Greater Reading Chamber Commerce Quarterly Spring 2017 - 17

GreaterReadingChamber.org

Economy-Outlook

Contributors: Jeremiah Sensenig,
GRCCI Governmental Affairs Committee,
and Tracy Hoffmann, GRCCI Board Member

Michele Richards, Senior VP, Market Leader,
Commercial Market Executive, Fulton Bank, NA

David Roland, Senior Vice President, Market President,
Berks/Northern Montgomery Counties, BB&T

According to the National Federation of Independent Businesses (NFIB),
confidence soared in December to one of the highest levels since 2004.
Improvements in hiring, expansion, and sales were all notably higher.
However, according to the survey, loan demand remains historically weak,
and business owners cited that they need more tangible reasons than
low interest rates to borrow and invest. We're hopeful the economy will
strengthen in 2017 and reverse this trend.
There has also been talk of sweeping corporate tax reform under President
Donald Trump. We'll have to wait and see, but if enacted as proposed, it
would be particularly impactful to small business as they pay the highest
effective tax rates in the country. Lower taxes should further stimulate small
business lending.

Although the stock market has seen a run-up since the election, I would
call the majority of our customers "cautiously optimistic." Certainly most
feel the economy has reached a stabilized level on many fronts and we are
doing financing for projects every day. However, we still hear a lot about
backlogs only being a few months out at any time, which makes longer
term projects more challenging, and margins are still very competitive.
But those borrowers with liquidity and strong balance sheets have seen
good opportunities to make strategic acquisitions and asset purchases.

Inflation has been steadily rising since late 2015 and accelerated through the
latter part of 2016. Increased inflation may be an issue in 2017, but it won't
necessarily be a risk.
Much is dependent on the Trump administration's proposed fiscal policy.
If personal income and corporate tax cuts were to become law in 2017, we
could experience increased inflation early in 2018.
If this situation were to arise, it could force the Federal Reserve to accelerate
the 2-3 hikes expected in 2017. Either way, rates will likely be higher for
business borrowers by the end of 2017. Of course the plus side to this is
higher savings rates.

Short term and long term rates have risen recently but are still low
historically. Continued increases may cause an early flurry of borrowing
as companies and individuals who have sat on the sidelines make moves
to capture rates. Savings rates will rise but will lag increases in borrowing
rates.

In the near term, a slight increase in inflation could be positive, leading to a
rise in home prices and accelerated business expansion.
There is potential that we may enjoy a year or two of strong productivity if
tax cuts, increases in infrastructure spending, and a rise in defense spending
stimulate growth.

N/A

We would like to see the new administration bring a balanced approach
to regulations. Regulations should serve to provide meaningful guidance
to businesses and important protections for consumers. We've seen some
positive progress in banking as a result of the increased government oversight
imposed over the past decade. Unfortunately, we've also seen the toll of
heavy-handed regulation on our industry. The unintended consequence of
which has been a mass consolidation of banks.
Our goal as a company has always been to provide the best products,
services and support to the individuals, businesses and communities we serve.
We're hopeful that a more restrained approach by the new administration to
new and existing regulations will benefit businesses and consumers alike.

Adapting to and complying with the current and growing regulatory
environment has been challenging for financial institutions. While there
have been good reforms, requirements and disciplines instituted as part
of CFPB and other legislation like Dodd-Frank, there are instances
where oversight and rules overlap, making it confusing and sometimes
contradictory for banks in some situations. More streamlining and
consolidation of regulatory agencies would be helpful to avoid these
situations.

According to Moody's Research, Reading is powering forward. The private
sector is creating jobs at twice the statewide pace. The manufacturing
industry is heading in the right direction, and healthcare and professional
services are outperforming. Faster job growth in high-wage industries is
driving above-average gains in average hourly earnings.

The merger of Susquehanna and National Penn banks with BB&T has
provided a much broader suite of products and services to our bankers
to discuss with clients. Insurance, wealth management and international
services represent a few of the many new or greatly expanded lines of
business through which we expect to help customers and see growth in
2017. On the commercial lending side, industrial and office are segments
we are prioritizing in the real estate segment and our bank is always
looking to support our existing and prospective business and industrial
clients of all sizes. Our retail lending platform is also more robust and can
easily be augmented with a wider array of deposit and personal financial
and investment services.

Like everything in life, determination, focus and commitment are the major
factors in achieving success. We enjoy working with clients who are passionate
about what they do, but passion isn't always enough to be profitable. Clients
who combine a strong personal purpose with a solid business strategy and
market research are more likely to thrive in any economy.
At Fulton, we're also investing in projects that serve low- to moderateincome communities. It is very exciting to see the impact that these
investments have on individuals and whole neighborhoods. We're also
increasing our focus on serving small businesses, which are really the major
drivers of our economy.

BB&T serves business and consumer clients of all sizes.

Continued on page 18
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