UPPER CUMBERLAND – In many ways, financial institutions are not unlike those of the health care variety. Consolidations are more commonplace. Both see technology driving changes. And both have the Affordable Care Act (ACA) on the tip on their tongues.
While not an exceedingly top concern for banks – they’ve got online security issues, increased expectations for loan growth and growing governmental regulations for that – the health care law is still impacting their business in an indirect way.
“I’m not so much affected, but my customers are affected. So that hits home,” Nelson Forrester, regional president at First Tennessee Bank in Cookeville, said. “If you think about banking at its core, we take deposits and we make loans. And on the lending side of that is managing risk. With health care reform, we can’t identify the risk, and our customers can’t identify the risk because, it just seems to me, the rules change somewhat frequently. That’s frustrating to our customers.”
Spring full swing
On the national scale, the ACA could require banks to make staffing adjustments and increase recordkeeping regarding its employees. But – like in many other respects – the rest is fairly unknown. Putnam 1st Mercantile’s size – the Cookeville bank has less than 50 employees – saves it from certain aspects of the health care law, so it’s hard to pinpoint the exact cause and effect. Other than the uncertainty it brings.
“It hasn’t overly impacted us,” CEO Chris Holloway said, “other than not knowing what’s out there. The biggest thing is trying to figure out what’s coming next.”
Forrester said First Tennessee, which has more than 170 locations statewide, does offer resources where he can turn for information, but he’s yet to find the one that answers all the questions.
“Until we can nail down what we know and what the rules are going to be going forward, that uncertainty certainly hangs over people as they look to plan and expand,” Forrester said. “I do think it’s a big cloud hanging over the economy right now.”
That’s not to say other aspects of business aren’t looking up.
Residential loan demand and commercial loan demand have slowed at the beginning of the year, Holloway said, and refinancing, of course, has too with a rise in rates, but spring has come full circle with new requests. Underwriting for mortgage lending is still tight and qualifying still stringent. On the commercial side, regulations might not be as heavy but the paperwork quota is still high.
At First Tennessee, Forrester says they have set internal goals for increases in several measurable areas this year – aggressive but reasonable aspirations – and those numbers are certainly higher than in 2013.
“I see loan demand increasing, and I hope it mirrors the (state of the) economy. I certainly feel better as a banker in March 2014 than I did in March 2013,” Forrester said. “There’s more opportunity for growth than there has been through the recession. There just hasn’t been a lot of demand because there just wasn’t a lot of growth. But we’re starting to see that pick up.”
Projections at Putnam 1st Mercantile are more optimistic. Holloway thinks people will have more discretionary income this year, thus meaning new accounts and more money borrowed.
“Banks in this area, they didn’t participate a lot in what caused the economic crash: subprime lending, taking of TARP money, those kind of things, so we were able to get through these times better than maybe banks in other areas,” he added. “I don’t think the economy is back, it’s slowly turning but it’s not back to the level and nor should it be in some respects. Earnings are the real indicator as to how the banking industry is doing, and I would say most banks in this area are doing good in that regard.”