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The basics:

• NJBIZ panel features leaders from TD Bank, Smallwood Wealth, Gibbons
• Discussion digs into interest rates, construction loans and debt
• Conversation covers 90+ minutes on current, future finance trends in NJ
• Video link to watch below

A group of experts joined NJBIZ Aug. 19 for the latest panel discussion on Trends in Banking & Finance.

Hosted by NJBIZ Chief Editor Jeffrey Kanige, the discussion included:

• Michael Lubben, director, Corporate Group, Gibbons PC
• Charles Ponti, regional vice president for Southern Bergen and Hudson region, TD Bank
• John Smallwood, president and CEO, Smallwood Wealth Management

Over 90 minutes, the group traversed a number of key topics in this space, including the opening question posed by Kanige.

“We’re going to talk a lot about the kinds of work that you all do, and I’d like to start talking about interest rates – because that’s central to the banking business,” Kanige led off. “It’s top of mind for borrowers, of course. I’m curious to hear from each of you, starting with Charles – what you make of the current interest rate environment and how that’s driving decisions by borrowers, by lenders? What is the dynamic now and how has it changed since Jan. 1? Charles, what do you see when you look at the interest rate environment and how it’s affecting businesses?”

Cuts coming

Ponti began noting that rates were extremely low during the pandemic.

“I think people got so used to rates being near zero – that any jump from there was a bit of, potentially, a sticker shock for them. But if you look historically, they’re not really extraordinarily inflated at this point,” Ponti explained. “I think, in combination, however, with some higher interest rates and a general overall economic uncertainty, it has slowed some borrowers down. Demand has somewhat been tempered.”

He said the one place feeling the impact most is on the real estate side.

“Because if a property is generating a certain NOI [net operating income] – and the rates are higher – it could certainly only support, a smaller level of debt,” Ponto explained. “So, prices could be depressed a bit. Or on a refinance or a maturing loan, potentially, you might find a borrower or a sponsor that might have to curtail a loan and pay down an outstanding balance on the refi – or something along that line.

“So, I would say, we are envisioning a decrease in rates, in the near-term. Our forecast is for a cut starting in September and moving [forward] a couple of more cuts – three in total – by the end of the calendar year.”

I think people got so used to [interest] rates being near zero – that any jump from there was a bit of, potentially, a sticker shock for them.
– Charles Ponti, TD Bank

Residual effects

Smallwood said, “When you think about the interest rates, where they are, and the speed at which they came from – that floor, that very low historical level – and the speed that they went up; that impacted a lot of things. And we’re starting to see the residual byproducts of that. We’re seeing housing markets starting to get some supply.”

He noted that in other states, such as Florida, there are 30%–40% drops in some real estate values.

Replay: Trends in Banking & Finance

Click through to register to watch the full panel discussion!

“Which is a problem. When you think about government debt, corporate debt, anything that’s floating or maturing getting renewed, that’s going to put significant impact on profit-and-loss statements,” said Smallwood. “So, when you look at markets, typically, you overshoot, you undershoot. And I think we’re in an overshoot position – where the natural conversation is in the 3.5% to 3.8% range. And I think that gets you to your money in the bank still makes money, which is a huge problem.

“But it also brings the affordability of housing, and a company holding debt – brings it back into a real thing. Private equity has slowed down. Seeing a lot of slowdown as a result of it. So, the pressure is down, the way I see.”

Driven by demand

Lubben said, “A lot of what I do is more on the development side, on the construction lending side. So, first is, things are getting better because a lot of the transactions that I work off are priced off of term SOFR [Secured Overnight Financing Rate]. And if you look a year ago, term SOFR was 5.3 or so – and today, it’s right around 4.3. It’s been holding fairly steady since January. So, that drop – one point – but it’s been a significant assist in getting deals done.

“And we actually just closed, in the last two weeks, two significant construction loans totaling over a few hundred million dollars together for residential development. And I think a lot of it just has to do with the fact that there’s certain markets in the country, and specifically in New Jersey, where you can still get appetite from lenders to lend into those deals – because there is such a strong demand for housing in our area right now.”

The conversation continued through further discussion on interest rates and where they may go; M&A and capital markets; impacts of the Big Beautiful Bill; tariffs; technology – particularly artificial intelligence; cybersecurity/fraud; workforce and opportunities; viewer questions; and much more.

Stay tuned to the Aug. 25 NJBIZ issue for further coverage from this informative and timely panel discussion.