While the state’s banks plow ahead through the waters of 2020, propelled by stiff winds from the strong state economy, several challenges loom on the horizon, industry-watchers say. 

Overall, 2020 looks set to be a good year for lenders, Bank of New Hampshire President Paul Falvey said.  

“It’s interesting. If you talked to me 6 months ago, there were some indicators that caused some concern,” he said. “But you talk to me today and the outlook for 2020 is ‘more of the same.’ Good, stable, steady growth.” 

But the same winds driving profit centers like commercial lending are also making it harder to recruit good talent. As in recent years, banks are also turning to technology as they seek to take advantage of opportunities like small business lending and deal with the difficulties recruiting new depositors thanks to low interest rates. And a slew of federal and state regulatory changes also lie ahead. 

Companies across New Hampshire are struggling in the face of high housing prices — the statewide median single-family sale price was $285,000 according to recent data from The Warren Group, publisher of The Registry Review — and an economy that offers good job opportunities at every turn. Banks are no exception, said NH Bankers Association President Krisity Merrill.  

“A lot of our banks are increasing what they pay,” she said, citing Franklin Savings Bank’s recent move to a $15 minimum hourly wage. “They’re doing that to stay competitive. Others are looking for ways to assist with new hires’ student debt.” 

The state’s many small-town banks are challenged to compete for young hires with exciting cities like Manchester and Boston, she said.  

Bank of New Hampshire has so far not had to struggle to attract the talent it wants, Falvey said, but maintains a robust employee engagement effort with regular events and offers perks like tuition reimbursement. 

“It’s a good circle. It’s a nice environment for people who really want to take care of customers,” he said. “We’re seeing pretty stable, solid employee base. We’re bucking that trend a little bit.” 

Opportunities in Small Business Lending 

The new year could also see community banks and credit unions increase their focus on small businesses by adding more services for these customers, Erika Baumann, a senior banking analyst with Aite Group, said in an email.   

Consumers have become aware of the ability to receive funds in real time, making this service an expectation for best-in-class service, she said. These expectations affect all types of payments, including person-to-person, business-to-customer and business-to-business.   

The Clearing House, which is owned by the country’s largest commercial banks, launched a real-time payment network two years ago. It now connects about 51 percent of the country’s demand deposit accounts with about 20 mid- and large-sized banks in the network. 

The first community banks will go live on the RTP Network in the first quarter of 2020, Baumann said, noting that this development indicates that these banks recognize the importance of offering a real-time solution and the ease of connecting to the network.   

One possible area for partnership involves money management tools, Baumann said, including forecasting, expense management, invoicing and mobile payments.  

She expects these institutions to work with core processors and online banking providers to find ways to take advantage of the capabilities these fintechs have to offer.   

Opportunities to work with small businesses continue to grow. According to the U.S. Small Business Administration, New Hampshire has almost 135,000 small businesses in 2018, a 1 percent increase over 2017.  

When it comes to residential lending, Bank of New Hampshire’s Falvey said his institution just finished rolling out a new residential lending system that “dramatically improves our online residential lending process.” 

“It’s got to be easy to understand, intuitive and responsive” for prospective homebuyers. 

Banks will also see changes to the Community Reinvestment Act in 2020. The Office of the Comptroller of the Currency and the FDIC rolled out proposed new CRA regulations governing the lenders they regulate late last year.  

If adopted, the rules would clarify what qualifies for credit under the CRA and where it qualifies. The regulators would develop and maintain a publicly available list of pre-approved activities. The list would be updated regularly, and stakeholders would be able to submit suggestions for the list. Under the proposed regulations, banks would further be required to designate areas beyond these areas where they draw a significant portion of their deposits, which would be significant for the new wave of online-only banks. 

“We hope to see the Federal Reserve have a voice in that so there’s consistency in the regulatory environment,” NH Bankers’ Merrill said.  

Merrill said to watch for action in Concord around proposals for a financial literacy commission and biometrics and cybersecurity. The trade group is also waiting for more details come out on proposed mortgage mediation legislation and a proposal to require lenders to offer small-dollar loans.  

“Those are probably really well intended but we want to understand the impact to banks,” she said.  

Diane McLaughlin contributed reporting.