Interview: John Herring, New Jersey Market President, Liberty Bell Bank - A Division of The Bank of Delmarva

As of February, 2021, 20,559 PPP loans had been issued to New Jersey businesses

John Herring

New Jersey Market President Liberty Bell Bank - A Division of The Bank of Delmarva

( ) to more than 20,000 New Jersey businesses, totaling $2.0 billion and an average loan value of $100,220. This was above the national average of close to $82,000 per business. To add a further layer of protection for small businesses, New Jersey made the decision to make PPP loans tax-free. All expenses paid through PPP funds will be tax-deductible.

The huge effort by banks in getting this money to struggling businesses cannot be overstated. As soon as the SBA made the financial lifelines available to struggling businesses, New Jersey banks had all hands on deck to process the vital resources. But even before the PPP program set in, New Jersey banks were already heavily engaged in lending to small businesses. Eight Garden State banks made the Top SBA lender list in the agency’s fiscal year 2019. TD Bank came out on top of the list of 20 banks by approving 604 small-business loans across the state totaling $79.4 million. Regional Business Assistance Corp ranked third at 100 loans for $58 million; UCEDC was sixth with 69 loans for $3.4 million; Cooperative Business Assistance Corp was eighth with 59 loans for $1.4 million; Peapack-Gladstone Bank came in 10th with 31 loans for $22.3 million; The 504 Co. ranked 11th with 30 loans for $33 million; New Millennium Bank was 24th with 25 loans for $23.2 million and First Commerce Bank came in 18th with 20 loans for $5.6 million.

As the pandemic wore on, other financial institutions relied on strategic partnerships to distribute as many loans as possible. Cross River, a New Jersey-based community bank, leveraged its fintech partnerships to process 105,000 PPP loans worth an aggregate $4.5 billion as of June 6, 2020, ranking 15th in the SBA’s list of top lenders by value and fourth by the number of loans processed, only behind financial behemoths JPMorgan Chase, Bank of America and Wells Fargo.

Regulations The speedy acceleration in 2020 toward the

How has demand for the bank’s services shifted with the pandemic?

Loan demand has continued to grow. There’s been a great amount of activity in the construction industry, both commercial and residential, rehabs and flips, and contract building. The real estate market has been crazyhot and that has presented some nice opportunities. We had developed a bit of a niche in construction lending before our merger and we were fairly active in the construction business. That has continued throughout the pandemic. The bank’s pipeline has performed extremely well. Overall, I would say we’re back very close to 100% in terms of business compared to prepandemic levels.

What impact have you seen from the increased focus on digital platforms?

We’ve definitely seen an increase in demand for our digital banking services. We’ve always used remote deposit capture to expand our reach in this market as we have a limited number of branches. I think there’s definitely less branch traffic and most of us expect that to be the new normal. A lot of young people are banking from everywhere and it’s great to have those options and opportunities. A lot of people have been surprised by the amount of business you can do over Zoom and on a remote basis without being in the office five days a week, so I do think there are some changes that will stay in place.

What is behind the consolidation in the industry?

If you’re a smaller bank and you’ve been around for a while but you don’t have a ton of capital, it’s difficult to navigate the regulatory and the compliance aspects of the business. Larger banks have entire departments dedicated to those issues. With smaller community banks, that isn’t always the case. Another factor driving consolidation is the opportunity to be a part of a larger organization and to take advantage of the opportunities that it affords.

New Jersey is home to 23 commercial banks.

digitalization of banking on a global scale led to the need for new regulation primarily focused on technology and transparency. Deloitte points to regulatory trends moving toward an evolving oversight of digital transformation and technological innovation; governance; anti-money laundering compliance; consumer protection and dynamic data environments. It boils down to ensuring technological implementation does not compromise individual users’ financial data while fostering more transparency over how banks manage their capital and the different sources it comes from. “Regulators continue to refine existing regulations implemented in the wake of the financial crisis (global financial crisis) and are now focusing their attention on existing policy areas such as climate risk, digital currencies, technology, and innovation. Meanwhile, they are reviewing their own supervisory processes and reinforcing the core banking supervisory pillars of governance, risk management, capital adequacy and planning, liquidity management, and compliance with laws and regulations,” Deloitte wrote in its 2021 banking regulatory outlook report.

Banks are also pivoting to increasingly disruptive and tech-intensive solutions to serve their customer base amid the rise of fintech players. In October 2020, Varo Money, a Silicon Valley fintech startup, began accepting federally insured customer deposits. It is also the first consumer fintech company to be granted a national banking charter. It is likely that the company is trailblazing the path for other fintechs to do the same going forward, possibly at a faster speed. The implication of this landmark is that it puts fintechs virtually on a level playing field to start competing with banks. Banks that fail to get on par with this trend risk falling behind.

In fact, fintech is on track to becoming a $1.3 billion ( )