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Potential Impacts of 2016 Political, Energy and Interest Rate Changes

The primary political season is underway. As you watch, read and listen to coverage 24/7 for the next several months, pay attention to which candidates are promoting more regulation on what they refer to as “Wall Street Banks.” That’s code for increased regulation for the banking industry as a whole because politicians often don’t distinguish between large money center banks and true community banks. The Dodd-Frank legislation already has raised the cost and difficulty of doing business for community banks. Mortgage and consumer credit products are more difficult to administer and obtain, which means they’re costlier to you. Consider how additional regulation could affect your bank and your ability to attain such products in the future.

The energy markets continue to be in the doldrums. Pricing is at the lowest level in a decade. While on the surface this seems good for the consumer, low prices are leading to layoffs and significantly reduced investment, which ultimately slows the economy for us all. Some are predicting higher prices later in the year, but many things have to fall in place for that to happen: the world economy needs to improve; supplies need to come in line with demand; the international political unrest and conflict needs to soften. A difficult challenge to say the least. The silver lining is that the lower price environment will eventually weed out the weak players, and down the road, we will settle into a pricing scenario that makes it economically feasible for the surviving companies to grow and invest again.

Several more interest rate hikes were anticipated for 2016 following an increase of 25bps late last year. Today, that seems less likely; the Fed is suggesting a more cautious approach to the rate hikes. While one rate increase could take place later this year, we’d need to see much stronger economic growth indicators in the second quarter to make that possible. Plan accordingly for your upcoming borrowing needs.

As a strong community bank, all of these factors affect Bank SNB, just as they do you. But we believe offering the most talented bankers who pay attention to and support our communities is the best way to assist your business through uncertain times. Under the direction of newly added leadership in Austin, Tulsa, Oklahoma City and Denver, our local teams are focused on meeting your banking needs – whether through a new loan for working capital, a lease for specialized equipment or sophisticated treasury management services. Bank successfully despite environmental changes. Bank SNB.

 

On The Mark was written by Bank SNB President and CEO Mark Funke.