Speaker 1: You're listening to Bloomberg Business Week with Carol Masser and
Speaker 1: Jason Kelly on Bloomberg Radio. So November, just a little
Speaker 1: while ago, Dave Wilson was here and he was talking
Speaker 1: specifically about financial shares needing some help in recovering. I
Speaker 1: do remember I listened to Dave Wilson in comparison with
Speaker 1: technology names. It was actually his chart of the day.
Speaker 1: But I gotta say, I don't know that that's the
Speaker 1: case of Connect One Bankcorp. Because the stack has done
Speaker 1: very well and certainly been recognized by investors. In twenty nineteen,
Speaker 1: Frank Sorrantino is back with US CEO at Connect One,
Speaker 1: based in Englewood Cliffs, New Jersey, back in our Bluemberg
Speaker 1: Interactive Broker studio here in New York. Nice to have
Speaker 1: you here with us. Great to be here again. So
Speaker 1: how would you describe the banking environment? It's an interesting
Speaker 1: environment today, certainly interesting, good, interesting, Well, you know what
Speaker 1: is that? It's a Chinese curse? Right, have lived an
Speaker 1: interesting life? Um, certainly an interesting environment. You know. We
Speaker 1: we find that the econom of me in general is
Speaker 1: doing pretty well, and most of our business owners are
Speaker 1: fairly upbeat. About what's going on. Yet, everything that you
Speaker 1: see or reading the news, including you know today, depends
Speaker 1: on what day you wake up and you know what
Speaker 1: what what Twitter feed you are watching? So um, but
Speaker 1: in general, I think the economy is pretty good. Banks
Speaker 1: are pretty well positioned. They've never had so much capital
Speaker 1: as they have today. Um, as you saw, you know,
Speaker 1: earnings were pretty good for banks across the board past quarter.
Speaker 1: Do you think it's right when they talk about loosening
Speaker 1: some of the reserves or some of the requirements, you know,
Speaker 1: rolling back some of the financial crisis and financial crisis
Speaker 1: era adjustments on banks. I don't think there. I don't
Speaker 1: really believe there was anything significant there that's contributed to
Speaker 1: or added to where the financials are today. Uh. Some
Speaker 1: of those things were mostly adjustments. There weren't any any
Speaker 1: really big wholesale Uh. There are things of course that
Speaker 1: I think, UM, we need to take another look at
Speaker 1: some of the capital requirements. Some of the complexity that's
Speaker 1: in that's in the regulation more so than the actual Um.
Speaker 1: You know, what does the regulation say, it's the complexity
Speaker 1: around it in the cost of compliance with that complexity,
Speaker 1: I think is just a drag on the economy, and
Speaker 1: it doesn't really benefit anyone. Tell us about what your
Speaker 1: customers are telling you, because you know, I feel like
Speaker 1: we have an okay picture of what businesses are saying,
Speaker 1: whether they're borrowing, whether they're spending, whether they're expanding. If
Speaker 1: you can generalize sort of how your customers are feeling,
Speaker 1: what what would you say? So, look, I think um
Speaker 1: clients in general, and it almost doesn't matter what industry
Speaker 1: we're talking about. But the labor markets tight, okay, So
Speaker 1: that's both a good thing and a bad thing. Interest
Speaker 1: rates are low on historic by historic standards or any
Speaker 1: other standard you want to look at, so people feel
Speaker 1: confident about making certain types of decisions about the future
Speaker 1: in that In that environment, people feel good that they
Speaker 1: have jobs. Businesses feel good that their businesses are profitable. Uh,
Speaker 1: people feel they can expand or you know, make capital
Speaker 1: improvements to their business because interest rates are really low.
Speaker 1: So in general, it's an upbeat. It's an upbeat sense
Speaker 1: of where we are. So are you seeing more people
Speaker 1: take out mortgages? Are you seeing you know, businesses that
Speaker 1: you that are your clients either take out money for
Speaker 1: capital expenditures or improvements. What what do you are you
Speaker 1: seeing deposits grow. What are you seeing, Frank in terms
Speaker 1: of your metrics? So, yes, yes, and yes, I would
Speaker 1: say the biggest, the biggest holdback in the residential economy
Speaker 1: right now is the lack of product in brand new housing.
Speaker 1: It's just not there. Um. So that's that's so, that's
Speaker 1: a good sign for that industry. Yes, businesses are borrowing,
Speaker 1: businesses are expanding, Businesses are uh spending money on a
Speaker 1: lot of technology, capital improvements, efficiency matters, and you know
Speaker 1: this whole concept of well, we're going to wipe out
Speaker 1: an entire um part of the economy because of you know,
Speaker 1: efficiencies that are coming to the market place. I just
Speaker 1: I don't see it. I see it going in the
Speaker 1: other direction. There are more better quality jobs that are
Speaker 1: going unfilled today than I think than there ever have
Speaker 1: been before. So when it comes to your business, more
Speaker 1: consolidation coming coming. And are you a buyer here? So
Speaker 1: well yes and yes, um. So you know, the the
Speaker 1: banking industry has been consolidating somewhere around four to five
Speaker 1: per year for the last twenty years or so. There
Speaker 1: were some twenty thousand banks years ago. There are five
Speaker 1: thousand and a few others right now the rate of
Speaker 1: consolidation is about the same. It's still consolidating at about
Speaker 1: five percent, which would be a two fifty banks a
Speaker 1: year UM. And yes, Connect one Bank closed on an
Speaker 1: acquisition earlier in the year uh and we announced another
Speaker 1: one here in August. So there are opportunities to build
Speaker 1: scale to create a more efficient banking platform under connect one. Well,
Speaker 1: what do you get out of consolidation and we just
Speaker 1: got about forty seconds here. What do you get? Is
Speaker 1: it just in case you're able to cut back on people,
Speaker 1: but because you can kind of integrate operations. Look, I
Speaker 1: think I think you really look need to look at
Speaker 1: the bigger economy to understand what's happening right. Um, the
Speaker 1: community bank model, where geography is so important, has has
Speaker 1: slipped away a bit. So efficiency is important, scales important,
Speaker 1: The ability to market across a much larger platform is important,
Speaker 1: and you need size uh and revenue in order to
Speaker 1: be able to do that. And the best and one
Speaker 1: of the one of the best ways to do that
Speaker 1: is to merge with your partner or or or acquire
Speaker 1: or be acquired. All Right, I love talking to you.
Speaker 1: I really do feel like we get a snapshot of
Speaker 1: what's going on, because I feel like there's so many
Speaker 1: questions out there. So thank you. All right, Frank Sarantino,
Speaker 1: Chief Executive, I'll sort of connect one bank, publicly traded
Speaker 1: based in Inglewood Cliffs, New Jersey, here with us and
Speaker 1: wowspital famous daughter. Yeah, well I know that we'll see world.
Speaker 1: I'm so delighted to have our next two guests in
Speaker 1: our studio. We mentioned earlier we would talk about affordable housing.
Speaker 1: Habitat for Humanity New York City works on that. It
Speaker 1: also has an initiative to help support more homeowners financially.
Speaker 1: And so let's get into it. Karen hay Cocks is
Speaker 1: back with us full disclosure. She's a neighbor of mine
Speaker 1: and we run into the dog park occasionally. She's CEO
Speaker 1: of Habitat for Humanity New York City. Also with us
Speaker 1: is Chris Ellam. He's executive director of Habitat for Humanity
Speaker 1: New York City Fund. And so let's get into their news.
Speaker 1: You said you'd be back when you had some news,
Speaker 1: So what's going on. That's great? Well, I think what's
Speaker 1: going on is most of the time when people think
Speaker 1: about Habitat for Humanity, they think they know right, yeah,
Speaker 1: we know what we do. We write, we get a
Speaker 1: bunch of volunteers together and raise some walls. Visions of
Speaker 1: Jimmy Carter like you know that fresh out of the
Speaker 1: hospital where I was a couple of weeks ago. Fortunate,
Speaker 1: very fortunate to say so um, And then fact, that
Speaker 1: is who we are. But in New York City we're also,
Speaker 1: as you might expect, this much more complex animal um.
Speaker 1: And so one of our goals really is will never
Speaker 1: be able to build our way out of an affordable
Speaker 1: housing crisis in New York City. And so consequently our
Speaker 1: model is morphed to try and preserve the existing affordable
Speaker 1: housing that we do have, try and prevent displacement of
Speaker 1: low income homeowners across New York City and keep them
Speaker 1: where they are. So we have this complex preservation model,
Speaker 1: and part of that is the c d f I
Speaker 1: or the lending entity. So I want people to know
Speaker 1: that we are who you think we are, but we're
Speaker 1: also this other, much more complex, impactful um entity that
Speaker 1: works in the city of New York. And so Chris
Speaker 1: Ellum break it down for us, how does this work?
Speaker 1: Because you know, our audience certainly appreciate sort of the
Speaker 1: complexity of finance and how it plays through here, how
Speaker 1: does it work well? At first, I think it's important
Speaker 1: to recognize that um c d f I Fund was
Speaker 1: created as Apartment of the Treasury, so this is something
Speaker 1: that the federal government also funds through the c d
Speaker 1: f I Fund, and the c d f I Fund
Speaker 1: was designed to get capital to underserved communities throughout the country.
Speaker 1: We are a small fund that focus is solely on
Speaker 1: affordable housing, building new affordable housing that's long term, affordable,
Speaker 1: and preserving what we have, particularly in New York City,
Speaker 1: the HDFC community. So we take investments mostly from c
Speaker 1: r A motivated investors, and then we deploy that strategically
Speaker 1: in the HDFC community to help stabilize those buildings. This
Speaker 1: is fascinating. Where's this money coming from? So talk about
Speaker 1: the investors that are actually pulling up some money so
Speaker 1: they can come and investors can come from multitude of places.
Speaker 1: Um there are impact investors, there are foundations that do this,
Speaker 1: family wealth offices. I'm just curious if it's coming from
Speaker 1: all these different avenues. Because this is we spend a
Speaker 1: lot of time talking about public markets versus private markets,
Speaker 1: and private markets are getting into some very interesting areas
Speaker 1: and it sounds like you guys are benefiting from it.
Speaker 1: I think a lot of people talk about impact investing,
Speaker 1: and I would bet you that almost everybody has a
Speaker 1: slightly different version of what that means. But that's effectively,
Speaker 1: that's what we're looking for. This is a marriage of
Speaker 1: public and of it moneys towards specifically housing and affordable
Speaker 1: housing in New York City. And so it's a much
Speaker 1: more complex funding model, but we are seeing philanthropists or
Speaker 1: people who have funded us traditionally through annual giving or
Speaker 1: monthly giving look at more complex giving programs, and we're
Speaker 1: certainly looking to develop that sector much more prolifically so
Speaker 1: that we the people that who are philanthropically minded also
Speaker 1: can potentially leverage their wealth towards this work. Right well,
Speaker 1: and Karen, I think you used the word and if
Speaker 1: you didn't, I will. I mean, there is a crisis
Speaker 1: of affordable housing here in the New York City area.
Speaker 1: And so Chris, help us understand maybe some specific projects
Speaker 1: where you know, people might have might be familiar with,
Speaker 1: or at least familiar with the areas that we're talking about. Sure,
Speaker 1: so I think a great project we were involved in
Speaker 1: along with Springbank at the City of New York as
Speaker 1: well as an organization called You Have was a forty
Speaker 1: some odd unit HDFC cooperative which is a limited empty
Speaker 1: cooperative in the Hunts Points section of the Bronx. The
Speaker 1: building had suffered some abandonment. But the other thing, you know,
Speaker 1: we always talk about is for restrictive housing or affordable
Speaker 1: housing us to be restriction and benefit. And in this scenario,
Speaker 1: this building was paying market rate taxes because there is
Speaker 1: there was a tax cap they were eligible for. But
Speaker 1: being that the tax rate in the South Bronx and
Speaker 1: that area was not nearly as high as sort of
Speaker 1: the cap, so they weren't benefiting from that. They suffered
Speaker 1: from some disinvestments and abandonment. And then through technical assistance
Speaker 1: and the hard work of the people came before us
Speaker 1: if you Have and the partnership we have a Spring Bank,
Speaker 1: we were able to lend to take care of some
Speaker 1: municipal arrears to stabilize the building and make them eligible
Speaker 1: for city funding. So our loan total between Spring and
Speaker 1: US is about five and fifteen thousand dollars to satisfy
Speaker 1: municipal arrears that then ended up leveraging about four to
Speaker 1: four and a half million dollars of public investment, saving
Speaker 1: those units for for multiple generations to come. Talk to
Speaker 1: us about scaling upcar and how much of this can
Speaker 1: you guys do we are? You know, that's part of
Speaker 1: the deal. I think you know to who much has given,
Speaker 1: much is expected, And I think we are leveraging our
Speaker 1: rand and our balance sheet to do this kind of
Speaker 1: work in a way that the Habitat is not able
Speaker 1: or staffed up to do around the nation. So we
Speaker 1: are what I like to affectionally refer to as an
Speaker 1: and organization. So Chris has another job in addition to
Speaker 1: being the executive director of the fund. He works most
Speaker 1: closely with our homeowner applicants and getting them ready for homeownership.
Speaker 1: So there's a lot of uh dual hat wearing going
Speaker 1: on at um At Habitat New York City. And we
Speaker 1: like to be efficient and effective with the resources that
Speaker 1: we have on hand. That said, the art in the
Speaker 1: art and science of this work is trying to predict
Speaker 1: the time at which we need to staff up and
Speaker 1: and be ready to service more and more. But this
Speaker 1: allows us effectively to touch thousands more families than we
Speaker 1: would ever be able to do in our traditional model.
Speaker 1: And so Karen, as you talk to your colleagues around
Speaker 1: the country in the broader organization, I mean, what what's
Speaker 1: the mood right now, because you know, housing is arguably
Speaker 1: one of the most personal things, and that's at the core.
Speaker 1: I lived in Orgia for a long time, very familiar
Speaker 1: um with the organization, Like, how are people feeling about
Speaker 1: that opportunity to to own a home, to live in
Speaker 1: a place that's that's both appropriate and affordable. I think,
Speaker 1: you know, at first, I thought you're going to ask
Speaker 1: the question relative to my colleagues, and I think when
Speaker 1: I think about my colleagues in the housing sector around
Speaker 1: the nation had attat for humanity specifically. Certainly we're feeling tentative,
Speaker 1: but we're also really looking to be as creative and
Speaker 1: as negle as we can and looking at new models
Speaker 1: that habitat historically never would have addressed. Um we're looking
Speaker 1: at rental options and rental own options and different strategies
Speaker 1: really to engage and serve families because we believe in
Speaker 1: that role always and forever, the role that housing plays
Speaker 1: in the overall health and long term wellbelling being of
Speaker 1: the families that work with us. But I think how
Speaker 1: our homeowners feeling. I mean, I think our sector. You know,
Speaker 1: they are quite honestly doing everything that they could. They're
Speaker 1: doing everything right, but they're just slightly above being able
Speaker 1: to receive any real subsidy, and they're slightly below being
Speaker 1: able to receive a market based deta. There's I think
Speaker 1: they're tenacious regardless of the market. I also think they
Speaker 1: are an incredible credit risk given that they We have
Speaker 1: a very low default rate nationwide and we ride through
Speaker 1: many of the market twists and turns, and I believe
Speaker 1: that's because of the resiliency of the community that we
Speaker 1: serve around home Long. I have to tell you, I
Speaker 1: I moderated panel at Milkon Institute included the CEO Brookfield
Speaker 1: as It Management Um, Tom Barrack of Colony Capital, the
Speaker 1: CEO of Discovery Land Company, all these big real estate leaders,
Speaker 1: and our conversation ultimately turned very quickly to affordable housing
Speaker 1: like it is on everyone's radar. So it's great to
Speaker 1: see the work that you guys are doing. All right,
Speaker 1: we really appreciate you coming by. Karen Haycocks is CEO
Speaker 1: of Habitat for Humanity New York City and Chris Sillam
Speaker 1: is executive director of the Habitat NYC Fund. That's going
Speaker 1: to do it for us on a Halloween. My daughter
Speaker 1: has worked for a habitat for him now with their
Speaker 1: with their colleagues, with their with their friends and and me,
Speaker 1: and we're gonna go back and do more. It's great stuff. Um,
Speaker 1: busy day, jobs tomorrow, jobs tomorrow, everybody looking forward to
Speaker 1: that's going to give us a key look for Carol Masser.
Speaker 1: I'm Jason Kelly, and this is Bloomberg Radio. Bloomberg Business
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