C&I Outlook

Local Banks Eye Biz Lending Boost in 2025

Less CRE Demand, Fewer Fed Rate Cuts Buoy Hopes


With commercial real estate loan demand down, many New Hampshire banks are hoping to grow their business lending portfolios in 2025. But expect fierce competition. iStock illustration

New Hampshire banks hope to build upon this past year’s incremental improvements in business lending across the state.

According to FDIC data, total statewide commercial-and-industrial lending by New Hampshire-based banks rose to $746 million through the third quarter of 2024, up a modest 2.6 percent compared to the same period in 2023 and up 8.7 percent compared to the first three quarters of 2022.

Among the local banks seeing big C&I lending gains were Franklin Savings Bank (up 25.4 percent to $24.6 million), Walden Mutual Bank (up 128 percent to $37.2 million) and Claremont Savings (up 73.8 percent to $28.9 million), according to FDIC data.

Not all New Hampshire-based banks saw a boost in C&I lending through the third quarter – with one bank’s C&I lending down by as much as 25 percent compared to the same period in 2023.

Still, Small Business Administration loan data tends to confirm that business lending has been on the rise of late in the Granite State. Total approved SBA 7(a) lending by state, regional and national banks was up 32 percent in New Hampshire, to $130 million for the federal fiscal year ending Sept. 30, compared to the prior fiscal year, according to SBA data.

TD Bank was tops in approved SBA 7(a) lending in New Hampshire this past fiscal year, via 166 deals worth $22 million, more than double the dollar value of the previous year’s approved loans for TD.

Other notable SBA lenders include Meredith Village Savings ($4.3 million, up from $1.3 million) and Merrimack County Savings ($2.7 million, also up from $1.3 million).

Shift Away from CRE

Local bankers cite a number of reasons for the increase in business lending in 2024, including a slowly improving economy and late-year Fed interest-rate cuts that appear to have attracted the interest of some business borrowers.

But a few local bankers said there’s also been a shift, broadly speaking, away from commercial real estate lending toward more C&I loan business, due to the rise of at-home work that’s hurt the values of office buildings and made them less attractive to investors.

The lower office-building values have also pinched banks that made CRE loans when interest rates were low, only to find many of those loans tied to assets whose values have plunged.

“We’re seeing it,” said Frank Teas, president and CEO of Nashua’s Millyard Bank, referring to a shift away from CRE to C&I lending across the industry. “People are nervous over [the future of] offices and whether borrowers can pay off debts.”

Millyard is a commercial bank that’s tried to stay clear of major CRE lending deals, preferring instead smaller “owner-occupied” CRE loans, such as for dental offices or even pizza parlors, Teas said.

He also said Millyard likes loans for multifamily properties.

“We’re still seeing requests for that,” he said.

Jim Brannen, chief executive of First Seacoast Bank in Dover, said his bank is not curtailing CRE lending.

“We’re not drawing a line in the sand and saying, ‘We won’t do X or not do Y,’” said Brannen, who takes over as chair of the New Hampshire Bankers Association in 2025.

But Brannen said First Seacoast, like Millyard Bank, tends to focus on smaller owner-occupied CRE loan deals, such as for medical and legal offices, or for businesses located in industrial parks.

Strong Demand from Some Sectors

As for C&I lending, Teas said he’s seeing strong demand from borrowers in the sheet-metal and machine-shop fields that are often tied to the IT or defense industries.

He also said dental practices have been a regular source of C&I lending.

At BankProv, chief executive Joe Reilly spent most of the past year steering his institution toward more CRE loans, not less, as part of his bank’s strategy to disengage from its disastrous foray into courting cryptocurrency miners as borrowers that ended with a bank loss of $35 million two years ago. The cryptocurrency fiasco led to the resignation of then-CEO Dave Mansfield.

The Amesbury, Mass.-based BankProv, which has four branches in New Hampshire, has successfully sold off its cryptocurrency portfolio – and is now focusing entirely on CRE and C&I lending, said Reilly.

As for CRE, hospitality-sector firms have been a good source of loan business for the bank, said Reilly. Residential developers building small subdivisions have also been occasional CRE loan customers, he said.

As for C&I lending, BankProv is mostly focusing on businesses with revenues of $10 million or less. Among the types of business seeking C&I loans are small manufacturers, trucking firms, and even some flower shops, Reilly said.

2025 ‘Shaping Up to Be Good’

As for the 2025 outlook, Reilly said BankProv has already budgeted for a 5 percent increase in business lending next year.

First Seacoast’s Brannen said next year is “shaping up to be pretty good” in terms of C&I lending, but he’s not expecting a huge surge.

“It’s going to be OK,” he said. “It’s not going to be a banner year. The volume isn’t going to be as robust as it was a few years back.”

Frank Farone, managing director at bank advisory and consulting firm Darling Consulting Group, agreed that 2025 will likely see increased lending in New Hampshire, but probably not as much as hoped.

The Federal Reserve, nervous that inflation may not be under as much control as thought, has indicated it probably won’t be cutting interest rates as aggressively as many bankers had once expected – and that will limit lending in 2025, Farone said.

Another factor that could constrain C&I lending locally in 2025: New Hampshire still has a lot of smaller banks, despite past industry consolidation, Farone said.

“There’s a lot of competition chasing deals,” he said. “There’s a limited pool of potential loans out there. I’m just not sure where the growth will come from [in 2025].”

Banks might be wise to focus more on existing customers and their growth potential and needs, rather than chasing new customers, he said.

“We tell clients, ‘Don’t take your customers for granted or they’ll go elsewhere,’” said Farone. “Anything can happen in this competitive market.”