact of millennials on banking institutions, and the future of banking. Moderated by Sherilyn Olsen, partner at Holland & Hart, here are a few highlights from the event.

How has commercial lending in Utah fared over the last couple of years? 

Ed Sanches | SVP | Central Bank

Commercial lending is really driven by the job market, and the job market in Utah is great.

Ram Halteh | SVP | Key Bank

Every year we say the same thing, “We’re waiting for things to slow down,” yet they continue to grow. For us, we’ve grown 10 percent year over year, consistently, at least 10 percent in that area. And last year was no exception. We expected it to slow down, we thought interest rates may start going up, but they went back down, so all we’ve seen, really, is growth.

Ed Sanches | SVP | Central Bank

There are only four other states in the nation that have as good, or better, job growth than Utah. I think that’s Nevada, Arizona, Washington, and Texas. So when you look at just the state, you just see big projects everywhere, so that naturally lends to commercial lending in Salt Lake and in particular Central Bank. We’re located in Utah County and it’s just growing like crazy, I mean you look at Silicon Slopes all through that corridor and there’s just so much commercial growing. 

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How has the labor shortage in Utah impacted commercial projects? 

Sherilyn Olsen | Partner | Holland & Hart

The great labor market has led to some labor shortages that impact commercial projects being able to be done on time. 

Brad Baldwin | President | First Utah Bank

A lot of our commercial borrowers are having difficulty finding qualified people.

Ram Halteh | SVP | Key Bank

It’s driven up construction costs. When we’re looking at commercial real estate projects, it’s difficult for us to get appraisals that match the construction costs, especially when we’re doing “as is” and “as completed”, and part of it is, it just hasn’t caught up to it and that’s primarily driven by higher labor cost.

Our experts got together to discuss what's new this year in banking and finance.
Utah Business Magazine meeting with Utah Bankers at offices of Holland & Hart in downtown Salt Lake City November 6, 2019.

How is technology impacting the commercial lending business? 

Len Williams | CEO | Peoples Utah Bancorp

We’re spending more on technology, probably five times what we did two years ago, and double what we did last year. The technology is giving the community banks an opportunity to compete on a larger scale. We just signed up for an automated lending platform that’s the same one that Bank of America, KeyBank, and US Bank use, and we’re a little bank headquartered out of Utah County. Same price, same process, same visibility to our clients. It’s provided a great opportunity.

Erik Tadje | VP | Brighton Bank

We have a four branch network, our footprint is so small. Technology gives us access to the state and gives us availability where we wouldn’t have in the past. So technology makes us more relevant than if we were back how we were 30 years ago. Technology allows us to model and access to the same type of tools that some of the larger firms have so that we can access and mitigate risk on a larger scale.

Ram Halteh | SVP | Key Bank

We’re investing heavily. But we’re also purchasing other tech firms and fintech firms that complement our business. We have five areas of focus, and we’re trying to digitize our enterprise, support the business strategy, insight and analytics, cyberfraud, and modernize our operating efficiency. 

What are the trends you are seeing in cybersecurity?

Brad Baldwin | President | First Utah Bank

We’re starting an examination this week, and a common question from regulators is, “what’s your largest concern?” Historically, I would have said credit, quality, interest rate risk, and market conditions. My answer very quickly was cybersecurity risk. We’ve seen our customer’s systems hacked, and turn into computer takeovers. 

The vulnerability comes on the consumer side and the business owner’s side. We’re seeing a lot of impersonation where they’re going in and spoofing accounts, they’re emailing them pretending to be their clients. So really, it’s more training on business banking and consumer banking to make sure they’re paying attention to things on their side because that’s where the vulnerability’s coming in. 

Kelly Harris | President | Harris Financial

Once a new way of tricking someone into clicking on an email attachment has been figured out, there’s 10 more that come into play. It’s on the consumer side, but we have to take responsibility for that with the consumer and it’s just a daily challenge. I’ve got an email from every bank in town that says my account has been compromised, and I don’t have accounts with them. But it’s just something new every day, and it’s certainly challenging us in the securities world.

Len Williams | CEO | Peoples Utah Bancorp

I assume all the banks hire third parties to come and test their systems periodically. We hire a group of former government security employees, and they always find a way in. There is always a way in. The thing that keeps me up at night is knowing we’re never going to be perfect at that, we just have to be more perfect than the bank across the street. 

Our experts got together to discuss what's new this year in banking and finance.
Brad Baldwin from the First Bank of Utah speaks during a meeting of Utah Business magazine with Utah Bankers at offices of Holland & Hart in downtown Salt Lake City November 6, 2019.

Darryle P. Rude | Chief Examiner | Utah Department of Financial Institutions

As a regulator of state-chartered institutions, cybersecurity has been our number one risk.  Cyber is a very dynamic process. Fix it today, someone’s trying to attack you tomorrow. It is an ongoing, never-ending process. 

There are several states that are becoming more and more conservative and pushing out state-only laws that haven’t yet been adopted nationwide. New York and California are kind of leaders [in regards to handling] the consumer data of those consumers in those states. So if you’re operating nationwide, or outside of Utah, there may be even more restrictive compliance regulations in those areas right now.

Sherilyn Olsen | Partner | Holland & Hart

The regulatory push seems to affect not just vendors for security or hosting of data, but even law firms that represent banks. We’re required by our banking clients to disclose all the cybersecurity precautions we have in place. 

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Branden Hansen | EVP/CFO | Bank of Utah

Wire fraud has become very pervasive, and the dollar amounts can be quite large. We try to educate the customers. They’re the ones being taken advantage of, and as much as we try to sort of keep ahead of what’s happening, that’s where the risks lie. As an industry, we’ve got to figure out a better process, or better education for those customers to protect themselves.

Brad Baldwin | President | First Utah Bank

One of the hacker’s tools is LinkedIn. They can go on LinkedIn and profile your entire company. People are very free to put their job title, their job description, and their contact information. So they can build an organizational chart from the CEO to the accounting department… and use that information to send phony emails from the CEO to the accountant or the CFO, or somebody in their treasury management department. It makes them look very real. People just aren’t aware of how that information is really being used.

What are you seeing with millennials and brick-and-mortar banking?

Brad Baldwin | President | First Utah Bank

Community banks like ours continue to open branches. I think the challenge for every bank is to integrate your brick-and-mortar presence with your online presence. I think the issue is that we don’t need as many branches as we need to. Our total branch traffic is substantially lower over the last five years. But our total transactions are up, which tells you that people are doing them on the phone, on the computer, or on the tablet. But people do want to know you’re there. They want to come in, usually to open accounts, make changes, and resolve issues. It would be a huge mistake to close your branches.

Branden Hansen | EVP/CFO | Bank of Utah

Most community banks have holes in their footprint. Some of the national banks maybe are over-built and that’s why they’re closing branches, but I think as a community bank, there are still expansion opportunities.

Len Williams | CEO | Peoples Utah Bancorp

One of the fallacies in technology is that we’ll come up with a new channel and can free up this other one. You can never take away a channel. Once you have one, be it a branch, be it a drive-through, be it bank by mail, some people still use that. You can’t ever take it away because you get a certain number of clients that get hooked on that kind of a deal. So it’s hard to direct to one easy, cheap channel. So we are building less. 

Ed Sanches | SVP | Central Bank

Community banks are looking very carefully at the holes in the footprints. We’re also looking differently at what a traditional bank experience looks like when you enter. Even within the offices that we currently have, we’re looking at that a little differently. I think the younger generation expects that it is going to be different than maybe what their parents or grandparents felt. 

How do the current trends in Utah compare nationally? 

Len Williams | CEO | Peoples Utah Bancorp

I sat on an FDAC council in DC, and every meeting we start by talking about our area and our state. Our business and our customer’s business shows that things still look a little better here than the rest of the country.

Brad Baldwin | President | First Utah Bank

It’s very hard to have a thriving bank if you’re not in a thriving economy. So, we’re just very fortunate to be in Utah at this point in time.

We all benefit from a diverse economy in Utah. One of the most diverse in the country. So most of our portfolios would reflect that. With no undue concentrations in any one industry.  Salt Lake and the Wasatch front are big winners in this expansion, so is Boise, so is Denver, so is Seattle. But not everybody is.

Darryle P. Rude | Chief Examiner | Utah Department of Financial Institutions

Speaking specifically to the state charter depository institutions, we usually outperform the national banks, locally and across the country. Better capitalized, higher earnings, and a little less concentrated. You know, we seemed to have learned from past problems with commercial real estate and have brought those forward and diversified the balance sheet so hopefully, they’re better protected for the next downturn. The rural areas are not sharing in the wealth and the growth and the higher standard of living. 

What’s the number one challenge that you anticipate for 2020?

Brad Baldwin | President | First Utah Bank

Qualified talent is high on the list. There’s a lot of competition, not just among banking, the financial institutions, the industries that are looking for highly educated skilled people with technology backgrounds and skills. Unemployment is so low, it’s hard to grow your business if you can’t get the right people.  We’ve been very active with the University of Utah, working with their banking program up there with banking classes. 

Ed Sanches | SVP | Central Bank

I think another challenge is how we can evolve but still maintain our identity. We have to evolve, we have to change. The banking industry has changed dramatically over the last five years, and over the next 10, it’s going to continue to change. The challenge for us is how do we continue to do that and maintain our identity and not change who we are? Otherwise, we run the risk of becoming the blockbuster of banking.

Isaac Ewaleifoh | VP | Goldman Sachs

Negative rates. Primarily, you get deposits from people and get in a particular amount of money, and then turn around and lend it out at the higher rate, and then you make that net interest. Now, we’ve had two back-to-back records in the US and might not be getting nearer to negative rates. Speaking personally for myself, if your bank were to charge me money to put my money in the bank, then I probably wouldn’t put my money in that bank. If those deposits dry up, then how will the banks get money to lend out?

Ed Sanches | SVP | Central Bank

There are so many fintech companies out there.  A huge challenge that all banks are going to be facing, is how can we become that easy and convenient? It’s a little more difficult with the regulatory environment that we’re under to try to comply with that at the same time make things easy.

Erik Tadje | VP | Brighton Bank

How much money is deposited in Venmo right now that traditionally would be in our banks? I talked to my kids and I say “Hey, your account’s getting low.” “No, it’s not, I’ve got $800 in Venmo.” We’ve got to change how we’re gathering deposits and how we’re funding our commercial loans. That will continue to evolve like cybersecurity, we have to know how to do it, and once we know how to do it, it will change again with technology.

Len Williams | CEO | Peoples Utah Bancorp

Margin compression is an issue that we’re definitely going to have to deal with this next year.

Our experts got together to discuss what's new this year in banking and finance.

What are your biggest opportunities for growth in 2020? 

Ram Halteh | SVP | Key Bank

People are afraid of restaurants. We look at those because they’re saying they fail, and we’ll provide some SP lending, but we’ll look at the payment side of the restaurant business, and providing tech support. If you can pay your bill right at the table, and using our key bank application without having to wait for the server to come to you, and also make your reservation through there. Then, that’s part of the solution that we provide. Another one is transportation. The Amazon effect has had an impact on that as well. But we’re being very selective. And so, certain areas that other banks and other industries may perceive as slightly historically risky, if you know it really well, and you can mitigate the risk and you know which clients to focus on, can be very good for us.

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Erik Tadje | VP | Brighton Bank

Our opportunity lies in getting more good talent―talking about talent as an issue―so that we can expand organically and kind of make sure that we can hit more customers with what we already have. We all have to do more with less every year. The technology question helps that. I don’t see us changing that at Brighton Bank anytime soon.

Isaac Ewaleifoh | VP | Goldman Sachs

For us, it’s really expanding into areas that we ordinarily were not in before. So the launch of our consumer platform was very popular, and a few months ago we launched a co-branded credit card with Apple, and that was wildly successful, it had millions of people subscribe to credit cards or typically carry a higher rate on them. A lot of people are balanced on credit cards, and it’s a huge margin business for us. Being able to use that technology and obviously to partner with a firm like Apple to roll that out, that’s tested, it’s working. 

Ed Sanches | SVP | Central Bank

We have to teach our young to be interested in financial services. There’s an opportunity for investment and other opportunities. I think that’s incumbent upon the industry as a whole, that we just can’t raid each other’s banks and institutions from employees. We’ve got to start grooming the next generation.

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