NJBIZ presented its latest panel discussion program Tuesday, which focused on key trends in the banking and finance sectors.

The discussion, hosted by NJBIZ Chief Editor Jeffrey Kanige, featured a distinguished slate of panelists including:

• Gregory Garcia, executive vice president and chief operating officer, First Commerce Bank
• Martin Melilli, commercial market president, TD Bank
• Bernel Hall, president and CEO, New Jersey Community Capital
• Ran Eliasaf, founder and managing partner, Northwind Group

Throughout the 90-minute panel, Kanige and the experts covered ground on a wide range of topics, ranging from the current lending environment/conditions to what businesses need to know to technology, capital markets and more.

What to expect

Kanige opened the discussion gauging the state of play.

“I wanted to start with an assessment from all of you about where the business is now. And what businesses can expect when they’re approaching banks and other lenders,” said Kanige. “And what the environment is?”

Garcia described this year as tough.

“I’d say, at the latter part of 2023 and continuing into, so far, this year – it’s been much slower than the previous years, obviously coming out of the pandemic,” said Garcia. “There’s a lot of reasons for that. Obviously, higher interest rates are probably the primary driver of that. But, also, the liquidity issues that financial institutions are facing right now. It’s hard to fund loans. So as bankers and I think as lenders, we are always looking to lend. But we’ve got to have the funding to do it. So that’s been a little bit of a challenge. I also think borrowers are not diving in with both feet. They’re kind of dipping their toe in the water a little bit – and pausing.”

Those sentiments were echoed by Melilli.

“I think Greg and I are on the same page. The thumbnail sketch would be loan volume is flat to slightly down for most institutions,” said Melilli. “There are a few bucking the trend. But across the board, that’s generally the case. Deposits are up, for sure. And overall, because of those two factors, rate compression is really hurting banks’ earnings right now. So, it’s a little bit tougher to make money if you’re a bank.”

Replay: Trends in Banking & Finance Panel Discussion

Click through to register to watch the full panel discussion!

Hall opened his remarks by noting that his organization benefited from the conditions and subsequent adjustments banks have to make in recent years, such as raising rates and leaning more toward lending to tried and trusted borrowers.

“Because those people who did not get access to capital through conventional banking means actually came to us as a community development financial institution and looked for loans through us,” Hall explained. “So, our prior two years have been phenomenal and, actually, historic as it relates to loan volume.”

But he also pointed out that because of rate compression from NJCC’s funding sources, his organization has now had to start raising its rate, which has slowed volume a bit.

“For as much as we could recycle old dollars and old repaid loans that were coming in at lower rates. We could put them out at lower rates and kind of subsidize the gap being created by the bank pullback,” Hall continued. “We did. But that had a finite lifespan. And now we’re having to tinker with our rates in order to manage the rate compression that everybody else has mentioned.”

Eliasaf echoed Hall and noted that his organization has been the most active in the last year or so.

“In 2023, we put out about $1 billion of new loans. And in 2024, we’re at a pace to do double that – basically picking up the slack where commercial, regional, local banks have been halting their deployments for the reasons mentioned by other colleagues here,” Eliasaf explained. “Private debt firms like ours, with private capital, have been picking up the slack and lending.”

Looking ahead

Eliasaf expects this trend to continue. He cited the Silicon Valley Bank crash and the subsequent high-profile regional bank failures.

“There’s a lot of pressure on banks’ balance sheets,” he said. “And private lenders have been, I think, moving in and taking up loans that typically would get done by commercial banks.”

Kanige asked for the response from the bankers, Garcia and Melilli, about that trend, the pressure banks face and whether that has left them gun shy.

“We’re obviously a very heavily regulated industry. So, the regulatory response to what happened in Silicon Valley and Signature and some of the other institutions – was basically to come pretty hard on all financial institutions,” Garcia explained. “So, we have been very careful and judicial in how we deploy our funds. Our asset quality remains strong. I’d say throughout the industry, our asset quality is strong.”

In case you missed it:

• Done deal: Provident finalizes $1.3B merger with Lakeland Bank
• Republic First Bank seized by FDIC, sold to Fulton Bank

However, Garcia noted it is a liquidity issue at this point.

“So, we’re being very careful with how we deploy our liquidity. A lot of it has to do with some of the regulatory concerns that are out there. They come and examine us every 18 months,” said Garcia. “We got to make sure that we’re following their rules – if you will. I think that actually makes a lot of sense where private capital funding and private equity’s coming in to pick up that slack. That’s a true statement – and a challenge for us, quite frankly.”

“I’m on the same page. The one thing, I guess, where I differ a little bit is because of the size of TD Bank,” said Melilli. “Just like Greg, we are extremely regulated and highly regulated. And that’s all for the best. But the good news for my personal situation with TD Bank – we are known as kind of a conservative bank, in general. So, we kind of pride ourselves on good times or bad – we still lend. And I got to be honest. Our lending as an institution has gone up significantly over the last five years. But particularly, it started with COVID – where a lot of banks shut their doors. And I’m not speaking negatively. The reality is – because we’re kind of spread out around the country, and nationally, our sources of revenue and our sources of deposits are kind of vast. So, we’re a little insulated, if you will, from some of the effects of COVID. And as a result, we actually were able to grow.”

The substantive discussion drilled down further on the aforementioned topics, issues and more.

Coming up in the next NJBIZ issue, we will have a further analysis of the panel.