2024 Outlook and Observations from the Findley Reports
The Findley Reports enters 2024 with some question marks as to where things will go in 2024 for many CFIs in the Western United States. While financial performance for many banks was good in 2023 due to the rise in interest rates, the last few years shook our foundations, and the liquidity scare and two major failures in California did not help things.
While we leave 2023 shaking our heads, we also have a positive outlook that the future will be better for those who are prepared and have an open mind and an open heart. We see most CFIs did a great job in positioning themselves to weather this continuing storm. But the liquidity crunch and economy are not helping. We remain cautiously optimistic about the prospects of most CFIs, but there are still quite a few banks with a challenged future, and 2024 will be a difficult year for those who do not have a fortress-type balance sheet, a stable income statement, and a connection with their customers. We had a few large and surprising hard exits, a voluntary liquidation, and a forced merger in 2023.
We may have a few hard exits in 2024. Top line revenue will likely decrease due to the interest rates, but, unfortunately, if interest rates come down, the COF will likely be slow on the downward end, impacting NIM. CFIs have proven how critical they are to the economy and small - to medium-sized businesses. While we see some big challenges for a few that have not built a fortress-type balance sheet, those CFIs that have structured their balance sheet and have a clear focus and larger purpose will be able to survive quite nicely. The returns will not be as great – but still there will be a decent return. The word continues to be: survive. A 7% to 10% ROAE is a good thing in a difficult time! Some will do much better. The goal is to be a significant positive experience for all who touch your bank. Not every year can be a record year!!