Writer: Max Crampton-Thomas
2 min read August 2021 — Small, nimble community banks proved to be a vital cog in Minnesota’s handling of the pandemic and recovery. Jeff Wessels, president of Crown Bank, spoke with Invest: and discussed how his financial institution helped businesses navigate the uncertainties of the pandemic to emerge stronger as a result.
What were the most significant ways in which Crown Bank grew over the past year?
In the last year and a half, we were highly active in the PPP sector for our local businesses. Despite our size, we did over 600 loans throughout the two rounds of funding. When the pandemic shutdown occurred last March, we understood that the big banks were going to tighten their credit. We took the opportunity to make our services and products available to small businesses and other investors in the community at that time to help them continue to grow and get through the pandemic. We were able to grow the bank from about $195 million at the end of March 2019 to about $300 million by the end of June 2021.
Because so many businesses received PPP loans and didn’t need their banks to provide lines of credit, we shifted toward the commercial real estate market by adding more products for our customers. What that allowed us to do is significantly grow our commercial real estate loan portfolio and help that sector grow in the Minneapolis area.
What is the state of affairs of the banking and financial services sector?
The banking and financial services sector in the Twin Cities is strong. Bank profits are up and there is strong demand particularly in real estate. The PPP program and Main Street Loan program have provided the banking system with a significant level of liquidity allowing banks the ability to provide funding to help the local economy rebound.
What is the impact of historically low interest rates across the financial landscape?
We’re seeing interest rates leveling off. The compression is slowing. For the most part, banks have been able to manage their bottom lines and their yields. We’ve been able to lower prices to accommodate the lower interest rates. Should interest rates go up, we are nimble enough to be able to adjust. We have looked at different interest rate scenarios and the bank is in good shape if interest rates go up and down.
If inflation continues, there is going to be a little need for money. The money is in the system right now, the government has put it there. We will be there for our customers should they need some additional liquidity. Most businesses we work with are in good shape as well.
Which industries have you seen reach pre-COVID levels of activity?
We were dealing with successful companies before the pandemic. Those companies seem to have recovered almost to their pre-pandemic levels, if not all the way to where they were in 1Q20. Smaller manufacturing companies have not quite recovered primarily because of supply issues.
These customers are worried about getting the supplies needed to keep their businesses going and their orders filled.
Are there elements to confirm the onset of a real estate bubble?
Everything seems to be very good in this sector so naturally people are wondering if it is time to be concerned that it is starting to be overbuilt. There have been worries about the amount of new products coming online in the multifamily market for years. Couple that with the increasing costs of construction materials and the fact that rents are increasing to more than what the average renter can afford, and we have potential for a problem.
While we have concerns in the multifamily space, home-building is a very hot market right now. I worry about rising interest rates which could cause a slowing in that market especially with the cost of lumber and other building supplies up more than 25 to 50%.
What is Crown Bank’s near-term outlook?
We are focused on hiring the best people and attracting the best customers so we can continue our strong growth trajectory. We would like to continue to grow our portfolio between 15 and 20% a year over the next few years. Our motto is making the possible, possible and our goal is to build on the relationships we have, create new relationships and make life better for our customers by helping them achieve their dreams.
For more information, visit: https://crown-bank.com/