2022 Projection: Barring some black swan event that could really change global markets, like a terrible variant or global war, I think we have a pretty solid 2022 for an industry. Inflation is an economic certainty, and more supply chain issues are expected.
The pandemic has bogged down some industries, put the stock market in flux and been a rainmaker for others. What’s the impact on banking?
It was pretty unique to us because the government looked to us to get through the financial crisis, by using us as the catalyst to get (Paycheck Protection Program) money out the door. When government shuts you down for eight to 10 weeks, that money is vital. In my opinion, the program was a success and gave businesses the confidence not to lay off their employees. We have a vested interest in our customers being successful. We worked seven days a week through it and produced documents faster than we ever have. We, at Legacy, made a year’s worth of loans in a six-week period two times in a row. That was pretty intense. But these businesses made it through.
What do you foresee as the greatest economic challenges ahead?
It just has to be inflation, which is a combination of supply chain issues. When they print money like they are, that just creates more money supply, people go out and spend it. Inflation is an economic certainty. I see more supply chain issues in the next six months. They’re saying they’re going to raise [interest] rates three times next year. If you have wage growth of 5% and inflation north of that, that means our standard of living is going down each year and that’s unsustainable. They’re going to have to rein in the good times a little bit. We had to do it in the ’80s to get it under control.
Where do you see banking’s greatest opportunities?
We’re uniquely positioned as a bank. We specialize in affordable housing, new market tax credits, government programs to help house people as housing has gotten more expensive. We really like the future. If banks aren’t struggling and they’re safe and sound, they’ll continue to lend money. I’m not overly pessimistic about the future, but I do think there are some major headwinds. Savings has gone up. Whether for a family or a business or a bank, it’s always a prudent thing to do.
The way people pay for and own things – and even what they own – is changing with the advent of blockchain, non-fungible tokens, etc. How does that affect conventional banking?
It’s nearly impossible to replace the U.S. dollar as the median for transactions. But this all is forcing banks to think about how everyone is going to pay for things. Our little bank has fewer transactions by far than we did 10 years ago. COVID forced us to learn that there are new ways of doing things. We have to adapt. If you don’t, you’ll probably be left behind. To me, it’s not that we’re going to replace the U.S. dollar with bitcoin. It’s just that banking is going to be digitized.
What should business owners be alert for entering 2022?
Inflation is the biggest concern. They need to build wiggle room into everything they’re doing. In construction, for example, they’re saying, if this happens in the next 30 days, here’s your price. They need to have good reserves and a good banking relationship for bad times. When you’re looking at everything being really expensive, you have to be prepared for some downside risks and headwinds.
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