HighGrove Partners
Client Pictured:
HighGrove Partners

 Pictured above is Jim McCutcheon, CEO of 

HighGrove Partners, with 

his banker, Chuck Schwartz, Senior Vice President.

 

Director for Emory's Center for Ethics Speaks to Business Leaders
At Atlantic Capital Bank's
February 15 Business Leaders' Breakfast, Dr. Paul Root Wolpe challenged leaders in attendance to expand their thinking on moral dilemmas, which are seldom clear-cut. Dr. Wolpe explained that it is often how an issue is framed that determines our response.  Attendees of the breakfast indicated that it was refreshing to be challenged to think about issues from different perspectives. 
 
Maria Sutej of Avon speaks at the
Atlantic Capital Bank Women in Leadership Forum

On February 21, Maria Sutej, Regional Vice President of Sales at Avon, spoke to a roundtable group of 22 women at Atlantic Capital about her leadership role at Avon, the lessons she has learned in her 25+ years in business, and her passion for creating employment opportunities for women.

 

Catch us on WSB
Atlantic Capital Bank has begun sponsoring the Closing Bell report on WSB radio (95.5FM and AM750). Listen at 6pm weeknights to hear a message from Doug Williams, President and CEO of Atlantic Capital Bank.
 
Contact Us
Atlantic Capital Bank
3280 Peachtree Road NE
Suite 1600
Atlanta, GA 30305
404.995.6050
atlanticcapitalbank.com

Atlantic Capital Bank's eNewsletter

First Quarter, 2012

Economic and Business Outlook, March 2012
by Doug Williams, President and CEO of Atlantic Capital Bank
Doug Williams

Douglas Williams,

President and CEO of Atlantic Capital Bank

In December, I wrote about the structural limitations on economic growth imposed by heavy debt burdens in the household and public sectors.   It seems clear that correcting these excesses will define the fundamental direction of economic activity for the next three to four years, if not longer; however, the monetary policy response to current conditions may have an equally consequential effect on the future. 


Central banks throughout the developed world have adopted accommodative monetary policies to ensure generous capital markets liquidity, stimulate economic activity, and keep interest rates low to protect overextended borrowers.  These polices have had their intended effect, at least in the short term.  Markets are functioning efficiently, credit is available for worthy borrowers, and the cost of servicing debt is at historically low levels.  There is little doubt accommodative monetary policy is appropriate for periods of turmoil and uncertainty.  The propitious actions of central bankers have probably saved us from global economic collapse, but at what price?


Easy money has historically resulted in an eventual rise in general price inflation and the creation of asset value bubbles.  Persistently low interest rates make it difficult for savers and fixed income investors to make adequate returns.  Rising rates of inflation further erode these returns, often resulting in negative real returns.  Leveraged speculation in asset values fueled by artificially low interest rates distorts the operation of fundamental market forces in those assets.


Apart from the appreciation recently apparent in gold and some commodities, inflation is currently quite modest and generally below levels targeted by the central banks.  So far, it seems central bankers have struck equilibrium between supporting a weak and vulnerable economy and risking broader price inflation and formation of asset value bubbles.  Only time will tell if this delicate balance can be maintained, but from history's perspective, the greater probability is that inflation will re-emerge and we will pay a significant price for the palliative care of accommodative monetary policy. 

 

Client Spotlight: HighGrove Partners
Commercial Landscape Design and Maintenance Solutions
highgrove.net

Last summer, Atlantic Capital Bank took a trip to the site of one of HighGrove Partners' landscape design projects in Buckhead. The bright flowers and lush greenery (pictured at the top of the page) attest to HighGrove's skill in creating and maintaining innovative landscapes.

 

Says Jim McCutcheon, CEO, "We get great results because we have an important goal in mind: understanding, helping, and pleasing our clients, who are at the center of all our efforts. The relationship Atlantic Capital Bank has with us is much like the one we have with our own clients. They work hard to understand us and help us with our needs. I have a great working relationship with my banker, Chuck [Schwartz, SVP at Atlantic Capital]. He gets excited about seeing us do well. When I talk to him about HighGrove, he doesn't say, 'Okay, just tell me about your numbers.' Instead, it's, 'Tell me how I can help your business.' It's truly much more of a partnership than I've ever experienced with a bank. The results have been impressive."

 

 To view more Atlantic Capital client stories, please visit atlcapbank.com/clientstories.  To learn more about HighGrove Partners, please visit their website: highgrove.net.

Home Prices and Consumer Spending

How the residential mortgage market is affecting businesses and families in Georgia

By Rogier Kamerling, PhD, Treasurer of Atlantic Capital Bank

white house Most readers can probably attest to the fact that buying a home is the single largest purchase they will ever make, and that their home accounts for a significant part of their net worth. It will therefore come as no surprise that home prices, and the expectation of the future trajectory of home prices, have a large impact on consumer spending, which in turn accounts for about 70 percent of GDP. Most economic research suggests that the elasticity of consumption to housing wealth is 2-3 times as large as financial wealth (stocks for example). Small to medium size businesses are feeling the negative impact through lackluster sales.  The decline in home values also impacts their own access to credit since many small businesses rely on the value of their home as a significant source of capital for their business.  Because of the broad economic impact of the movement of home values, stabilization is seen by many, including Chairman of the Federal Reserve Ben S. Bernanke, as the key to a sustainable economic recovery. In this article I will explore some of the recent trends in residential real estate and delineate some of the key drivers of these trends to give some guidance as to what the future might bring.   

Recent Trends 
Over-investment typically has serious negative effects on the economy, but has far more serious consequences when it is financed with borrowed money. In the years leading up to the crisis, a combination of factors, including lax underwriting standards, a proliferation of exotic mortgage products, low interest rates and the strong global appetite for securitized loans fueled a rapid increase in household borrowing. After the influx of new and often speculative homebuyers with access to easy credit dried up, U.S. home prices, which reached an all-time high with respect to disposable incomes in 2007, started to decline rapidly, setting off a chain reaction pushing the U.S. into "The Great Recession."

One reliable measure of residential real estate prices, the S&P Case Shiller Home Price Index, shows that values peaked around April 2007 and then started their precipitous decline.  The headline index for the 20 largest MSAs declined more than 30 percent in the 2 years following the peak. The Atlanta MSA initially held up better than the national average; prices only declined by roughly 21 percent in the two years following the peak. Home prices appeared to have stabilized in late 2010 to mid 2011, which gave some solace that the worst was behind us. Unfortunately, in July 2011, home prices started to fall again, and at an accelerated pace, bringing the peak-to-trough decline to about 35 percent (using the most recent data set, ending in December 2011).          
                                                                                   
One of the most damaging factors pushing home prices down has been the historically large share of distressed sales. RealtyTrac, a company that specializes in tracking foreclosures, reported recently that during the fourth quarter of 2011 distressed sales accounted for 24 percent of all U.S. residential home sales. To give a frame of reference, this percentage is typically in the low single digits in a more balanced housing market. In Georgia, as the downward divergence from the national trend of home prices might suggest, distressed sales accounted for a significantly higher share. Third only to Nevada and California, distressed sales in Georgia accounted for 39 percent of all residential sales during the fourth quarter.
Housing index
Outlook
An article about the recent trends in housing affordability could be titled something along the lines of: "Housing affordability, a day in the desert." Housing affordability has made a turnaround from red hot, don't burn yourself, to a pleasantly cool, I am spending less than one-third of my budget on housing. The large drop in home prices in conjunction with the Federal Reserve pushing its benchmark interest rate practically to zero (and their bond buying programs), have pushed housing affordability below the historical norm. Nonetheless, as long as there is a steady supply of distressed properties, it remains a buyer's market. Analyzing the recent progress in working through the large number of distressed properties it seems reasonable to expect that it will take roughly another 6 quarters before we return to a more normal environment. Especially with lackluster job growth and a cautious economic outlook, prospective buyers are likely to continue to expect bargains or continue to wait for more price declines. One area that I have left out of the analysis is the policy factor. It still remains very uncertain what potential new housing programs might come from Washington and what the fate of Fannie Mae and Freddie Mac will be. The potential impact on the future trajectory of home prices could be substantial, but due to the uncertain nature of the role policy will play, I have assumed we will continue to muddle through indecisively with existing policy structure in place. Considering all the factors mentioned above it seems unlikely that stabilizing home prices will be in the cards for this year, and is more likely to be a tale that will be told in late 2013 or 2014.

Atlantic Capital Bank

atlanticcapitalbank.com

Member FDIC, Equal Housing Lender