community banker update - july 2015

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Online lendingTime to Get in the GamePg. 6

It’s Almost Here!reGister nOw

Also In This Issue....

strategic PlanningPg. 7

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2 COMMUNITY BaNker UpdaTe | JULY 2015

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View a complete calendar andregister for CBI-sponsored webinarsand events at www.cbiaonline.org

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GOVERNMENT & AGENCY BONDS MUNICIPAL BONDS | MORTGAGE BACKED SECURITIES

PUBLIC FINANCE | MUTUAL FUNDS/EQUITIES CORPORATE BONDS | MUNICIPAL BOND CREDIT REVIEW

BOND PORTFOLIO ACCOUNTING & ANALYSIS ASSET/LIABILITY MANAGEMENT

July 2015 webinar line-uP

July 7 RegulatoryOversightofThird-PartyVendors:DueDiligence,Management &Contracts

July 8 MandatoryComplianceRegulationsfortheFrontline

July 9 ManagingE-SIGN,E-Statements&E-Disclosures

July 14 DirectorSeries:UnderstandingtheBoard’sRoleinCyberSecurityRisk

July 15 MasteringtheSBA7aLoanPart2:Documentation,Closing&Funding

July 16 CommercialAppraisalReviewPart2:SalesComparisonApproach

July 21 YourCustomerHasFiledBankruptcy,NowWhat?

July 22 RegulationEMadeEasy

July 23 EmergingLeaderSeries:DevelopingYourUDAAPProgram:Policy,Procedures, RiskAssessment&Audit

July 28 ConstructiontoPermanentLendingCompliancewithCFPBRules:Including ChangesImpactedbytheNewIntegratedDisclosureEffectiveAugust.1,2015

July 29 CallReports:LendingSchedulesRC-C,RC-N&RI-B

July 30 AdvancedACHSpecialistSeries:DoesYourOriginatorAgreementMeetNACHA RuleRequirements?

COMMUNITY BaNker UpdaTe | JULY 2015 3

In This Issue

July2015WebinarLineup......................2FromtheEVP&CEO...............................344thAnnualConvention.....................4-5

OnlineLending........................................6AdequateStrategicPlanning..................7FromtheTop............................................8FinePoints...............................................9RuralMainstreetSurvey................ 10-12 Building A New Foundation….

Justasyourcommunitybankisthefoundationsupportingaprosperouscommunity,sotooarethenextgenerationofcommunitybankleadersthefoundationofourindustry.YourboardofdirectorsidentifiedthiscriticalfactoroveradecadeagoandCBIhasbeenhardatworksupporting,encouragingandbuildingthenextgenerationofcommunitybankers.

TheLeadersofTomorrowpeergroup,astheonlymulti-functionnetworkinggroupinIowa,haspreparedover300bankersforthenextstepintheircareersincluding7CEO’ssofar.Theylearntoleadandoperatetheirgroup,practiceandlearnleadershipskillsandconnectwithothersimilarbankersacrossthestate.Ifyoubankhasneverhadanyonejointhegroup,thereisnotimelikethepresenttostartsomeoneinyourbankdownthepathtoleadership.AnumberofLOTbankerswillbeattheAnnualManagementConferenceinOkobojiandtheywouldbepleasedtosharewithyouthebenefitsoftheirgroup.LookforthemhostingtheWineandCheesereceptiononThursdaynight.

Likewise,theencouragementofbankemployeechildrenisanothermethodtoexposeyoungpeopletoacareerinbankingandtheLeadersofTomorrowscholarshipprogramhasgivenover20bankemployeechildrentheopportunitytopursuehighereducationaswell.

TheCBICouncilofPresidentssawthisissueasanopportunitytosupportourindustrybyforminganeducationalfoundationtofurthertheseprograms.Since2012,theCBIEducationalFoundationhasenabledourscholarshipprogramstogrowandexpand.Asatax-deductible501(c)3FoundationwearecontinuingoursupportforfinancialliteracybysponsoringtheGovernor’sConferenceonFinancialLiteracy,increasethedollaramountsfortheLOTscholarshipsandthisyear,implementingTheCBIFoundationInternScholarshipProgram.

ThisexcitingprogramplacescollegeJuniorsincommunitybanksforthesummer,wheretheyareexposedtoallfacetsofcommunitybankinganduponsuccessfulcompletionofaprescribedcontentoutline,willbeawardeda$1000scholarship.Wehaveanumberofbanksparticipatingintheprogramthisyearandareanxioustoseetheoutcome.Inaddition,manymemberbanksandindividualshavemadecontributionstothefoundationinsupportoftheseprograms.

Thefutureofcommunitybankingdependsonbuildingthebankersoftomorrow,andwithyourhelpandparticipation,CBIwillleadtheway.

CompletedetailsofalltheseprogramsareavailableontheCBIwebsiteatwww.cbiaonline.org.

EVENTS CALENDAR44th Management Conference &Annual Convention............... July 15-17

8th Annual Golf Tournament...Aug. 11

LOT Quarterly Meeting............ Aug. 20

Certified Community LenderCertification Renewal............... Aug. 20

Community Bankers for ComplianceFall Session......................Sep. 22 & 23

Community Banking SummitsFall Sessions........................Oct. 13-15

LOT Quarterly Meeting.............Nov. 19

Community Bankers of Iowa1603 22nd St, Suite 102West Des Moines, Iowa 50266Phone: [email protected]

Iowa Land Records

The InvictusConsulting Group

Welcome NewCBI Members!

The Community Bankers of Iowawould like to welcome the following companies to the association, and

thank them for their support:


There’s Still Plentyof Time To Register!Join the Family Reunion atthe 44th Annual Convention

CommunityBankersofIowa’s44thManagementConferenceandAnnualConventionrepresentstheimportanceofcommunitybanks’personalserviceandcommitmenttotheircustomersandthecommunitiestheyservewiththetheme,“Where Everybody Knows Your Name.”TheConventionstrivestounitecommunitybankersthrougheducationfromnationallyrecognizedspeakers,accesstothelatestproductsandservices,andnumerousopportunitiesfornetworking,camaraderie,andtheexchangeofideaswithcommunitybankersstatewide.

TheConvention’sEntrees(GuestSpeakers)includeformerCIAoperativeProfessorJim Olson.OlsonwillopenthefirstGeneralSessionwithhispresentation“A Different Kind of Career: Under Cover in the CIA”.TofollowisChip Eichelbergerwho’llshowyouhowtorecapturethepowerofmomentumandgeneratehigh-achievingemployeesduringhismotivationalspeech“Get Switched On”.

KickingofftheSecondGeneralSessionisJim Schipper,SuperintendentoftheIowaDivisionofBanking,giving“Iowa’s Banking Perspective”.ICBAImmediatePastPresidentJohn Buhrmasterisnext,addressingattendeesoncommunitybankingissuesatthenationallevelduringthe“ICBA Update”.OntheConvention’sclosingday,SendoffSpeakerJeff Havenswillfillinthegapsregardinggenerationalissueswithahilariouskeynoteaddress“US! vs THEM!: Understanding Millennials”.

AdditionaleducationthatyoucantakebacktoyourbankandutilizewillbeprovidedbytheConvention’sSide Dishes(Break-OutSessionSpeakers.)Theever-popularRegulators’ Panelisbacktodiscussexaminationandcomplianceissues.ThepanelfeaturesIADivisionofBankingSuperintendentJim Schipper,RegionalDirectorJames LaPierrewithFDIC’sKansasCityRegionDivisionofSupervisionandConsumerProtection,andIowaRegionalDirectorJeff JensenfromtheFederalReserveBankofChicago.Navigating“Emerging Trends in Data Breach Response”isDan Kramer,SHAZAM’sSeniorVPofMarketing&MerchantServices.ICBA’sExecutiveVPandChiefMarketingOfficerChris LorencewillalsobeonhandtodiscusssocialmediamattersattheBankers’RoundtableBreakfast,andwillbebacktomoderatethe“Social Media Discussion Panel”break-outsession.

SitinattheTown Hall BreakfasttomeetIowa’sLeadership:IowaHousemembersRep. Chip Baltimore(R-District57)andRep. Tom Sands(R-District88),andSecretaryofAgricultureBill Northeywillbethere.ThengoonajourneywithRandy PottsandSarah Nielsentolearnaboutthisyear’sIowaShowcasefeaturedbusinessWinnebago Industries.

ThroughouttheConventionthereareseveralAppetizers:recreationalactivitiesandopportunitiestonetworkwithyourpeers.SpousesandfamilymembersareallstronglyencouragedtoattendtheGeneralSessionsaswell;presentationsby

July 15-17, 2015

John Buhrmaster

ChipEichelberger

Dr. JamesOlson

JeffHavens

General Session Featured Speakers

Come to CBI’s 44th Annual Convention to See This

BillNorthey

SarahNielsen

RandyPotts

ChipBaltimore

Town Hall Breakfast Speakers

TomSands


thisyear’sspectacularspeakerlineupwillbeinformative,enlightening,andentertainingforALLConventionattendees!Alsoontherecreationandentertainmentrosterare:

• The Eleventh Annual Catch and Release Fishing Tournament: SpendthemorningatthewateringholeduringtheTenthAnnualFishingTournament.Thetournamentisopentomen,womenandyouthsovertheageof16withvalidIowafishinglicenses,whethernoviceorexperiencedfishers.Theprofessionalguidesknowwheretofindthebigonesforyou,andwillevenbaityourhooks!

• Mixed-Pair Golf Tournament: Tee-offatBrooksNationalGolfClubduringtheMixedPairGolfTournament.Thetournamentisafour-person,bestshotmatch.

• Kick-Off Reception: Hoistaglass!JointheConventionCommitteeattheMajesticPavillioninArnoldsPark.ThereceptionwillhonortherecipientsoftheRobertD.DixonFounders’Award,theUpandComingBankeroftheYearAward,theLeadersofTomorrow’sScholarshipwinners,andthewinneroftheCommunityBankingMonthBest-of-the-BestCompetition.

• Wine & Cheese Reception:AneveningofnetworkingbeginswiththeWine&CheeseReceptioninArrowwood’sWimbledonRoom.Sip,share,andbuildrelationshipswithotherIowacommunitybankerswhileyoulearnaboutthemanyservicesourpartnersoffertostreamlineyourbankingbusiness.MakesuretovisiteachboothtobeeligibletoentertheGrandPrizedrawingheldduringtheGalaReception!TheWine&CheesereceptionissponsoredbytheLeadersofTomorrow.SwingbytheirstationtoseeiftheLOTgroupisrightforyouoramemberofyourbank.

• Gala Reception & PAC Auction:Enjoyfoodstationsguaranteedtosatisfy,thenplaceyourbidsattheGala’ssilentandlivePACAuctions!AllproceedsfromtheauctionsupportCBI’sPACandremaininthestateofIowa.ParticipateinthePutting Contest,thenvisitthe“Photo Finish”photoboothtocapturememoriesofyourtimeattheConvention.Don’tforgettotakelotsofselfies!

• Bankers’ Golf Tournament:Hittheafter-hourspartyatthefinaleventoftheconference.EnjoylunchatBrooksNationalGolfClubfollowedbyashotgunstartforthefour-person,bestshotBankersGolfTournament.

SpecialDessertsarealsoscheduledforspouses.Firstit’sHappy HourduringtheWelcome Reception & “Cheers for Women” Breakfast,wheretheycanenjoyaspecialbuffetofquiche,freshseasonalfruitandassortedpastries.HeidiKooikerfromViBellaJewelrywillrecounttheViBellastorywhiletheladiesbrowsebeautifulhandmadejewelrycraftedbyartisansinIowa,Mexico,andHaiti.Later,theycanheadtoA Toast to the Arts: A Trip to Pearson Lakes Art Center.SpendanunforgettableafternoontouringtheCenter’ssixgalleries,artstheatre,interactivegallery,libraryandeventshall.Then,they’llnametheirpoisonandproposeatoasttofellow-tourgoersatanexclusivespouses-onlycocktailparty.Here’s to your health!

There’ssomethingforeveryoneatCBI’s44thManagementConferenceandAnnualConvention.Join us at the Family Reunion and be a part of spreading the community banking message!

Additionalinformationandregistrationisavailableonlineatcbiaonline.org.IfyouhaveanyquestionsabouttheConvention,[email protected].

By the time Convention is over,everyone will know YOUR name.

We hope to see you there!

DanKramer

JamesLaPierre

ChrisLorence

JeffJensen

JimSchipper

Breakout Session Speakers

Amazing Speaker Lineup!

Gather on the greens at the 44th Annual

Convention’sMixed-Pair and

Bankers’ Golf Tournaments.

Enjoy refreshments, learn about new products, and bidon luxury items at the Gala / PAC Auction / Tradeshow.

Connect with Iowa leadership at the Town Hall Breakfast.


Doyourememberthedayswhenfinancialinstitutions(FI)didn’thavewebsites?Forthosemillennialsouttherewhojustfelloutoftheirchair,yes,therewasatimewhenbanksandcreditunionsdidn’thavewebsites.Whatweheardinthosedayswasthatcommunity-basedbankingwasarelationshipbusinessandthatFI’sknewtheirclientbasesowelltheydidn’t“need”awebsite.Itcertainlywas,andstillis,arelationshipbusiness.But,canyouimagineanFIoperatingwithoutawebsitetoday?Ididn’tthinkso.Whataboutthedaysbeforecellphones?IfIhadadollarforallofthepeopleIheardsay,“I’llnevergetoneofthose”,whonowown,notonlyacellphonebutatabletaswell,I’dbewritingthisblogpostfromabeachsomewhereinsteadofmyoffice.Thepointis,timeandtechnologycontinuetomarchon.FI’sarefindingnewanduniquewaystoconnectwiththeircustomersandmembers,andasinnovationincreases,productofferingsincreaseaswell.Unfortunately,sincetherecession,non-FIcompetitorshaveemergedwithinthelendingmarketplaceandhavemovedaheadofFIsinanumberofways.

Youcanpaybillsoropenacheckingaccount,butcanyourequestfinancingdirectlyfromyourFIswebsite?Probablynot.Whatif

you’reasmallbusinessownerandneedfinancingrelatedtoyourcompany?Evenmoreunlikely.Infact,wesurveyedanumberofFI’slastyearandlessthan8%hadanykindofmechanismforabusinesstorequestfinancingonline.Yet,weknowthatpeopleareincreasinglyusingtechnologytodomosteverythinginlife;includingfindingsourcesoffinancingandcredit.Theexplosionofonlinealternativelendersoverthelastseveralyearsisproofenoughofthatfact.Consequently,thenumberofloansdoneonlinewiththesetypesoflendershasanexponentialgrowthcurveattachedtoit.Still,FI’shavebeenslowtoreactandevenslowertocompete,eventhougheveryinstitutioniscryingoutforloandemand.Maybeyou’veseentheseheadlinesfromrecentperiodicals:

“Why Your FI Needs a Digital Lending Platform—Now”“Community FI’s Need Sleeker Approach to Small-Business Lending”

“FI’s Conspicuously Scarce in Supercharged Online Loan Field”

Thisboldbutnecessaryleapforwarddoesn’trequireanFItochangeitscreditcultureorlendingstandards,itsimplybegsfortheinstitutiontomeettheborrower’sneedsinanewanduniqueway.Itasksyoutoleveragethetechnologychannelsthatyou’vealreadyinvestedin,butinwaysthataremeaningfultothosewhowishtoaccessyourservices.Onlinebanking,forexample,wouldn’tbeaverypowerfultoolifwhenyouloggedin,youhadtocalltogetmoreinfo,orclickonthe“ContactUsforMoreInfo”button.Whyshouldyourloanproductsbeanydifferent?Thinkaboutitthisway,thetopthreeresponsesfromborrowerswhenaskedwhattheyarelookingforinalenderareusually:

• Makeiteasyformetoapply• Givemeaquickinitialresponse• HelpmegetthecapitalIneed,evenifyoucan’tdoityourself

AskyourselfifyourFI’sloanmethodologymeetsthoseresponses.Ifnot,it’stimeforyoutogetinthegameandstopsittingonthesidelines.Somedaywe’llalllookbackandrememberthedayswhennobodyofferedloansonlineandwonderwhattooksolong.

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Community Bankers of Iowa

Onceagain,regulatorsarezeroinginoninadequatestrategicandcapitalplanningprocessesatmanycommunitybanks.

TheOfficeoftheComptrolleroftheCurrencylisted“strategicplanningandexecution”asitsfirstsupervisorypriorityforthesecondhalfof2015initsmid-cyclestatusreportreleasedinJune.ThatechoesconcernsfromtheOCC’ssemiannualriskperspective,whichfoundthatstrategicriskwashighformanybanksasthey“struggletoimplementtheirstrategicplanseffectively.”

FDICChairmanMartinJ.GruenbergsaidinMaythatregulatorsexpectbanks“tohaveastrategicplanningprocesstoguidethedirectionanddecisionsofmanagementandtheboard.Iwanttostresstheword‘process’becausewedon’tjustmeanapieceofpaper.”

Hesaidthateffectivestrategicplanning“shouldbeadynamicprocessthatisdrivenbythebank’scoremission,vision,andvalues.Itshouldbebasedonasolidunderstandingofyourcurrentbusinessmodelandrisksandshouldinvolveproperduediligenceandtheallocationofsufficientresourcesbeforeexpandingintoanew

(Strategic Planning continued on page 14)

Regulatory Scrutiny Focuses on Adequate

StrategicPlanning

Written By: Lisa Getter and Adam MustafaInvictus Consulting Group


key under the matWritten By: Jack Hartings, Chairman of ICBA

TherejectionoftherecentMasterCard-Targetsettlementshowedussomethingthatmanyofuscommunitybankershaveknownforalongtime-thatpenniesonthedollarisneveragooddealforanyone.

WhenTargetagreedtoreimburseaffectedMasterCard-issuingbanksroughly$19millionfollowingtheretailer’smassive2013databreach,whichincurredsignificantcostsforthousandsofcommunitybanks,itgavecommunitybanksachoice-eitheracceptthemeagersettlementorcontinuethecostlyandriskyroadoflitigation.AsICBA’sCamFinewroteinanAmericanBankerop-edonthesubject,“talkaboutbeingcaughtbetweenthedevilandthedeepbluesea.”

Neitheroptionwasparticularlydesirable,andtherejectionofthesettlementprovedit.Thisiscertainlyacaseof,“it’sbetterifitdidn’thappeninthefirstplace.”

Andwhilewecouldwishthatdatabreachesneverhappened,orwereathingofthepast,weknowthattheyareaveryrealthreattocommunitybanksandourcustomers.That’swhyyouknowalltoowellwhyICBA’sdatasecurityprinciplesaremoreimportantnowthanever(seesidebar).

Ascommunitybankers,weknowourcustomers,butit’smoredifficulttoprotectthemwhenwedon’tseethematthepointoftransaction.Wedependonsystemsthatuselogicandtrendstospotirregularities,buttheyareneverfoolproof.Whiletechnologyisamazing,it’snotalwaysperfect.

Thesamegoesforcybersecurity.Communitybanksareheldtoanincrediblyhighstandardinprotectingourwebsitesandsensitiveinformation,andweshouldbe-we,andmostimportantly,our

customersdependonus.Butit’sachallengeforbanksofallsizes.Andaswehaveseenoverandoveragain,cyberthievesarealwaysevolving.

Andwhilecommunitybankscanhavethemostsecuresystemsinplace,wecan’tstopthere.Weneedtocontinuetoeducateourcustomerstoprotecttheirpasswords,logincredentialsandpersonalinformation.Notdoingsoleavesthekeyunderthefrontdoormat.Andwhilebusinesscustomerswant24/7accesstosendACHandwires,thereisacostandvulnerabilityassociatedwiththat.

Weliveinaworldwhereeveryonewantseasy,real-timetransactions,butthereisatremendouscosttoprotectthoseuser-friendlysystems.WhileIknowcommunitybanksareuptothechallenge,weneedtobemorethanafewstepsaheadofthetechnology.Weneedtokeepmovingbecausecyberthievesarelurkingbehindus.

JackHastingsisChairmanofICBA,andPresidentandCEOofThePeople’sBankinColdwater,Ohio.

tOPfrom the ICBA’s Data Security Principles

• The costs of data breaches should ultimately be borne by the breached party.

• All participants in the payments system-including merchants-should be subject to Gramm-Leach-Bliley Act-like data security standards.

• A national data security breach and notification standard should replace the current patchwork of state laws.

• Unnecessary barriers to effective threat-information sharing between law enforcement and the financial and retail sectors should be removed.

• While community banks and other financial institutions continue to move to chip technology for debit and credit cards, these technologies alone may not have prevented the recent retailer breaches and do not protect against fraud in “card-not-present” transactions.“...we need to be more than a few steps

ahead of the technology. We need to keep moving because cyberthieves are

lurking behind us.”


Letfreedomring.Leteconomiclibertyandopportunityflourish.LetcreditflowonMainStreet.Thismonth,ontheheelsofcelebratingournation’sbirthtosecurepersonalfreedomandeconomicopportunity,IndependentBankerhighlightsrecentlysuccessfullendingbycommunitybanks.Themagazine’scoveragerepresentssnapshotsofourindustry,becausetherearefartoomanyworthycommunitybanklenderstohighlightinanysingleissue.Sothecoverageispartrecognitionofandtributetothepivotalrolecommunitybanksplayindeployinglocaldepositstosupportpeopleandlocaleconomies.

Available,affordablecreditistheindispensiblelubricantinournation’smightyeconomicengine.Inimmeasurablydiverseways,creditempowersprogressandhelpsfulfillindividualideasanddreams—thefoundationofAmericanopportunity,freedomandprosperity.Knowledgeable,responsivelending—alongwithprocessingsecurepaymentsandsafeguardingsavings—isfundamentaltotherelationship-basedmodelallcommunitybanksfollow.

Everycommunitybankwants—andinfactcountson—itscustomerssucceedingfinanciallyasmuchormoretomorrowastheydotoday.Inherently,thatinvolvesresponsiblyprovidingcredittoasmanypeopleaspossiblewhoneedit.Oftenwhenotherfinancialinstitutionsfailtomeetconsumers’needs,it’scommunitybanksthatstepuptoprovidethecreditthathelpsMainStreetsucceed.

However,anunderlyingstorylineamidthismonth’sIndependentBankercoverageishowhardcommunitybanksmustworktodaytocontinuetoprovideresponsible,neededcreditonMainStreet.Atalmosteveryturn,fromcounterproductivecompliancerequirementstomisfitprudentialmandates,one-size-fits-alloverregulationisimposingcostlyburdensthataredistractingifnotdownrighthinderingcommunitybanksfromtheirprimaryroleofprovidinguseful,job-creatingcredit.

Fortunately,ICBAandcommunitybankershavesecuredseveralimportantandunprecedented

exceptionsforcommunitybanksfromsome,butnotenoughof,thenewestDodd-FrankActprovisionsandmandates.Butthosesensiblepolicyvictoriesonlystemmedatideofexcessiveregulationalreadyweighingdowncommunitybanks.ThetruthisthatmanymisdirectedregulationsdesignedforWallStreetmegabanksandnonbankscontinuetoshackleMainStreetcredit,asindicatedbynumerousindependentstudiesandamountainoftestimonyfromMainStreetcommunitybankers.Theevidenceisclearandoverwhelming,andtodayfewpolicymakersinWashingtondenyit.

WithconstantinputandencouragementfromICBA,Congresscontinuestoworkonlegislationtoprovidemeaningfulregulatoryreliefforcommunitybanks.ManymeasuresderivedirectlyfromICBA’sPlanforProsperitypolicyproposals.Allofwhichwouldfreecommunitybanksfromregulationtrulyaimedatmegabanks,andmanyoftheproposalswoulddirectlyhelpcommunitybanksfocustheirlimitedtimeandresourcesonMainStreetlending.America’sconsumers,families,smallbusinessesandanyonewithapersonalstakeinoureconomywillbenefitfromthemeasures.

That’sourprimarymessagetoCongressaswe—withhelpfromyouandeveryoneatyourcommunitybank—pushtosecuremeaningfulregulatoryreliefthisyear.Forsomanyimportantreasons,forsomanypeople,letcreditflowonMainStreet.Letfreedomring!

freedom and lendingWrittenBy:CamdenFine,PresidentandCEOofICBA

Following Mr. FineMore than 1,000 people are following Camden Fine’s tweets @Cam_Fine— are you? Visit www.twitter.com/cam_fine.

finePOints

“Every community bank wants - and in fact counts on - its customers

suceeding financially as much or more tomorrow as they do today.”


June Survey Results at a Glance:• TheRuralMainstreetIndeximprovedtogrowthneutral,

highestsinceJanuaryofthisyear.• Farmlandpricesdeclinedforthe19thstraightmonth,but

withwidevariationsacrosstheregion.• Almostoneinfivebankers,thesameasinMay,reported

negativefalloutfromtheavianfluoutbreak.• Morethanone-thirdofbankersthinktheFederalReserve

shouldwaituntil2016toraiseinterestrates.• Homesalessoaredforthemonth.

OMAHA,Neb.–TheCreightonUniversityRuralMainstreetIndexforJuneroseslightlyfromMay’sweakreading,accordingtothemonthlysurveyofbankCEOsinruralareasofa10-stateregiondependentonagricultureand/orenergy.

Overall:TheRuralMainstreetIndex(RMI),whichrangesbetween0and100,climbedtogrowthneutral50.0fromMay’s49.0.

“Thisisthethirdstraightmonththeindexhasrisenandthatindicateseconomicconditionsareimprovingintheregion,thoughtheyremainweakbyhistoricalstandards.ThestrongdollarisweighingonagriculturalcommoditypricesandfarmincomefortheRuralMainstreeteconomy,”saidErnieGoss,JackA.MacAllisterChairinRegionalEconomicsatCreightonUniversity’sHeiderCollegeofBusiness.

Farming and Ranching:Thefarmlandandranchland-priceindexforJunedeclinedtoitslowestlevelsinceNovemberoflastyear.Theindexdeclinedto31.1fromMay’s39.7.“Thisisthe19thstraightmonththeindexhasmovedbelowgrowthneutral.But,asinpreviousmonths,thereisagreatdealofvariationacrosstheregioninthedirectionandmagnitudeoffarmlandprices,”saidGoss.

TheJunefarmequipment-salesindexmatchedMay’srecordlow12.5,whichwasdownfromApril’s15.6.Theindexhasbeenbelowgrowthneutralfor23straightmonths.“Withfarmincomeexpectedtodeclineforasecondstraightyear,farmersremainverycautiousregardingthepurchaseofagriculturalequipment,”saidGoss.

Banking:TheJuneloan-volumeindexdeclinedto79.9from79.6inMay.Thechecking-depositindexroseto48.0fromMay’s43.8,whiletheindexforcertificatesofdepositandothersavingsinstrumentsfellto38.6fromMay’s39.7.

ThismonthbankCEOswereaskedwhenshouldtheFederalReservebeginraisingshortterminterestratesandwhenwilltheFedbeginboostingshortterminterestrates.Approximately12.8percentofbankerssaidtheFedshouldimmediatelybeginraisingrates.Ontheotherhand,morethan34percentofbankersrecommendthattheFedwaituntil2016topushrateshigher.

HoweverintermsofexpectedrateincreasesbytheFed,almostone-thirdanticipatearatehikebytheFed’sSeptember2015meeting.Approximately40.4percentexpectaninterestrateincreaseinthefourthquarterof2015.Approximately27.7percentexpecttheFedtodelayarateincreaseuntil2016.

Hiring:Despiteweakercroppricesandpullbacksfrombusinesseswithclosetiestoagricultureandenergy,RuralMainstreetbusinessescontinuetoaddworkerstotheirpayrolls.TheJunehiringindexwasunchangedfromMay’s61.5.“RuralMainstreetbusinessescontinuetohireadditionalworkers.Whiletherateofnewhiringishealthierinurbanareasofeachstate,RuralMainstreetcommunitiesaregrowingjobsatasolidannualpaceofapproximately1percent,”saidGoss.

Confidence:Theconfidenceindex,whichreflectsexpectationsfortheeconomysixmonthsout,expandedtoaweak45.9from41.5inMay.“Theavianflucombinedwithlowagriculturalcommoditypriceshavehadnegativeimpactsonbankers’economicoutlook,”saidGoss.

“Forthelasttwomonths,wehaveaskedbankersaboutthefalloutfromtheavianfluoutbreak.LittlechangedbetweenMayandJunewithalmostoneinfiveofthebankers,or18.8percent,reportingnegativeimpactsfromtheoutbreak,”saidGoss.

ButaccordingtoPeteHaddeland,CEOoftheFirstNationalBankinMahnomen,Minn.“TheBirdFluhasbeentoughonMinnesota.”

Home and Retail Sales:TheJunehome-salesindexjumpedto68.1fromMay’s66.0.TheJuneretail-salesindexincreasedtoaweak50.0from49.0inMay.“Wehaveyettomeasureanysignificantupturninretailsalesstemmingfromthedownturninfuelprices,”saidGoss.

Eachmonth,communitybankpresidentsandCEOsinnonurban,agriculturallyandenergy-dependentportionsofa10-stateareaaresurveyedregardingcurrenteconomicconditionsintheir

(Rural Mainstreet continued on next page)

main street economic survey

C r e i g h t o nU N I V E R S I T Y

Rural Economy Improves to Growth Neutral:No Spread in Negative Impact of Avian Flu

Ernie Goss


(Rural Mainstreet continued from previous page)

communitiesandtheirprojectedeconomicoutlookssixmonthsdowntheroad.BankersfromColorado,Illinois,Iowa,Kansas,Minnesota,Missouri,Nebraska,NorthDakota,SouthDakotaandWyomingareincluded.ThesurveyissupportedbyagrantfromSecurityStateBankinAnsley,Neb.

Thissurveyrepresentsanearlysnapshotoftheeconomyofrural,agriculturallyandenergy-dependentportionsofthenation.TheRuralMainstreetIndex(RMI)isauniqueindexcovering10regionalstates,focusingonapproximately200ruralcommunitieswithanaveragepopulationof1,300.Itgivesthemostcurrentreal-timeanalysisoftheruraleconomy.GossandBillMcQuillan,formerchairmanoftheIndependentCommunityBanksofAmerica,createdthemonthlyeconomicsurveyin2005.

Colorado:Afterrisingabovegrowthneutralfor11straightmonths,Colorado’sRuralMainstreetIndex(RMI)hasfallenbelowthe50.0thresholdforthelastfivemonths.TheRMIdidimprovefromMay’s47.7to48.6forJune.Thefarmlandandranchland-

priceindextumbledto29.1from50.9inMay.Colorado’shiringindexforJunedeclinedto56.0fromMay’s62.4.

Illinois:TheRMIforIllinoisroseto49.7from49.2inMay.Thefarmland-priceindexslumpedto34.1fromMay’s42.9.Thestate’snew-hiringindexdecreasedto58.5fromMay’s59.2.

Iowa:TheJuneRMIforIowaslippedto51.8fromMay’s52.1.Iowa’sfarmland-priceindexforJunefellto44.3fromMay’s52.3.Iowa’snew-hiringindexforJunedippedto62.6fromMay’s62.9.

Kansas:TheKansasRMIforJuneroseto48.2fromMay’s47.5.Thestate’sfarmland-priceindexforJuneslumpedto26.5fromMay’s33.9.Thenew-hiringindexdippedto55.4from55.6inMay

Minnesota:TheJuneRMIforMinnesotaroseto52.6fromMay’s50.1.Minnesota’sfarmland-priceindexdeclinedto40.5from42.0inMay.Thenew-hiringindexforthestateclimbedto61.0from58.8inMay.AccordingtoMarkHewitt,CEOofNorthwoods

(Rural Mainstreet continued on next page)

Tables 1 and 2 summarize survey findingsNext month’s survey results will be released on the third Thursday of the month, July 16.

Table 1: Rural Mainstreet Economy One Year Ago and Last Two Months: (index > 50 indicates expansion)

June2014

May2015

June2015

Area economic index 53.6 49.0 50.0

Loan volume 74.6 79.6 79.9Checking deposits 50.9 43.8 48.0

Certificates of deposit and savings instruments 39.4 39.7 38.6Farmland prices 49.1 39.4 31.1Farm equipment sales 35.0 12.5 12.5Home sales 66.1 66.0 68.1Hiring 63.2 61.5 61.5Retail business 51.8 49.0 50.0Confidence index (area economy six months out) 55.5 41.5 45.9

Table 2: The Rural Mainstreet Economy, June 2015Percentage of bankers reporting

SignificantCosts

Cost but not significant Little or no cost A positive from higher

livestock prices

Regardingthecurrentavianorbirdfluoutbreak,whathasbeentheimpactthusfartoyourareaeconomy? 6.3% 12.5% 79.2% 2.1%

ImmediatelyAt the next

meeting of rate setting committee

At the September 2015

meetingFourth

quarter 2015 2016

WhenSHOULDtheFederalReservebeginraisingshortterminterestrates? 12.8% 6.4% 8.5% 38.3% 34.0%

ImmediatelyAt the next

meeting of rate setting committee

At the September 2015

meetingFourth

quarter 2015 2016

WhenWILLtheFederalReservebeginraisingshortterminterestrates? 0.0% 2.1% 29.8% 40.4% 27.7%

Follow Ernie Goss on Twitter: www.twitter.com/erniegossFor historical data and forecasts, visit: www2.creighton.edu/business/economicoutlook/


(Rural Mainstreet continued from previous page)

BankinParkRapids,“Slowrecoveryfromtherecessioncontinues.Wearenotyetbacktopre-2007growthlevels.Loandemandcontinuestobeweak.”

Missouri:TheJuneRMIforMissourigrewto49.9from48.0inMay.Thefarmland-priceindexforJunedeclinedto35.0fromMay’s36.2.Missouri’snew-hiringindexadvancedto58.8fromMay’s56.5.

Nebraska:TheNebraskaRMIforJuneincreasedto48.8from47.8inMay.Thestate’sfarmland-priceindexfellto29.5from39.0inMay.Nebraska’snew-hiringindexdippedto56.6fromMay’s57.6.

North Dakota:TheNorthDakotaRMIforJunedecreasedto52.6fromMay’s53.9.Thefarmland-priceindexfellto56.0from74.9inMay.NorthDakota’snew-hiringindexdeclinedto67.2fromMay’s72.0.

South Dakota:TheJuneRMIforSouthDakotaexpandedto52.2fromMay’s50.5.Thefarmland-priceindexdecreasedto42.1fromMay’s44.5.SouthDakota’snew-hiringindexroseto61.7from59.8inMay.

Wyoming:TheJuneRMIforWyomingadvancedtoaweak49.2fromlastmonth’s48.2.TheJunefarmlandandranchland-priceindexslumpedto32.7fromMay’s42.3.Wyoming’snew-hiringindexdippedto57.9fromMay’s59.2.

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(Strategic Planning continued from page 7)

businessline.Further,thereshouldbefrequent,objectivefollow-uponactualversusplannedresults.”

Inwritingaboutstrategicrisk,theAtlantaFederalReserve’ssupervisionandregulationdivisionsaidthat“asoundstrategic planningprocessisimportantforinstitutionsofallsizes,althoughthenatureoftheprocesswillvarybysizeandcomplexity.”Thearticlenotedthattheprocess“shouldnotresultinarigid,never-changingplanbutshouldbenimble,regularlyupdated(atleastannually)andcapableofrespondingtorisksandchangingmarketconditions.”

Giveneconomicchangesandincreasedmarketcompetition,communitybanksmustunderstandhowtoconducteffectivestrategicplanning.Thisismoreimportantnowthanever,saysInvictusConsultingGroupChairmanKamalMustafa.

Thesmartestbanksareusingnewanalyticstodeveloptheirstrategicplans–notbecauseofregulatorypressure,butbecauseitgivesthemanedgeinthemarketplaceandaviewoftheirbankstheycannototherwisesee,Mustafasaid.

“Strategicplanningisuselesswithoutincorporatingcapitalplanning.Themosteffectivecapitalplanningisbuiltfromthe

resultsofstresstesting.Thesecriticalfunctions–strategicplanning,capitalplanningandstresstesting–mustbeintegratedifabanktrulywantstounderstanditsfuture,”hesaid.

Headvisesbankstousethesamefundamentalmethodologyforbothcapitalplanningandstrategicplanning,orelsetheywillruntheriskofgettingmisleadingresults.

OCCDeputyComptrollerforSupervisionDarrinBenhartalsoadvisescommunitybankstousestresstestingtodetermineifithasenoughcapital.“Boardsalsoneedtomakesuretheinstitutionhasadequatecapitalrelativetoallofitsrisks,andstresstestingcanhelp,”hesaidinaFebruaryspeech.“Wealsotalkabouttheneedtoconductstresstestingtoassessandinformthoselimitsasbankmanagementandtheboardmakestrategicdecisions.Themostvaluableandoftenmostdifficultriskmanagementdecisionisknowingwhentosay“no”becauseyouhaveexceededyourrisklimits,”hesaid.

TheOCCsaysthatmanycommunitybanksarestrugglingto“executestrategicandcapitalplansgiventhecurrentoperatingenvironment.”Examinerswanttomakesurethatbankboardsandseniormanagementhavedevelopedadequatestrategic,capitalandsuccessionplanningprocesseswithrealisticplansandappropriateriskcontrols.

community banker update - july 2015

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