Home Improvement

Interest rate risk

by Christopher Liechty | June 10, 2015

Having been open for nearly three years, Home Improvement Lending has established some relationships with notable contractors. Frankly, as a new name in home improvement lending, we probably wouldn’t have made a dent in the market if the economy weren’t in a bit of flux at the time. Sometimes you just get lucky.

With bigger relationships, we sometimes exchange customization for a volume commitment. In one of these negotiations, the issue of interest rate risk came up. Of course, the contractor doesn’t think of it as interest rate risk. From their perspective, they simply want advance notice of pricing changes. As a non-banker, this is an eminently reasonable request. If prices are going to change, give a few weeks notice so that budgets can be adjusted and profit margins can be maintained.

We like that kind of thinking. Contractors who think like that are contractors who will find our program attractive. But this is a double-edged sword; advance notice of pricing changes creates interest rate risk for us. Banks operate with much smaller margins than many industries, including the contracting industry. As financial intermediaries, we take deposits and aggregate them in order to make loans. Those deposits cost us money every day and we generate interest income from the loans to cover that cost plus our expenses. At the end of the day, a bank performing reasonably well will produce a return on those loan assets of around 1.5%.

Imagine that market rates are rising. If tomorrow, the Fed raises rates by 1.5% and we are constrained contractually to not change our loan pricing, what happens? The deposits we get increase in cost by 1.5 percentage points and our loan interest rate doesn’t change. We make no money on those loans. That’s interest rate risk illustrated (actually, this is an oversimplification of the issue, but the end result is similar) and why we avoid it like the plague.

It still looks like we may see rate increases start again in 2015, so all of us should be preparing mentally for a return to the “old” normal. It’s sure been a long time!

Home Improvement

Hours of Operation Monday – Friday
8am – 6pm MT
Saturday
9am – 4pm MT

Holiday Closures

Please note: Holiday closures are not the same for the Recreation and Home Improvement Departments.

  • New Year’s Day
  • Labor Day
  • Memorial Day
  • Thanksgiving
  • Independence Day
  • Christmas
  • New Year’s Day
  • Memorial Day
  • Independence Day
  • Labor Day
  • Thanksgiving
  • Christmas
  • Day before Thanksgiving,
    Wednesday,
    November 26, 2025
    – Closing at 3:00 MT

    Day after Thanksgiving,
    Friday,
    November 28, 2025
    – Closing at 4:00 MT
  • Day before Christmas,
    Wednesday,
    December 24, 2025
    – Closing at 3:00 MT

    Day After Christmas,
    Friday,
    December 26, 2025
    – Closing at 4:00 MT

    Saturday after Christmas,
    December 27, 2025
    – Closed
  • New Year’s Eve
    Wednesday,
    December 31, 2025
    – Closing at 4:00 MT

    Day After New Years,
    Friday,
    January 2, 2026
    – Closing at 4:00 MT

    Saturday After New Years,
    January 3, 2026
    – Closed

Home Improvement Application Processing Open as Follows

Home Improvement loan application processing is open on the following holidays. All other departments are closed.

  • Martin Luther King Jr. Day
  • Columbus Day/Indigenous Peoples’ Day
  • Presidents’ Day
  • Veterans Day
  • Juneteenth
  • Martin Luther King Jr. Day
  • Presidents’ Day
  • Juneteenth
  • Columbus Day/Indigenous Peoples’ Day
  • Veterans Day

Recreation

Hours of Operation Monday – Friday
8am – 5pm MT
Closed Weekends

Holiday Closures

  • New Year’s Day
  • Labor Day
  • Martin Luther King Jr. Day
  • Columbus/Indigenous Peoples’ Day
  • Presidents' Day
  • Veterans Day
  • Memorial Day
  • Thanksgiving
  • Juneteenth
  • Christmas Day
  • Independence Day
  • New Year’s Day
  • Martin Luther King Jr. Day
  • Presidents' Day
  • Memorial Day
  • Juneteenth
  • Independence Day
  • Labor Day
  • Columbus/Indigenous Peoples’ Day
  • Veterans Day
  • Thanksgiving
  • Christmas Day
  • Day before Thanksgiving,
    Wednesday,
    November 26, 2025
    – Closing at 3:00 MT

    Day after Thanksgiving,
    Friday,
    November 28, 2025
    – Closing at 4:00 MT

    Day before Christmas,
    Wednesday,
    December 24, 2025
    – Closing at 3:00 MT
  • Day After Christmas,
    Friday,
    December 26, 2025
    – Closing at 4:00 MT

    New Year’s Eve
    Wednesday,
    December 31, 2025
    – Closing at 4:00 MT

    Day After New Years,
    Friday,
    January 2, 2026
    – Closing at 4:00 MT

Borrower Services

Hours of Operation Monday - Friday
8am-11pm MT
Saturday
9am-1pm MT

Holiday Closures

:
  • New Year's Day
  • Thanksgiving
  • Memorial Day
  • Christmas
  • Independence Day
  • New Year's Day
  • Memorial Day
  • Independence Day
  • Thanksgiving
  • Christmas

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