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“And to the community banks, yes, they have been unfairly traduced, because they weren’t the problem. But they have to be careful not to allow themselves to be used by some of their big, big brothers.” — Rep. Barney Frank, July 27

In a speech to the National Press Club on Monday, Congressman Frank, chairman of the House Financial Services Committee, sounded empathetic toward community banks even as he promoted a proposed consumer financial protection agency, which many community banks oppose.

Frank said community banks “were not the perpetrators of the abuses; they will not be the subjects of the corrections.”  But ICBA has noted (e.g. in this association op-ed posted on the Grand Rapids State Bank blog) that a new agency would effectively punish community banks and their customers “for the deceptive practices of others.”

Responding to the objection that proposed regulation would yield “plain vanilla” products, Frank said: “I don’t think you can force people to offer a palatable product,” and offered this reassurance: “I would say, in particular to the community banks, they are very unlikely to see much change when this happens.”

Frank contended that community banks “should welcome this consumer financial protection agency, once they understand how we plan to do it. They are now suffering from unfair competition and reputational damage from a whole lot of unregulated people out there–check cashers and payday lenders and remittance senders. We plan to give the [proposed agency] authority over a number of currently unregulated entities.”

Responding to critics who cite CRA as a cause of the current crisis, Frank said: “Talk to the community bankers, the people who run the smaller, locally based banks, who justifiably object when people denounce banks and they get swept in, getting blamed for things they were not guilty of doing. If only institutions [that were] subject to the Community Reinvestment Act had made mortgage loans, we would not be in the crisis we are in today.”

Frank encouraged community banks to “work with us” on regulatory reform and to avoid being “used by some of their big, big brothers” to defeat new regulations.

He needed money for plumbing repairs and to reinstate his driver’s license. He stole the money from a Michigan bank, then knocked off four others. Why? He was “stressed.”

From the Detroit Free Press, via Drudge.

Here’s the latest economic report from Ernie Goss at Creighton University. He released the following on July 16:

 

OMAHA, Neb. – For a second straight month, the overall index for the Rural Mainstreet economy declined, and continues to indicate significant economic weakness, according to the July survey of bank CEOs in an 11-state region.

 

The Rural Mainstreet Index (RMI), which ranges between 0 and 100, slipped to a weak 32.6, from 34.0 in June and 36.2 in May, but was up significantly from February’s record low of 16.9.  A reading of 50.0 is considered growth neutral.

 

“The RMI has remained below growth neutral for 17 consecutive months.  After appearing to bottom out earlier in the year, the index, which gauges overall economic activity, is now trending downward,” said Creighton University economist Ernie Goss. Goss and Bill McQuillan, CEO of City National Bank in Greeley, Neb., created the monthly economic survey in 2005.

 

The weak global economy has affected the farm sector significantly.  With net farm income under pressure, both land prices and sales of farm equipment have weakened over the past several months.  “This month we asked bankers their expectations for 2009 crop income.  Only 6.3 percent of the bankers forecast an increase in farm income over 2008 levels.  Fully one-third expect crop income in 2009 to be lower than 2008,” said Goss.

 

The problem with farm income is crop prices, not yields, according to the Rural Mainstreet  CEOs. “It appears that yields will be 10-15 percent higher than last year, however, prices will be down close to 25 percent,” said Bradley Robson, CEO of First State Bank in Belmond, Iowa. Echoing Robson’s sentiment, Joe Kennedy, CEO of First National Bank in Frankfort, Kan., reported, “We have had very good rains in the past 10 days or so.  The crop yields should be better than the past three years.”

 

Reflecting this weakness the farmland-price index moved below growth neutral for the ninth straight month and the farm-equipment-sales index dropped below growth neutral for the 10th consecutive month.

 

The farm-equipment sales index climbed to 36.2 from June’s 33.3 and May’s record low 28.3. The farmland-price index declined to 41.4 for July, down slightly from June’s weak 45.7. After peaking at 81.0 in January 2008, the farmland-price index declined to a record low 33.1 in March of this year.

 

Perhaps as an early warning of a muted economic recovery, the confidence index, which tracks expectations for the Rural Mainstreet economy six months out, tumbled to 44.6, from June’s 52.2 and May’s 56.0.    

 

This month bank CEOs also were asked whether they supported an increase in taxes on workers earning more than $280,000 annually to support providing health insurance for the uninsured. “The bank CEOs  clearly do not support such a program. More than two-thirds, or 68.8 percent, responded that they definitely did not support such a program. Only 2.1 percent supported the tax increase,” said Goss. 

 

Dan Coup, CEO of First National Bank in Hope, Kan., amplified the thinking of many bankers when he said, “No one source can be expected to cover the costs.  There has to be a combination of reduction in expenses and increased revenue.  The medical field is a lot like banking in that the costs of regulating each have become a big part of the problem.”  Coup’s bank currently pays 100 percent of the cost of a family plan for health insurance.  As of Aug. 1, 2009, that cost will be more than $1,000 per month per employee. 

 

Hiring in the rural areas remains very weak for the Rural Mainstreet Economy.  The new-hiring index for July was 25.0, its lowest level since April of this year, and down from June’s frail 29.0.  This is the 19th consecutive month that the index has been below growth neutral, due in part to the national and global recession and weakening farm and energy commodity prices.  Over the past 12 months, rural areas of the region have lost almost 5.0 percent of their jobs.  July’s survey indicates that these job losses are likely to continue in the months ahead,” said Goss.  

 

Like much of the nation, retail sales were less than healthy for the month with a July retail-sales index of 29.5, its lowest level since April 2009, and down from June’s 33.7.  

 

For a second straight month, the Rural Mainstreet home-sales index declined. The July reading slipped to 40.0, its lowest level since April 2009, from June’s 45.9 and May’s 48.7. “Real estate is selling very slowly,” said Pete Haddeland, CEO of First National Bank in Mahnomen, Minn.  Ken Walsh, CEO of Ruby Valley Bank in Twin Bridges, Mont., indicated that real estate prices have softened somewhat, and that activity had slowed considerably. “The real estate agents tell me that the inquiries have picked up recently, so maybe the transactions will be forthcoming.” 

 

Rural Mainstreet reported slippage in healthy banking numbers for the month.  The loan-volume index slumped to 43.1, its lowest level since November 2006, and down from June’s 56.1. For July, checking deposits expanded to 58.5 from 54.2 in June.  The index for certificates of deposit and other savings instruments dipped to a 53.8 from 54.1 in June.    

 

In July’s survey, bankers were asked their assessment of the impact of the 2009 federal stimulus package on the Mainstreet Rural economy.  None of the bankers reported that the impacts had been large and meaningful while 37.5 percent indicated that the impacts were zero.  Slightly over 60 percent, or 62.5 percent reported that the impacts were “very little or small.” 

 

Each month, community bank presidents and CEOs in nonurban, agriculturally and resource-dependent portions of an 11-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, Montana, Nebraska, North Dakota, South Dakota and Wyoming are included.

 

This survey represents an early snapshot of the economy of the rural, agriculturally and energy dependent portions of the nation. The Rural Mainstreet Index is a unique index covering 11 regional states, focusing on approximately 200 rural communities with an average population of 1,300. It gives the most current real-time analysis of the rural economy.

 

Below are reports for each state:

 

Colorado: Colorado’s Rural Mainstreet economy continued its downward trend.  The Rural Mainstreet Index (RMI) sank to 18.6, a regional low, from June’s 20.0.  The July ranch- and farmland-price index declined to 27.4 from 31.8 in June and 37.9 in May.  July’s home-sales index decreased to 26.0 from June’s 31.9 and May’s 47.4.

 

Illinois: The Illinois RMI once again remained below growth neutral. The RMI for July declined to 30.5 from June’s 32.0.  Farmland prices continue to show weakness with a July reading of 39.4, which is down from June’s 43.8, but up significantly from May’s 23.2.  July’s home-sales index slumped to 38.0 from 43.9 in June.  However, as in other parts of the region, crop yields are expected to be strong.  According to Kent Siltman, president of Citizens First State Bank in Walnut,  “Our crops in northwest Illinois look good at this point. We have more than enough moisture right now, but could use some warmer weather to move everything along as we are about two weeks behind where we would normally be due to late planting.  As for the stimulus package we have seen some road work going on in the area which is nice.”

 

Iowa: Iowa’s RMI once again slipped below growth neutral according to the monthly survey of bank CEOs.  The RMI for July dipped to 30.6 from June’s 32.0 and May’s 37.2. The farmland-price index was also below growth neutral with a July reading of 39.4, down from June’s index of 43.7.   July’s home-sales index slipped to38.0 from 43.9 in June and 49.7 in May. Farm income for 2009 is expected to be off 2008 levels.  According to Steven Lane, CEO of Security Savings Bank in Farnhamville, “Even though prices are down I’m seeing some of the best looking corn in the last ten years.”

 

Kansas: The Kansas RMI, like much of the region, was below growth neutral 50.0.  The July RMI slumped to 25.1 from June’s 26.6.  The farmland-price index dipped to 34.0 from June’s 38.3 and May’s 39.5.  July’s home-sales index stood at 32.6, which was down from 38.5 in June. “Wheat looks very good and harvest time is here.  However, the economy is not improving to-date and I don’t see much on the horizon for improvement,” said  Dale Bradley CEO of Citizens State Bank in Miltonvale.

 

Minnesota: Minnesota’s RMI sank to 22.2 from 23.7 in June and 25.9 in May.  The farmland-price index declined to 31.1 from June’s 35.4.  July’s home-sales index stood at 29.7, which was down from June’s 35.6. According to Pete Haddeland, CEO of First National Bank in Mahnomen, “Crop income will be down from last years record crop income.”

 

Missouri:  Missouri’s RMI slipped to 28.9 from June’s 30.4.  The July farmland-price index decreased to 37.8 from June’s 42.1.  July’s home-sales index stood at 36.6, down from June’s 45.1.      

 

Montana:   Montana’s RMI stood at a weak 33.5. Ken Walsh, CEO of Ruby Valley Bank in Twin Bridges, reported weak farm income with cattle prices down significantly.  However, he added, “The plus is that tourism seems to be holding steady, with the fishing outfitters even or ahead of 2008.”

 

Nebraska: As in past months, Nebraska’s RMI remained below growth neutral. The July RMI sank to 35.6 from June’s 37.0 and May’s 40.6.  The Nebraska farmland-price index for July slipped to 44.4 from June’s 48.8.  July’s home-sales index was 43.0, down from 48.9 in June.   

 

North Dakota:  For a second straight month, North Dakota’s RMI was the highest in the region.  The July RMI of 57.6 was down slightly from June’s 59.0.  The July farmland-price index for the state slipped to 66.4 from June’s 70.9.  July’s homes-sales index was a very healthy 65.0, though down from June’s 70.8. 

 

South Dakota: South Dakota’s RMI remained below growth neutral with a July reading of 40.5, down from June’s 41.9.  The state’s farmland-price index dipped slightly below growth neutral to 49.3 from June’s 53.7.  July’s home-sales index was 47.9 compared to June’s 53.9.

 

Wyoming: Once again, Wyoming and North Dakota were the only states with RMIs above growth neutral.  Wyoming’s RMI declined to 51.8 from June’s 53.2 and May’s much higher 64.1. The June ranch- and farmland-price index was also a very healthy 60.6, but was lower than June’s 65.0. The July home-sales index stood at 59.2 which was lower than June’s 65.2.

I had a chance to visit with Kris Ausborn when I was in Okoboji, Iowa last week for the 38th annual convention of the Community Bankers of Iowa. Ausborn, of the Iowa Trust & Savings Bank, Emmetsburg, was the association’s 2008-2009 president. When I asked him about highlights during his year of leadership, he referred to CBI’s legislative effort to make it easier for banks to lend to businesses adversely affected by tornadoes and floods.

 

“We have an Iowa Credit and Guarantee Fund that has been funded for a number of years in this state,” Ausborn explained. “It was meant to fund a guarantee on loans to beginning businesses. It wasn’t getting the support it needed from the Iowa Department of Economic Development,” Ausborn explained.

 

CBI attempted to breathe some life into the program by redefining it so lenders could use the guarantee on loans they make to businesses attempting to rebuild after the natural disasters the state suffered in spring of 2008.

 

“We saw this as one way to really make that program viable. Let’s use those funds that are available for relief for victims of these natural disasters. The legislative leadership was in favor of it. They were looking for [disaster relief] funding from anywhere they could find it. On the last day of the session, our concept was attached to a bill and passed,” Ausborn explained. “The rules are still being drawn up on how we can distribute this funding but it will be open to any county that was declared a natural disaster in 2008, which is 80 to 90 percent of our counties.”

 

Although Ausborn was optimistic about the community banking industry in Iowa, he was realistic, particularly in light of developments on the national stage. “The problem we face is the number of banks continues to decline. There are going to continue to be consolidations, especially with what comes from the federal regulators — much more compliance and regulatory effort is going to be out there to contend with,” he said.

 

Ausborn said the growing regulatory burden is one of the main reasons bankers decide to get out of the business. “There are other community bankers,” he said, “who say ‘I understand your problem; if you want to sell out, we’d sure like the opportunity to buy.’ I do see a lot of that.”

 

Look for additional coverage of the Community Bankers of Iowa annual convention in the August 1-14 edition of NorthWestern Financial Review. Additional coverage also will be presented in the Sept. 1-14 edition.

Bank president and blogger Noah Wilcox said the Obama administration’s proposed Consumer Financial Protection Agency would infringe a basic American liberty, the right “to think for ourselves.”

He said much else beside. Check out his post Consumer Protection or Elitism?

Click here.

Chicago-based columnist Liz Wheeler dug out some practical examples of how Midwest banks are using Twitter and Facebook, media that have been extensively hyped but whose business uses may still mystify some bank marketers. The article is set for the July 15 print edition of NorthWestern Financial Review, but here are some tidbits:

Tweets, fans: Why some banks start

Wheeler spoke with North Shore Bank, Brookfield, Wis., which, in about a year of use, has built up more than 800 followers on Twitter.

Participating in social media was a way to go where the customers are, and, as Kate Knox, the bank’s marketing communication manager, told Wheeler: “Nothing else has jumped out that says we need to be there.” Tim Gluth, the bank’s e-business coordinator, said “it fit with our community-minded approach. It doesn’t have to be a physical community.” The bank also has a Facebook page, which is meant to attract people who wouldn’t normally go to the bank’s main web page.

Chicago-based Marquette Bank joined Twitter in April, in part to preserve promotional power at a time of tightening budgets. “It doesn’t mean we do less; we just get smarter,” said Jeff MacDonald, vice president and director of marketing and communication.

Wheeler also spoke with First American Bank, Purcell, Okla. CEO Jim McAuley said the bank was eager to use Twitter because “we felt that social banking was the wave of the future.”

Community First Bank of Boscobel, Wis., said it connects with a target market of stay-at-home-moms through its Facebook page. Wheeler notes that Community Bank of Oak Park River Forest, Ill., sees Facebook as “an environmentally friendly alternative to traditional marketing.”

Some uses for social media

Marquette Bank uses Twitter to promote rates and bank events, and to send out financial tips. MacDonald said he also does a daily search of key words such as ‘banks’ and ‘banking’, to see what users are talking about. He responds to relevant conversations and even sends links to Marquette Bank locations when users express frustration with their banks.

North Shore Bank used Twitter to warn about a scam and to calm customers when a grocery store chain announced it would close stores where the bank had branches. Gluth said the bank is careful about using Twitter for promotions. “We want to fit in; we don’t want to be an uninvited guest,” he told Wheeler.

Look for Liz Wheeler’s article Can a business case be made for Twitter? in the next NorthWestern Financial Review magazine, available July 15.

This editorial in from yesterday’s Start Tribune of Minneapolis/Saint Paul shows a completely different understanding of the state’s banking industry than that held by Chris Serres, the newspaper’s banking beat reporter. As early as last February, I made the comment that I thought Serres was sensationalizing the banking industry story. I have refrained from commenting on several subsequent articles written by Serres. The essay on the newspaper’s July 5 editorial page, however, nails it. No sensationalization, just a straightforward accounting of the industry situation.

Maybe the editors at the Star Trib don’t talk to the reporters. But I think it would be a good thing if they did.

 

 

Steven M. Wilcox is president of Wilcox Bancshares, which owns the Grand Rapids State Bank in Grand Rapids, Minn. Wilcox is president of the Bank Holding Company Association, a trade group for bank holding companies in the Upper Midwest. I really liked his column in the association’s second-quarter newsletter. I re-represent it here:

 

President Obama announced regulatory reform for the banking industry on June 17. I remember when we went through this before. In 1989, Congress passed FIRREA and in 1991 it followed up with FDICIA. Those two reform laws gave us the regulatory regime we have today, which President Obama is now set to change.

 

But the more things change, the more they stay the same. FIRREA closed down the regulatory agency that regulated savings and loan associations, which was called the Federal Home Loan Bank Board. It replaced it with a new agency called the Office of Thrift Supervision. Now, 20 years later, President Obama is proposing to do away with the agency. He wants to merge it into the Office of the Comptroller of the Currency, which will be renamed the National Bank Supervisor.

 

It is always easier to pass legislation in the midst of a crisis than it is when things are running smoothly. FIRREA and FDICIA worked their way swiftly through the halls of Congress on the heals of the S&L crisis and banking problems in the ag and energy sectors. The Gramm-Leach-Bliley Act, another piece of major reform legislation, took more than a decade of Congressional wrangling before it finally passed in 1999. Things were pretty good in the 1990s, so few people felt compelled to act on this. Today, of course, there is a sense of panic about what’s going on in financial services, so experts are predicting swift consideration of the President’s reform proposal. Some say we will see a reform law by the end of the year. That would be lightening fast for Congress.

 

My bank, Grand Rapids State Bank, commemorated its 95th anniversary on June 14. A lot has happened in our community, in our state and in our country since the bank opened its doors in 1914. But we have survived and thrived. No matter what happens on the broader stage, it is important to pay attention to what’s going on in your own shop. Work hard and give your customers great service. When all is said and done, that’s more important to your bank and its customers than any measure of regulatory reform or anything that goes on in Washington.