“Interest rates do have a biting effect,” said Tom Bennett III, president, CEO and co-founder of First Oklahoma Bank in Jenks.

“I think it’s making many people think longer before they decide” in contemplating a major purchase, such as a new car or home, he said.

“Certain sectors are perceived to have more (lending) risk in today’s financial environment.”

The average value of homes in the Tulsa area has spiked $80,000 to $100,000 more than before the COVID-19 pandemic, local real estate agents told the Tulsa World recently.

That increase, along with a shortage of nearly 13,000 single-family homes in the area and increased mortgage payments, has made it more difficult for people to purchase and finance, bank CEOs said.

Another big factor, they said, is a record level of credit card debt.

Those in the U.S. held more than $1.05 trillion on their credit cards in the third quarter of 2023, a record, and a figure certain to grow once the fourth-quarter data are released by the Federal Deposit Insurance Corp. next month, The Associated Press reported.

A recent report from the credit rating company Moody’s showed that credit card delinquency rates and charge-off rates — or the percent of loans that a bank believes will never be repaid — are now well above their 2019 levels and are expected to keep climbing, the AP reported.

“That’s super scary,” Bennett said. “People are stuck financing increasing amounts of credit.”

Among the factors banks consider for consumer loans are credit scores, credit history, how many costs and payments individuals have, and how much income is going toward paying off debt, he said.

Stacy Kymes is president and CEO of Tulsa-based BOK Financial, a $50 billion company that has $105 billion in assets under management and administration, and operates in eight states.

Asked about the loan environment today, he said, “It depends on the circumstances, the industry, the individual.

“For us, we’re very much in the lending business. We want all the lending opportunities that we can get, whether that be retail or mortgage or commercial or corporate.

“If you think about the context of mortgages, higher interest rates have made it harder to find the right opportunity,” Kymes said.

“Certainly interest rates have had an impact on the borrower’s ability.

“What we saw in the last year on the commercial and corporate side a little bit was that there were some banks who maybe felt some stress because of the (real estate) market environment and so they kind of cut back on the lending they were doing,” Kymes said.

“I think people felt that. We try to go the other direction because we have lots of equity and capital to deploy. We saw that as a time to really be more proactive, particularly from a business development perspective.”

Kymes said that over about the last two years, BOK Financial’s loans have grown more than 10%.

“That’s an important thing for us to continue to do. It’s especially important here in Oklahoma,” he said.

“I think having a bank headquartered here in Tulsa is so critical to Oklahoma because the larger banks increasingly are focused on the highly affluent, the uber-wealthy. … That’s not what our core business is.

“Here in kind of what they call the ‘fly-over’ states, it’s important to have a headquartered bank (that) can serve our community, and I think that’s a big part of what is our purpose, and that is being active in lending, … giving back to our communities.”

Bobby Lorton is Tulsa-area president of Houston-based Prosperity Bank.

“The relationship between interest rates and lending is complex and multifaceted,” he said.

“Overall, banks are likely to prioritize risk management and prudential lending practices in the current economic environment, which may result in reduced lending activity in certain sectors or to borrowers with higher perceived risk profiles. Economic conditions, regulatory requirements and market dynamics all play a role in shaping banks’ lending decisions,” he said.

Likewise, Kirk Hays, Tulsa region president for Arvest Bank, said banks that have ample capital reserves and stable deposits will continue lending.

“I do think that the economic climate has encouraged an increased focus on loan quality. I can say with certainty that Arvest is not reluctant to loan, as evidenced by our 21% loan growth in the Tulsa market in 2023,” Hays said.

One of the biggest changes in recent years in the banking industry is digital banking and the ability for almost anyone to conduct most transactions on their smart phone.

“Everything you could do at a branch, you can largely do on your phone today,” Kymes said. “But we still think the branch networks are important. I think they provide a great source of convenience for customers who have a real person they want to talk to.

“They have an important financial decision that they need to make in their life, and they want somebody who does that every day that they want to talk to.”

But digital banking and real-time market data and news, he said, have allowed people access to much more information than in the past.

“Because you have so much access to information now, you can make better financial decisions, right?” Kymes said.

“I think that’s what we try to do — your information is available to you when you want to see it in the format that you want to see it — that’s a big part in what has changed in customer preferences over time.”

Bennett said a vibrant network of community banks in the Tulsa area has made it easier — especially for small businesses — to get loans, even in tougher times.

“Community banks do well over 50% of small-business loans,” he said.

Small business lending, Lorton said, “is of paramount importance” for fostering economic growth, promoting entrepreneurship and innovation, supporting community development, expanding access to credit and strengthening the overall resilience of the financial system.

“It represents a fundamental pillar of inclusive and sustainable economic growth, with far-reaching implications for individuals, businesses and societies as a whole,” said Lorton, former publisher of the Tulsa World.

“It is vitally important for local economies to have access to lending to help small businesses grow and expand and for consumers to purchase homes and other large ticket items,” Hays said.

“I believe it is the engine that powers and sustains our economy.”

Bank executives said artificial intelligence, which is becoming more prevalent across all kinds of business platforms, has not yet permeated the banking industry on a large scale.

“I think we’re in the top half of the first inning of that game,” Kymes said.

“It’s hard to see, certainly in the near term, where that would be imbedded in credit-decision making, which is where people want it to go. There’s too many inherit biases that can be built into those models, so the industry has pulled away from that in the near-term,” he said.

The ability to identify an unusual transaction in a customer’s account, flag it and provide notification, … “those are areas where I do think you are going to see (AI) in the banking industry,” Kymes said.

The kind of generative AI, “where it’s seeing things and making decisions and doing that kind of stuff, I think we’re really not seeing that being prevalent today. We’re in the very early stages of that. But you can see where very clearly that is the path in many respects,” he said.

“Banks have to be convinced that it works,” Bennett said. “But banks are slow, and they are not prone to take giant leaps without a lot of caution.”

“Where (AI) is able to manifest itself is on cyber-risk, where the bad guys try to do bad things, … and also in general fraud,” Kymes said.

AI, Lorton said, is expected to revolutionize banking by enabling more personalized customer experiences, improving operational efficiency, enhancing risk management practices and driving innovation across the industry.

“Banks that successfully harness the power of AI to augment human capabilities, unlock actionable insights and deliver value-added services will gain a competitive edge in the rapidly evolving digital landscape,” Lorton said.

“Old kind of fraud, like check-washing, where they stole checks from the post office … and things like that had really diminished a great deal, but things like that have seen a resurgence post-COVID,” Kymes said.

“So that kind of old-school fraud as well as the new fraud, which is social engineering and … somebody sends you a text and says ‘Your account’s been compromised and would you send me this information,’ … people are vulnerable to that.

“They become fearful, and that creates an opportunity for bad guys to do things, and that is also accelerated at a higher level. The banks do their very best to create systems around that to protect their customers from people trying to do harm,” Kymes said.

“Banks that embrace digitalization, data-driven insights, and ecosystem partnerships — while effectively managing risks and compliance obligations — will be well-positioned to thrive in an increasingly competitive and dynamic landscape,” Lorton said.

“The banks that will thrive will be those that focus on being active and involved members of the communities where they operate while providing excellent customer service,” Hays said.