Interesting Times for Interest Rates

Interesting Times for Interest Rates

The following was published in Prairie Business Magazine's February 2018 issue, written by Dennis Walsh, Chief Credit Officer at First International Bank & Trust.


Four rate increases by the Federal Reserve in the last year have caught the attention of individuals and businesses as Prime Rate has jumped from 3.50% to 4.50%.  Ironically Prime Rate was at a historically low level of 3.25% for over seven years following the 2008 downturn.  For those of us that remember rates over 20% in the early 80’s and consistently over 12% for most of a decade, these rates seem very low.  By contrast many in business and especially financial services have never experienced double digit borrowing rates.  Rate increases have stimulated discussion about future rate trends and potential impacts to businesses and individuals.

The Federal Reserve has indicated a possibility to continue rate increases in 2018 with speculation that rates may increase another .5 to 1.0%.  However, their decisions will be impacted by economic trends and especially by inflation and GDP growth.  Also, the global economy will impact domestic rates as much of the world still has lower interest rates than America.  Continued domestic growth coupled with strong global growth, especially in major economies, could signal a longer term increasing rate trend.

A long term trend of higher rates has unique impacts for each sector of our economy.  For example, a 2% increase in residential mortgage rates would slow housing demand and would place downward pressure on property values.  As rates increase, buyers qualify for smaller mortgages because a greater amount of their income is allocated to interest.  The family that qualified for a $350,000 mortgage may only afford a $320,000 level which impacts values.

Businesses considering purchase of long term assets also are impacted by higher rates.  The impact is strongest for assets that provide a lower level of return on investment such as real estate.  Additionally the carrying cost of inventory and underperforming assets become larger concerns as rates increase.  Higher interest rates require all businesses to reassess borrowing costs in management decisions.  Also businesses that have grown with debt and are carrying significant long term debt feel the immediate impact of higher interest costs to their bottom line.

Agriculture producers are significantly impacted by higher interest rates because of the large capital requirements for ownership of land and expensive equipment.  Agricultural real estate has historically low return on investment so the low interest rates of the past 15 years have helped to stimulate agricultural real estate values.  Higher long term rates coupled with current commodity values and declining agricultural income could put significant pressure on agricultural real estate values.

We learned in the 1980’s that interest rates have a secondary impact on the value of the dollar versus foreign currencies.  If we see significant strengthening of dollar values we can expect pressure on industries with dependency on exports such as manufacturing and especially agriculture.  If dollar values increase by 10% versus foreign currency, we can expect a similar decrease in significant regional commodities such as wheat and edible beans where the majority of production is exported.

Commodities such as soybeans that are less dependent on export demand may not experience the same downward pressure, but if currency values in countries such as Brazil decline, we may see increased soybean imports pressuring local values.

Some businesses which are not dependent on large fixed assets may feel little direct impact from higher interest rates.  However if the rates slow economic growth or negatively impact business clients all businesses will experience indirect impacts.  The high rates of the early 1980’s were used as a tool to stop rampant inflation but they also slowed economic growth to a crawl.

For business and individuals we can speculate on interest rate trends, but none of us know what will happen.  Just as we need to make adjustments for outside forces such as weather, competition and impact of economic trends, we need to manage the impact of interest rates.  During times of historically high interest rates, many businesses in our region grew and remained profitable.  Strongly managed businesses will continue to enjoy success in spite of interest rate impacts.
 

Checkmarc - A Simple Check Recovery Service that Saves Time and Money for Business Owners.

First International Bank & Trust offers a free service to our small business customers that takes the work out of check collection. Checkmarc is a free service we offer that works to recover dishonored checks and electronic payments. It eliminates the time spent on check recovery so you can concentrate on business, not collections.

Checkmarc handles the collection and notifies you when the item has been recovered. You will receive 100% of the face value on all recovered items. There are no services fees, no equipment fees, no set-up fees and no contracts to sign. There is a dedicated customer service team available for all inquiries, and a free, secure website with 24-hour status on all in-process items. 

The Checkmarc process is simple.
  1. Enroll with a Personal Banker at your local First International Bank & Trust branch. 
  2. Receive a welcome packet from Checkmarc via email which includes additional program information, your Checkmarc ID number, and a username and password for the check-tracking website. 
  3. Checkmarc will notify you vial email when an insufficient funds check is received.
  4. Recovered funds are initiated via ACH (Automatic Clearing House) on Friday for the previous week’s recoveries. The deposits are made the following Monday. Checkmarc will notify you when funds have been recovered. 
Your business is a key contributor to the success our communities through job creation, innovation and the many way you give back to the community. When businesses are growing, everyone benefits. We strive to offer competitive business solutions to help your business grow and prosper.


First International Bank & Trust has always had a passion to support small business owners, and Checkmarc is another way we can help make your business more profitable. 


For more information please contact a Personal Banker at your local First International Bank & Trust branch.

Save a Trip to the Bank with Merchant Capture

Merchant capture. You hear your banker talking about it, but what is it?


Merchant capture or remote deposit capture, allows a business customer to deposit checks right from their place of business; saving a daily trip to the bank. Here’s how it works. Customers use a desktop scanner connected to their PC and the Internet to scan checks and electronically deposit them into their business account(s). 

Merchant capture allows you to streamline your check deposit process to better manage your receivables, gives you the added convenience to make deposits when it is convenient for you, and reduces time and money spent on courier fees or trips to the bank.

A real-world example of how merchant capture can save a customer time, but also help streamline the process is when one customer was looking to have all four locations, in four different communities, deposit into the same account. The users were assigned by location, allowing the corporate office to easily identify the source of funds and expedite the reconciliation process. All deposits are captured and an image is available. 

For more information about merchant capture, please contact one of our Cash Management Representative at 800-359-8092; email cashmanagement@firstintlbank.com or visit our website

 

Heads-up on Security

The Equifax breach, the Target breach and on and on. It seems like every couple of months there is a new information security threat hitting the news. At First International Bank & Trust we take our customers security and privacy very seriously. Here are a few ways to avoid the latest scams; phishing, vishing, and smishing. 

Phishing – The attempt to acquire sensitive information such as usernames, passwords, and credit card details by appearing to be a trustworthy source. Phishing occurs through electronic communication, such as email. Criminals send out massive amounts of emails, hoping to get some individuals to fall victim. Common email subject lines might be:
  • Urgent!
  • Action Required!
  • Important!
  • Breaking News (criminals often use a current event to grab your attention)
Criminals ask the victim to either click on a link or open an attachment. If this action is completed, your computer will most likely be infected with a virus in order for the criminal to gain your personal information; or the criminals may simply request the information.

Vishing – The attempt to gain sensitive information using voice or phone call with local numbers to give the appearance of a local trusted organization. If you receive a call by someone claiming to be a financial institution, person of authority, or someone looking to confirm information, there’s a good chance they’re a criminal. Common calls indicating a scam include:
  •  A call claiming they have seen suspicious traffic from your computer or they can fix your slow computer.
  • A call claiming you’ve won the lottery.
  • A call indicating you have a relative in jail. 
Smishing – The attempt to gain sensitive information through text message. If you receive a text from an untrusted sender don’t click on the link, respond to it or take any further actions. It the text message is impersonating a financial institution, you may want to make them aware to the event.

Whether it’s phishing, vishing, or smishing. Here are some best practices. 
  • DON’T click on the link or open the attachment.
  • Be suspicious of any unsolicited email requesting personal information.
  • Keep an eye out for grammatical or spellings errors in any email that may seem suspicious. You can also hoover over the link to ensure the link embedded in the email is the link you are being directed to. 
  • Avoid filling out forms in email messages that ask for personal information. Never send personal or sensitive information via email. 
  • Always compare the link in the email to the link that you are actually directed to. 
  • Visit the official website by typing in the address, instead of clicking on a link in an unsolicited email. 
  • Contact the actual business that supposedly sent the email to verify if the email is genuine. Do no use a number contained within the email. Lookup the phone number on the internet or with a phone book. 
First International Bank & Trust will never email, call or text you and ask you to verify personal information. For more information on this, and other information security threats, visit our website.
 
The Benefits of Going Local!

The Benefits of Going Local!

While looking for the right mortgage company to help you finance or refinance your home, the amount of options you have can quickly get overwhelming. When you include the options available online, it’s difficult to know where to start. There are plenty of mortgage companies that like to boast about their gimmicks, like 3-second mortgages or an interest rate far below the competition. Today, however, many consumers know to proceed with caution, especially in regard to what may be the biggest financial purchase they ever make.

You’ve probably heard horror stories about missed closings, hidden fees, and having your loan pushed off to someone you’ve never spoken to.

At First International Bank & Trust, we use a different approach. We strive for no surprise closings – we want our customers to know exactly what they’re signing up for. In fact, over 95% of our customers indicated that information about their loan and the lending process was explained to them in clear, easy to understand terms.

Not only will your loan be financed by a long-standing bank with an excellent reputation, we now offer local servicing. What does that mean for you?

We won’t sell your loan to a third party investor*, so that means you can pay your mortgage where you do your banking. Our customers can have the peace of mind knowing that their mortgage will stay with the company that gave it to them.

*Some exclusions may apply