Download File - South Metro Denver Chamber

Economic Forecast
A banking perspective
Don Childears
President and CEO
Colorado Bankers Association
Who we are
The Colorado Bankers Association represents more than 90% of :
• The $142 billion in assets held by banks in Colorado
• 141 FDIC insured, regulated, traditional banks operating in
Colorado
• 21,722 men and women who work within a Colorado bank
CBA focuses on creating a stronger economy and
helping Coloradans realize dreams by building
better banks.
Scope of Colorado banking
• Banks – 141 (89 Colorado charters, 52 out-of-state banks)
• Employees – 21,722 – exceeding $1.0 billion payroll
• Offices – 1,519 – not counting delivery of services via ATM, telephone
banking, internet banking, mobile banking
• Assets – $142 billion
• Capital – $11.1 billion
• Loans – $86.6 billion – Helping Coloradans Realize Dreams
• Voluntary contributions to community groups – $87 million/year
• Taxes – Historically pay $½ billion annually in income taxes
General health of financial sector
• Record run of record low rates – impacting bonds, equity
investments, cost of credit
• What’s the future on interest rates?
• Multiple CO economies: metro & north, other Front Range, resorts,
rural ag – each further segmented, experiencing varying amounts of
unemployment, population growth, construction
• There is no one Colorado economy
General health: continued
Many variables in ag, mining & oil/gas, construction, data, technology,
education, health care, tourism, but a few generalities from banks’
perspective:
• Concern about potential over-development in sectors (like higher
priced apartments), so banks cautious in lending – given CO’s
boom/bust history
• Demise of much of mining and the price of oil impacts not just
workers and companies, but whole communities, tax-dependent
governments
Generalities
Ag production
• Low commodity prices are hurting ag producers. In past, they already
would be in trouble. This time high equity (little debt) buys time so
we don't anticipate broad actions until next fall – by banks and/or
regulators.
• Compounding factor? Trump attitudes on trade could hurt ag exports and
further depress prices?
Generalities: continued
Infrastructure
• Infrastructure spending: spurred by Trump’s plans or stymied by
those concerned about deficits?
• With already tight state budget, CO spending on infrastructure
(transportation) is political issue: no room in state budget now, so dependent
on “new” revenue (hospital provider fee) or ballot initiatives in 2018 (or
2017?) where education and social service sectors compete for same $$ and
only one of them or none will pass.
Generalities: continued
• Health care – who knows where health insurance segment is headed?
Much tied to result of Obamacare.
• Tourism – taught again how dependent we are on Mother Nature.
• Population – continue to be Mecca for millennials?
Banking
Banks’ earning pressures + rising expenses + over-regulation + scarce
capital = consolidation
• Loan demand is strong now, but that is expected.
• Could be substantial loan losses if economy falters.
Regulation
Regulation is killer:
• CBA display on 2,400 page Dodd/Frank Act
• Others thought we were insane when we predicted in
2010 that 20,000 pages of regulations would come out
of that (6½’ of paper) picture
• Not all rules adopted and surpassed 24,000 pages.
• Expect 30,000 pages when done – above 8’ ceiling.
• All that is on top of previous regulations.
• The cost of compliance and risk of noncompliance are
driving factors in small banks selling to larger ones.
Banking regulation: continued
• Complex regulations, for example: TRID mortgage disclosure form (2
merged into 1) has 1,000 pages of instructions – liability if there is any
deviation.
• Some community banks have stopped making mortgage loans because of
this volume, complexity and cost of compliance. Adds to consolidation
pressure, so fewer competitors.
Regulation: what it means for customers
• Almost no credit to low income individuals despite banks believing
they are creditworthy because they fail government standards.
• Small business owners must jump through many expensive hoops and
experience lengthy delays to get credit.
• Trickle down: requirements for big banks imposed on smaller ones as
“best practices.”
Political
• Already touched on federal issues
• Initiatives with economic impact
• 69 – State Single Payer Health Care System, defeated 4:1
• 70 – State Minimum Wage, adopted
• Construction defects – possible, great effort to promote, optimistic (but
legislative leaders always start there)
Marijuana
• Trump’s “states’ rights” view, or his AG pick Jeff Sessions’ “enforce
federal law” view?
• Congressional action not in near future despite majority of states
permitting.
• Consolidation in marijuana industry.
• 10 people control nearly 20% of Denver’s 1,046 active medical and
recreational licenses.
• Silver bullet du jour doesn’t work.
National economy
• Various regulatory relief bills – There is momentum, but many bigger,
high-impact issues
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Infrastructure
Tax reform
Obamacare
Immigration
Trade agreements
• Banks will be working hard to achieve regulatory relief in 2017, to
strike while the iron is hot
• That means restoring flexibility so they can lend to customers now
precluded by government regulations
Thank You
Colorado Bankers Association
One Sherman Place
140 East 19th Avenue, #400
Denver, CO 80203
Phone: 303-825-1575
www.coloradobankers.org
www.financialinfo.org
(consumer information)
www.smallbizlending.org
Colorado Bankers Association
Government Relations team:
CBA
Don Childears
Jenifer Waller
Amanda Averch
Colorado Legislative Services
Melanie Layton
Jim Cole
Garin Vorthmann
Zoey DeWolf
Hogan Lovell
Craig Umbaugh
Other partners