Page 16 - BusinessWest January 23, 2023

Tony Worden says everyone is hoping the Fed helps the economy to a “soft landing” with its rate policy aimed at reversing inflation.
outcome will be,” he went on. “Will the Federal Reserve be able
to engineer a soft landing? Last year, we thought we were in for a couple of rate increases, but the rates went much higher than every- one thought they would. When you do strategic planning, you make assumptions about what the rate environment will be, and we were all wrong last year.”
This year, economic projections include not only the rate issue, but whether unem- ployment will rise, what the impact of energy costs will be, and much more. On the topic of energy, Worden said the region has seen a mild winter so far, so that could help people weather the still-high costs.
“I guess if people knew what was going to happen, they could make a lot of money. From a banking standpoint, a lot of loan customers don’t want to make decisions until they know where we’re all situated.”
Saving and Spending
Worden lend some recent historical per- spective to what banks are seeing when it comes to consumer and business behavior, starting in 2020, at the height of the COVID- 19 pandemic.
“For a few months, Americans were saving at a rate that hadn’t been seen in 80, 90 years. They were saving money, they weren’t going anywhere, there was a lot of stimulus, both federal and state, and banks saw their depos- its increase tremendously because people were sitting on a lot of cash.”
While that’s generally not a bad thing for banks, he said, coopera- tive banks not only pay for FDIC insurance, but also pay premiums on the private Depositors Insurance Fund, which covers deposits beyond the $250,000 the FDIC covers. “All the deposits coming in but no loan demand cost us money in a way; we were paying insur- ance on all the deposits, but couldn’t put the deposits to work.”
In the second year of the pandemic, people were starting to spend again, take vacations, and work on their homes, while most stimulus had ended, so deposit levels crept toward a more typical environment, and loans picked up as well. And while the current
“We’re still
seeing a decent residential market, not as robust as
it had been, but still decent. On the commercial side, we’re still looking at some interesting deals. But everyone
is holding their breath when
it comes to construction lending for large projects.”
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