Rural Banker Sentiment Collapses

Posted on 04/16/2020 12:28 PM

A monthly attitude survey of Midwestern rural bankers highlights the highly negative economic outlook that has swept through the region since the outbreak of Covid-19. The Rural Mainstreet Index (RMI) plummeted in April to its lowest level since the survey’s beginning in January 2006. According to the monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy, this is the second straight record low with a reading well below growth neutral.      

The overall index for April slumped to 12.1 from 35.5 in March. April’s decline represents the largest one month fall since the survey was initiated in January 2006.

“More than nine of 10 bank CEOs expect the coronavirus to produce a recession in their market area. This is up significantly from March when 61.3% of bankers anticipated such a recession,” says Creighton University’s Dr. Ernie Goss, who conducts the monthly survey.

Jim Eckert, president of Anchor State Bank in Anchor, Illinois, says, “Low commodity prices and the Wuhan Chinese virus are major concerns. The economy will suffer for a long time due to the shutdown.”

Approximately 94%, of bankers report a decline in client or customer visits over the past two weeks as a result of the coronavirus.  Almost one-third, or 30.3%, indicate their bank had experienced higher loan delinquency rates resulting from the coronavirus threat over the same two-week period.

Farming and ranching: Farmland prices continue to slide. April’s reading fell to 40.9 from March’s 46.6. This is the 76th time in the past 77 months the index has been below growth neutral.

The April farm equipment-sales index dropped to 20.0 from 37.5 in March. This marks the 79th month straight month that the reading has remained below growth neutral 50.0.  

Banking: Borrowing by farmers expanded for April. The borrowing index rose to 75.8 from March’s 66.1. The checking-deposit index declined to 65.6 from March’s 69.4, while the index for certificates of deposit and other savings instruments increased to 48.4 from 45.2 in March.      

This month bankers were asked to assess the Paycheck Protection Plan (PPP). Almost one-half, or 45.5%, report the PPP was too confusing for borrowers.

However, James Brown, CEO of Hardin County Savings Bank in Eldora, Iowa states, “Our experience is very positive. There are virtually no difficulties for customers to apply. Our biggest problem is getting on-line quickly with SBA.”

Todd Douglas, CEO of the First National Bank in Pierre, South Dakota, says, “As of April 10, 2020 we have approval for 949 loans totaling over $120 million in the PPP program. We still have many pending to work through.”

Don Vogel, CEO of Farmers National Bank in Prophetstown, Illinois, reports his bank had continued with increased number of refinancing's due to low rates, and now large number of SBA program loan requests.

Confidence: The confidence index, which reflects bank CEO expectations for the economy six months out, sank to 27.4 from March’s 28.3. This decline follows March’s reading which represented the greatest one month decline in the confidence reading since the survey was initiated.

Each month, community bank presidents and CEOs in nonurban agriculturally and energy-dependent portions of a 10-state area are surveyed regarding current economic conditions in their communities, and their projected economic outlooks six months down the road. Bankers from Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wyoming are included.   

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