Author: admin

How’s the Economy?

Written by admin on January 3, 2019. Posted in Announcements, Blog, News.

Big fish, big calculations

Capitalize on low hanging fruit to identify a ballpark value added activity to beta test. Override the digital divide with additional clickthroughs from DevOps. Nanotechnology immersion along the information highway will close the loop on focusing solely on the bottom line. Podcasting operational change management inside of workflows to establish a framework. Taking seamless key performance indicators offline to maximise the long tail. Keeping your eye on the ball while performing a deep dive on the start-up mentality to derive convergence on cross-platform integration.

Collaboratively administrate empowered markets via plug-and-play networks. Dynamically procrastinate B2C users after installed base benefits. Dramatically visualize customer directed convergence without revolutionary ROI.

Efficiently unleash cross-media information without cross-media value. Quickly maximize timely deliverables for real-time schemas. Dramatically maintain clicks-and-mortar solutions without functional solutions.

Completely synergize resource taxing relationships via premier niche markets. Professionally cultivate one-to-one customer service with robust ideas. Dynamically innovate resource-leveling customer service for state of the art customer service. Objectively innovate empowered manufactured products whereas parallel platforms. Holisticly predominate extensible testing procedures for reliable supply chains.

Delivering on the promise

Dramatically engage top-line web services vis-a-vis cutting-edge deliverables. Proactively envisioned multimedia based expertise and cross-media growth strategies. Seamlessly visualize quality intellectual capital without superior collaboration and idea-sharing. Holistically pontificate installed base portals after maintainable products.

Collaboratively administrate turnkey channels whereas virtual e-tailers. Objectively seize scalable metrics whereas proactive e-services. Seamlessly empower fully researched growth strategies and interoperable internal or “organic” sources.

Building a new world

Written by admin on December 23, 2018. Posted in Advice, Announcements, Consultation.

Holistically foster superior methodologies without market-driven best practices. Distinctively exploit optimal alignments for intuitive bandwidth.

Bring to the table win-win survival strategies to ensure proactive domination. At the end of the day, going forward, a new normal that has evolved from generation X is on the runway heading towards a streamlined cloud solution. User generated content in real-time will have multiple touchpoints for offshoring.

Capitalize on low hanging fruit to identify a ballpark value added activity to beta test.
Override the digital divide with additional clickthroughs from DevOps.
Nanotechnology immersion along the information highway will close the loop on focusing solely on the bottom line.

Podcasting operational change management inside of workflows to establish a framework. Taking seamless key performance indicators offline to maximise the long tail. Keeping your eye on the ball while performing a deep dive on the start-up mentality to derive convergence on cross-platform integration.

Collaboratively administrate empowered markets via plug-and-play networks. Dynamically procrastinate B2C users after installed base benefits.

Efficiently unleash cross-media information without cross-media value. Quickly maximize timely deliverables for real-time schemas. Dramatically maintain clicks-and-mortar solutions without functional solutions. Completely synergize resource taxing relationships via premier niche markets. Professionally cultivate one-to-one customer service with robust ideas. Dynamically innovate resource-leveling customer service for state of the art customer service.

Asseting your dreams

Phosfluorescently engage worldwide methodologies with web-enabled technology. Interactively coordinate proactive e-commerce via process-centric “outside the box” thinking. Completely pursue scalable customer service through sustainable potentialities.

Add pace to your business

Written by admin on December 11, 2018. Posted in Advice, Consultation, Projects.

Dramatically mesh low-risk high-yield alignments before transparent e-tailers. Appropriately empower leadership skills after business portals.

Leverage agile frameworks to provide a robust synopsis for high level overviews. Iterative approaches to corporate strategy foster collaborative thinking to further the overall value proposition. Organically grow the holistic world view of disruptive innovation via workplace diversity and empowerment.

Accounting is our skill

Efficiently unleash cross-media information without cross-media value. Quickly maximize timely deliverables for real-time schemas.

Objectively innovate empowered manufactured products whereas parallel platforms. Holisticly predominate extensible testing procedures for reliable supply chains. Dramatically engage top-line web services vis-a-vis cutting-edge deliverables.

Bringing joy for every company

Credibly reintermediate backend ideas for cross-platform models. Continually reintermediate integrated processes through technically sound intellectual capital. Holistically foster superior methodologies without market-driven best practices.

Distinctively exploit optimal alignments for intuitive bandwidth. Quickly coordinate e-business applications through revolutionary catalysts for change. Seamlessly underwhelm optimal testing procedures whereas bricks-and-clicks processes.

No Compromise for Your Business

Written by admin on November 28, 2018. Posted in Advice, Blog, News.

Efficiently unleash cross-media information without cross-media value. Quickly maximize timely deliverables for real-time schemas.

Numbers can’t hide from us

Dynamically target high-payoff intellectual capital for customized technologies. Objectively integrate emerging core competencies before process-centric communities. Dramatically evisculate holistic innovation rather than client-centric data.

Improve the bottom line

Written by admin on November 19, 2018. Posted in Advice, Blog, Projects.

It’s a number game

Efficiently unleash cross-media information without cross-media value. Quickly maximize timely deliverables for real-time schemas. Dramatically maintain clicks-and-mortar solutions without functional solutions.

Proactively envisioned multimedia based expertise and cross-media growth strategies. Seamlessly visualize quality intellectual capital without superior collaboration and idea-sharing. Holistically pontificate installed base portals after maintainable products.

Have proper accounting in your path

Credibly innovate granular internal or “organic” sources whereas high standards in web-readiness. Energistically scale future-proof core competencies vis-a-vis impactful experiences. Dramatically synthesize integrated schemas with optimal networks.

The Value of Internal Audit Through a Fresh Set of Eyes

Written by admin on May 18, 2018. Posted in Management & Planning.

By: Jeanette McKeever, CCBIA, Consultant & Internal Audit Operations Manager

There is risk in every aspect of the banking industry and the regulatory environment seems to continually change. As to the governance and control functions of the banking industry, it may be refreshing to the board of directors, audit committee, and executive management to have their internal audit function re-assessed and validated though a fresh set of eyes to assure that the controls in place are functioning as intended.

A strong internal control system, including an independent and effective internal audit function, is part of sound corporate governance. The board of directors, audit committee, senior management, and supervisors must be satisfied with the effectiveness of the bank’s internal audit function, that policies and practices are followed, and that management takes appropriate and timely corrective action in response to internal control weaknesses identified by internal auditors. An internal audit function provides vital assurance to a bank’s board of directors (which ultimately remains responsible for the internal audit function, whether in-house or outsourced) as to the quality of the bank’s internal control system. In doing so, the function helps reduce the risk of loss and reputational damage to the bank.

All internal auditors (whether in-house or outsourced) must have integrity and professional competence, including the knowledge and experience of each internal auditor and of team members collectively. This is essential to the effectiveness of the internal audit function.

We encourage bank internal auditors to comply with national professional standards, such as those issued by the Institute of Internal Auditors, and to promote due consideration of prudent issues in the development of internal audit standards and practices.

The scope of the internal audit function’s activities should ensure adequate coverage of matters of regulatory interest within the bank’s audit plan. Regular communication by the audit committee, management, and affected personnel is crucial to identify the weaknesses and risk associated to assure that timely remedial actions are taken.

Young & Associates, Inc. can independently assess the effectiveness and efficiency of the bank’s internal controls and processes to provide value and assurance that the internal control structure in place operates according to sound principles and standards.

For more information on how we might provide internal audit services specific to your bank’s needs, whether it is outsourced or co-sourced, please contact me at 1.800.525.9775 or e-mail jmckeever@younginc.com.

The CFPB in the Future

Written by admin on May 18, 2018. Posted in Compliance & Regulations.

By: Bill Elliott, CRCM, Senior Consultant and Manager of Compliance

With the change in management of the CFPB, we are seeing changes in how they operate. When they published their Regulatory Agenda for Fall 2017 (late as usual – it appeared in January 2018), they restated what Section 1021 of the Dodd-Frank Act specified as the objectives of the Bureau, including:

Providing consumers with timely and understandable information to make responsible decisions about financial transactions
Protecting consumers from unfair, deceptive, or abusive acts and practices and from discrimination
Addressing outdated, unnecessary, or unduly burdensome regulations
Enforcing federal consumer financial law consistently in order to promote fair competition, without regard to the status of a covered person as a depository institution
Promoting the transparent and efficient operation of markets for consumer financial products and services to facilitate access and innovation

They stated that their work in pursuit of those objectives can be grouped into three main categories:

Implementating statutory directives
Other efforts to address market failures, facilitate fair competition among financial services providers, and improve consumer understanding
Modernizing, clarifying, and streamlining consumer financial regulations to reduce unwarranted regulatory burdens

Implementing Statutory Directives

In this area, the CFPB is continuing efforts to facilitate implementation of critical consumer protections under the Dodd-Frank Act. They listed three efforts under way. They include:

Regulation C (Home Mortgage Disclosure Act)
Mortgage servicing changes
Continuing to improve the TRID portion of Regulation Z

The CFPB also listed other projects that are “in the works,” but probably nowhere near completion.

Other Efforts To Address Market Failures, Facilitate Fair Competition among Financial Services Providers, and Improve Consumer Understanding

In this area, the CFPB said they were considering rules, such as:

Payday loans, auto title loans, and other similar credit products
Debt collection
Overdraft programs on checking accounts
Prepaid financial products
Modernizing, streamlining, and clarifying consumer financial regulations

Many of the regulations are approaching 50 years old and are out of date with the current world. For instance, Regulation B allows you to turn down a customer for not having a land line phone in the home. That was fine in the 1970s, but probably not relevant now. Updating this and many other regulations is overdue, including looking at the effectiveness of some of the more recent changes, which they say they will be doing.

Conclusion

We will have to wait and see what happens. As with all bureaucracies, and based on their past performance, changes are likely to appear slowly. In general, it appears that “new regulations” may slow down a bit, giving us in the industry a chance to catch up.

Young & Associates, Inc. offers a wide variety of compliance services to help your bank satisfy these compliance requirements. If we can help you “catch up” or improve your response to any of the regulations, we stand ready to assist. Please contact Karen Clower, Compliance Operations Manager, at kclower@younginc.com or 330.422.3444 and she will be happy to discuss our services with you.

Assessing Management Skills in Agricultural Borrowers

Written by admin on May 18, 2018. Posted in Lending & Loan Review.

By: Robert Viering, Senior Consultant & Lending Department Manager

In our loan review practice we have seen an overall deterioration in farm financial results. However, we have noted that there are borrowers that are still providing reasonable returns and acceptable debt service coverage ratios. Our anecdotal observations have been confirmed by data from farm financial databases from farms in the Midwest. In his blog post in the December 19, 2017 Corn + Soybean Digest, Dr. David Kohl observed, “Regardless of farm size or enterprise, the gap between the top one-third of economic performers and the bottom one-third is widening. Among the most profitable, common practices include strong production, a drive towards efficiency, and an executed marketing and risk management.” My interpretation of his comment can be simplified to: Management skills count.

In our loan review client banks, management skills may be a part of the bank’s risk rating model, but how management skills are determined varies widely. All too often most borrowers are rated as having good management skills even if their financial results put them in the bottom third of financial performance. Based on my 30+ years as a banker and now as a loan review professional, management skills are what separates the top and bottom producers. The question becomes, how do we assess the management skills of our borrowers? While there are no hard and fast rules, there are several attributes that can often help in making an assessment of management skills.

The following are items to consider when assessing management skills:

Production competency. On the production side, you will want to honestly assess how their level of production compares to others with similar operations. As an example, if they are consistently producing more bushels of corn per acre than similar farms in your market, then their skills should be rated higher than an operation with more variable results or certainly better than those that are consistently below their peers. You will want to consider if their equipment line/livestock production facilities are appropriate for the scale and sophistication of their operation.
Financial competency. Questions for you to consider to determine financial competency include: Are you provided accurate, thorough, and timely financial information? Are the cash-flow projections reasonable and based on sound assumptions (you will need to back test borrower’s cash flows to actual results to assess this attribute)? Does the producer understand the financial implications of their decisions?
Risk management. Risk management is about protecting what you have and limiting your downside. Among the items to assess include whether they are carrying adequate crop insurance. This can include whether they can cover the difference between what insurance pays and what they expected to produce. Other questions that are important to consider include: Does the borrower have a marketing plan? Do they make good use of hedging strategies? A good marketing plan can help pick up some additional income while limiting the downside of market volatility.
Intangible skills. There are a few other items that should be considered that are difficult to quantify but are important to consider. Among the items to ask are: Are they willing to make tough decisions? This is often about expenses and includes the ability to reduce family living, reduce labor costs (even if it means a family member may have to leave the operation), or any other decisions that may not be popular or easy but may be required to succeed. Do they have a long-term vision of where they want to go? Even if they are not considering doing anything different, that is still a strategy that has its risks. Are they realistic in their understanding of their operation’s strengths and weaknesses? Are they open to taking advice from outside experts to improve their operation? Do they have any trusted advisors that they use? If applicable, do they have a plan to transition to the next generation? If so, do they have an understanding of the next generation’s strengths/weaknesses and the risks in their transition plan?

Agriculture is like all other types of business: good management is critical to long-term success and especially to getting through more challenging times like today. As a bank, having a good understanding of the borrower’s management skills is an important aspect of knowing the level of risk in a borrower. We encourage banks to make a thorough assessment of a farm operator’s management skills, especially today as management skills can often be the difference between long-term success and just surviving, or even the difference between just surviving and having to quit farming.

For more information on this article, contact Bob Viering at bviering@younginc.com or 1.800.525.9775.

Changes to the Appraisal Threshold

Written by admin on May 18, 2018. Posted in Lending & Loan Review.

By: Kyle Curtis, Senior Consultant

The OCC, Federal Reserve Board, and FDIC (collectively, the agencies) have adopted a final rule to amend the agencies’ regulations requiring appraisals of real estate for certain transactions. The final rule increases the threshold level at or below which appraisals are not required for commercial real estate
transactions from $250,000 to $500,000. The final rule defines commercial real estate transaction as a real estate-related financial transaction that is not secured by a single 1-to-4 family residential property. It excludes all transactions secured by a single 1-to-4 family residential property, and thus construction loans secured by a single 1-to-4 family residential property are excluded. For commercial real estate transactions exempted from the appraisal requirement as a result of the revised threshold, regulated institutions must obtain an evaluation of the real property collateral that is consistent with safe and sound banking practices.

The agencies have adopted a definition of commercial real estate transaction that excludes construction loans secured by single l-to-4 family residential properties. Specifically, the final rule defines commercial real estate transaction as a real estate-related financial transaction that is not secured by a single 1-to-4 family residential property. This definition eliminates the distinction between construction loans secured by a single l-to-4 family residential property that only finance construction and those that provide both construction and permanent financing. Under the definition in the final rule, neither of these types of loans will be commercial real estate transactions; they will both remain subject to the $250,000 threshold. However, a loan that is secured by multiple 1-to-4 family residential properties (for example, a loan to construct multiple properties in a residential neighborhood) would meet the definition of commercial real estate transaction and thus be subject to the higher threshold.

Evaluations

With the increase in the threshold, it is expected that many institutions will now utilize internal staff to prepare evaluations for commercial transactions that are less than $500,000, so it might be time to revisit the Interagency Appraisal and Evaluation Guidelines (Federal Register, Vol. 75, No. 237), as well as the Interagency Advisory on Use of Evaluations in Real Estate-Related Financial Transactions (FDIC, FIL 16-016). While the Guidelines state that an evaluation is not required to be completed by a state-licensed or state-certified appraiser or to comply with USPAP, the evaluation preparer should, however, be knowledgeable, competent, and independent of the transaction and the loan production function of the institution. Evaluations may be completed by a bank employee or by a third party. In smaller communities, bankers and third-party real estate professionals have access to local market information and may be qualified to prepare evaluations for an institution.

An evaluation should provide a reliable estimate of the market value of the property and, therefore, the approach or approaches used in an evaluation should be appropriate to the property being valued, and the intended use, so it may be appropriate to omit one or more of the three approaches to value. If the income approach is the primary approach for a tenant-occupied, income-producing property, it may be appropriate to omit the sales comparison approach and the cost approach. Similarly, if the sales comparison approach is the primary approach for a single family residence or an owner occupied commercial property, it may be appropriate to omit the cost approach and the income approach.

The Guidelines provide information regarding the minimum content that should be contained in an evaluation. Unlike an appraisal report that must be written in conformity with the requirements of USPAP, there is no standard format for documenting the information and analysis performed to reach a market value conclusion, but like an appraisal report, the evaluation should contain sufficient information to allow a reader to understand the analysis that was performed to support the value conclusion and the institution’s decision to engage in the transaction.

Young & Associates, Inc. offers a Third-party Appraisal Review service designed to provide financial institutions with a qualified, independent review of appraisals, consistent with the requirements listed in the 2010 Interagency Appraisal and Evaluation Guidelines. For more information on this article or the interpretation of the appraisal guidelines, contact Kyle Curtis at
kcurtis@younginc.com or 330.422.3445.

Liquidity Risk Management

Written by admin on May 18, 2018. Posted in Management & Planning.

By: Martina Dowidchuk, Senior Consultant

Does your liquidity management meet the standards of increased regulatory scrutiny?

What was once deemed acceptable is gradually coming under a more rigid review, and financial institutions need to be prepared to show that their liquidity risk oversight complies with both supervisory guidance and sound industry practices.

The liquidity risk may not be among the areas of community banks’ immediate concern given the abundance of liquidity in the banking industry today. However, the history shows that liquidity reserves can change quickly and the changes may occur outside of management’s control. A bank’s liquidity position may be adequate under certain operating environments, yet be insufficient under adverse environments. Adequate liquidity governance is considered as important as the bank’s liquidity position. While the sophistication of the liquidity measurement tools varies with the bank’s complexity and risk profiles, all institutions are expected to have a formal
liquidity policy and contingency funding plan that are supported by a liquidity cash flow forecast, projected liquidity position analysis, stress testing, and dynamic liquidity metrics customized to match the bank’s balance sheets.

Some of the common liquidity risk management pitfalls found during annual independent reviews include:

Cash Flow Plan

Lack of projected cash flow analysis
Inconsistencies between liquidity cash flow assumptions and strategic plan/budget
Lack of documentation supporting liquidity plan assumptions
Overdependence on outdated static liquidity ratios and lack of forward-looking metrics
Lack of back-testing of the model

Stress Scenarios

Stress testing of projected cash flows not performed
Stress tests focusing on a single stress event rather than a combination of stress factors
Stress tests lacking the assessment of a liquidity crisis impact on contingent funding sources
Insufficient severity of stress tests

Contingency Funding Plan Document

Contingency funding plan failing to address certain key components, such as the identification of early warning indicators, alternative funding sources, crisis management team, and action plan details
Lack of metrics defined to assess the adequacy of primary and contingent funding sources in the baseline and stressed scenarios

Liquidity Policy

Inadequate risk limits or lack of acceptable levels of funding concentrations defined in the liquidity policy
Liquidity policy failing to address responsibilities for maintenance of the cash flow model, model documentation, periodic assumption review, and model validation

Management Oversight

ALCO discussions related to liquidity management not containing sufficient detail and not reflected appropriately in the ALCO meeting minutes
Lack of periodic testing of the stand-by funding lines
Lack of liquidity model assumption review or documentation of such review
Lack of periodic independent reviews of the liquidity risk management process

If you are interested in an independent review of your existing liquidity program and a model validation or are looking for assistance with developing a contingency funding plan, liquidity cash flow plan, and liquidity stress testing, please contact me at 1.800.525.9775 or mdowidchuk@younginc.com. Young & Associates, Inc. offers an array of liquidity products and services that can help you to ensure compliance with the latest regulatory expectations.

A Look to the Future

Written by admin on May 18, 2018. Posted in Compliance & Regulations, Information Technology, Lending & Loan Review, Management & Planning, Uncategorized.

By: Jerry Sutherin, President & CEO, Young & Associates, Inc.

On January 31, 2018, I was fortunate to have the opportunity to purchase Young & Associates, Inc. from Mr. Gary Young, the company’s founder and current Chairman. Nearly 40 years ago, Gary created this organization with a vision of providing community banks with consulting services that were typically cost-prohibitive to perform internally. Since its inception in 1978, Young & Associates has evolved from a small start-up organization offering select outsourcing and educational services to one of the premier bank consulting firms with clients nationwide and overseas. We now offer consulting, education, and outsourcing services for nearly every aspect of banking.

From the outset of our acquisition discussions, Gary and I agreed that the greatest asset of the company is its employees. Over the years, not only has Gary developed unique servicing platforms for the industry but more importantly, he has assembled an employee base that is second to none. These employees provide a level of expertise and service to our clients that remains unparalleled in the community banking industry.

To quote Gary, “I founded Young & Associates with the goal of assisting community banks while maintaining a family atmosphere that valued and respected the people that I work with.” Going forward, it is my primary objective to carry on this legacy that Gary has created. I look forward to making this a seamless transition building on the solid foundation that Gary has built over the years. With the work of our employees and support of our clients, there is no doubt that Gary’s legacy will continue for years to come.

Although the ownership of Young & Associates, Inc. has changed, the company’s name, mission, personnel, quality of service, and structure will not change in any way. Gary now serves as Chairman of the Board and will remain actively involved with the business through January 2019, providing the same high-quality service while also assisting me with the transition. In addition to ensuring a smooth internal transition, Gary and I remain focused on making sure that the relationship with our clients remains strong. Existing and new clients are encouraged to contact me, Gary, or any of our consultants to discuss this transition and how we might be able to earn your business.

Capital Market Commentary – 2018 Forecast and 2017 in Review

Written by admin on February 28, 2018. Posted in Management & Planning.

By: Stephen Clinton, President, Capital Market Securities, Inc.

The stock market continued its climb to new heights in 2017. The stock market was propelled by the election of President Trump, which brought the expectation of lower taxes, less regulation, and an administration favorable to businesses. The Dow ended 2017 at 24,719.22, an increase of 25.08% for the year. The S&P 500 also improved nicely, ending up 19.42%. The market, despite a correction in early February, has increased further from 2017’s year-end values.

The Fed continued its plan to move short-term interest rates higher in 2017. The Fed moved short-term rates up 25 b.p. in March, June, and December. The three-month T-Bill ended December at 1.39%, an increase of 88 b.p. from year-end 2016. Longer-term interest rates were little changed from year-end 2016, resulting in a flatter yield curve.

Job creation continued in 2017, and the unemployment rate in December was 4.1%. The unemployment rate is at a level not seen in 17 years. The low unemployment rate would typically lead to rising wages, but wage growth was only around 2% in 2017.

As we enter 2018, there are a number of items worth monitoring:

Economic Growth. U.S. economic growth for 2017 came in at 2.5%, comparable to prior years. The slow but steady expansion that began in mid-2009 ranks as the third longest economic expansion in U.S. history. Should the recovery continue into the second half of 2019, it would become the longest recovery on record, surpassing the 1990’s economic boom.
Housing. Home prices continued to rise in 2017. The S&P/Case-Shiller National Home Price Index rose 6.2% in the 12 months ending in November. The rising price for homes has exceeded inflation and wage growth for several years. The limited housing inventory has aided the rise in prices along with historically low mortgage rates. U.S. single-family homebuilding surged to more than 10-year highs in November. Existing home sales were up 5.6% in December, while new home sales increased 17.5%.
Industrial Production. U.S. manufacturing activity remains strong. The Institute for Supply Management said its purchasing managers index rose to 59.7 in December, the second highest level since early 2011. A reading over 50 indicates expansion in the sector; below 50 suggests contraction. Boeing recently announced deliveries of 763 aircraft in 2017, a record for the company. Auto sales were down 1.8% in 2017, but with sales of 17.2 million vehicles, it marked the first time the industry has surpassed 17 million for three consecutive years.
Consumers. Consumer confidence is positive. The University of Michigan’s consumer sentiment index average level for 2017 was the highest since 2000. A sign of the strong consumer sentiment is reflected in consumer debt. In the fourth quarter, consumer debt, excluding mortgages and other home loans, rose 5.5% from a year earlier. That is the highest amount since the Federal Reserve Bank of New York began tracking the data in 1999. Moreover, consumers’ non-housing debts accounted for just over 29% of their overall debt load, also the highest amount on record.
Inflation. The Fed’s preferred measure of inflation in January was 2.1%, moving above the Fed’s target of 2% for the first time in a while. The anticipated 3% growth of the economy along with the tight labor market and rising interest rates is expected to finally push inflation upward.
Political Risks. There are a number of geo-political risks that could significantly change the outlook for 2018. Among these are the ongoing Brexit process, North Korea nuclear saber rattling, and President Trump’s plans to renegotiate NAFTA. Furthermore, the dysfunction in Washington creates uncertainty.

Predictions for 2018

Lending Activity. We anticipate an increase in lending activity. We think the lower tax rate for businesses will encourage businesses to expand their operations.
Interest Rates. The Fed has indicated that three rate increases are probable in 2018. We think that we will get those increases.
Home Prices. We expect the growth rate in home prices to be lower than in the past several years. We think higher interest rates will come into play and make housing less affordable. We also think that the less favorable tax status of the deductibility of mortgage interest will have an impact on some home buyers.
Inflation. We do see inflation moving up in 2018. As mentioned above, we expect wage increases to heighten. The low unemployment rate and the shortage of skilled labor in many markets will put pressure on employers to increase wages to attract and retain workers. We also think the growing economy will impact commodity prices.
Jobs. We envision unemployment to remain low as businesses expand.
Regulation. We expect bankers to be disappointed about the lack of regulatory relief in 2018. It will be difficult for regulatory relief to filter down the bank regulatory bureaucracy.

Merger and Acquisition Activity
Merger activity in 2017 was slightly higher than the activity in 2016. In 2017, there were 267 announced mergers of banks and thrifts compared to 244 deals in 2016. In terms of deal size, the total assets of sellers totaled $147 billion in 2017, compared to $188 billion in 2016 and $459 billion in 2015. Pricing on 2017 bank sales improved significantly from 2016’s pricing, recording a median price to book multiple of 162% and a price to earnings multiple of 20.9 times. We believe that 2018 will see increased merger activity spurred, in part, by bank buyers’ enhanced profitability from reduced corporate taxes

Capital Market Services
Young & Associates, Inc. has a successful track record of working with our bank clients in the development and implementation of capital strategies. Through our affiliate, Capital Market Securities, Inc., we have assisted clients in a variety of capital market transactions. For more information on our capital market services, please contact Stephen Clinton at sclinton@younginc.com or 1.800.376.8662.