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Reflections on 2021 from Commercial Banking

From the desk of Don Marek

As the Commercial Banking Executive, I have a unique perspective of the business communities that Fremont Bank serves.  Given that 2021 was such a tumultuous year, I wanted to share some of the highlights and lowlights…perhaps some of my musings will be helpful as we get ready for 2022!

“Happy” New Year 11 Months Ago

One may compare COVID-19 to a houseguest that lingers much too long, but I think of it in terms of the quote attributed to Mark Twain, that “reports of my death are greatly exaggerated.”  We were hoping that the virus was dead or dying, but it remained as virulent as ever. 

We at Fremont Bank started the year working tirelessly get 2nd Draw Prepayment Protection Program (PPP) ready for launch in an effort to help small businesses in our community.  In January, we funded $82 million of these forgivable loans, and by June, we had provided $213 million total to our clients.

As Winter Thaws, Lending Increases

I’ve compared the pandemic to a tornado in terms of other natural disasters.  A tornado touches down in unpredictable spots, devastating one house while the neighboring home is intact.  The pandemic continues to impact segments of the economy in very different manners. While many businesses are thriving, experiencing surging demand for their essential products and services, others struggle to survive, given material disruptions to their business models.  We are grateful we were able to help many of our clients in the hardest-hit industries, including restaurant and hospitality, while simultaneously supporting the surging demand of clients in industries experiencing unprecedented growth, such as contractors and developers. 

As President Biden signed the $1.3 trillion American Rescue Plan, Fremont Bank’s construction lending balances jumped by 16%, indicating that real estate investors needed no rescue, with housing shortage and infrastructure investment fueling building in the Bay Area.  With all economic indicators in green, the Bank adjusted its underwriting guidelines back to “pre-pandemic” levels and lowered interest rates to reflect the lower risk.

Fremont Bank’s Access to Industry Experts

While worries over the spread of the Delta variant delayed any hope of a “return to normal,” Fremont Bank continued to offer virtual events to keep our community informed and connected.  In April, I moderated a panel of local experts to discuss the question, “Is now the time to purchase property for your business?”  I’m sure you can guess the answer—it was undoubtedly “yes,” and we were experiencing surging demand for commercial real estate loans!  One of the panelists, Tim Tikalsky, tax principal at Sensiba San Filippo, offered some great tax advice leading into changes for 2022.  You can watch a recording of the event here.

Another virtual event we produced was “Avoid the common pitfalls of new home construction,” which was moderated by Vice President and Team Lead Alexis Kleinhans.  Fremont Bank Commercial Relationship Specialist Matt Cooper discussed issues faced by borrowers when embarking on building their primary residence or dream vacation home.  With a general contractor, title officer, architect and real estate agent, the group provided useful advice on issues such as broken priority and building permits.

As the title sponsor of the San Francisco Business Times “State of the Tri Valley” in August, I was asked to present opening remarks at the virtual event, which highlights innovation in technology and the 2040 visionary plan.  The communities of Danville, Dublin, Pleasanton, Livermore and San Ramon have a business ecosystem with thriving innovation driven by the two national labs (Sandia and Lawrence Livermore), and growing publicly and privately traded tech, biotech, and manufacturing companies. 

Expanding the Team

The Bank has grown nearly 12% in total assets through November, and that trajectory has necessitated an expansion of our commercial lending team. As the No. 1 SBA Lender in the Bay Area in 2020, we continue to see a need from small businesses for these government-supported SBA loans, which enable up to 90% financing on business acquisitions, commercial real estate, equipment and even working capital. Jenna Williams, who has 15 years of experience in SBA lending, joined the team in July. 

We also expanded our presence in Marin and San Francisco by hiring Paul Barenfus, who has an impressive resume of financing family-owned businesses in a variety of industries.  In addition to adding quality commercial lenders to the team, I was proud to announce the promotion of Terick Albert to Team Lead.  In his expanded role, Terick still manages some of our largest client relationships, but he also coaches a team of six loan officers, credit analysts and assistants in the origination of loans throughout the Bay Area.  Congratulations, Terick!

Supporting Our Community

As community bankers, our team members remain active in the communities we serve, supporting our not-for-profit clients, donating time and making financial contributions to various charitable organizations.  While there are many organizations we supported in 2021, I’ve spotlighted a couple below.

We were proud to sponsor this year’s Livermore Chamber of Commerce golf tournament at beautiful Wente Vineyards.  Even though my foursome didn’t win, we had a splendid day with clients Altamont Beer Works and Sensiba San Filippo, among others.  We also helped raise over $100,000 for Boy Scouts of America and were honored to be the recipient of the 16th annual Distinguished Citizen Award Dinner.  CEO Andy Mastorakis accepted the award on behalf of Fremont Bank, which was recognized for its decades-long (starting with founder Morris Hyman) commitment to building strong leaders among boys and girls in our communities through the Scouting program.  Over 200 clients and friends of the Bank purchased tables to support Scouting. Both the Livermore Chamber and Golden Gate Area Council (Scouting) are clients of the Bank, and have been fantastic partners through the years.

Finishing Strong and Optimistic for 2022

As I write this, Fremont Bank’s Commercial Lending department is wrapping up a record funding year.  Our department’s success is a reliable indicator of the health of our local economy, and we are seeing business owners across most sectors and local communities investing in their companies. 

Our forecast for 2022 includes 15% year-over-year commercial loan growth.  The metrics for a healthy local economy are solid: GDP is forecasted to grow 4.4% in 2022, and job growth in California should be 4.2% after growing just 1.7% in 2021 [source: Dr. James Doti, Chapman College].  The Fed is expected to raise rates at least twice in 2022, which would likely bring the WSJ Prime rate up 50 basis points to 3.75% by the end of next year.  Rising interest rates are usually a sign of a growing economy; this all bodes well for our local economy.

With the continued demand for small business and commercial loans we are experiencing, and favorable economic indicators, we are planning for continued growth into 2022.

A Sincere Thank-You

As our team works hard these last few days to fund loans before year-end, we would like to take a moment to thank our clients for their partnership with Fremont Bank over another unusual year. Whether our team handled your Paycheck Protection Program forgivable loan or the refinance of your commercial property, we are appreciative of the trust you place in Fremont Bank.  We are proud to operate as an independent community bank, and that independence helps us respond to our clients’ needs, many of which are family-owned businesses, in a timely and customized manner.

Enjoy the holidays with your family and friends, and we look forward to continuing to support our business community in 2022!