Banking Executives Outlook for 2021 | The Stoler Report-New York's Business Report
♪ [Theme Music] ♪ ♪ [Theme Music] ♪ >>> Michael: Oh, crystal apple, [Richard laughs] you are dull. Okay? This is an unfortunate thing. We've had many shows where you've been bright and shiny, but now you're very, very dull, but hopefully with a vaccine, hopefully with the change in elections and everything taking place, 2021 will be a better year than 2020. So today to discuss their view, the people who provide financing, the people who are in the banking business will provide their thoughts on the outcome for 2021. My guests include Blair Ridder, who's the regional president at M & T Bank. Chris Maher, who's the
chairman, CEO and president of OceanFirst Bank. And last but not least, my friend Dick Ehst, who is the president and CEO of Customers Bank. So, we have somebody in New York City. We have somebody in Red Bank and we have somebody in Wyomissing, Pennsylvania. Most of you are regional, on the northeast region. How do you see the opportunities for 2021? I mean,
this year, you know, we've had deferrals, we've had certain changes, we've had PPP. Where do you see the opportunities as a, a major bank player in this market? Let's start with Blair. >>> Blair: Yeah. So you, you, you mentioned PPP and I think that's exactly where I think the opportunities are gonna lie, but the regional players, like, like you just mentioned the, the folks on the call here, have the ability to meet their customers face to face in their time of need. And, and I think 2020, 2021 will really be the point in time where institutions that took care of their communities are gonna, re -- reap the rewards where those larger banks who were unable to meet the needs are going to see some more challenges.
>>> Michael: From what I read Dick, you were like one of the top 10 providers of DPP financing in the entire nation. Correct? >>> Richard: That's right, Michael, we were number six in, in the country. And we, you know, you, we enjoyed, I think about 110,000 companies that we supported through that process, originating about 5.1 billion in loans. And it was really a difficult, I think, for some of the larger institutions to, to accommodate these needs because they are, they don't have the flexibility perhaps that, that Blair has got -- and Chris has got -- and our company have. So, we took advantage of it. We reap the rewards of it. We earned a little over a million dollars, a hundred million dollars rather as a result of our efforts. But
I think Blair's right. I think we're going to enjoy the benefits of that effort in 2021. >>> Michael: Chris, how the OceanFirst fair in the PPP business? >>> Chris: We were a big part of the PPP as well. And not only is it about the dollars that you got out, but it's the speed with which you could get it out. So, I think, all of us that are here
today, but many other banks were very quick to respond and in some cases much faster than the major national banks. So, as we go into next year, I think, you know, the market has an incredible amount of liquidity. PPP was a part of that, but our customers are in good shape. They've got, they've got dollars to spend. They're ready to spend. They're ready to make investments. They've been sitting on the sidelines a
little bit. But I think as we go into ‘21 and we start to, you know, get some of these questions answered about the election and the vaccine and other things, I think you're going to see cash you can put to work and it could be a very, a very positive year as the year folds. >>> Michael: You know, here's a question for all three of you and I mean, all of you are aggressive, looking for new business, dealing with small clients, providing them lines. Prior to COVID, it was a relationship business that you would go visit someone, have a lunch, have a cup of coffee, have a dinner, go networking. How -- in today's world I find that much difficult. I don't really love the Zoom
relationship. I think it's a totally different world. How do you see the future? Because even with a vaccine, it's going to take time before people are going to feel comfortable over there. How are you, how are your people going out to try to develop new business? Chris? >>> Chris: Well, you know, I think you hit the key there is that the relationships are the foundation on which our business is built. I think as we go into the future, you're going to see
a careful blend of using tools like Zoom and others that are really impactful, they allow you to connect quickly with your, with your customers. But you're also going to continue to, in some cases you just have to walk those customers' facilities. You have to understand what they're doing. You have to meet them face to face. So, we look forward, looking forward to more of that next year. But I think it's going to be a blend, not
just for banking, but for many industries where it's a combination of in-person and remote. >>> Michael: Dick? >>> Richard: And Michael you've heard me introduce our company in the past as one of the largest companies you've never heard of, because our, our company was really built on word of mouth. Our company is built on our good customers talking to their centers of influence about the services and service that we provide. And, you know, that I think is going to pay substantial dividends to us in the future. But I'm not really
seeing that we're going to be changing our methods that much, you know, we will adapt, we will improvise and then we'll execute on that. >>> Michael: How are you looking at real estate in the future because of the work at home situation, the changes of the coworking and the scenario, the, you know, the regulations by New York state with regards to rent regulations? It's harder to lend today on real estate. And all of you are active players in the market. How are you, how are your plans for 2021 different than they were when you were doing your budget for 2020? Chris? >>> Chris: You know, I would tell you into your comment about relationships. You know, this is a market where I think there are
extraordinary opportunities to invest in real estate, in all markets, including the urban markets, but you're gonna have to be very careful to make sure that your banking activist real estate operator. What I mean by that is someone who doesn't just kind of sit back and collect rents, but more actively participates in the management of the properties, is able to turn tenants over when they need to, is able to reposition properties. So, I think the active, engaged, real estate investor is going to have a great number of opportunities and the banks will be there to support them. But we're going to have to be careful about those folks who may have been sitting on a property, you know, kind of collecting their coupon for the past -- years or 10 years or whatever it may be. They may be under some pressure and you're going to have to be careful, but there's plenty of capital out there. But it won't be uniformly applied.
>>> Michael: Blair? >>> Blair: I think sponsorship is the single most important thing. So, you know, in 2020, we focused on sponsorship. In 2021, we're going to be focusing on sponsorship. It's, we have seen yet again, through all the cycles that the cream rises to the top and your best in class operators are the ones who are able to navigate uncertainty. And, and we certainly are seeing it here in New York City. But we see it across the bank. Last time we spoke Mike, we, we, we talked about healthcare and skilled nursing and assisted living and in the pandemic. And
we're seeing a continued outperformance by those people that who not only own the real estate, but who operate the facilities themselves. So, those people that really know what they're doing, the part-timers are, are getting wiped out. But those that, that really understand the business or are committed to it, many times in a multi-generational fashion, they, they just behave differently and they're seeing really good outcomes. So, we're going to continue to stick to those kind of folks. >>> Michael: All three of you are on a growth mode. Okay? You
know, Customers Bank is a number of years old, under Chris' role, OceanFirst has grown from a small Thomas River Bank to a much larger regional bank, including Pennsylvania, Dick, you're in Pennsylvania, not too far away from you. [Richard laughs] Okay? And you know, M & T, we know who they are. How are you going out today to find new talent and for you to grow and to meet the demands and the fact that you will have capital, how are you looking after and trying to get new talent? Chris? >>> Chris: It all comes down to leadership. So, you know, we're a company that, that focuses on the quality of our commercial bankers. So, our folks are credit trained. They have deep,
long histories. They have good rolodexes, they have great customer lists. And if you, if you try and hire them one at a time, it can be a little bit daunting. But when you find
regional leadership, that can then open the doors to help you kind of find those next half dozen or dozen folks in the market. I'd say one other thing, talent chooses to come to banks where they can get things done. So, you have to be focused on being able to support the, the bankers as they join the company. No banker will come to you, I don't care how much you're going to pay them, if they don't feel they can be successful in your market. So, it's a combination of leadership and, and having a model where they know they can get things done and service their clients. Because at the end of the day, it's their brand with the client.
>>> Michael: Dick? >>> Richard: Yeah, we have, we have about a thousand team members on board right now. And that is up from nothing 10 years ago. And we have built that, rather incredible team members strengths through referrals. So, and it, and we continue to do
that. So, we have, you know, we look upon the hiring process as inviting someone into your home. So, they really need to have the absolute right cultural fit to, in order for us to accommodate them. So, the, the skill sets that are available today in the marketplace are, are pretty broad and deep. We hire attitude and we hire folks that really embrace our culture. And because we think it's unusual in our industry, there's two things that we practice here at, at Customers. And one is that
everybody in the company deserves the, or needs to feel as though someone cares about them. And the second thing is that everyone in the company needs to look, needs to have something to look forward to. You get those two things right, everything else is easy, both in the management process and the recruiting process. You get those two things wrong,
everything else is hard. We have a 7% turnover rate, which is unheard of in our industry. So, you know, how do we attract talent? We go after folks that we know and we respect. And but,
we're going to try to recruit them from, you know, from our internal resources. We've already recruited my replacement, but that person has known us for eight years. We've got other folks in our, in our audit function and then our risk function that we have gone to the outside to recruit -- but they are outliers. In fact, in both cases, those folks were consultants to us and we've decided to bring them on full time. So, we're very cautious and careful about how and who we
bring into our house. But it all starts with making sure that our current team members are well taken care of. >>> Michael: You all mentioned, you were heavily involved with the PPP and we're talking about a potential second stimulus plan, which we have to have. Now, will the banks be doing a similar job on the stimulus plan, will be a second PPP program that you see out there, or how will the monies be distributed over there? >>> Chris: You know, I would certainly hope that we took a winning formula and we're able to extend it again and do the exact same thing over. And now there could be a more targeted
approach. Maybe there are certain industries, like the restaurant industry that are particularly hard hit and others that may not need it as acutely as, as the hospitality business. What we demonstrated is that when Congress and the treasury put together a clear program that thousands of banks across this country were able to get hands -- get dollars into the hands of people that needed it the most and to keep those payrolls flowing, and then that kept the rest of the economy going. I think it was just a tremendous opportunity, a
government private partnership. I think they should do it again. I think they should fund it strongly. I think they should be a little more targeted about which industries need the help, but I know that we're ready for it. And if anything, I think we're positioned to do it even better this time, because we've been through it once before, but let's, you know, kind of double down. >>> Blair: One of the points that, that impressed me the most was the ability for us to sort of learn along the way with the government. Things changed. And, and, and our ability to adjust
along the way to meet the needs of the customers was better than I, than I would've anticipated. You're even seeing some of that tweaking with the main street program, which, which hasn't seen broad utilization yet, but, but they continue to tweak around the edges to try and improve it. So, I, I agree with you. I think the opportunity for the banking industry to support whatever stimulus needs to come out would be, would be fantastic.
>>> Michael: When you're looking at 2021, and all of you are working on your budgets, you're working on different areas, where do you see the majority of the concentration that you plan to do in your budgets right now in 2021? >>> Chris: Well, you know, I think that there's some clear industries that are going to require and deserve a lot of investment, so anything in the logistics space. So, you know, we're seeing a continued hot market around anything, you know, warehouse related, distribution related. Those are obviously they're gonna kind of come to the top. You're also going to see, I think as Blair mentioned, you know, our, our smartest customers have cash, they have liquidity, they know how to do things. There will be repositioning opportunities and for the people that we know and trust, and we have those relationships with, we're going to be happy to get into those repositioning opportunities. So, every market brings opportunity.
And look, there are other things that I think are going to come along pretty soon. I think we've learned as a country that sourcing all of our PPP overseas may not be the best thing in the world. So, I think you're going see a reaction to that and some reassuring of some critical medical infrastructure and that those are going to be some great CNI opportunities as well. So, I think we see it in those areas. I think there are areas that can face an uphill battle. It's not an easy time to run, say a
fitness center, and that's not going to get better next year. >>> Richard: When we look at opportunities, you know, we see opportunities, of course, in our, in our note on note, we see opportunities in our new funds finance effort that we're going to be launching within the next two or three months. And we see opportunities to, and our, our CFG group it's based out of Portsmouth. It's in, the leasing and equipment financing business. But I think more importantly, I think there are
market opportunities in this environment. You know, we, we do business right now throughout New England. We've got facilities in, in Boston and Providence and New Haven. And, I like Maine too, by the way, but I haven't found a good opportunity there yet. >>> Michael: You haven't found the right team yet.
>>> Richard: Yeah, exactly. Yeah, exactly. But we we've recently opened, well, we opened Chicago, last year, but we recently opened Northern Florida. Because we think there's significant opportunities there. And we
recently opened Texas and we think there's significant opportunities there. We like Texas a lot. Texas is a, a very business friendly state in spite of the fact that they probably went the wrong way, two weeks ago. But, but I think there's, there's geographic opportunities within our basic business, which is CNI lending. as well as owner occupied CRE. I'd like to make a comment to, getting back to your previous question, Michael. You know, I think as, as Chris pointed out there always will be opportunities in the commercial real estate business. We are
obviously much more sensitive to doing business in New York today as a result of some of these legislative issues and just the general political environment there. But we have some really outstanding clients in New York, who really understand their business, who we have fostered over the last several years. And we're going to make sure we take care of them. So, we're not
shutting the door just because of some political challenges. We're being more cautious. But certainly, when it comes to supporting our very good customers, we're going to continue to do that.
>>> Michael: All three of you are well capitalized. Do you see more consolidation in the banking market with the type of business you do coming in the future? Chris? >>> Chris: Yeah, I think there's no question that there's going to be additional consolidation. And when you stop and think about why the consolidation occurred for the last few years, it's scale matters. Scale matters around technology,
around compliance around maintenance. And now we're facing a very difficult interest rate environment yield curve. So, if you are going to be dealing with compression in the yield curve for the next year or two, one of the best things you can do is obviously grow organically, but also to increase your scale to reduce your expenses proportionately.
So, so we think there's going to be a lot of factors driving. The way we like to look at markets is there's like a trifecta you can get, right? So, if I take New York, for example, as we entered New York and we waited to enter New York until we had the asset size and capabilities to do things right there, we paired together some internal talent development with the acquisition of lenders from, from a couple of other places and the acquisition of a small family owned bank. And those three things gave us a powerful combination and existing customer list, some people we can grow from an entry level, but some astute folks that have been in the market for many years and can help build that out. So, similarly, you know, in Philadelphia, we went with the team first and we've been doing organic growth there. Although some of the acquisitions in the
last few years got us a little more exposure in the Philadelphia market. So, I think it's going to be a combination of things, but the, the, for the forces that contributed towards industry consolidation are going to be around in spades in the coming years, pressure on, on interest margins, pressure on technology, pressure on regulatory requirements and compliance. And one of the main answers for that is scale. >>> Michael: What, what are the challenges that you see going forward in 2021? >>> Richard: Technology, cyber, those are cyber will continue to be an issue. And I don't think that's going to be in any shape
or form less of an issue in the future. I think it's going to be more of an issue in the future. So, you know, protecting the customers, protecting your information will be a really a continuing challenge into the future.
>>> Blair: The biggest challenge I think is also our, our, our best opportunity. And it's meeting customer needs as rapidly as they're changing. So, the banking industry has done a fantastic job of, of having a very stable, strong customer base, but the needs of those customers are changing rapidly. The fintechs have a huge advantage over us in their ability to move quickly. But we have a very strong advantage in that people trust the banking industry with the movement of their money, in a way that I'm not sure exists in the fintechs.
So, our ability to rapidly meet customer needs in a way that's tangible for them, I think is, is going to be the biggest challenge for us. But if, if we're able to do that, I think we can expand into more than just what we've been historically. We can add products and services that, we can leverage our relationships off of to, to, to great effect. And we can, you know, meet head-on the challenges of the Amazons and the Apples and the Googles as they continue to come into the financial services. >>> Michael: Chris, I think when we think about the cornerstone of our business relationships and managing those relationships and, and many times that may be generational businesses who you're banking, you know, several generations of a family.
And you really know the people that are the good operators, of translating everything we do in the relationship side into a digital world is a balancing thing. One of the most significant investments we've made in the last several years is enabling our bankers to be able to do business via video, even pre pandemic, you know, we've got video teller machines out in multiple locations that we can staff with a small crew in a single place. But I think transitioning what makes us great and makes our business work, which is that relationship, connection, understanding businesses, building that rapport with our customers and being able to do it in a digital manner and as Dick points out, safely without a cybersecurity issue coming, coming back to bite you. That's a, that's the important multi-year issue. We're going to
have to outrun the fintechs. We're going to have to outrun the biggest banks in the country. So, it's going to be a challenge. We need to make sure that we're focused on that. >>> Michael: We got a minute and a half left. I'd like to ask the question on the role of intermediaries to help your banks grow. I know Dick, you've done a lot of business with
intermediaries. I think Chris you're at a certain level. I think Blair has less over there. How, how do you look at the role of intermediaries? Chris? >>> Chris: Well, look, I mean, they, they can provide wonderful opportunities for you to access markets that you can't or not well positioned to access directly on your own. So, you
know, whether that's a loan broker or a third-party referral, could even be, you know, accountants, attorneys, these are really important sources of business for us. And, and you need to, you know, make sure you understand those markets, you treat them like the professionals that they are, that you're working collaboratively. But I think you also have to maintain and understand that you're going to have some long-term direct relationships there -- the banks relationships that, you know, came in through a different channel were built a different way or over different time periods. So, I think being able to, to understand both channels, to treat them with, with respect, with professionalism, I think is an important thing. And if you do, you can make a
tremendous opportunity out of it. >>> Michael: Dick? >>> Richard: We have an obligation. I think, as an industry, we have an obligation. We, we've lost our way in some respects and losing our way in some respects is, we've lost customer opportunities to some of these intermediaries. So, our position quite frankly, is we want to embrace them. The good
ones. Good ones. The ones who have an appreciation for the compliance responsibilities that we have as an organization. But, so we're, we're embracing those intermediaries in a big way, because we want to find what they have found, which is ways in which they can meet customers' needs that the banks have avoided over the last 10 or 15 years. >>> Michael: Right. I think in summation, you know what, they have to look after you, because it's a relationship business and that's important. I know that's the relationship at M & T. And I hope that it's going to get shiny, the apple. Okay? [Richard
laughs] I hope that it gets brighter and I hope to see you all in 2021. I'd like to thank Blair, Chris and Dick. See you next week. >>> Richard: Thank you so much, Michael. Bye-bye, now. ♪ [Theme Music] ♪