John F. Healey is chair of Crown Bank, Edina, Minn., which he co-founded in 2000. Healey serves as 2024 president of the Bank Holding Company Association, which is holding its semi-annual Spring Seminar April 29-30 in Edina. BankBeat publisher Tom Bengtson talked with Healey about the economy, deposit challenges, and the value of networking. Their conversation has been edited for clarity.
You speak to people in business all the time. What are they telling you about their businesses or the economy?
John Healey: They feel healthy overall. The revenues and net incomes of our customers are just fine. The challenge is just the high cost of borrowing. It certainly is impacting real estate. From a banking standpoint, lending business has really slowed down. A lot of banks are seeing flat loans because of high interest rates. There’s not as much motivation to borrow.
One or two years ago, liquidity was abundant. That’s changed. How are you dealing with that and what are your customers demanding?
J.H.: The high interest rates have resulted in negative money supply growth. That’s meant fewer deposits for us to compete with. It’s a day-to-day challenge and there’s no panacea. We’ve paid more for deposits but look at it as a long term thing. Our customers are more important in the long term. That really has resulted in less operating income for banks. My sense is that the average community bank is running about 50 percent of last year’s net operating income, and that’s before debt service. So that’s a huge impact.
People still like to talk about the three bank failures that happened in 2023. Do your customers ask you about that?
J.H.: It did rapidly change the marketplace perception of banks; people were very concerned about the safety of banks at the time. We did a lot of communication and added a program (ICS) that allows us to do unlimited insurance on deposits.
Deposit insurance really bubbled to the top as an issue as a result of these failures, with people talking about deposit insurance reform.
J.H.: That has died down some. But I’m for at least doubling deposit insurance. There’s never been any inflationary indexing on it and there needs to be. It’s less in real dollars than it used to be.
Are your customers sensitive to this, and are they aware of the limits?
J.H.: They really are. We signed our customers up for the unlimited deposit insurance program. We had a lot of demand. I would estimate we’ve got 15 percent or more of deposits in that program now.
We’ve always considered one of the primary values of a BHCA membership is networking. Talk more about that.
J.H.: I’ve figured out that it’s a time saver. I can catch up with five or 10 or a dozen or more people that I would normally have lunch with. This two-day event is saving me five to 10 lunches or more!
Editor’s Note: The full conversation between BankBeat Publisher Tom Bengtson and John Healey, chair of Edina, Minn.-based Crown Bank, can be viewed on YouTube at https://www.youtube.com/watch?v=3uoTPdP8nsA