When the banker moves, the deposits follow

Rick Roque published a piece this week that I've read 3 times now. He and James Deitch put live survey questions to a room of mortgage executives at HousingWire's IMB conference in Dallas, with the votes on screen as they came in. The room more or less wrote its own forecast for the next 3 years.

His short version: most of the room expects rates to stay high into 2027. 78% plan to cut operating cost to price better. Zero percent will cut what they pay loan officers. And while executives named digital lenders as their biggest threat, their own loan officers were moving their licenses to the wholesale channel. (Those are his numbers, from his survey and NMLS data. The whole piece is worth your time.)

I don't place mortgage bankers. But I read it and recognized a lot of my own calls with California commercial bankers this year. Some of Rick's math carries straight over to community banks and the lower middle market. Some of it breaks, and where it breaks is where it gets interesting.

The quiet threat uses the side door

Rick's sharpest line is that the room was watching the front door while the production left through the warehouse. The executives named the competitor with the TV budget. The loss was their own producers.

Community banks do the same thing. Ask a CEO about competitive threats and you'll hear private credit, fintech, or a money center bank buying the deal. Ask me what I watch happen most, and it's a relationship manager or a market manager taking a book across the street to a bank with better comp, a looser credit box, or a cleaner platform.

In the lower middle market that hurts more than it does in mortgage. A mortgage borrower closes once and moves on. The owner of a family distribution company calls their banker, by name, for years. When that banker moves, the operating accounts and the deposits tend to follow. And deposits are the cheapest money a community bank has.

Everyone will protect producer comp

78% of Rick's room wants lower cost, and 0% will touch loan officer pay. I'd bet community bank boards land in the same spot. No board wants to be the bank that trimmed RM comp and handed its best producer a reason to take the recruiter's call.

So the cuts land below the producer: credit administration, underwriting support, loan operations, treasury onboarding. That's exactly where the new AI tools are aimed. Spreading financials, drafting the first pass of a credit memo, watching covenants.

That changes who banks hire. Fewer junior analyst seats. More demand for credit leaders who can rebuild the process and keep the box where it belongs. A chief credit officer who can say "we took time to decision from 3 weeks to 5 days and our loss rate didn't move" is going to be expensive, and worth it.

Where the mortgage math breaks

Mortgage lost its escape hatch. Most homeowners are sitting on low rates, so there's no refinance wave coming to bail anybody out.

Commercial loans mature on a schedule. The CRE and term loans written when rates sat near the floor in 2020 and 2021 are coming due, whether the borrower likes the new rate or not. That cuts 2 ways. Some borrowers get squeezed on debt service. And some incumbent banks will decline to renew, which hands a well capitalized bank with a strong credit team a shot at relationships it couldn't touch 3 years ago.

So the same banks that want to trim credit headcount need sharper credit judgment right now. I'd watch that tension closely.

The lower middle market also resists being turned into a commodity. A 30 year fixed is a standard product, so speed and price win. A $4 million line to a company with lumpy receivables takes judgment. I think fintech keeps chipping at the small end (small dollar SBA, equipment, cards) and private credit keeps picking off sponsor backed and leveraged deals. In the middle, the banker still decides who wins the relationship. Which is why the producer question matters even more in commercial than it does in mortgage.

What I'd do this quarter

Rick closes with a to do list for mortgage CEOs. Here's mine for community bank CEOs and chief credit officers.

Map your top 10 producers by what would follow them. Which operating accounts, which deposits, which owners would pick up the phone if that banker called from a new number.

Ask what they'd need to stay before a competitor asks what they'd need to leave.

Before you cut below the producer, put a name next to credit. Somebody has to run underwriting and portfolio management through a repricing loan book, with fewer people.

Decide which door you're walking through. Rick frames it for small mortgage lenders as a choice between rebuilding cost or combining with a stronger platform while you still pick the partner. Sub scale community banks face a version of the same choice.

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