Thomas Beck, President & CEO, Northeast Bank

In an interview with Invest:, Thomas Beck, president and CEO of Northeast Bank, discussed the bank’s community impact, the evolving banking and real estate sectors, and the importance of maintaining long-term growth strategies while continuing to support small businesses and the broader Twin Cities region.

What has been the overall impact of Northeast Bank in the region over the last year?

We’ve had a huge ongoing impact on our region. As a community bank, we maintain a hands-on relationship with our community at large. We understand what businesses and nonprofit organizations are dealing with, both on the lending side and the financial services side.

Beyond that, we contribute through volunteer hours and by working with numerous nonprofits and charter schools. I feel, and I may be biased, but I believe we’ve made a significant impact on the Minneapolis–St. Paul region, especially on the Minneapolis side. The cities are divided by a river, but we’re making inroads into St. Paul as well.

Our marketplace covers the entire Twin Cities area, which is home to about 3 million people. Through technology and our ability to connect with the community, we engage with the entire region. Like many community banks, we have a big impact on our region.

How has the banking and finance sector evolved in Minneapolis–St. Paul, and why is it an ideal location for Northeast Bank?

Brick-and-mortar branches are less essential now because technology has made banking much more accessible. People can do almost everything from their phone or computer. It amazes me that the phone I’m using has more technology than the original space shuttle.

Banking has changed significantly due to this increased accessibility. Things can be done quicker and from anywhere, but it also brings challenges like fraud. There are bad actors trying 24/7 to commit fraud, and we constantly fight that.

The biggest change is not always being face-to-face with clients. Many prefer handling everything online or from their office. However, some still value personal interaction, so we have lenders who meet with clients. We’re adaptable, helping customers set up online banking or other services so they can work remotely.

What trends are you seeing in the commercial real estate sector, particularly in light of recent interest rate changes?

Interest rates will help a little bit. I do think there’s been a scale-back; there are more vacant office buildings. The pandemic really gave businesses the opportunity to rethink how they operate. Remote work became a major factor, and many businesses realized that if their employees could get work done outside of the office, they could save on rent.

We’ve seen this play out in downtown Minneapolis, where there are now more vacancies than before. We lend a lot for owner-occupied real estate and some investment property, but we’re careful about where we go in that space.

Interest rates are helping, though. Real estate rates are more tied to the treasury market, and while prime rates and the Fed funds rate have dropped slightly, we’re not back to where we were. Four or five years ago, rates were around 1% to 2%, then they shot up to 7% or 8%, and now they’re down to about 6.5%. It’s not where it used to be, but it’s enough to start melting the ice in the real estate market.

Given the consolidation trend in the banking industry, what is your outlook on the future of community banks like Northeast Bank?

The recession 15 years ago shrunk the banking footprint significantly, leading to a lot of consolidations. The usual drivers for community banks to sell are a lack of family succession or a lack of growth opportunities. Luckily, we don’t face either of those issues.

I think there will continue to be some consolidation and sales, but it has slowed down a bit. The M&A business in our industry has cooled off. We’re just under $800 million in assets, on our way to becoming a billion-dollar bank, which is a good size to sustain operations and provide a good return for investors. At that level, we can cover costs, absorb overhead, and invest in technology.

However, smaller banks without a growth strategy or succession plan, particularly in small towns, will continue to be potential acquisition targets for larger banks. I’ve seen some transactions, but not a lot in the Upper Midwest. It’s definitely slowed down here.

What strategies have you implemented to maintain a strong workplace culture, given the tight talent landscape?

We understand that the next generation of employees has different motivations. When I started, it was about survival — taking any job available. Today’s workforce wants purpose and meaning in their work.

This aligns with our community involvement. New employees are encouraged to get involved, whether through a nonprofit or a food shelf. It adds value to their experience, making them feel like they’re contributing to societal change, not just processing loans.

We listen to our employees. How can we make their work more fulfilling? I have a “Sunday night rule” — if you can’t sleep because of work stress, it’s time to find something else. We don’t want our employees to feel that way.

We foster a collaborative environment where people are excited to come in, despite challenges. We also offer flexibility. For long-time employees considering retirement, we discuss options like part-time work or consulting so they can continue contributing. We’ve had many of these conversations.

What do you see as the biggest opportunities for growth for Northeast Bank in the next few years?

We’re actually expanding our footprint by bringing in more employees. We’re in a growth mode right now. As larger organizations get even bigger, we find that some of their senior VPs or EVPs become disillusioned. We’re trying to create opportunities for those individuals.

We’re bringing in a couple of new team members, but we vet them carefully to ensure they fit our culture and will work well with us. This helps us grow stronger and build a more significant base.

That said, the fundamentals of our business haven’t changed. We’re a small business bank, and we focus on helping businesses grow. I often talk to our lenders about the societal good we promote—by providing capital to businesses, they can grow, hire people, pay taxes, and contribute to the community. There’s a societal good in that.

However, to do that, you have to be profitable. I always say, “No margin, no mission.” We have to make money to keep doing what we do. But I believe community banks like ours play a crucial role in providing capital to small businesses, helping them expand, create jobs, and serve their communities.

We have a strong synergy with our community, and we’re going to continue expanding on that. We like the structure and format we have in place, and while we’ll keep growing, we won’t change our fundamental values or mission. Those will always remain the same.