Rural Banker Attitudes See Slight Improvement

After declining below growth neural for March, the overall Rural Mainstreet Index shifted to slightly positive for the month, according to the April monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy.

Overall: The region’s overall reading in April climbed to 50.1 from March’s 45.6. The index ranges between 0 and 100, with a reading of 50.0 representing growth neutral. 

“The rural mainstreet economy continues to experience slow, to no, to negative economic growth. Only 8% of bankers reported improving economic conditions for the month with 84% indicating no change in economic conditions from March’s negative growth,” says Ernie Goss, Creighton University who conducts the survey.

Mike Van Erdewyk, CEO of Breda Savings Bank in Breda, Iowa, states, “It seems like a self-fulfilling prophecy that they will say higher rates stopped inflation when it may be more of unprecedented government actions not letting the market sort it out.”

Farming and ranching land prices: The region’s farmland price index rose to 64.6 from March’s 63.0. This was the 31st straight month that the index has advanced above 50.0. 

Farm equipment sales: As a result of solid farm financial conditions, the farm equipment-sales index fell to a still solid 54.3 from 59.5 in March. The index has risen above growth neutral for 27 of the last 29 months.

Banking: The April loan volume index slipped to a still healthy 62.5 from 63.0 in March. The checking-deposit index plummeted to a record low 25.0 from March’s 40.9, while the index for certificates of deposit and other savings instruments dipped to 74.0 from March’s record high 75.0.

The record low checking deposit index is a real concern, Goss notes. According to Jeffrey Gerhart, former Chair of the Independent Community Bankers of America, “Depositors may move money around in order to keep under the $250,000 FDIC limit. This goes on frequently, so I don’t consider this a concern.” 

Additionally, Gerhart advises depositors to visit their bank about the various options available to reduce depositor risks. 

Bank CEOs were asked several questions regarding the recent bank failures of Silicon Valley Bank and Signature Bank:

• More than three of four, or 76.2%, of bank CEOs oppose the recent Biden/Yellen/Fed bank bailout of Silicon Valley Bank and Signature Bank.
• Two-thirds of bank CEOs oppose all bank bailouts (i.e., community, regional and multibillion dollar banks).
• Approximately 29.1% support bailouts of all banks posing systemic risks.
• Approximately 64% reported depositors exiting due to higher financial risks.

Hiring: The new hiring index for April climbed to 54.2 from 45.5 in March. Labor shortages continue to be a significant issue constraining growth for rural mainstreet businesses, Goss states. Over the past 12 months, the rural mainstreet economy has expanded jobs by 2.8% compared to a lower 2.1% for urban areas of the same 10 states.

Confidence: The slowing economy, higher borrowing costs and labor shortages continued to constrain the business confidence index to a weak 38.0, down from March’s 39.1. “Over the past 12 months, the regional confidence index has fallen to levels indicating a very negative outlook,” observes Goss.

The Rural Mainstreet Index covers 10 regional states, focusing on approximately 200 rural communities with an average population of 1,300.