The Economy

Behavioral economics allows insight into customer decision-making

Patterns of behavior, including how a customer feels — their emotional state when they are interacting with banking professionals — is valuable information in creating successful transactions and relationships. If bankers know the behavior of a group inside of its customer base in data-analytical terms, and know how their customers feel when they are interacting with their financial selves, it makes it easier to offer products and services that the customer may not know exist. [Continue]

Will next generation move banks beyond challenges?

The focus in the banking industry during 2017 continued to be on performance. The Fed began raising the fed funds rate in late 2015 and again in late 2016. All expectations were for rate increases to resume in 2017, which they did in January, March and July up to a range of 1.00 to 1.25 percent, where it has remained. Even with these increases, margins remain compressed and borrowers are challenged by persistent concerns, particularly in the agricultural economy. Ag output pricing remains low and current supplies high. Therefore, as producers try to wait for price increases to sell, returns to producers resulting from improved yields on new production are not expected to materially increase overall returns and may have the effect of increasing downward pressure on prices, thus reducing returns. To increase prices more, avenues for sales need to open up. Trade restrictions can be counterproductive to development of market expansion, keeping domestic supplies to low valuations. This is putting pressure on land valuations adding further complications for banks operating in the agricultural communities. [Continue]

Pondering the intricacies of monetary policy

Wow! What a year 2017 has been. Manic hardly describes the antics in Washington after the election of Donald Trump. Those of you who know me are keenly aware that to me, “poly” means many, and “tics” are blood-sucking insects. … I digress, my apologies. This article is not about the swamp; it is about the community-banking environment heading into 2018, so let’s stay focused. [Continue]

A post-crisis view: Don’t let prosperity cause complacency

Similar to 2005 when I started at the FDIC, the U.S. economy is experiencing a period of prosperity. Growth in real GDP has averaged 2.2 percent in this expansion, and was right around 3 percent in the second and third quarters of 2017. Our stock market has reached new highs and real estate prices have been rising. Global economic growth appears to be picking up, with the IMF raising its growth forecasts for Japan, China and Europe. [Continue]