By Jay McKenna, President and COO
It has been awhile since I’ve communicated broadly to all of you. As we have just wrapped up the midway point of our fiscal year, I thought now would be a good time to reconnect.
Our company continues to perform at a very high level on all fronts. Based on almost all metrics, we are meeting or beating targets in key areas such as customer service, sales/production, operations, and financial performance. This success is attributed to the efforts of each and every one of us coming to work every day with a sense of mission and purpose, despite the upheaval caused by the COVID-19 pandemic.
As to the broader economy, the ongoing low-interest-rate environment is having obvious impacts on consumer behavior and on financial institutions like ours. Mortgage activity continues at very high levels, although it is down quite a bit from the last year’s highs. Low rates are making home purchases attractive. However, we’ve all read about (or experienced!) the lack of housing supply, so that is suppressing some mortgage purchase volume. Consumers have also become somewhat debt-averse, so that has made our efforts to grow our home equity book challenging, despite having some great offers and products. You may know that we are one of the largest boat and RV lenders in the Midwest. That business is currently exceeding our already high goals. However, our dealer partners are telling us they are concerned about running out of inventory as we move into summer. So if you or your friends or family are thinking about buying a unit, do it soon (and get a loan from North Shore Bank!). On the deposit side of our business, we have seen hundreds of millions of dollars flow into customer accounts from government programs such as PPP and the stimulus payments. Customer behavior now favors keeping lots of money in safe liquid bank accounts and forgoing longer-term CDs, given the low rates.
I’m sure you’ve all read that the economy is ramping back up right now. The growing talk is now about the inevitable emergence of inflation, given the government’s massive spending plans and a rapidly growing economy. We can start to see this in our own everyday lives, from the rising cost of filling up our gas tanks to the tape total on our weekly grocery visits. The Fed has committed to keep rates low for the foreseeable future despite what is happening, calling this inflation “transitory.” Many experts are beginning to worry that if inflation starts to become more acute, the Fed will be forced to act by raising rates. So that is the story that we will be certainly be paying very close attention to.
Where does all of this leave us? Our most basic challenge is to deploy the excess liquidity we have into assets that make sense from an interest-rate and risk standpoint. We are very well capitalized, with pristine asset quality, and we have a team of outstanding, high-performing employees, so that makes us well positioned to take advantage of opportunities in the market.
I am now going to tread delicately, but directly, onto the issue of COVID. Over one year ago, when the virus was first hitting the U.S., I wrote to you saying I was optimistic we would be out of the woods in a few weeks or months. I was clearly wrong, as I am on many predictions! But now we are at a point where we can hopefully see light at the end of the tunnel. By all measures, things seem to be under control as vaccines roll out with supply keeping up with demand. Anyone who wants a vaccine can now get one, so now it is time to start planning for getting back to normal. Certainly for many, normal will never return, as they choose to — or may have to — live their lives in a different way. But for most of us, it is time. I appreciate the tremendous efforts of our department managers and employees throughout the past year as they have navigated various remote-work scenarios, and as we now prepare to bring most everyone back to normal office life after Memorial Day. I especially appreciate our branch and other front-line employees, for whom remote work has not been possible. You are my true unsung heroes of this pandemic!
Now as to vaccines: I understand this is an emotional and divisive issue for some. As your employer, we respect your privacy and right to make your own healthcare decisions. However, as you know, we have made it possible for employees to voluntarily provide documentation of their vaccinations, should you wish to. In so doing, you will be able to avoid mandatory quarantines related to exposure and travel. Those policies are otherwise still in place, as we follow government guidance. As of today, we have no change on our face-mask policies, especially since we remain under so many different mandates in different jurisdictions. We will continue to monitor the government guidance on masks, and we will update our policies as soon as conditions and guidance allow. On a personal level, for what it’s worth, I will share that I have been fully vaccinated, and my wife is a registered nurse currently employed as a vaccinator.
Stella and Domino, bringing cheer to North Shore Bank and reminding you of this month’s “For the Love of Animals” campaign.
We all know COVID has thrown us more than a few curveballs, so we must be prepared for future possible changes. But given the strength and resilience shown by the North Shore Bank team over the last year, I feel like we can handle anything that comes at us! Since our new Bank on Kindness initiative is focused on zoos, humane societies, and animal welfare, I share with you a photo of Stella and Domino, who share my enthusiasm on the subject. Here’s to a great second half of our fiscal year!