With a quick nod to Meghan Trainor for the opening line, the question becomes “Is it?”

After all of the uncertainty surrounding the United Kingdom’s historic vote, the markets seemed to just as quickly absorb the perceived (short-term) and real (long-term) angst of the British voters’ decision to exit the European Union. Clearly, it will take years to accurately assess the full impact of this referendum as the formal process and procedures of the actual exit fall into place. Understandably, you may now be asking “What does this have to do with Michigan banking?”

Not much really, other than catching one’s attention as Austin Associates launches a monthly series of statistical summaries and relevant commentary on Michigan’s financial institutions’ sector, and with this initial piece, possibly framing (philosophically, if not economically) the upcoming U.S. Presidential election.

This monthly summary will evolve, retaining the initial statistical framework that depicts Michigan’s publicly-traded financial entities, as well as the diverse collection of smaller private and semi-private community banks that operate across the state. Over time, I expect to incorporate any meaningful changes to this analytical summary and provide notable insights and color to the performance metrics.

The Michigan Banking Summary – September 2016 (see link below) conveniently coincides with the usual “status quo” dynamics that often accompany the financial markets coming out of the summer months and heading toward the release of third quarter numbers. The Michigan Historical Performance for Market Indices (see link below) will be a standard feature of this monthly piece, as will the attached link to tables cataloging Michigan’s banking sector.

Feedback and comments on the material provided in this summary are always welcome, as well as any thoughts that you may have on future topics and additional analytical exploration.

Concerning the 2016 Presidential election, is it quite possible, much like the market’s response to the actual Brexit vote, that the various forecasts of potential disaster irrespective of which party takes office, may be a bit overblown and may discount the underlying resiliency of the market to absorb and ultimately process the potential impact of the changes at hand? Said another way, it is clear that the recovery coming out of the Great Recession has been tepid. The Fed is wrestling with mixed economic data that could equally be interpreted as both supportive of a possible rate hike this month, while at the same time, giving strength to those recommending that the next interest rate increase should probably not occur until the December meeting. Will it really matter whether it is a Republican or Democrat occupying the White House, if appropriate and constructive steps are not taken by our government to address the serious long-term structural economic issues?

Please do not interpret the last sentence as advocating a vote for “none of the above.” I recognize that the foundation of each party’s platform provides meaningful insight and guidance as to expectations about how each nominee would govern. I just wonder in this election cycle (if the balance of power in the House and Senate do not dramatically shift), will the ultimate economic impact be dramatically different? I am discouraged by what is playing out on the national scene, but I remain optimistic about the resiliency of the Republic. Given the weaknesses and “issues” of our two major party nominees, it has been at times comical and sad, over the past year to watch the staunchest supporters of each candidate spend so much time and energy trying to highlight that the other candidate is more deplorable.

On a more sane and salient note, it has been energizing and enlightening to catch up with so many of you these past few months, and hear about your successes and challenges in communities across the state. The opportunity to reconnect with folks I followed during my Roney years has been greatly appreciated as you have willingly opened your doors. For those that I need to re-establish connections with, you have my word that I will continue my efforts to reach out to each one of you.

I always enjoy hearing about the operating dynamics of community banking and the nuances that exist in each market. You have taken the time to indulge my inquiries and to provide candid insights. I recognize that each of you are assessing and addressing the challenges of this “lower for longer” environment and its attendant margin pressures, the competitive conditions that continue to escalate on both sides of the balance sheet, the potential implications of CECL coming on the heels of more stringent capital requirements, the potential ramifications of breaching stated CRE concentration thresholds, the current state of the credit cycle, possible succession considerations as you look to the future, and the elevated regulatory burden across just about every aspect of your business.

Please do not hesitate to reach out to me, or to my colleagues at Austin Associates, if we can be of any assistance in helping you assess these challenges and your competitive landscape. To my knowledge, the economic cycle has not been repealed. Managing through the inevitable slowdowns and heightened competitive pressures while maintaining operational integrity and underwriting/pricing discipline is critical. And, as an aside, with the third quarter closing in a few weeks, please feel free to call me if you would like an unbiased sounding board and a confidential discussion regarding your shareholder communications. I am happy to proffer an opinion utilizing my background within the equity research and capital markets arena.

Michigan Banking Summary – September 2016Michigan Historical Performance for Market Indices – September 2016