President’s Message (January 2019)

It seems like I just wrote the 2018 President’s Message and here we are at the start of another new year. Let’s recap how we fared in 2018 and set some predictions of what 2019 may bring.

New business flow in 2018 was pretty on par with prior years. We had a strong first half; business activity was vigorous, and we put some good deals on the books. Then the summer doldrums kicked in (a bit early) only to turn around again in the last quarter. We ended the year on a very strong note; in fact, 2018 turned out to be our best year since we took the company private in 2014.

As some of you may have heard, our Client Development Officer in Seattle for the past five and one-half years retired at the end of the year. He referred us to his replacement, Nabil Istafanous, who joins us as of this month. He’ll cover the Pacific Northwest and we’re very happy to have him on board. I’m also pleased to announce that we’ve re-hired Cindy Mustard in our Eastern Midwest market. She, too, starts this month which makes us fully-staffed throughout the country.

I expect this year to be quite active as interest rates will continue to rise which will put additional stress on marginal borrowers. Smart banks will take a good, hard look at which of their deals are marginal and realize if they don’t act on them soon, they’ll have a tougher time in 2019, all things being equal. Everything I read from economists say we’ll see a recession by the end of the year. This is just added reasoning why under-capitalized small businesses may continue to struggle.

We expect to see less runoff this year as I have to believe if things occur the way I see them, our clients will have nowhere to go. We’ve already seen signs of banks tightening their credit policies and that should only increase as the year progresses.

Given that we’re in a divided Congress, I don’t see a lot getting accomplished on that end. At some point, the parties will see that they need to work together but until they do, it will be a continued impasse.

M&A activity in our industry is moving as I expected with many lenders gradually moving out of the lower end of the market. This has certainly increased our deal flow, and with our strong finish in 2018, we’re coming into 2019 with quite a bit of momentum. While I expect another competitive year, I believe this year will be equally strong for Celtic Capital.

I’m looking forward to a successful 2019 and wish you all the best for a successful year, too.

Mark Hafner
President & CEO
Celtic Capital Corporation