Coronavirus Erases Rural Banker Optimism

Posted on 03/19/2020 3:41 PM

The optimism previously reflected by rural bankers has vanished – erased by concerns by the impact of coronavirus, according to the March Rural Mainstreet Index (RMI) conducted by Creighton University. The abrupt change in attitude resulted in the RMI plummeting to its lowest level since October 2016. 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 first reading below growth neutral after six straight months above the 50.0 threshold.

Overall: The overall index for March slumped to 35.5 from 51.6 for February. March’s decline represents the largest one-month fall since the survey was initiated in January 2006. “Approximately 61.3% of bank CEOs expect the coronavirus to produce a recession in their market area. However, almost one-third, or 32.3%, expect little economic impact from the coronavirus threat,” says Dr. Ernie Goss, who conducts the monthly survey.

Over the last two weeks the coronavirus has resulted in almost one-half, or 47.6%, of bankers surveyed reporting a decline in client or customer visits. Almost one-fourth, or 23.8%, indicate their bank had experienced higher loan applications resulting from the coronavirus threat. Another 14.3% of banks reported an increase in staff absences due to the coronavirus.

However, not all banks experienced impacts. According to Don Vogel, CEO of Farmers National Bank in Phillipsburg, Kan., “Our rural area has not been directly impacted by the virus as of yet.” Says Marc Lamon branch president of FirsTier Bank in Kimball, Neb., “Our bank location is in a smaller town and less influenced by consumer traffic as we primarily finance farm operations.”

Farming and ranching: After moving above growth neutral in December, the farmland and ranchland-price index has fallen below growth neutral for three consecutive months. Even so, March’s reading dipped to 46.6 from February’s 46.8. This is the 75th time in the past 76 months the index has been below growth neutral.

The March farm equipment-sales index slipped to 37.5 from 37.9 in February. This marks the 78th month straight month that the reading has remained below growth neutral 50.0. Hiring: The employment gauge fell to 48.3, its lowest reading since December 2016, and down from February’s solid 57.8.

Confidence: The confidence index, which reflects bank CEO expectations for the economy six months out, plunged to 28.3 from February’s favorable and healthy 58.1. March’s reading represented the greatest one month decline in the confidence reading since the survey was initiated in 2006.

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