Welcome to 2018! What does this year have in store for us and our customers? This question is one I pose to myself each year at this time as I put the final touches on our 2018 plans and budget. A process and exercise very much similar, I believe, to what all of you endure annually as you forecast your strategic plans and budgets. Nationally and economically speaking, I believe 2017 was another great year for our customers.
Low inflation and continued low and stable interest rate environment, strong corporate profits for small and large businesses (except national retailers – Amazon excluded), low levels of problem loans and non-performing assets has extended the run of nirvana type conditions for the community financial industry we serve. The large corporate tax cuts that go into effect in 2018 will likely spur these favorable conditions for another year and possibly beyond. With the exception of an event occurring, man made or natural, it is hard to fathom that 2018 will be anything less than great.
As you know, if you have followed me for anytime, I am a bit of a contrarian and begin to worry when things remain this good for this long. Having experienced several economic cycles and bubbles busted since I entered the banking profession in the early 80’s, I believe everything cycles and what goes up, must come down. I worry that we now have a new generation of lenders and quite possibly chief credit officers that have never experienced the downside of a full-scale or industry specific decline. Loan policies become more and more lax, underwriting terms, conditions and covenants are eliminated or watered down and ongoing annual reviews and monitoring is eliminated or overlooked as long as the customer pays on time.
The human tendency in good times is to become complacent in continuing to do the things that will protect their loan portfolio and their banks capital and earnings if there is a sudden and quick downturn in the economy when that day occurs: these are the things I worry about. However, for now I will try to enjoy the good times. I simply can’t advise anyone to take their eye off the ball and encourage you to continue to engage in best practices for loan portfolio management.
Last year, I was pleased to see the fruition of 2 years of time and investment in the credit analysis system along with our release of an interface in support of CRE Portfolio Stress Testing. In 2018, we will be releasing additional functionality under separate module pricing for support of ALLL-CECL calculations and automated reading of electronically created personal and business tax returns. Finally, we are in the midst of enhancing our Ag analysis area of credit analysis for our customers with agricultural loans.
Again, thank you for your continued business and look forward a wonderful and prosperous 2018!