Community Banking News Blog | Community Bankers of Iowa (CBI) - Community Bankers of Iowa | Des Moines, IA

September Rural Mainstreet Index Bounces Back Above Growth Neutral: Four of 10 Bankers Report Recessionary Conditions

9/23/2019

September Survey Results at a Glance:

After falling below growth neutral for August the Rural Mainstreet Index jumped slightly above the 50.0 reading for September.
More than four in 10 bank CEOs report that their local economy is in a recession.
As a result of continuing weakness in the farm sector, more than half of bankers reported increasing collateral for farm loans, and one in four rejected a higher percent of farm loan applications.
Bankers expect farm equipment sales in their area to decline by another 7.4% over the next 12 months.

OMAHA, Neb. (Sept. 19, 2019) – The Creighton University Rural Mainstreet Index (RMI) for September climbed above growth neutral according to the monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy.

Overall: The overall index rose to 50.1 from 46.5 in August. This marks the third time in the past five months that the overall index has risen above growth neutral.

The trade war with China and the lack of passage of the USMCA (NAFTA’s replacement) are driving confidence and growth lower for most areas of the region.

“Despite a $16 billion federal government support package this year and somewhat stronger grain prices, more than four in 10 bankers are reporting that their local economy is in a recession,” said Ernie Goss, PhD, Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business.

As reported by Dale L. Leighty, chairman and CEO at First National Bank of Las Animas, Colorado, “Grain prices are (still) a big negative for our customers.”

Rural Mainstreet Index Drops to Lowest Level in Two Years: Trade War Having Negative Impacts

8/19/2019

August Survey Results at a Glance:

The Rural Mainstreet Index fell below growth neutral to its lowest level in almost two year.
Three of four bank CEOs reported the trade war was having a negative impact on their local economy.
Seven of 10 bankers support continuing, or even raising tariffs on imported Chinese goods.
Despite worsening economic conditions on the farm, bankers expect only a modest 4% rate of farm loan defaults over the next year.
Business confidence index plummeted to its lowest level since October 2017.

OMAHA, Neb. (Aug. 15, 2019) – The Creighton University Rural Mainstreet Index (RMI) fell below growth neutral for the only the second time this year. According to the monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy, the RMI for August indicated negative growth for the region.

Overall: The overall index slumped to 46.5 from 50.2 in July. This is the lowest reading for the index since October 2017. The index ranges between 0 and 100 with 50.0 representing growth neutral, and an RMI below the growth neutral threshold. 50.0, indicates negative growth for the month.

“The trade war with China and the lack of passage of the USMCA (NAFTA’s replacement) are driving growth lower for areas of the region with close ties to agriculture. Despite a $16 billion federal government support package coming soon, a drop in farm income is negatively affecting the Rural Mainstreet Economy,” said Ernie Goss, PhD, Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business.

Three of four bankers reported the trade war was having a negative impact on their local economy.

As stated by Jeffrey Gerhart, CEO of the Bank of Newman Grove in Newman Grove, Nebraska, “Trade wars have been and will continue to be a drain on our ag economy”.

“Despite the negative impact of tariffs and the trade war, only 28.2% of bankers support cutting tariffs on imported goods from China,” said Goss.

Rod Cornelius, market president for Pinnacle Bank in Grand Island, Nebraska reported, “I quickly surveyed 12 local producers, a majority indicated (U.S. should) increase tariff pressure - go big or go home. Although the majority again indicated the tariffs are negatively impacting the local economy.”

July Rural Mainstreet Index Above Growth Neutral: Bankers See Negative Tariff Impacts on Economy

7/22/2019

July Survey Results at a Glance:

For the seventh time in the past eight months the Rural Mainstreet Index remained above growth neutral.
Bankers reported that approximately one in 10 farm operating loans from 2018 were not repaid and were rolled into 2019 loans.
Less than half of bank CEOs think the Federal Reserve should reduce short-term interest rates at its July meetings.
Almost nine of 10 bankers reported that tariffs and trade skirmishes have had, or will have, a negative impact on their local economy.

OMAHA, Neb. (July 18, 2019) – The Creighton University Rural Mainstreet Index (RMI) for July rose above growth neutral for the month. According to the monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy, the RMI for July indicated positive growth for the region.

Overall: The overall index fell to 50.2 from 53.2 in June. This is the seventh time in the past eight months that the index has remained above growth neutral. The index ranges between 0 and 100 with 50.0 representing growth neutral, and an RMI below the growth neutral threshold. 50.0, indicates negative growth for the month.

“Higher agriculture commodity prices and rebuilding from recent floods supported the Rural Mainstreet Index (RMI) for the month. Furthermore, almost nine of 10 bankers reported tariffs and trade skirmishes have had, or will have, a negative impact on their local economy. This is up from eight of 10 recorded last September,” said Ernie Goss, PhD, Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business.

Data Breach, PCI Standards, and the $6.2 million Contract Clause

6/25/2019

by John Lande
Dickinson Law

Payment card system breaches can cause millions of dollars in damages. Consumer losses are generally minimal, because Regulation E obliges card issuing banks to generally reimburse consumers for fraud. There are nevertheless millions of dollars of damages associated with responding to payment card breaches in the form of fraud reimbursements and card re-issuance costs. These damages are apportioned among the various banks and card networks involved in processing credit and debit card payments. That was the environment the case of Spec’s Family Partners v. First Data Merchant Services arose in, a case decided by the United States Court of Appeals for the Sixth Circuit.

The case involved a credit card breach at dozens of liquor stores in Texas owned by Spec’s Family Partners (“Spec’s”). The breach occurred because of the chain’s failure to comply with and implement the Payment Card Industry Data Security Standard (“PCI DSS”). As a result, fraudsters were able to install malware that harvested the credit and debit card data of Spec’s customers. The damages were created when banks that issued customer credit and debit cards learned of the breach. The issuing banks had to reimburse customers for fraud losses, and incur the costs of reissuing cards to customers.

June Rural Mainstreet Index Climbs Above Growth Neutral: Farm Woes Raise Loan Defaults for One-Fourth of Bankers

6/21/2019

June Survey Results at a Glance:

For the sixth time in the past seven months the Rural Mainstreet Index climbed above growth neutral.
More than one in four bank CEOs reported rising loan defaults due to farmer financial woes.
Almost half of bankers reported that due to crisis level farm income, farmers in their area have responded by selling the farm, or otherwise leaving the farm.
Almost seven of 10 bank CEOs support continuing or raising current tariff levels.

OMAHA, Neb. (June 19, 2019) – The Creighton University Rural Mainstreet Index (RMI) for June rose above growth neutral for the month. According to the monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy, the RMI for June indicated positive growth for the region.

Overall: The overall index climbed to 53.2 from 48.5 in May. This is the sixth time in the past seven months that the index has risen above growth neutral. The index ranges between 0 and 100 with 50.0 representing growth neutral, and an RMI below the growth neutral threshold. 50.0, indicating negative growth for the month.

“Higher agriculture commodity prices and rebuilding from recent floods boosted the Rural Mainstreet Index (RMI) for the month. Furthermore, despite the negatives from the trade war, 69.4 percent of bankers support either raising, or continuing current tariffs,” said Ernie Goss, PhD, Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business.

Jeff Bonnett, president of Havana National Bank in Havana, Illinois, said it has been estimated that anywhere from 15 to 20 million acres were not planted in corn.

According to Bonnett, “Based upon this information, corn prices should be in the $5.75 to $6 (or more) a bushel range. What are we missing? Will the true corn acres planted be revealed after the required certification through FSA due by July 15th?”

Guest Article: Minimizing Risk in Agricultural Loans During Times of Uncertainty

6/4/2019

by Emily Staudacher
Dickinson Law

Trade wars and wet conditions as farmers attempt to plant their 2019 crop have generated a great deal of uncertainty in the agricultural industry. As the uncertainty surrounding trade and weather grows, it is important to conduct file reviews and ensure best practices are being utilized to secure a lender’s collateral position in government farm program payments and crop insurance proceeds.

FARM PROGRAM PAYMENTS
Courts across the country are divided when a security interest attaches to a government farm program payment, and even if they can attach at all. Due to these uncertainties, best practices dictate using all methods available to a lender in securing collateral.

First, execute a security agreement and file a UCC Financing Statement with the Secretary of State. Once again, courts are divided on which description of collateral is appropriate for farm program payments. In order to avoid any questions whether farm program payments are included in a collateral description on a security agreement, ensure that it includes both farm product and their proceeds, and general intangibles. A blanket financing statement should then be filed with the Secretary of State.

Rural Mainstreet Index Slumps Below Growth Neutral: Farm Loan Defaults Expected to Double from 2017 Rates

5/20/2019

May Survey Results at a Glance:

For the first time since November the Rural Mainstreet Index (RMI) fell below growth neutral.
Bank CEOs project the percentage of farm loan defaults over the next 12 months will double the default rates for 2017.
In reaction to weak farm income, almost two-thirds of bankers have increased collateral for farm loans.
More than one in four bankers reports rejecting a higher percentage of farm loans due to declining farm income.
The economic confidence index dropped to its lowest level in almost two years.

OMAHA, Neb. (May 16, 2019) – The Creighton University Rural Mainstreet Index (RMI) for May slumped below growth neutral for the month. According to the monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy, the RMI for May indicated negative growth for the month for the region, after five months of growth.

Overall: The overall index for May slipped to 48.5 from 50.0 in April. This is the first time since November of last year the index has fallen below growth neutral, indicating negative growth for the month. The index ranges between 0 and 100 with 50.0 representing growth neutral.

“The trade tensions and tariffs are hammering the farming economy. Grain farmers throughout the region continue to experience losses produced by trade issues and plentiful global supplies. On the other hand, the expanding U.S. domestic economy is supporting livestock producers in the region. For May, according to bankers, the negatives far outweighed the positives,” said Ernie Goss, PhD, Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business.

According to Lonnie Clark, president of the State Bank of Chandler in Chandler, Minnesota, “The current low farm commodity prices are a negative to farmers.”

Government Affairs Weekly Report - Week 15: Apr. 22-27, 2019

5/3/2019

by CBI Lobbyist Jeff Boeyink - Partner, LS2 Group

Overview / Major Events
The 2019 Session of the Iowa General Assembly came to a close around 2:30 pm on Saturday, nearly a week EARLY (Session was scheduled for 110 days this year and that day doesn’t arrive until this Friday—May 3). The Governor now has 30 days to act on all the budget bills and a host of policy bills that will be delivered to her in the coming days. That said, expect her to act on the Health and Human Services budget early this week (as it includes a significant supplemental appropriation to keep the Medicaid system fully funded through the end of the current fiscal year).

Governor Reynolds weighs in on Session accomplishments
“We made historic investments into pre K-12 Education and put more money into community colleges and our public universities. We protected job creators who hire individuals with past criminal offenses and funded the Future Ready Iowa Initiative, so that Iowans can get the skills they need for cutting-edge careers. Our judicial nominating system was reformed to give Iowans a greater voice. Iowa will also have a first of its kind Children's Mental Health System. And with the Governor’s Empower Rural Iowa Initiative, Iowa is one step closer to seeing growth and prosperity in every single corner of our state.

“While a lot was accomplished, we’re not finished yet. Next year, I will push again for a constitutional amendment to restore felon voting rights and work to expand access to contraception. We will also continue our focus on growing the economy as well as create opportunities to attract top talent to Iowa by sharing our story as a vibrant, affordable, and welcoming state."

View the Legislative Bill Tracker.

Rural Mainstreet Index Falls for April: More Than One-Fifth of Bankers Expect Flood Loan Defaults

4/23/2019

April Survey Results at a Glance:

For the fifth straight month the overall index has remained at or above 50.0.
More than one-fifth of bankers, or 21.9 percent, expect an increase in farm loan defaults stemming from recent floods.
Farm loans soared to their highest level since initiation of survey in 2006.
Approximately 43.8 percent of bankers reported that recent floods have had a negative impact on the local economy.

OMAHA, Neb. (April 18, 2019) – The Creighton University Rural Mainstreet Index (RMI) for April stood at growth neutral for the month. According to the monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy, the RMI has now remained at, or above, growth neutral 50.0 for five straight months.

Overall: The overall index slipped to 50.0 from 52.9 in March. Since falling below growth neutral in November of last year, the overall RMI has risen above the growth neutral value. The index ranges between 0 and 100 with 50.0 representing growth neutral.

“Our surveys over the last several months indicate the Rural Mainstreet economy is expanding outside of agriculture. However, this month, 43.8 percent of bank CEOs indicated that the recent floods were having a negative impact on their local economy,” said Ernie Goss, PhD, Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business.

Government Affairs Weekly Report - Week 14: Apr. 15-18, 2019

4/19/2019

by CBI Lobbyist Jeff Boeyink - Partner, LS2 Group

Overview / Major Events
Leaders of the House and Senate made major progress on budget negotiations and announced they had agreed on a global budget number. While details of how that number will be divided remain, the agreement on the size of the FY20 budget removes a major obstacle to an on-time adjournment. In fact, there is a growing belief that Session could conceivably adjourn by late next week or into that weekend (which would be a week early). However, it will not take much of a hiccup to move the timetable back to the original schedule.

Bi-Partisan Deal Reached on Sports Betting
This week a bi-partisan deal was reached on legislation that would allow existing Iowa casinos to operate sports betting operations in both their physical facilities and through the use of mobile applications. The deal also included the respective leaders of the House and Senate—meaning passage in both Chambers looks a near certainty.