Independent Banker - December 2022 - 35

Next: State association partnerships 
The $1.3 billion community
bank, which serves the New York
City metro, specializes in providing
financing to CRE owners, developers
and investors, as well as providing
commercial and industrial (C&I)
loans to operating companies.
Although it is difficult to predict
how the CRE market will react to the
higher interest rates of the second
half of the year, activity slowed in
August and September, notes Psyllos.
FDIC data also pointed to a strong
start to 2022, with total loan and
lease balances at $109.9 billion in
the first quarter, up 1% over fourth
quarter 2021. Excluding PPP loan
forgiveness, the annual total loan
growth for the trailing 12 months at
the close of first quarter 2022 would
have been 9.2%, and C&I loan growth
would have been 18%.
First Business Bank in Madison,
Wis., anticipates hitting 10% in
organic annual loan growth in 2022.
Growth is driven in part by healthy
C&I business. Some of the strongest
areas have been asset-based lending
and equipment finance.
The usage of credit lines is also a
little bit higher than it was a year ago
when everyone had PPP funds, notes
Dave Seiler, COO of First Business
Financial Services Inc., parent
company of the $2.8 billion-asset
community bank.
Potential lending hurdles ahead
Lenders are keeping a close eye on
market challenges that could slow
lending activity in the latter half of
2022 and into 2023. Higher rates
are already starting to affect the CRE
market. " We're still seeing growth in
the CRE area, but it's been a little bit
slower, " says Seiler. Other potential
risks ahead include continued supply
chain disruption and inflation.
The reality is that there is a lot of
uncertainty in the market, including
" Lending activity in the first half [of 2022] was
up significantly over the prior year due primarily
to the increase in refinance and purchase
activity in anticipation of rising interest rates. "
-MICHAEL PSYLLOS, ALMA BANK
concerns of a potential recession
ahead, which will likely weigh on
activity and borrower demand. " All
of that will ripple into both C&I and
CRE lending, " says Psyllos. However,
market disruption could also create
opportunities to acquire assets at
more attractive levels than where
they have historically been trading,
he adds.
Identifying growth opportunities
In what could be a more challenging
economic environment, community
banks are looking at ways to maintain
and grow lending business. Some
bank and nonbank CRE lenders have
moved to the sidelines, which is
creating more runway for community
banks to compete for deals. Some
banks also see an opportunity
to capture new commercial and
consumer customers following an
active year of bank M&A deals and
consolidation.
Alma Bank is working to grow
its SBA lending platform with
504 and 7(a) loans for clients that
might not have access to traditional
bank financing. " We came out
of the pandemic with a better
understanding of the SBA, having
done a significant amount of PPP
lending, " says Psyllos.
QUICK STAT
+38%
The difference in commercial
real estate transaction volume
growth between the first half of
2021 and first half of 2022.
Source: MSCI Real Assets
Even if there is a recession ahead,
banks in general have better liquidity
and better balance sheet strength
than they did going into the recession
of 2008-09. " Credit quality has
been good, and community banks
are well positioned, " says Vicknair.
" In addition, I think new lending
opportunities will surface that have
not previously been considered. "
Some lenders tend to have a
specific underwriting box. " As a
community bank, we have the
flexibility to work with customers and
figure out ways to get deals done, " he
adds. " That's where we're going to see
a lot of opportunity over the course
of 2023. " 
Beth Mattson-Teig is a writer
in Minnesota.
independentbanker.org Q 31
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Independent Banker - December 2022

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