Is economic uncertainty affecting bank lending?

TEMPERATURES IN PLACE THROUGH LATE WEEK. WELCOME TO NEW HAMPSHIRE’S BUSINESS. I’M FRED KOCHER. THE ECONOMIC BUSINESS UNCERTAINTY THAT EXISTS RIGHT NOW IN NEW HAMPSHIRE AND ACROSS THE COUNTRY RAISES THIS QUESTION. OUR NEW HAMPSHIRE BANK’S LENDING, AS USUAL, ESPECIALLY TO THE SMALL BUSINESSES THAT DOT THE NEW HAMPSHIRE LANDSCAPE. WELL, HERE’S THE UNCERTAINTY. I’M TALKING ABOUT ECONOMIC UNCERTAINTY IN NEW HAMPSHIRE, JOB GROWTH STALLED, ESPECIALLY MANUFACTURING, HOUSING AFFORDABILITY AT RECORD LEVEL, OVERNIGHT VISITS FROM CANADA TO NEW HAMPSHIRE DOWN 49.3%. EXPORTS TO CANADA FROM NEW HAMPSHIRE DOWN 42%. NOW HERE ARE THE BANKS. I’M TALKING ABOUT COMMUNITY BANKS IN NEW HAMPSHIRE, 37 COMMUNITY BANKS WITH 234 BRANCHES, 19 COMMUNITY BANKS HEADQUARTERED IN THE STATE, 18.8 BILLION TOTAL DEPOSITS HELD AT COMMUNITY BANK BRANCHES. MY GUEST, WHO IS PRESIDENT OF ONE OF THOSE BANKS, SAYS NEW HAMPSHIRE BUSINESSES NEED COMMUNITY BANKS. THAT’S CRYSTAL DION, PRESIDENT AND CEO OF PRIMARY BANK, BASED IN BEDFORD WITH BRANCHES IN MANCHESTER. DERRY NASHUA, WHERE THEY PROVIDE FINANCIAL SERVICES PRIMARILY TO BUSINESSES, BUT ALSO INDIVIDUALS. WELCOME. NICE TO HAVE YOU HERE. IT’S A PLEASURE TO BE HERE. NICE TO HAVE YOU HERE. WHAT’S THE BANKING CLIMATE IN NEW HAMPSHIRE RIGHT NOW GIVEN THE BUSINESS CLIMATE OF UNCERTAINTY AND THINGS LIKE THE COST OF DOING BUSINESS INFLATION, TARIFFS AND SO FORTH? ABSOLUTELY. THE BANKING INDUSTRY IS STRONG. WE HAVE SEEN RECORD LEVELS OF CAPITAL STRENGTH IN THE BANKING ENVIRONMENT, BUT ONE IN AN IMPORTANT POINT IN PARTICULAR TO TALK ABOUT WITH THE BANKING CLIMATE IS THE DECLINE OF BANKS ACROSS THE COUNTRY. WE HAVE SEEN A RECORD DECLINE IN THE NUMBER OF BANKS. WE HAVE SEEN A RECORD DECLINE IN THE NUMBER OF BANKS THAT ARE COMING ONLINE, WHICH POSES A UNIQUE CONCERN FOR SMALL BUSINESSES, PARTICULARLY IN NEW HAMPSHIRE, BECAUSE THEY ARE THE ONES WHO PROVIDE THE ACCESS TO CAPITAL FOR THESE BUSINESSES TO GROW. WELL, TALK ABOUT CAPITAL ONE BRIGHT SPOT FOR NEW HAMPSHIRE BANKING, AS YOU KNOW, IS NEW HAMPSHIRE LEGISLATURE’S INCREASE THIS YEAR IN THE LENDING LIMIT OF YOUR BANK, OF YOUR BANK AND ALL THE BANKS FROM CHARTERED BANKS IN NEW HAMPSHIRE FROM 2015 TO 20% AND TO 25%. IF THERE’S A SECURED LOAN, HOW MUCH IS THAT GOING TO HELP WITH LENDING? WELL, IT CERTAINLY GIVES US A GREAT FLEXIBILITY, HOWEVER, SMALL BUSINESSES IN THE STATE OF NEW HAMPSHIRE ARE RARELY HIT THAT CAP. EVEN AT THAT 15 MARK. SO WHILE IT, AS I MENTIONED, DOES GIVE US THAT FLEXIBILITY, IT IT CERTAINLY IS IS SOMETHING THAT WE WE MAY NOT NEED TO USE. AND GIVES NEW HAMPSHIRE BANKS MORE COMPETITIVENESS WITH NEW ENGLAND BANKS, WHICH ARE ALREADY AT THAT. THOSE LEVELS. ABSOLUTELY, ABSOLUTELY. AS YOU KNOW, THERE ARE DIFFERENT SIZES OF SMALL WHEN IT COMES TO SMALL BUSINESS. HERE’S A RECENT WALL STREET JOURNAL ARTICLE ABOUT THAT. AND IT’S CALLED A REDEFINITION OF SMALL BUSINESS LENDING OR BANKING. ESTABLISHED SMALL BUSINESSES WITH REVENUES IN THE MILLIONS THEY SEEK LOANS. BUT GIG WORKERS AND INDEPENDENT CONTRACTORS JUST NEEDED A BANK ACCOUNT FOR DEPOSITS. SO WHAT ARE YOU SEEING WITH YOUNG ENTREPRENEURS? ARE THEY JUST SEEKING DEPOSITS OR ARE THEY SEEKING LOANS? IN MOST CASES, THEY’RE SIMPLY SEEKING DEPOSIT ACCOUNTS. YOU KNOW, THEY’RE THEY’RE YOUNG IN THEIR CAREERS. THEIR BUSINESSES ARE YOUNG. THEY’RE JUST LAUNCHING. SO THEY REALLY DON’T HAVE A NEED FOR LENDING. THEY MAY NOT HAVE A STAFF WHERE THEY NEED CASH FLOW. SO REALLY THEY’RE MORE CONSUMER TYPE PRODUCTS AND SERVICES AS OPPOSED TO BUSINESS TYPE PRODUCTS AND SERVICES. YOUR FUTURE CUSTOMERS FOR LOANS? ABSOLUTELY. YOU HOPE. WE HOPE. YES. HERE’S A LIST OF ITEMS YOU’RE FAMILIAR WITH. AND LET’S PUT THAT UP ON THE SCREEN. ANNUAL SURVEY OF COMMUNITY BANKS WITH TOP RISKS. AND YOU CAN SEE FROM THE COST OF FUNDS ALL THE WAY DOWN THAT LIST, TO TECHNOLOGY IMPLEMENTATION. AND THAT’S FROM A NATIONAL SURVEY. IN THAT LAST ITEM. TECHNOLOGY LEADS ME TO ASK YOU ABOUT ARTIFICIAL INTELLIGENCE. HOW MUCH IS AI BEING USED IN THE BANK? YOUR BANK TODAY, BOTH FOR YOUR OPERATIONS AND FOR THE CUSTOMER? WELL, AI CERTAINLY IS IS AN INTERESTING PHENOMENON AND SOMETHING THAT BANKS HAVE TO TREAD VERY LIGHTLY. WE DO USE CERTAIN AI IN OUR BACK OFFICE, HOWEVER, IT WILL BE SLOW FOR BANKS REALLY TO ROLL OUT USE OF AI FOR THE CLIENT JUST BECAUSE OF THE NEED FOR PROTECTION IN THE FINANCIAL SERVICES INDUSTRY. RIGHT NOW. LET’S PUT THIS GRAPH UP ON THE SCREEN REAL QUICK HERE. LOOK AT THE MIDDLE OF THIS GRAPH WHERE THE BLUE LINES REPRESENT A NEW COMMERCIAL BANK. CHARTERS. AND THEN LOOK AT THE MIDDLE OF THE GRAPH THAT SHOWS A SHEER DROP DURING THE 2008 2009 FINANCIAL CRISIS. AND THEN THE SIGNIFICANT ABSENCE OF BLUE LINES AND THE ABSENCE OF NEW COMMERCIAL BANK CHARTERS EVER SINCE. THIS IS A CONCERN OVER THE LAST 25 YEARS, THE NUMBER OF BANKS ACROSS THE COUNTRY HAS DECLINED BY ABOUT 53%. WE’VE GONE FROM OVER 8000 BANKS DOWN TO ABOUT 3900 FDIC INSURED INSTITUTIONS, WITH NO NEW BANKS COMING ONLINE. AS I HAD MENTIONED EARLIER. SO THERE IS A CONCERN ABOUT, AGAIN, WHERE ARE THESE BUSINESSS GOING TO GET THEIR ACCESS TO CAPITAL? YEAH. WELL, CRYSTAL DIONNE IS PRESIDENT AND CEO OF PRIMARY BANK IN NEW HAMPSHIRE. THANK YOU SO MUCH. THANKS FOR HAVING ME HERE. AND IF YOU MISSED PART OF THIS BRIEFING ON SMALL BUSINESS BANKING IN NEW HAMPSHIRE, YOU CAN GO TO WMUR.COM WHERE