WASHINGTON — Independent Community Bankers of America Chief Economist Paul Merski believes that community bankers are in a strong capital position and situated for the slower economic growth environment over the next year.
"Community banks are solid because they are well-capitalized and will likely see beneficial improvement as the Federal Reserve Board shifts its monetary policy to maintain current interest rates or lower them in the near future," Merski told a gathering of community bank directors during the ICBA Annual Bank Director's Conference in Napa, Calif.
"The economic cycle is at a transition point and settling into a slower but steady growth rate," he said. "Fortunately, community banks are nimble and adept at adjusting as the economy changes.
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Community banks will benefit from the recent Federal Reserve Board policy shift away from hiking rates, and the current troublesome inverted yield curve will improve for banks in the months ahead. The improving shape of the yield curve should take some pressure off banks' compressed net interest margin going forward."
Merski also highlighted several positive signs in the economy, including:
o The dramatic 25% drop in energy prices that is boosting consumer confidence and disposable incomes;
o Strong employment numbers and continued income gains are supporting consumer spending;
o No dominant spillover impact on consumers from the sharp housing market correction that is underway; and
o Strong corporate earnings and the continuation of beneficial lower tax rates on capital, investment and savings that are reflected in higher stock market levels.
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