Over the past few weeks, I’ve given much thought as to what I wanted to say in the final Michigan Banking Summary of 2020. A short, but sincere, “Happy Holidays” just didn’t seem quite right amidst the hardships and losses experienced across our state (and this country) because of the pandemic. Waxing philosophical on the challenges facing the industry (notably continued severe margin pressure) and the economy (uncertainty as to the ultimate impact of business shutdowns and still-elevated levels of unemployment)  felt more like it would simply be an ongoing rehashing of commentary from recent months. Talking about the level of vitriol pervading the current political landscape on both sides of the aisle…well, quite candidly, 2020 has been both difficult and dark for all of us.

So, I harked back to a simpler, more peaceful time in my life, when innocence was largely a function of child-like ignorance and bliss. A time when my three brothers and I as young boys would dream of Christmas morning and the promise that it held to excite and amaze while possessing all-consuming joy. Growing up in a blue-collar community on the south shore of Long Island, surrounded by neighborhoods laced with tract after tract of Levittown-style single-family homes, we didn’t have much but we were instilled with a solid work-ethic and a foundation built from a steady moral compass that my folks assiduously shaped. As Christmas approached (and by the way, I willingly relived that sense of wonderment, albeit vicariously, through the eyes of my four children as they came of age), my brothers and I would daydream about the presents that might await us under our family’s Christmas tree. Looking back, I’m sure I rarely received some of the more grandiose objects of my child-like desires, but I know for sure that I never felt disillusioned. My folks were adept at instilling a sense, quite simply, centered on being thankful for what you have and not bitter about what you don’t. As my Dad would often say, “A roof over your head, food on the table, clothes on your back, and a warm bed to sleep in…the rest is gravy.”

Consequently, as 2020 draws to a close, I looked back on what I wrote last year at this time. Given the ongoing surreal existence we have all inhabited for most of this year, twelve months ago in many ways feels like twelve years have passed. Nonetheless, I made the following observations:

2020 promises to be another interesting year for the industry and, depending upon the direction and magnitude of potential interest rate changes and shifting economic dynamics, it will also (no surprise) possess challenges that may intensify as the year unfolds. Hard to believe that roughly a year ago the markets were convinced that the Fed would be raising rates at least twice, if not three or four times. Today, sentiment appears to signal that the Fed will be in a holding pattern with regard to rate moves unless there is a dramatic shift in the economy. I am confident that the state’s banking organizations are up to the task. Capital levels continue to be robust; most leadership teams have been battle-tested, risk management architectures have strengthened noticeably since the Crisis, and ideally the Fed can help choreograph a more modest and short-lived economic slowdown when it surfaces somewhere down the road. Economic cycles are inevitable. Ideally, as we’ve stated in the past, they just need not be catastrophic. If you survived a storm, you won’t be bothered by the rain. Solid fundamentals (prudent growth, sound expense control, strong capital levels, possibly a bit of pre-slowdown reserve building, ongoing cultivation of sustainable fee income sources, etc.) should remain the focus. In my equity research days, I never lost sleep when organizations within my coverage universe stuck to their knitting and continued to display the basic blocking-and-tackling that had largely built the healthy foundation of their existing franchise value. Stay focused. Stay disciplined. Remain prudently opportunistic. Protect and preserve your culture. It’s a marathon, not a sprint.

Interesting year? Check. Challenges that may intensify as the year unfolds?  Check. I’m sure we would have gladly traded places for a more traditional “economic slowdown” in the U.S., but that was not meant to be. Obviously, the unforeseen potential “dramatic shift” in the economy came swiftly and has been devastating. Yet cause for optimism abounds. Unemployment levels are slowly recovering from April highs (24% here in Michigan, and nearly 15% nationally) as they grudgingly work their way back toward pre-pandemic levels. Much uncertainty remains, and consumer confidence seems to ebb-and-flow with the latest Covid-19 case counts and resultant State-mandated business closures and stay-at-home directives. Assuming Congressional support is just around the corner in terms of additional stimulus and much-needed relief until businesses can safely and confidently fully reopen, we hopefully will be putting this pandemic in the rearview mirror in due course. On the healthcare front, successful vaccine trials at multiple pharmaceutical companies are helping to bridge a deep emotional chasm that is forecasting very dark days over the next few months. It seems clear that while our collective fatigue related to the virus grows, and our nation’s resolve will continue to be tested, the resiliency of our populace and ongoing acts of kindness and compassion toward one another will prove critical in the coming weeks.

Consequently, circling back to the opening of this missive, the only thing I would truly like for Christmas is this: a quick and effective distribution of a Covid-19 vaccine, and the hope that when I sit down to write my thoughts in December 2021, we have moved ever closer, if not yet fully, to something resembling normal. More importantly, that each of you, your families, and friends, have safely made it to the other side of these difficult times.

In closing, attached please find our monthly summary of Michigan’s financial institutions. As you and your Board take your organization forward, please do not hesitate to reach out to me and/or my colleagues at ProBank Austin if we can be of any assistance in helping you assess the competitive landscape.  My prayers and best wishes to you and your loved ones for a wonderful Holiday Season! I look forward to re-connecting with all of you as 2021 unfolds. Again, I’d like to express this simple but heartfelt counsel: Be careful. Be smart. Stay healthy. Take care of your family, your colleagues, your community. Most important, be sure to take care of yourself. God bless.