File photo / Courtesy of Bangor Savings Bank
Bob Montgomery-Rice
January 8, 2024
Bangor Savings CEO: Interest rates expected to 'normalize,' and other 2024 predictions
The head of the largest Maine-based bank expects interest rates to "normalize" this year, though he's keeping an eye on signs of inflation and any signals that consumers are struggling to pay bills.
"With rates normalizing a bit and the Fed talking about some [reductions],” Bob Montgomery-Rice told Mainebiz, he's seeing what he characterizes as slow inflation, but not a recession.
He said he’s seeing “a bit of optimism. Most aspects of the economy are good.”
In the first quarter and the first half of 2024, "we’re watching consumer spending, [loan] delinquencies and asking, ‘Will rates go in a downward direction?’ We’re continuing to watch unemployment and labor. That’s the No. 1 thing preventing recession [and] if people can pay their bills," Montgomery-Rice said.
Bangor Savings, with assets of $7.46 billion and 62 Maine offices, is the largest bank based in Maine, according to the 2024 Mainebiz Book of Lists, based on assets through June 30, 2023.
Among all banks, Bangor Savings has a 12.32% share of the Maine market, behind TD Bank, which has a 13.37% of the market, according to Federal Deposit Insurance Corp. data through June 30, 2023.
Mortgage rates
Last year was characterized by continued inflation and a spike in interest rates — with mortgage rates hitting the 8% range for the first time in years. After unusually low interest rates in the 3% range, the rate hikes had a chilling effect on sales of homes and other big-ticket items.
Though last week, the national average for a 30-year, fixed-rate mortgage was 6.62%, according to the Federal Reserve Bank of St. Louis. That is similar to rates in August 2008, just before the economy went into recession and the Fed took action to make rates more favorable for consumers.
"Interest rates will be the biggest thing," Montgomery-Rice said. "There’s still competition in buying a good home. Mortgage rates have dropped a bit … 5% to 6% have traditionally been good rates."
Bangor Savings wrote 1,200 mortgages in 2023, totaling $370 million. The CEO said the bank is forecasting a bit more than that in 2024.
Montgomery-Rice cautioned that the housing market continues to have other challenges besides interest rates.
"Housing supply is a big issue. Prices shot up during the pandemic. Affordability is the big issue," he said. "We need to work on supply, here and throughout New England. There's a need for workforce housing," including multifamily housing.
The shortage of housing is having a "spillover effect for the workforce. We all need well-trained workers," Montgomery-Rice said. "It's been a day-to-day concern [for businesses] in the past three years. It may be a bit better — or people have gotten used to it. Having an available workforce is an issue for businesses of all sizes."
And it's not a problem that's going away. He cites data that shows Maine will need 5,000 new employees a year just to keep pace with retirements.
Trends in banking
Montgomery-Rice, who will mark 10 years as CEO of Bangor Savings this year, said Bangor Savings does not have any significant growth plans, but it will continue to invest in technology, including new products. Among those products will be financial services offered to fintech companies, an effort it will roll out more aggressively this year.
While he expects the banking industry to see more consolidation nationally, he doesn't expect to see as much in New England or Maine.
"I think you’ll see more [mergers] nationally, but a little bit less in New England and even less in Maine," he said.
"Maine banks are well capitalized. One thing that causes banks to combine is, from cost standpoint, the need to invest in technology. Maine banks are very healthy."
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