Banking Q&A: State of the industry

Banking sector issues have dominated financial headlines in the U.S. and abroad. The collapse of Silicon Valley Bank on March 10, followed by the failure of Signature Bank, continue to reverberate throughout the U.S. banking industry. Liquidity troubles at Switzerland’s Credit Suisse, meanwhile, threaten to roil global banking markets.

Northern Nevada Business Weekly conducted question-and-answer interviews with two regional banking executives to discuss these issues and others that impact the regional financial landscape. Here are their responses.

Andrew J. Ryback, president and CEO, Plumas Bank and Plumas Bancorp

 

Andrew J. Ryback, president and CEO, Plumas Bank and Plumas Bancorp

NNBW: How do you reassure consumers and businesses that their money is safe, especially with what recently transpired in Silicon Valley? Discuss the broader implications of the SVB collapse on the financial industry and how those impacts might be felt regionally or among your customers.

Ryback: Despite recent events surrounding Silicon Valley Bank and Signature Bank, the national banking system overall is resilient. We’re reassuring our clients by highlighting Plumas Bank’s performance, which reflects our longstanding strength and stability in comparison to peers.

We’re educating our clients about the community bank business model in comparison to larger financial institutions. As a community bank, we’re based locally — Plumas Bank is one of the only independent community banks in Northern Nevada and the only bank holding company headquartered in Reno. We are relationship focused and serve the unique needs of our clients. Our purpose is long-term financial stability and prosperity for the communities we serve.

NNBW: Where do you see interest rates heading in the next six, 12 and 24 months, and how will any additional rate movements affect Northern Nevada businesses and consumers?

Ryback: Over the past year, the Federal Reserve increased interest rates rapidly to keep inflation in check. The rate of the increase has created unanticipated ripple effects.

Some predictions indicate interest rates could be nearing their peak in the next six months, and we’ll get a good indication of that very soon. I anticipate we’ll enter a static or declining rate environment within the next 24 months. World events or global issues can also create a more rapid response by the feds.

NNBW: Commercial construction remains strong in Northern Nevada despite the rise in interest rates and increased cost of construction financing. Discuss the industry's view on construction lending in a high interest rate environment coupled with an extended period of regional growth.

Ryback: Northern Nevada has a lot of construction needs, with many businesses relocating to the area. Plumas Bank provides construction financing, and borrowers typically receive variable rates during the construction phase. With the rapid rise in interest rates, variable rates have strained some projects. Plumas Bank is providing as much flexibility as possible to keep construction projects moving forward including setting fixed rates during specific phases of the project.

NNBW: What’s your projection of the near future for the banking industry, especially in terms of mergers or acquisitions?

Ryback: We’ll continue to witness some combinations among the largest 150 banks, and some of those banks have a presence in the Northern Nevada region. From the government’s perspective, very large banks hold a concentration of financial risk, and as a result, federal regulatory approval of many of these proposed mergers is slowing.

While liquidity recently became the top concern for banks, credit quality and sensitivity to market risks will differentiate banks and their health in the coming months. Mergers and acquisitions are always occurring, and we’re seeing some in our area.

W. Dean Altus, Jr., Interim President/CEO, Greater Nevada Credit Union

 

W. Dean Altus, Jr., Interim President/CEO, Greater Nevada Credit Union

NNBW: How do you reassure consumers and businesses that their money is safe, especially with what recently transpired in Silicon Valley? Discuss the broader implications of the SVB collapse on the financial industry and how those impacts might be felt regionally or among your customers.

Altus, Jr.: At the time of submitting for this article, GNCU has not seen regional impacts due to the SVB collapse. However, we understand that recent banking challenges may have caused concern and uncertainty. Greater Nevada Credit Union continually assures our members and customers that we remain committed to serving them with integrity, transparency and reliability. Our credit union is backed by a strong regulatory framework, which ensures that we adhere to strict standards of safety and soundness. GNCU deposits are federally insured – our deposits are insured up to $250,000 per individual depositor, the same level as any federally-insured bank. In fact, credit union members have never lost a penny of insured savings at a federally-insured credit union, and GNCU is a safe place to save money.

NNBW: Where do you see interest rates heading in the next six, 12 and 24 months, and how will any additional rate movements affect Northern Nevada businesses and consumers?

Altus, Jr.: Since the COVID-19 pandemic started in March 2020, we’ve seen how changes to the Fed Rate affect the economy in real-time. Throughout the pandemic, the Fed dropped rates to nearly 0 percent to encourage businesses to invest and hire more workers and increase consumer spending to heat a cooling economy. When left unchecked, these positive changes can also lead to inflation. Since March 2022, the Fed has been increasing interest rates in an effort to fight inflation, which makes it more expensive to borrow money. Many experts are predicting interest rates will continue to increase as the Fed works to drive down inflation.

But it's not all bad news. When you deposit money in a bank or credit union, it's almost as if you're lending it to them so they can lend it to others. In return for letting them use your money, the financial institution pays you interest, which means you can benefit when the Fed raises interest rates.

Trying to navigate tough financial times can feel overwhelming, especially when making financial decisions. But you don't have to go through it alone when you have a partner that has your back like a credit union. As a member of a credit union, you’re also an owner, which means you get all the benefits of lower fees, higher savings rates, and attractive loans. Rather than paying off shareholders, credit unions reinvest revenue into their members and communities, which means your money can do more good while helping you do well.

NNBW: What’s your projection of the near future for the banking industry, especially in terms of mergers or acquisitions?

Altus, Jr.: The global pandemic accelerated the changes already underway in the credit union and banking industry. Notably advances in technology, consumer behaviors to adopt both digital and hybrid services, and the rise of fintech and non-bank startups, have created new opportunities and challenges. Greater Nevada Credit Union will continue to innovate and adapt to stay relevant.

As a community-based organization, we need to deliver what our members desire and serve the unique needs of those communities sometimes overlooked by larger for-profit entities. Mergers and acquisitions are typically driven by the need for increased profits and improved efficiency. That’s never been our motive, as we look to help more people live greater by accessing quality financial products at an affordable price. It is our firm belief that innovation does not have to come with a cost of quality service.