Independent Banker - January 2024 - 18

PORTFOLIO
®
ALM
BUDGETING
PROFITABILITY
are expected to climb to $1.4 trillion
in 2024 after dipping to $1.3 trillion
in 2023.
For commercial real estate loans,
construction activity has slowed, and
sales activity also dropped sharply
in 2023 due to the higher interest
rates and potential distress in CRE
loans. The fl ip side of that is that it
is a very capital-intensive sector and
there is huge demand for fi nancing
from borrowers with maturing loans.
According to the Mortgage Bankers
Association, an estimated $2.6 trillion
in commercial and multifamily loans
are expected to mature between 2023
and 2027.
Lumbee Guaranty Bank in
Pembroke, N.C., is continuing to look
at both commercial and multifamily
loans within its footprint as a good
book of business. Vacancy rates in
multifamily have remained very low,
says James W. Gore, chief credit
offi cer of the $500 million-asset
community bank. " I wouldn't say that
Interest rate headwinds
Borrowers are feeling the pinch from higher interest rates. As of
mid-December, the prime rate was hovering at 8.5% and borrowers
across the board are experiencing " sticker shock " from loan rates
that have more than doubled compared with early 2022. Looking
ahead to 2024, higher interest rates will continue to be the primary
challenge for borrowers. The higher rates are weighing on demand
for loans and making it more diff icult for banks to qualify some
borrowers due to the higher interest rate expense.
To varying degrees, community banks are seeing higher rates
We'll be at ICBA Live 2024!
Visit us a Booth #214
aff ect demand for loans. For example, Lumbee Guaranty Bank in
Pembroke, N.C., experienced relatively strong demand during the
first half of 2023, with year-over-year loan growth that stood at 7.1%
based on its reported second quarter results. However, it began to
see its lending activity plateau as the community bank moved into
the second half of the year.
" Because of the current outlook on interest rates maybe going
up a little bit or staying pretty flat, we expect very slow or no
growth during 2024, " notes James W. Gore, chief credit off icer.
First Business Bank in Madison, Wis., experienced strong
lending activity in the first half of 2023, with loan originations
up more than 10% year over year. Part of that increase is coming
from accelerating growth in its commercial and industrial
(C&I) business.
" What we hear from our business clients, particularly on the
conventional side, is that their businesses are doing well, and
they've got plenty of demand, " says Dave Seiler, president and
COO of the community bank's parent company, First Business
Financial Services Inc. He adds that the number one challenge is
still finding talent-not interest rates.

Independent Banker - January 2024

Table of Contents for the Digital Edition of Independent Banker - January 2024

Contents
Independent Banker - January 2024 - Cover1
Independent Banker - January 2024 - Cover2
Independent Banker - January 2024 - Contents
Independent Banker - January 2024 - 2
Independent Banker - January 2024 - 3
Independent Banker - January 2024 - 4
Independent Banker - January 2024 - 5
Independent Banker - January 2024 - 6
Independent Banker - January 2024 - 7
Independent Banker - January 2024 - 8
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Independent Banker - January 2024 - 11
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Independent Banker - January 2024 - Cover3
Independent Banker - January 2024 - Cover4
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