ISSUE #10

Funding Costs, Demographic Shifts, and Non-Bank Competition

The environment isn''t getting any easier for lenders. Regional banks and credit unions face a shifting landscape where rising funding costs and weak loan demand are pressuring margins, even as demographic shifts create deposit surpluses and push lending into riskier markets. CRE exposure remains a key vulnerability, prompting loan sales like Atlantic Union''s $2 billion portfolio transfer to Blackstone. At the same time, cyber threats and the growing role of non-bank lenders heighten systemic risk, underscoring the need for diversification, tighter risk controls, and balance sheet discipline. The ride''s just getting started.

Interesting Times delivers curated articles about events and trends that lie outside lenders'' conventional view of borrower risk. It helps them understand how changes in the global macroeconomy impact their lending and risk mitigation strategies.

Regional Banks Emerge as Key Economic Barometers Amid Rising Costs and Uncertainty

Several leading regional banks are serving as key indicators for the sector s health. Loan demand has shown modest improvement, but rising funding costs are pressuring net interest margins, and persistent macroeconomic uncertainty is weighing on credit growth and investor sentiment. These banks have become an important gauge for how the industry may navigate profitability and risk challenges in the months ahead. Read More >>

Demographics Reshape Lending: Aging Population Drives Surplus Deposits, Weakens Loan Demand

The U.S. banking sector is being reshaped by demographic change: an aging population, lower birth rates, and shifting immigration patterns. Older households hold more deposits but borrow less, creating local funding surpluses but weaker loan demand, especially in aging counties. This mismatch is pushing banks to expand lending beyond their branch networks, often into higher-risk markets. Larger banks are better equipped to manage these shifts through geographic diversification and advanced risk models, while smaller lenders face more strain adapting to these structural headwinds. Read More >>

Risks that Non-Bank Financial Institutions Pose to Financial Stability

Brookings warns that NBFIs such as private credit funds, money market funds, and hedge funds are playing a growing role in credit markets and could amplify shocks during stress events. Because these entities lack access to central bank liquidity and face lighter regulation, market disruptions could spill over to banks through credit exposures, derivatives, and shared funding channels. The report calls for enhanced monitoring and stress testing of NBFI bank linkages to prevent contagion. Read More >>

Blackstone Deepens CRE Bet with $2 Billion Loan Purchase from Atlantic Union

Atlantic Union sold roughly $2 billion in commercial real estate loans originally from Sandy Spring Bank to Blackstone in a bid to reduce its exposure to volatile CRE markets, particularly office assets facing rising vacancy rates. The transaction allows Atlantic Union to lower reliance on expensive deposit funding and reallocate into lower-risk securities, strengthening its balance sheet amid heightened CRE uncertainty. Read More >>