The U.S. middle market, as defined by the National Center for The Middle Market (NCMM), is comprised of companies with annual revenues between $10 million and $1 billion. It reaches all industry segments—both publicly and privately held companies—and includes family-owned businesses, partnerships and sole proprietorships. While the middle market represents just three percent of all U.S. companies, it accounts for a third of the private sector gross domestic products and jobs. These companies are a significant force in state and local regions, like the Puget Sound, by creating new jobs and driving economic growth in our region.
And as reported by NCMM, growth nationally in the middle market remains strong in the first quarter while confidence levels are trending down with the exception of local economies. To learn more about how the middle market is affecting business in the financial industry, we turn to Heritage Bank’s Sean Brennan and Carlos Guangorena, both senior vice presidents, regional commercial banking managers.
Q: The National Center for The Middle Market shows record growth in 2018 and it looks like it is positioned for continued growth, although a bit more conservative, year over year. Do you see the same thing happening in the Puget Sound region?
In terms of job growth, we are trending above the 12-month average in the Puget Sound region. We also benefit from a region that has mature markets in aerospace, agriculture, maritime and education. Cyclical growth is in our favor with continued real estate development in commercial and industrial office space and multifamily. Lastly, we are attracting national and international capital into our real estate growth and we are benefiting from being a hub of emerging technologies.
One area that could affect growth is the fact that many area industries rely on exported goods from other countries, which could be facing a slowdown due to possible changes in trade policies.
Q: Do you see a rise in middle market lending opportunities?
There is a lot of capital investment in the Puget Sound area; just take a look at the skylines filled with cranes. In terms of future opportunities, our area has not—and probably will not—feel a slowdown anytime soon.
Q: What are the biggest trends you’re seeing in the growth of the middle market today versus 10+ years ago?
We are now finishing up nine years of a historic arc of economic expansion, but just 10 years ago, we were in the middle of a huge downturn and coming out of one of the biggest recessions in the last 100 years. Our regional technology economy led the way out, delivering exceptional job growth and had an over weighted impact on commercial and residential construction in our core metropolitan markets.
There have been major shifts in how people shop pre- and post-recession, resulting in a decrease in traditional retail shopping. As a result, we’re seeing more investment and expansion of industrial distribution centers on the fringe of large metropolitan areas—largely tied to the change of how products are getting to consumers’ doorsteps—including transportation models and distribution warehouse facilities. This is a dramatic change and a trend we will continue to see moving forward.
Q: How does Heritage Bank work with their middle market customers?
Heritage Bank works with middle market companies within $5 to $150 million in revenue. Some companies may be just north or south of this range and include professional service companies, manufacturers, distributors and nonprofits.
As middle market companies grow, they require a more sophisticated look at treasury management solutions to make sure they are using the most efficient and effective methods. Heritage Bank’s relationship manager is empowered to make timely decisions for the mutual benefit of the customer and the bank.
Q: What do you want other companies to know about the way Heritage Bank works with middle market businesses?
Heritage Bank is a financially strong regional institution that has served the Puget Sound business community for more than 90 years. As a commercial community bank, we seek relationships with middle market operating companies and their owners through consultative bankers. Through dedicated service teams, we provide customized treasury management and credit services and solutions. We are committed to delivering staff continuity as well as professionals that know you and your specific needs.
Source: National Center for The Middle Market
About the Authors
Sean Brennan is the regional commercial banking manager at Heritage Bank, where he specializes in commercial banking products and services, business acquisition financing, credit structuring and underwriting, treasury management and business development. He helps dreams become a reality by strengthening business communities and fostering trust-based relationships with his customers.
Carlos Guangorena is the senior vice president, regional commercial banking manager at Heritage Bank. He has been with Heritage since 2012 but has been in the banking industry since 1980. Carlos is responsible for all of the commercial lending, structure and pricing in the Seattle and Everett regions, including commercial real estate term loans, construction loans, lines of credit, tax-exempt financing and commercial real estate for affordable housing development and preservation and nonprofit community facilities.