(upbeat music) - [Narrator] This is "Carolina Business Review."

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- On any given day, there's a lot of to be anxious about, maybe, but there's also a lot to be optimistic and progressive about, maybe.

Welcome to the most widely watched and longest running program on Carolina business, policy, and public affairs seen every week across the Carolinas for more than 30 years.

Thank you for supporting it.

In a moment for our panelists will help us tease out what is and what are some of the issues that will make a difference in the near term.

And later on, and this is my term, the non-bank sort of CEO of a Carolina's grown credit union, Truliant's Todd Hall joins us, stay with us.

- [Narrator] Major funding also by BlueCross BlueShield of South Carolina, an independent licensee of the BlueCross and BlueShield Association.

And Martin Marietta, a leading provider of natural resource-based building materials, providing the foundation on which our communities improve and grow.

On this edition of "Carolina Business Review," Mark Vitner of Piedmont Crescent Capital.

Ryan T. Coleman from Columbia Economic Development.

And special guest, Todd Hall, president and CEO of Truliant Federal Credit Union.

(theme music) - Welcome again to our program.

It's almost happy holidays.

I'm not gonna say it yet, I'm gonna hold it off a little bit.

Mark, nice to see you.

Mark, it has been 20 years since you've been on the program.

We're glad to have you back.

- Well, it's good to be back with you.

- Thank you.

Ryan, welcome to the program.

But Mark, I'm gonna start with you.

So how do you gin out what is fear about a recession and what the data really shows?

- Well, the fear about recession.

I don't know how real that is.

I mean, you look at the consumer confidence index, it's still relatively high.

I think that economists and myself included, have been warning that the economy appears to be headed toward recession for well over a year.

And to be fair, I think that most economists have said it's not a slam dunk, it's not a sure thing.

But when you look at the alternatives, is it gonna be a rolling recession?

Is it going to be, are we gonna have a soft landing?

It seems that the preponderance of economic data suggests that we're headed to a recession.

We've had a inverted yield curve for over a year, you'll look at banks' willingness to make loans and it's fallen off considerably, the credit spreads have widened.

Typically that would say that we're gonna have a recession either late this year or early next year.

But we also have all of the leftover stimulus from the pandemic.

There's still a lot of cash out there.

And then you've got the Inflation Reduction Act and the CHIPS Act and there's- - Which is money, right, flowing in?

- It's money that's flowing in now.

And here the Carolinas were big recipients of those dollars, and they have a real long runway on the spend out on that.

And one of the kind of secrets that really hasn't been told is if you go and look at the GAO numbers, the take up on those programs has been about twice what was estimated.

So there's a whole lot more activity than was planned when the actual acts were passed.

- Ryan, I promise I'm gonna give you a chance here, but I wanna ask you one more question, Mark.

So is there, you know, as economist, of course, I think you can run the data in your own head, but does anyone really know, and I would say even the Fed, does the Fed have an idea of... And I'll call it the distortive effect of a historic amount of money that's pumped into a system that still has these an unintended effect on distorting what a recession may look like.

- I don't know that anyone has that answer.

I mean, I think that the Fed was certainly surprised at how inflationary all that cash turned out to be.

- Really?

Were they surprised?

- Well, they seem to be.

I mean the transitory, transitory, transitory till it wasn't transitory anymore.

But the, you know, I think we are seeing that we're moving past that burst of liquidity and that we're reverting back to a more normal trend.

And as fewer as we have less and less of that hangover, I think the economy will begin to act a little more normal.

But in the next few weeks, we're going to see some pretty strong numbers.

The GDP growth for the quarter that ended at the end of September as likely to be around 3.5%, but all of the growth was at the start of the quarter and we ended on a fairly soft note.

In the fourth quarter this year, I think growth gonna be 1% or less.

- Okay.

Ryan, let's give you a jump in here please if you can.

- Sure.

- In Columbia, does the fear of a recession, are you hearing this?

And number two, what kind of effect does that have on economic development to date?

- So I would say from the city of Columbia's perspective, you know, certainly we kind of hear that out there, but Columbia has really started to catch on fire over the past few years.

And so from the local perspective, what we see is a lot of headwinds and opportunity at the city.

We've got a significant amount of people moving into the region.

We've got double digit population growth in the Columbia area.

We've got record enrollment at the University of South Carolina, and we've got opportunities in that we have lagged behind some of our- - The upstate and the local country.

Sure.

- With regards to multifamily offerings, typically our property taxes have been a bit of an impediment to us.

But through working with the city of Columbia and Richland County, we found a way to circumvent that.

Certainly the rising interest rates have created a new wrinkle for us to have to address in that equation.

And we've seen some developers put their projects on pause, but we haven't outright had people just walk away yet.

And I think from our perspective, you know, it's gotten so expensive in places like Charleston to continue to do some of these projects.

What we're pitching to people is there's growth opportunities and there's a value proposition here.

You know, and with regards to the interest rates, once things get more favorable, there's a lot of opportunity here down the road with regards to our riverfront that we're gonna be developing and with Scout Motors coming into the area.

- Yeah, and again, I don't wanna put words in your mouth, Ryan, but there seems to be the time has finally come, 'cause Columbia's been talking about Bull Street, River District, et cetera, et cetera.

So do you feel like, and just put on your objective hat here for a second, and I know you can, do you feel like this momentum is real then?

- Absolutely.

What it takes is it takes political leadership that is dedicated to being business-friendly.

You know, that's something that our city council came out real strong with last year.

You know, reducing regulations, making it easier to get permits and approvals.

And then just having that good working relationship with the county.

You know, we've got kind of a unique structure in Columbia and Richland County.

We are the largest utility provider in the state of South Carolina, so we bring the water sewer capability, but the county is the taxing authority.

And so they have the ability to help us out with property tax reductions.

And so we've gotten a good partnership where we're able to partner on these multifamily commercial deals downtown, where we're also able to partner on large industrial deals because we bring that utility capacity to the table.

And that's what's getting it done right now.

- Thank you, you know, Ryan, you referenced it.

Mark, you have referenced it and I don't know how many different reports and talks that I've heard you say, and that is the end migration to the Carolinas is gonna bail us out a lot, and that's, it's my term.

Will it?

Will all of this growth.

We can do a whole bunch of things that may not be in the best interest of our growth, but the number of people moving into our metros and- - It does, it does get bail us out of a lot of situations that folks are worrying about.

I mean, for example, the office market, everybody's worried sick about the office market and there's some real challenges there.

Charlotte was front page of the Washington Post about the doom loop and crazy stuff.

But Charlotte added 52,500 jobs over the last year.

That's slightly more jobs than Atlanta added over the last year, so that is just a tremendous amount of growth.

We likely added about 60,000 residents in the last year in Charlotte so that helps out.

And we need all that growth 'cause we really are building a lot of apartments and building a lot of office space.

You know, Raleigh and Durham have similar numbers.

Not as high as Charlotte of 52,000, I think it's like 30,000 net new jobs between Raleigh-Durham combined, but very strong population growth.

Wilmington, Asheville growing very strong.

But South Carolina really kind of jumps off the page in that... Well, Charlotte is topped Atlanta, Charleston, almost 5% job growth over the last year.

And Charleston does not have over a million people so they don't make it on a lot of lists.

But if you include 'em on those lists, they move way up to the top of the list.

It's one of the fastest growing at metro areas in the country.

- Is that sustainable for the low country?

I mean, given that they're very limited when you come to land, right?

- Well, they're very water constrained.

I mean, they've got a lot, not that they're gonna run outta water, but you've gotta get over the water, and so it funnels the traffic into a few roads and it's...

It amazes me that when you go to Mount Pleasant, how much traffic is going into Mount Pleasant in the morning and it is awfully hard to go into downtown Charleston when you're leaving Mount Pleasant because it's just hard to make that left-hand turn.

But I see they've got a long growth, runway of growth, because growth is spreading north and it's spreading out.

And so it's North Charleston has got tremendous growth and you've got Volvo, which is...

They're gonna be making the Polestar car there, which is, you know, a pretty nice little EV, so they've got a long runway for growth there.

- You know, Ryan, Mark just mentioned this too, and you made a reference to it, but the idea of commercial real estate and the specter of late stage commercial real estate cycle.

Meaning, as Mark said, there was a Washington Post cover story about the...

I don't know if it's cover story, but it was certainly prominent about Charlotte having a 30% vacancy rate downtown, one of the highest in the nation.

There are people that contest that.

But Columbia has had an issue challenging in getting down the vacancy rate for many years.

It seems like you have momentum.

Does that commercial real estate cycle scare you at all?

- Not really at all 'cause from the Columbia's perspective, we weren't overbuilt in commercial real estate.

And so going into the pandemic, we were probably at about a 10% vacancy rate downtown in the urban core and we're right back there again.

And what we saw is the businesses that had larger footprints obviously shrank their four plates going to remote or hybrid work.

But what that did was that created other opportunities for companies that were also moving to come into the city center.

And right now, you know, the defining thing that everybody is competing for right now is talent.

And so the ability to move from an office park where you gotta get in a car and you gotta go drive to one or two places to get your lunch, to now be in a downtown area where it's walkable and you're close to the university, it makes it easier for you to go in and engage and get that talent.

And so I won't say that the suburban office market is as healthy, but certainly downtown right now, we're doing pretty well.

Actually, our new constraint has become parking.

And so we've got a limited amount of structured and surface parking, and we're having to get a little more creative with how we solve for that.

But, you know, as far as a vacancy perspective, it's healthy for us.

- Yeah, good problem to have.

Stay with us.

We're gonna bring our guest on in just a second.

Before we do that.

Coming up on this program, the relatively newly installed president of the North Carolina Community College system named Dr. Jeff Cox.

Jeff was in Allegheny County in North Carolina for a while and got the big job, which is also a big challenge.

We're gonna find out how he thinks about what South Carolina's technical college system and North Carolina's community college system play in the next five to 10 years.

And then also just in time for holiday season.

I hate to get out on the front edge of this, but it's hard not to with the CEO of Butterball, Jay Jandrain will be here talking about an eastern North Carolina manufacture or rather farming in on this program.

In many ways, the last couple of years has brought in many ways, withering attention and pressure on this country's banks, deserved or not.

The financial institutions that underpin the lives of businesses and individuals have been stress test over and over again, both intentionally and not.

So how does that affect somewhat of my term, a non-bank, a credit union?

Is it the core of many communities and personal financial lives?

Joining us now is the president and the chief executive officer of one of the Carolina's largest homegrown credit unions.

Todd Hall of Truliant.

Todd, welcome back to the program.

- Thank you so much.

Glad to be here.

- And let's just clear this up once and for all.

It's Truliant, not Truleant, right?

- Correct.

- Okay, thank you.

- Usually if you're talking about it in a positive way, you can call me either one.

- Well said, sir.

Todd, last couple of years for banks.

And I say this with all respects, sir, we had Jim Blaine formerly a state employee credit union on, and wasn't offended, but was very, very determined to say credit unions are not banks were something closer than that, and that was his term.

But the idea that the banks the last couple of years have been under a lot of scrutiny, probably deserved in many ways.

How does that change the way you operate with that kind of scrutiny and regulatory attention?

- I don't think it changes a lot about how we operate, because obviously as a credit union, we're smaller, we're a little more community-oriented related to that.

Truliant being a low income designated credit union, more than 50% of our members make less than 80% of the median income of the community in which they live.

So, you know, we're serving a different purpose.

Our mission is to improve lives versus shareholder orientation of that.

But so we certainly are watching what goes on with the big banks and now that it starts to moving down to a hundred billion for the limit related to capital requirements that are kind of coming down the pike.

And we think there'll probably be trickle effect even into the regional communities of that.

You see tightening of what they're out there doing.

So speaking about economic development for Ryan in Columbia, you know, I think that you'll have less players in that because the big banks and the super regionals right now are concerned about what will that capital requirement be.

And so they're starting to pull themselves outta some of those lending markets.

- Yeah.

Okay.

Mark, question?

- Yeah, what are you seeing in credit?

What's happened with credit quality?

And that's a big concern that we're we're seeing all across banking.

- Yeah, deterioration, you know, we are starting to see... For Truliant, our delinquency numbers are about pre-pandemic kinda levels and so, and we had expected that.

But we're starting to see the expected losses in unsecured and credit card debt that is, you know, exemplifies kind of that recessionary conversation you guys had earlier, that the communities we serve are struggling a bit just in, you know, normal cost of living.

- Yeah, there's a lot of guesswork about what student loan repayments are gonna mean.

And do you think that that will have any meaningful impact on credit quality?

- I do.

I do, yeah.

Just the extent of the breadth of student lending debt out there, you know, within our member base and others.

I do think delinquencies will continue to rise as folks have to begin to decide what they're gonna pay.

And so, yeah, I do think it'll have some consequences.

- Mm-hmm.

Ryan.

- Yeah.

What's your outlook on commercial lending market?

I know, you know, right now we're still seeing multifamily, student housing's doing really well, industrials on fire, office is in a really bad place though.

And I say this with the caveat here.

- [Chris] Nervously laughing.

Sure.

- We've got a significant expansion project that would be build a suit with a ready to go tenant, incentives lined up, and they still can't get the financing for that.

So is there any, you know, hope of a positive outlook for some changes in that?

Or are we just gonna be sitting here and grinning and bearing this, you know, for 12 to 24 months or even longer?

- I think that we're gonna be in a bit of a lull for it for, you know, the duration.

I don't know, Mark, could probably speak better to that than I, but I think it's tight.

You know, folks are, are very tight.

The office piece is having impacts on people's losses and allowances, you know, across the spectrum of those that are in it.

You know, we are seeing, I'm sure that other smaller financial institutions being, you know, community regional banks and credit unions are getting opportunities at those that we've not ever seen before 'cause it's getting tied in the larger sector.

- Yeah.

- So I think deals will still be getting done.

I think the requirement of that's gonna be people, the developers are gonna have to bring more money to the table on the front end of that.

- [Ryan] Well, they love to do that.

- Yeah, well, I don't know.

(all laughing) - Said no one ever.

- You need to introduce that because I hadn't met those yet, but, so I do think that it's gonna be tight for a while.

- So when you model, when you're, your team, the operating committee and the banks kind of the strategic thinker, right?

And you're not just talking about, okay ladies, guys, here's where we're gonna be in 12 months, 24 months.

But if you follow through the spectrum, how are you modeling where you need to be at the peak of a slowdown or a recession, and then where you need to be to make sure that you're taking advantage of opportunities coming out of it.

- Yeah, for sure.

So we do a three year forecast on a kind of rolling basis looking at that and of course making a number of assumptions.

What will cost the funds be, you know, when do we think the FED may or may not move?

Will they move, you know, normally, like 75 bips, or do you see this, you know, what you see out there now this little 25, 25, 25 creep, which I don't buy, but, so we look at that quite often.

And so like the current system, you know, cost of funds is expensive.

A lot of institutions are kind of on the sidelines for gathering deposits fee.

And so I think that many of them don't have a lot of operating cash because of that, so they're either gonna have to borrow or they're gonna have to go out and pay for deposits.

You know, we believe that liquidity, the liquidity market's going to be very difficult into '24, maybe into '25.

And so we think it's a good time to go gather deposits so that we can continue to lend across all spectrums, commercial, residence, retail and all of that.

And that's what we're after.

Really, it's the tough part is when does the FED move?

How aggressively will they move?

We think it's longer than shorter and have for quite some time, so you'll see us trying to take monies right now in the deposit sector.

And that's the fuel that runs us all, right?

If we don't have deposit balances, you can't lend money.

- Mark, do you wanna ask Todd if he thinks that there's another interest rate increase?

'Cause he just kinda queued it off.

That's awarded.

- Well, Jamie Dimon said we might get to 7% on the funds rate.

- [Todd] I read that.

I read that.

- I don't know where that number, I think he just pulled that out and...

But are you preparing for higher for longer?

I mean, that seems to be the big buzzword you.

And what do you think?

Do you think the FED goes another time?

I mean that... - You know, I think that the shutdown, which we will have and, you know, our guess is probably on the longer end of average shutdown, so, you know, the four-week range, three to four-week range.

And if not that, that there might be several, just because of the House and what's going on in the House.

But, so I don't think you see anything in November.

I don't think they'll have data.

- Yeah, I hate to hear that about the shutdown.

'Cause one of the things that'll happen with the shutdown is we won't get any government data and it'll make it hard.

- Exactly.

- The Federal be flying blind so they really can't keep... - Right, and so, you know, obviously you would think that given what we've seen to date and just yesterday on core and some of that, that they would probably sit it out in November.

Don't know if they'll be up and running on data in December.

So if I was a betting man, I'd say we won't see anything for the remainder of the year, but first quarter, who knows.

- Yeah.

- Ryan, question?

- Not with regards to that, necessarily.

I'm interested to know, you know, you made a good mention earlier about focus on low income.

We've seen a lot of small business entrepreneurial growth.

Is there anything creative y'all have done to help serve that community?

'Cause we're kind of focusing on a homegrown approach, and so I'd love to hear if there's some creative things y'all have put out there to help people kind of scale up.

- Yeah.

Absolutely.

So we agree, you know, I think that this country is built on the back of Main Street America.

And so, you know, during the pandemic when PPP money came out, you know, we were not built for it, but we decided we needed to be serving our communities for that.

And so we were out there doing $45 million worth of PPP loans that an average loan amount of $30,000.

So totally different than some of the other games that you might've been exposed to.

But we're out there with the deposit side of things.

We offer a basically a free business checking account for small businesses like that.

And so that, you know, industry now is all about knocking on doors and making sure they understand what they have and then having a really good digital component of that so that ease of doing business.

Lending wise, we see a lot of that, you know, as we're structured, we're an SBA lender, so we're a preferred lender in the SBA world.

So we look at a lot of deals that business has risen right now because of the tightness in the credit markets we've talked about.

But it's difficult because with interest rates, most, you know, all of that is variable, right?

So you've got a prime plus factor in that that gets pretty expensive to operate with.

But we're aggressive in the SBA small business administration arena to try to support those small businesses that will mark our communities.

- Yeah, this... Go ahead.

I'm sorry.

- Yeah, yeah, our small business community, we've seen a lot more interaction between them and the local credit unions and it's led to a lot of fun, new openings, the support's great there.

I think they have the appreciation that they feel like they're dealing with someone local and, you know, not a corporate entity out of town.

So appreciate all that you're doing to serve your communities.

- Thank you so much.

Can I get a piece of that for a testimonial that we can run on our own.

- We can negotiate that after the program, but no one's going anywhere yet.

Todd, how about AI?

I mean, you have to model out what this looks like, not just for Truliant, but how, what does it do to financial services?

- Oh, I think it's gonna have tremendous impact.

I mean, I know that it is kind of the, you know, the media darling right now and everything financial.

- Sure.

- But it's for real.

And so we are modeling significantly in areas, like marketing, human resources, finance, and other areas right now that are focused particularly, but there's no doubt that AI is gonna have an impact on the speed of how financial institutions can do business.

The economics related to that.

I think what it allows us to then do is take the employees we have that might be involved in some of that manual transaction activity and allow them to do bigger and better things that allow us to then serve members quicker, faster, spend time and energies in the arenas, you know, the digital and online experiences that so much of our society is now expecting.

- You know, we've got literally a minute left.

And one more quick thing about AI, does it create compliance and legal and personal data issues that have to be sewn up?

- You know, I've not seen that aspect of it yet, but we're not so deeply into it.

Obviously, Congress is gonna be dealing with how do you regulate AI?

You know, is it state, is it federal?

You know, what is all of that shake out to be?

But in the banking industry, the credit union industry, we're so heavily regulated at the moment that we pay so much attention to people's information.

Our cybersecurity is so heavily, you know, developed and a great amount of operating expense goes that way.

So I feel pretty good that many in the financial industry will be foundationally ready to take on whatever those challenges might be.

- Yeah, okay.

Thank you.

Gotta cut it off, but thank you.

Todd, thanks for coming back on.

- Absolutely.

My pleasure.

I'm glad you're smiling about the next whatever's coming.

- That's right.

- Because you seem ready and suited for it, so please come back.

- I would love to.

Would love to.

- Yeah, Good to see you.

Ryan, welcome.

Please come back.

Love having you from Columbia.

- Absolutely.

- Mark, it's been too long.

Glad you're here.

You look great.

And as always, do a great job, so thanks for being here.

- Oh, thanks for having me back.

- Thank you.

Thank you for watching our program.

Hope your holidays whatever that is coming up, and your weekend is good.

Until next week.

Good night.

- [Narrator] Gratefully acknowledging support by Martin Marietta, BlueCross BlueShield of South Carolina, Sonoco, High Point University, Colonial Life, and by viewers like you.

Thank you.

For more information, visit carolinabusinessreview.org.

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