Area lenders project stability in Boulder Valley, northern Colo.

COMMERCIAL BANKS

Banker: SBA plans to close Denver office could affect economy

By Paula Aven Gladych

Despite tariff concerns and uncertainty around deep cuts to the federal government, commercial banks in the Boulder Valley and northern Colorado continue to be stable.

Susan Moratelli, vice president of commercial lending at MidFirst Bank in Boulder, said she is optimistic about this year.

“There’s general optimism even with office space,” she said. “If you talk to certain Realtors, they feel like this will shift, because a lot of companies are requiring employees return to work instead of the full remote that they enjoyed from COVID for awhile.”

Moratelli added that “people are moving ahead with projects. We are just accepting that the current rate environment is here to stay, at least in the stable range for the foreseeable future. So that helps, at least, with certainty for budget planning purposes and revenue forecasts, things like that.”

Tariffs continue to be a big concern for some of Moratelli’s clients, especially in the commercial and industrial loan space. They are “really causing heartburn and uncertainty for how it is going to impact their business model,” Moratelli said, and whether they should pass these higher costs on to their clients or what that chain reaction will be if they are doing any kind of offshore manufacturing or getting components or materials from international sources.

“It is a ripple effect,” she said.

Moratelli also commented on the U.S. Small Business Administration’s plans to close its office in Denver. So far, that announcement has not impacted banks working to put together SBA requests for loans.

“I’m not sure how that will trickle down and affect participant banks. The SBA, their mission is to grow small businesses across our country. Their support and presence is needed,” Moratelli said.

Moratelli added that she is also not sure how the current administration is going to impact participant banks, but she said that newcomers continue to move into Boulder.

Banks want to be in the area because they perceive it is where the action is, she said.

Farther north on the Front Range banks are in a great position to lend, which is great for borrowers, said Shawn Osthoff, president of Bank of Colorado in Fort Collins.

“Banks have very good credit portfolios, low past dues and well-capitalized and strong liquidity, and are in a great position to lend, which is great for borrowers,” Osthoff said.

President Donald Trump’s tariff war with Mexico, Canada and China prompted some businesses to stock up on inventory before these tariffs and counter-tariffs went into effect, he said. So, several borrowers are taking a “wait and see approach” on projects that could be impacted by tariffs or interest rates, Osthoff said.

In the multifamily residential market, Osthoff said he is seeing signs of a slowdown along the Front Range.

“Our supply caught up with demand in certain areas. On the other hand, there still appears to be strong demand for single-family residential units. We will see that into 2025 and into 2026,” he said. “The recent relief on mortgage rates, that helps a lot.”

Another big challenge is the occupancy rates of large office buildings, particularly in the Denver metro area.“Fortunately, not many community banks have exposure to those,” Osthoff said.

“Vacancy rates are high, rental rates are low. Northern Colorado has not experienced that kind of problem in office (buildings). For the most part, particularly in Class A or B office, there is still pretty good demand and good occupancy in Northern Colorado,” said Osthoff.

Gerard Nalezny, chairman and CEO of Verus Bank of Commerce, said his bank focuses on commercial lending in Northern Colorado, including Fort Collins, Loveland, Greeley, Windsor and Wellington.

“Those particular markets appear to be stable. No duress or any concerns. We are not seeing a rush of demand nor are we seeing an absolute shortage. We are somewhere in between,” Nalezny said.

He said he isn’t concerned about the market currently, but he is keeping a watch on the occupancy rates for industrial space since there seems to be a lot of industrial warehouse space along I-25.

“I wonder, at some point, if we will see softness in that market,” Nalezny said.

Northern Colorado also has a healthy occupancy right now in its office space, but Nalezny wondered if there would be a “bulge in office space that is associated with federal leases that might become vacant.”

Osthoff said that most banks are well-positioned to lend money right now.

From a Small Business Administration loan standpoint, there is still good demand and good access to guaranteed loans and the 504 loan program, which provides long-term, fixed rate financing for growing business, he said.

“We’ve got borrowers that have good capital saved up for a project, as long as they can put the money down that is required. The challenge we are seeing on multifamily projects or others where they are relying on rental income, is they may have to put more money into the project to make it cash flow. Rather than 75% loan-to-value, it is more like 60% loan-to-value, 40% equity in it to get it where the project will cash flow,” Osthoff said. “ It is all tied to cost, market rent rates, interest rates, and so I think more equity is required to make project cash flow if you are carrying debt.”

He added that Northern Colorado is seeing a fair amount of new construction, and many small businesses are doing well and looking to expand or acquire.

“We’re cautiously optimistic. There are a lot of wild cards out there, including tariffs and government funding. If government agency funding is cut it can impact customers renting to those agencies. Those are all things we are going to keep an eye on, and time will tell how it will impact our customers and impact the economy,” Osthoff said.