14 · SBJ.NET MARCH 4-10, 2024 FOCUS BANKING & FINANCE We eliminated paper personnel files and went electronic. It was great for us to have that information at our fingertips. Cari Gray HR Director Panera Bread “APlus helped us to remove administrative tasks from our managers and create efficiencies within our HR Department.” APLUSPAYROLL.COM | (417) 890-6404 those loans.” Reflecting on the Fed’s rate increases, Jones said while the number of them in such a short period might have been historic, it was the appropriate policy action. “They had to move that quickly because, quite frankly, I think they waited too long to move at all,” Jones said, noting the current interest rates are at a normal level from a historical perspective. “The kind of normal range for a mortgage is probably between 6% and 7%. It’s normal to get 4% and 5% on your certificates of deposit. It just hasn’t been normal to do that in the last 15, 20 years.” Hataway said he’s heard from a lot of banks in the state that said overall numbers, such as deposits, didn’t suffer in the aftermath of the bank failures. “We saw almost no deposit runoff here in Missouri from our banks, community banks, regional banks,” he said. “What happened was you had this vision that things were going to go south, and then it’s like everybody’s confusion in the national media about why are we still headed toward a soft landing. Somehow, we just seem to be managing through less liquidity in the market or just good business practices from people out there.” Still, he said there were banks who had net interest margin compression that impacted profitability, as they had to pay more for deposits, CD specials and time deposits, which is an interest-bearing account with a specific maturity date. “They were working to keep their business and consumer deposits, so they were kind of squeezing their net interest margin a little bit,” he said. McNew said customers seem to be more accepting of the current rate environment, adding he believes commercial activity in the Midwest is on the rise in recent months. Locally, he pointed to the development plan to bring a second Target store to west Springfield as a significant project. City officials estimated the project cost at roughly $60 million, according to past Springfield Business Journal reporting. City Council is currently considering a community improvement district proposal for Sunshine Towne Center, the future home of the retailer. As mergers and acquisitions have contributed to a drop in the number of banks nationally, activity in that area was muted in 2023. The 98 bank mergers were down from 161 deals a year prior, a nearly 40% drop, according to S&P Global Market Intelligence. Regulatory scrutiny, interest rates and recession fears were contributing factors and that environment should mean another slow year in that area, Hataway said. “Once you get into 2025 and you do hopefully have a little bit of rate improvement, you’ll see some institutions that are able to go through M&A activity a little more,” he said. “It all comes down to how the market looks for that kind of activity. What are capital ratios and equity ratios going to do?” Rate wait The Fed’s decision on interest rates is one the banking industry will be watching closely this year, McNew said. “When you talk about we may be seeing lower rates, a lot of banks have to make that decision about the highest and best use of capital and deposits to make good prudent decisions,” he said. “You don’t want to build your business around guessing and hoping. You’re not going to see a lot of people, even if it’s educated, making guesses on what’s happening because you can really have some challenges from that.” While prior predictions from some economists estimated the Fed would make multiple interest rate cuts in 2024, Jones is skeptical. Part of that is connected to the national unemployment rate, which the U.S. Bureau of Labor Statistics reported at 3.7% in January, as well as the current 3.1% inflation rate. “If employment numbers continue to be strong, and inflation is just kind of sitting where it’s at, I don’t see them cutting,” he said. “Why would they cut? You tend to want to cut when you want to stimulate the economy, but if the economy doesn’t need stimulating and you cut, what you do is create inflation. We could perhaps maybe even be towards the end of the year before we see a cut, if at all.” McNew agrees there’s an uncertainty with what is going to happen, which has the industry in a wait-andsee mode. “Then also the political landscape dictates being conservative to see what’s going to be going on over the next coming months,” he said. “You’re going to see banks be very conservative in how they deploy their capital, how they deploy their deposits.” • Foggy: Banking industry professionals on the watch for Federal Reserve moves Continued from page 9 Monte McNew: People seem more accepting of the current interest rate environment. 3.1% Current U.S. inflation rate 40% Year-over-year decline in U.S. bank merger activity in 2023
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