Bankers in Texas are reporting a sharp slowdown in both loan growth and loan demand, according to new survey data by the Dallas Fed. Uncertainty from tariffs was cited as one of the major drags on lending — one comment even mentioned the dreaded stagflation. So how much uncertainty looms in the booming Texas economy?
Starting at the border in Laredo, IBC Bank’s Gerry Schwebel said he’s seen a dip in lending. His customers are importers and exporters.
“Everyone is taking a pause and wait and see, as to as to what the implementation of the tariffs will mean to their particular companies or their particular sector,” he said.
In the northeastern corner of the state, Greg Wilson is president of Lamar National Bank in Paris, Texas, which does commercial, agricultural and consumer lending. He worries if tariffs stick around, construction budgets could get out of control.
“That is a scary concern, because at that point, (the) bank is going to have to either continue to lend beyond what was initially contemplated in the scope or kill the project, and neither one of those are good outcomes for banks or our customers,” he said.
It’s the inflationary impacts of tariffs on consumers that have InTouch Credit Union CEO Kent Lugrand worried. He does a lot of lending in the Dallas area, where people have already been squeezed by rent and insurance hikes.
“We are seeing an uptick in non-performing loans, mostly on the consumer side,” he said. “We are concerned that if the present course continues, that could worsen.”
In the Houston area, TDECU CFO Jason Schneider is more optimistic. He thinks some of the slowdown is seasonal and that the dust from tariffs will settle in the second half of the year.
“We'll also know for sure a little bit more around what the Fed's thinking,” he said.
If there is an economic storm ahead, Texas is a good place to weather it. But that also means negative indicators here could mean worse things elsewhere, said Rice University’s John Diamond.
“If credit is tightening in Texas, then you know that that's probably likely going on other places,” he said.
For now, when it comes to tariffs, the eyes of Texas — and the world — are upon them.
