TECHNICALLY SPEAKING - Community Bankers of Iowa (CBI) · SPEAKING. RECAP: Fall Community. Bank Summits. Is the next big thing the. Next Big Hassle? GOBANK. Walmart’s Check-out

OF

FIC

IAL

PU

BL

ICA

TIO

N O

F T

HE

CO

MM

UN

ITY

BA

NK

ER

S O

F I

OW

AN

OV

EM

BE

R 2

014

TECHNICALLYSPEAKING

RECAP:Fall CommunityBank Summits

Is the next big thing theNext BigHassle?

GOBANKWalmart’s

Check-out Line CheckingAccounts

Next Gen:CBI EDUCATIONALFOUNDATION

2 CBI BANKER UPDATE | NOVEMBER 2014

Want To Attend A Webinar?View a complete calendar and register for

CBI sponsored webinars and events atwww.cbiaonline.org

or Call Us at 515.453.1495for more information.

November 4 Director Series: Developing an Effective Succession Planning Strategy for Management & the Board

November 5 Emerging Leader Education: Turning Bank Financial Statements into Useful Ratios & Trends

November 6 Your Bank’s Loan Review Program: Meeting Risk Management Needs & Regulatory Requirements

November 12 Call Report Preparation: Balance Sheet Schedules

November 13 Vendor Compliance Issues: Risk Management, Contracts & Accounting

November 14 Ability to Repay & Qualified Mortgages: Lessons Learned the Hard Way & 2015 Changes

November 18 Required Compliance Series: Bank Protection Act Robbery Preparedness for All Staff

November 19 IRS Reporting Requirements: 1098s, 1099s, TINs, Backup Withholding & Recent FATCA Updates

November 20 Loan Deterioration Early Warning Signs: Where is Your Portfolio at Risk?

November 24 New CFPB Rules for Annual Privacy Notices

November 25 Incident Response: Before, During & After a Data Breach

NOVEMBER 2014 WEBINAR LINE-UP

a collection

888.726.2880W W W. F I R S T B A N K E R S B A N C . C O M

ST. LOUIS, MO OVERLAND PARK, KS

LINCOLN, NE

of knowledgeGOVERNMENT & AGENCY BONDS

MUNICIPAL BONDSMORTGAGE BACKED SECURITIES

PUBLIC FINANCE MUTUAL FUNDS/EQUITIES

CORPORATE BONDSBOND PORTFOLIO ACCOUNTING & ANALYSIS

ASSET/LIABILITY MANAGEMENTMUNICIPAL BOND CREDIT REVIEW

CBI BANKER UPDATE | NOVEMBER 2014 3

From the CEO & EVP, Don Hole

PAYMENT SYSTEM POKER – COMMUNITY BANKS CAN WAIT

The recent introduction of Apple iPay for the next generation iPhone and iPad, through the collaboration of Visa and the five largest banks in America has caused

even more confusion in the electronic payment arena with no clear direction for the majority of America’s and Iowa’s community banks. Never before has there been a proprietary payment solution from a huge device maker with no experience in the payments arena and a staunchly loyal (albeit a minor market share) customer base. By hooking up with Visa and the largest banks, Apple has gone “All In” to try to force their solution on the marketplace, much like iTunes which now resides on multiple platforms. But the payments business is not music. The initial roll out resulted in Bank of America double-charging their customers, two large drug store chains have announced they will not support Apple iPay as they are part of a consortium working on an alternative solution, and very few other processors ready to implement this solution.

My impression is that we are looking at something similar to the war in the 70’s and 80’s over videotape format. Remember Beta vs VHS? Sony, a huge company, wanted Beta and tried to force their standard on the marketplace. Others saw it differently and ultimately VHS won the day, but only until the compact disc dominated the market. Until of course downloading caught fire, only to be replaced by streaming, that will be replaced by…?

Being a member of the ICBA National Committee on Payments and Technology, along with Bob Steen of Bridge Community Bank in Mount Vernon, we had the opportunity to hear directly from Visa on their plans for the payment system of the future, including tokenization, near field communication (the technology that Apple iPay uses but that is NOT proprietary to Apple), and EMV. We also heard from the National Clearing House Association on their plans to streamline the ACH system to provide for income streams for originators and accepting banks of ACH transactions. I am reminded of history once again, back in the early days of ATMs, before branding, when bankers created their own networks like Shazam and were able to interchange transactions freely amongst themselves at minimal cost. Multiple parties creating their own solutions to electronic payments once again spotlights the issue of choice, competition, equal access and interoperability for all players in the market, be they large retailers, huge banks, hardware manufacturers or community banks.

The clearest view is that there is no clear view. Community Bankers need not stampede to the newest, coolest solution. There remains time to make small moves to satisfy customers until the path forward is clearer. Community Banks must insist on solutions that work for everyone in the market and do not declare winners and losers, either in terms of revenue and expense, or access.

Community Bankers of Iowa1603 22nd Street, Suite 102

West Des Moines, Iowa 50266Phone: 515.453.1495

In This IssueNovember 2014 Webinar Lineup .... 2

From the CEO .............................. 3

CBI Educational Foundation ......... 4

Recap:Fall Community Bank Summits .... 5

From the Top:Embracing Technology ................. 6

Fine Points:Transformational Times. ............... 7

Washington Watch:Retail Me Not ................................ 8

Community Bankers forCompliance Program .................... 9

LOT Quarterly Meeting ............... 10

Rural Mainstreet Survey ........ 12-14


The Community Bankers of Iowa Education Foundation, after being announced at the Annual Convention, is off and running. The list of contributing banks and individuals continues to rise and fund raising efforts by the Leaders of Tomorrow division have been successful. Two LOT Scholarships have been awarded and funded, and the Financial Literacy efforts have been in high gear as well.

The Community Bankers of Iowa Education Foundation has as its purpose:

9 To provide support for K-12 financial literacy education across Iowa;

9 To educate Community Bankers across Iowa;

9 To recognize accomplishments of Community Bankers both to the industry and their communities;

9 To provide education and scholarships to young people both within the industry and who could be interested in the industry.

Major activities Include:• Money Smart Week Elementary Poster Contest

(State-wide)

• Community Bankers Intern Scholarship Program (Spring 2015)

• Community Bankers of Iowa Leaders of Tomorrow Scholarship Program (Ongoing)

• Community Bankers of Iowa Robert D. Dixon Founders Award Program (Ongoing)

• Community Bankers of Iowa Leaders of Tomorrow Up and Coming Banker Award (Ongoing)

• Ongoing educational opportunities for bankers and prospective bankers across Iowa.

The foundation is an IRS approved 501(c)3 organization and contributions are tax deductible to the full extent of the law. Also in cooperation with the Community Foundation of Greater Des Moines, donors willing to make an endowment contribution of $10,000 or more can realize a 25% Iowa state tax credit in addition to deductibility*. Contact us for details on this exciting program. The Foundation is governed by former presidents of the Community Bankers of Iowa. If you would like more information or to make a tax-deductible donation, the brochure and form can be obtained from our website at: www.cbiaonline.org/2403/mirror/cbi-news.htm#3.

Community Banking Financial Literacy ProgramsCBI Education Foundation Off and Running

The following Banks and Individuals have contributed to the CBI Educational

Foundation and have achieved the first level of recognition for their commitment:

First State Bank - Belmond

Ackley State Bank

Security Savings Bank - Gowrie

Farmers Trust and Savings Bank - Buffalo Center

Bell State Bank and Trust Co. - Fargo

First Heritage Bank - Shenandoah

Premier Bank - Rock Valley

Iowa Trust and Savings Bank - Emmetsburg

County Bank - Sigourney

Rolfe State Bank

Citizens State Bank - Sheldon

Hardin County State Bank - Eldora

Estate of Mrs. Robert D. Dixon

www.cbiaonline.org/2403/mirror/cbi-news.htm#3

Would you like to make a tax-deductible donation to help ensure the future of community banking in Iowa? Visit our website at the address below to get more information, or to download the Brochure and Donation Form.


CBI held it’s bi-annual community banking summits Oct 14-16 in Carroll, West Des Moines and Algona. Community bankers from around the state met to network, learn about branch technology trends, and get an update on the ag economy in Iowa and the new Farm Bill programs.

Speaker Sandy Dixon, President/CEO of Sandy Dixon & Associates opened each Summit by educating attendees on current technology trends. Major talking points included meeting the demands of the customer, how to grow organically, and managing costs. Studies show that customers still want to go to their bank branches for advice. Technology today creates the opportunity for banks to create a customer-centric branch, focusing on service, referral, and education.

Ms. Dixon stressed that bankers have to understand the impact of shifts in the channels customers use to do their banking, and what it means for their banks. Multi/Omni-channel banking allows customers to start a banking process in one channel and finish it in another seamlessly. Use of today’s available technologies streamlines processes which help in trimming costs, but it also gives the bank’s staff more time to spend with customers.

Later at each meeting, Shane Ellis, Farm Management Specialist with the Iowa State University Extension Office detailed the 2015 Crop Marketing forecast. Next, he discussed the crop insurance programs outlined in the Farm Bill. The new 5-year farm program requires that farmers choose one of two options: Agricultural Risk or Price Loss coverage. Choosing an option is a 3-step process, beginning with: 1) reallocation/update of base acreages and yields; 2) election of the ARC or PLC program; and 3) annual enrollment. If a farm fails to elect an option, coverage defaults to the PLC program for 2015 through 2018. Ellis finished his presentation with examples of price comparisons, tools to assist farmers in reallocation, and sites to visit for more information.

A dinner reception followed the speaker presentations at each meeting. Attendance at each Summit location was up from last year, so community bankers had the opportunity to connect and exchange information and ideas with even more of their peers.

CBI would like to thank our sponsors for helping us to make the Fall Summits a success! Dates and locations for 2015 Spring Community Banking Summits are still to be determined.

2014 Fall Community Banking SummitsIowa Community Bankers Gather to Share Ideas

Speaker Sandy Dixoneducates bankers ontechnology trends.

Speaker Sean Ellis gives aCrop Market forecast.

Bankers from around the state gathered to network and increase their knowledge at the Fall Community Bank Summits.

Speaker Sponsor

Platinum Sponsors

Gold Sponsors

Thank You

Silver Sponsors - WDM Silver Sponsors - Algona

To The FollowingSponsors:


As a community banker and the father of three children—two teenagers and one young adult—I feel like technology has become a way of life. When I’m at the bank, I’m using technology to my advantage to run our business successfully and efficiently while providing our customers with the convenience that technology allows. When I come home, I see smartphones, tablets and every technical device under the sun. It amazes me how much technology young adults “need.”

Of course, I shouldn’t talk. I’m one of those folks contributing to the growing pile of technological gadgets in our home.

But that shouldn’t be something that any of us in the Buhrmaster family should feel bad about, and it’s not something that you as a community banker should feel bad about either. It’s a tangible example that shows you are embracing technology, and that shows that you are taking a step in the right direction for the well-being of your community bank and customers.

This positive attitude toward accepting and embracing technology has been embedded in our culture at 1st National Bank of Scotia since I can remember. In fact, I credit my grandfather with being our bank’s pioneer when it comes to technology. Back in 1962, he contracted with General Electric to generate statement savings accounts on computers. Everyone else was doing passbooks at that time. Here we were, a community bank in upstate New York, on the cutting edge of next-generation banking practices. But we didn’t stop moving; every new technological advance was a stepping stone for us and our customers.

Back in 1995, we continued that tradition with being the first bank in the state to do document imaging for all our loan files. Not only is it great to say that, but more

importantly, it’s great from a practical perspective. If I need to look up a customer document from nearly 20 years ago, I can easily access it. I don’t need to dust off files, and risk a sneezing attack, to find it. It’s also easier for the customer because it takes us less time to find what they need, which in turn saves them time and strengthens our overall customer relationship.

While it seems like technology is constantly changing, and that’s the reality, it’s looking back at the progress that our bank has made and citing these examples that helps me realize why being a community

bank technology pioneer is so important. It demonstrates so clearly how technology, when accepted and embraced, can add to your community bank’s efficiency and customer service, all of which helps the bottom line.

We at 1st National Bank of Scotia will continue to utilize technology to our advantage now and in the years to come. I encourage all of my fellow community bank brethren to do the same. After all, our newest generation of customers—millennials and beyond—will expect it from us, and it will be our job to step up to the challenge and serve them with the technology they’ve come to expect.

John H. Buhrmaster is Chairman of the ICBA and President of 1st National Bank of Scotia, in Scotia, New York.

From the TopWritten By: John H. Buhrmaster, Chairman of ICBA

Embracing Technology

“...we didn’t stop moving; every new

technological advance was a stepping

stone for us and our customers.”


Hey, did you read about that marvelous breakthrough yesterday?

Right now, I’d bet you’re guessing which particular invention or innovation I might be referring to. Take your pick. There’s plenty to choose from.

Throughout the sweeping arch of civilization, advancing knowledge and technology have brought us continual and inevitable progress. Every few generations or so, mankind takes a new turn at living and working through another transformational period of change. Each breakthrough period introduces unprecedented new possibilities, often along with turmoil and frustrations.

Of course, we’re all captives of the current digital information and communications age that’s causing a continually shrinking, faster-spinning planet. Even people living in the remotest locations today use mobile devices to connect into the digital hum of global humanity. For everyone, to one degree or another, it’s either evolve or devolve. There’s no middle ground.

Through hard work and substantial investments, community banks without question have kept pace with our society and industry’s newest technological developments. During your careers, with help from innovative service partners, you’ve adopted ever more sophisticated products and systems that have delivered increasingly greater efficiencies and value. You’ve introduced new delivery channels ranging from sophisticated self-service ATMs and universally accepted credit and debit payments cards to powerful cash management systems and super-convenient Internet and

mobile banking channels. Certainly, the robust growth of ICBA’s member product and service programs, which have tripled over the last decade, demonstrates our industry’s ability to adapt to new technology and new ways of doing business.

But just as important, you’ve deployed frontline and backroom technologies in smart, practical and nimble ways to stand up to a wide range of aspiring upstart and often deeper-pocket competitors in the form of megabanks, nonbank specialty lenders, Internet companies and software giants. In so doing, you’ve remained remarkably disciplined and focused to ensure your new technology delivers real value to your customers and institutions.

Don’t be distracted. Stay focused on managing and deploying technology as successfully as you’ve done for years. And remember how time and again community banks have proven that the combination of relationship-based banking expertise combined with smart and sensible use of technology remains the most powerful and resilient competitive model in the financial services marketplace.

While we continue to hear how new technologies will disrupt or even make obsolete the community banking business model, in reality technology levels the playing field and will continue to shape every community bank in both exciting and challenging ways, as it will for all financial services providers. But such developments should turn as much or more to your bank’s advantage—and the advantage of your customers—as it will for any other institution. Managed thoughtfully and soundly, new technology enhances, rather that supplants, the community banking business model.

And that’s not going to change, whatever new invention or innovation might be announced tomorrow.

Fine PointsWritten By: Camden Fine, President and CEO of ICBA

Transformational Times

“...smart and sensible use of technology remains the most powerful and

resilient competitive model in the financial services marketplace. ”

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


Washington Watch: Retail Me NotWritten By: Viveca Y. Ware, ICBA Executive Vice President of Regulatory Policy

Wal-Mart’s Latest Foray Into Banking DemandsConsistent Regulatory Oversight

The world’s largest company returned to the world of banking when it recently announced it would begin offering checking accounts in stores nationwide. Wal-Mart Stores Inc. is positioning its latest move into the financial industry as a low-cost alternative to traditional bank checking.

What the Bentonville, Ark.-based mega-retailer neglects to mention is that community banks have been offering low- and no-cost checking accounts for decades. Nevertheless, ICBA’s message is simple: If Wal-Mart is going to serve as a conduit for consumer checking accounts, these accounts should be subject to the same legal and regulatory framework as traditional checking accounts offered by banks.

Wal-Mart is teaming with prepaid payments card provider Green Dot Corp. and its bank, Green Dot Bank, to offer the new checking account product. The checking account, called GoBank, would be available to individuals over 18 who pass an in-house identity check.

Wal-Mart shoppers can open a “free” GoBank account by purchasing a $2.95 starter kit. The FDIC-insured checking accounts also have an $8.95 monthly membership cost, but those fees are waived for customers who receive qualifying direct deposits of at least $500 per month. Wal-Mart stores effectively serve as bank branches, and accountholders have access to a debit MasterCard and a network of 42,000 free ATMs.

Banking and commerceICBA’s reaction to the Wal-Mart announcement was swift and simple: The mega-retailer should stick to its retail business and leave banking to banks. Retailers and banks specialize in their distinct and separate businesses for good reason—mixing the two can result in serious conflicts of interest.

Further, if consumers are interested in low-cost checking, then they should look no further than their local community bank. The nation’s community banks have offered low-fee and no-fee basic checking accounts for decades. Nowhere else will consumers find highly accessible accounts with the one-on-one level of service they can get from community banks’ relationship-based businesses model.

If Wal-Mart is going to serve as a conduit for offering traditional banking services, it needs to protect its customers’ financial health just as is required of all banks. That means it should have to face all appropriate state and federal banking

laws and regulations. Of course, that includes those involving consumer protection, FDIC deposit insurance, privacy and data security, and Bank Secrecy Act and anti-money laundering safeguards—I could go on.

Call for consistencyThat is why in addition to urging customers to use community banks for their checking accounts, ICBA has called on policymakers to ensure GoBank accounts are subject to the same legal and regulatory framework and oversight as traditional bank accounts.

A consistent regulatory framework would allow customers to have a common experience, whether they are using a traditional banking account or an alternative channel for services like those offered by Wal-Mart. It would also ensure Wal-Mart and other nonbanks are unable to enter the business of banking while avoiding bank regulation and supervision.

Further, ICBA remains concerned that Wal-Mart’s plan violates state banking and branching laws concerning deposit-taking. Because Wal-Mart checking accountholders could open an account at the retailer’s stores and also add value to their accounts at stores nationwide, we’re calling on policymakers to review whether this activity represents a violation.

The bottom line is that if Wal-Mart wants to get into the business of banking, it should have to follow the multitude of regulations that community banks nationwide face every day. Meanwhile, as always, if consumers really want to find a low-cost checking option they should skip the Wal-Mart checkout line—and go see a community banker.

Viveca Y. Ware ([email protected]) is ICBA executive vice president of regulatory policy.


Today’s community bank compliance officer is charged with staying current with all the compliance rules and regulations and making sure they are being used effectively within the bank. The increasing complexity and pace of regulatory changes makes it critical that your bank’s compliance officer is ready and has the tools necessary to deal effectively with these changes as they occur. For 12 years, the Community Bankers of Iowa has partnered with Community Bankers for Compliance (CBC), a program that offers the tools and information needed to implement compliance throughout your bank.

The CBC program is the most successful and longest running compliance training program in the country and provides up-to-date information on compliance issues and developments in bank regulations, as well as proven techniques for maintaining your in-bank compliance program.

Having received approval from regulatory agencies, the CBC program has been instrumental in helping over 2,000 community bankers across the nation develop an increased understanding and ability to deal with regulatory issues.

Annual membership to the CBC Program consists of five inter-related compliance services:

1. Live Regulatory Seminars. Two live seminars are provided throughout the year. Two regulations will be presented with one in the morning and one in the afternoon. A detailed manual is provided to each participant.

2. Webcasts - Regulatory Update. Four regulatory update sessions are presented in webcast format on separate days. Each webcast discusses current news and regulatory changes that may have an impact on community banks. Each webcast will be 1.5 hours, including questions and answers. A detailed manual, written in full narrative, will be provided.

3. Monthly Newsletter. The Compliance Update newsletter is sent to program members each month. It provides an update of compliance issues that impact community banks.

4. Compliance Hotline. Members of the program may visit Young & Associates’ website or call their toll-free number for compliance officer questions that arise on a daily basis. This service ensures that your bank is just a phone call away from the information you need in order to answer your compliance questions.

5. CBC Members Only Web Page. This web page is reserved for banks that are registered members of the Community Bankers for Compliance Program. In it you will find special and timely information and tools provided by Young & Associates, Inc., that can be used to enhance the regulatory compliance function at your bank.

For more info or to register for the Community Bankers for Compliance program, visit our website at www.cbiaonline.org or contact Pretty Patel at 515.453.1495 or via email at [email protected].

Community Bankers forCompliance Program

Helps Protect Your BankBe Prepared for Upcoming

Compliance Changes

© Copyright Employers Mutual Casualty Company 2014. All rights reserved.

Trusted. Responsive. Friendly. Local.

Looks like we have a few things in common. Count on EMC® and your independent insurance agent to provide quality products and services to fit the unique needs of your community bank.

Home Office: Des Moines, IAwww.emcins.com CBSI is a subsidiary of

Community Bankers of Iowa

3100 13th Ave. S. | Fargo, ND5409Member FDIC

Working withcommunity banks

throughout the upper Midwest

• Participation loans (commercial, agricultural, construction, operating lines and term loans)

• Bank stock & ownership loans

• Bank building financing

• Business & personal loans for bankers

• Multi-family permanent financing

Call us for quick response, competitive rates and flexible underwriting.

Gary Keller – [email protected]

Gene Uher – 605.201.1864 [email protected]


Contact Robb Nielsen for more information. (712) 369-0139 [email protected]

Secure Banking Solutions, LLC • www.protectmybank.com

TRAC is a web-based automated information security tool suite which will guide the bank towards a sound information security program and a successful IT exam.

Modules include:

• IT Risk Assessment

• Third Party Management

• Enterprise Risk Management

• & More!

Contact us today formore information onpiloting our new module:Compliance Risk.

InformationSecurity Program

TRACon

Get your

Endorsed by:

Trusted. Partner.

IowaTIB ad-April1/3 pg square, color

The Next Generation of Community Banking Leadership

CBI’s Leaders of Tomorrow Program Quarterly Meeting - Nov. 20

The Community Bankers of Iowa’s Leaders of Tomorrow (LOT) program is holding their Quarterly Meeting on November 20 at the Sheraton Hotel in West Des Moines. Mark your calendars today and plan on sending the up-and-coming leaders in your bank to this educational, networking event.

Guest speakers include Jonathan Wegner, an attorney with Baird Holm LLP. Jonathan will educate attendees on effective use of lawyers in business practices. Also appearing is Josh Guttau, CEO/CFO of TS Bank in Treynor, who will give his presentation “The Future 5 C’s of Community Banking: CEO, Culture, Communication, Calculated, Contrarian”.

If you are interested in becoming a LOT member and for more info, contact Megan Hollinger at 515.453.1495 or via email at [email protected] or visit our website at cbiaonline.org.

The Leaders of Tomorrow is a program created by CBI to enhance the growth, leadership, and networking skills of future banking leaders. LOT establishes a network of leaders who serve and strengthen their communities and advocate for the community banking industry.

“CBI’s LOT has been very beneficial to me, not only as a banker, but also as an individual. The group has shown me the ins and outs ofthe banking industry, but also has allowed me to grow as a leader in my bank, community and family. I can honestly tell you this has beenone of the most beneficial groups for me.”

LOT Member Matt MuellerThe State Bank, Spirit Lake

Leaders of Tomorrow

MaxiMize yourpotential

withCBi’sleadersoftoMorrow

For more information on how to join, visit our website at www.cbiaonline.org or contact Megan Hollinger at 515.453.1495 or [email protected].


Are you Staying Current onCommunity Banking News with

CBI’s CommonCENTS?CommonCENTS is a weekly e-newsletter that keeps you informed of current organization activities and community banking news, delivered to your email inbox every Friday.

Are you and your bank employees receiving CommonCENTS? If not, email CBI at [email protected] with a list of names and email addresses that you would like added to the recipient list.

If you would like to submit news and events from your bank for inclusion in the weekly e-newsletter, please contact Krissy Lee at [email protected] or 515.453.1495.

Gain the vantage point that over 95 years of turning consumer insights into proven revenue channels can provide. Deluxe Financial Services facilitates genuine connections between your financial institution and its account holders. Our programs deliver what your account holders want and provide measurable results to your institution’s profitability.

Let’s get you connected.

Start connecting todayat deluxe.com/connect

or by calling1-888-633-5893.

© 2

011

Delu

xe E

nter

prise

Ope

ratio

ns, I

nc. A

ll rig

hts r

eser

ved.

Start seeing what connected customers can do for your bottom line.

Cari W.

Busy MomMusic fan

Carol B.

SmallBusinessOwner/Baker

Keith W.

DesignerMovie buff

Karl S.

SalesRep

Sports fan

Arthur J. Gallagher& Co.

BCC Advisers

Welcome New CBIAffiliate Members!

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

thank them for their support:


October Survey Results at a Glance:• Rural Mainstreet Index fell for the fifth straight month to its

lowest level in more than four years.• Farmland prices declined for the 11th straight month, while

the index sank to a record low reading.• On average bank CEOs expect farmland prices to decline

by 5 percent over the next year.• For a third straight month farm-equipment sales declined

to a record low level.• Bankers reported no change in share of farmland sales

financed since June of this year.

OMAHA, Neb. – The Rural Mainstreet Index moved to its lowest level in more than four years, according to the October survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy. The index has been trending lower since June 2013 when the reading stood at 60.5.

Overall: The Rural Mainstreet Index (RMI), which ranges between 0 and 100, with 50.0 representing growth neutral, sank to 43.4, its lowest level since February 2010, and down from September’s 48.2.

“The stronger U.S. dollar, weaker global growth and abundant supplies have pushed U.S. grain prices down by more than 30 percent over the last 12 months. This has weakened the farm economy. Furthermore, the same factors have weakened oil prices and I expect these lower prices to begin negatively affecting areas of the region heavily dependent on energy commodity sales,” said Ernie Goss, Ph.D., the Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business.

Even so, some farmers have been protected from current low commodity prices. As indicated by Jeff Bonnett, president of Havana National Bank in Havana, Ill., “Many of our farm operators had sold a good portion of their (current) corn at $5, or a little over, going into this farm year. That will work in their favor with corn prices hovering between $2.75 to $3 at this time.”

Farming and Ranching: The farmland and ranchland-price index for October slumped to 20.2, the lowest level since initiation of the survey in January 2006, and down from September’s 33.7. “Much weaker crop prices continue to take the air out of the bubble in agriculture land prices. This is the 11th straight month that the index has moved below growth neutral,” said Goss.

According to Michael Johnson, CEO of the Swedish American Bank in Courtland, Kan., “A quarter section of irrigated land sold last week. Price was down 25 to 30 percent. Most likely a result of much lower crop prices.”

Fritz Kuhlmeier, CEO of Citizens State Bank in Lena, ILL said, “Reduced commodity prices will stop farmland price increases and begin an erosion, especially in lower quality dirt, as well as driving cash rents slowly lower.”

The October farm-equipment sales index slumped to a record low 15.1 from 17.6 in September, also a record low. The index has been below growth neutral for 15 straight months. “This is lowest reading that we have recorded for the equipment index since we began the monthly survey in 2006. The more than 30 percent decline in agriculture commodity prices has pushed farmers to significantly shrink their equipment purchases,” said Goss.

This month bankers were asked to project farmland price changes for the next year. More than three-fourths of the bank CEOs expect farmland prices to decline over the next year with an average decline of 5 percent reported. Additionally, bankers expect cash rents to decline by an average 3.4 percent over the next year. This is down from an expected gain of one percent recorded in March of this year.

Furthermore, according to Jim Ashworth, president of CNB Bank Shares of Carlinville, Ill., “Although grain yields are very high, depressed prices could result in a decline in cash rents and land prices next year for the first time in many years.”

Banking: The October loan-volume index dipped to a still strong 71.7 from 75.9 in September. The checking-deposit index slipped to 49.1 from September’s 56.4, while the index for certificates of deposit and other savings instruments moved to a weak 40.4 from last month’s 42.8.

“According to bankers, there has been little change in the proportion of farmland purchases for cash. Approximately one-fourth of farmland sales in October and June were not financed. It is surprising that as crop prices have deteriorated, there has not been a significant change in the share of farmland purchases that are financed,” reported Goss.Jim Eckert, president of Anchor State Bank in Anchor, Ill., said, “Declines in crop prices will be a damper on farm borrowings and incomes for the foreseeable future.”

Hiring: Rural Mainstreet businesses continue to hire at a solid pace, though the October hiring index declined to a solid

(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

October’s Rural Mainstreet Index Plummets:Farmland Price Index Sinks to Record Low

Ernie Goss


(Rural Mainstreet continued from previous page)

55.7 from September’s 56.5. “Businesses on Rural Mainstreet continue to add jobs at a healthy pace even with the weaker agriculture conditions. Year-over-year job growth for the region is approximately 1.3 percent, which is well above the historic average. I do expect this pace to weaken in the months ahead,” said Goss.

Confidence: The confidence index, which reflects expectations for the economy six months out, rose to a very weak 34.6 from 33.4 in September. “Much weaker agriculture commodity prices negatively affected the outlook of bank CEOs over the last several months,” reported Goss.

Home and Retail Sales: The October home-sales index dipped to a 49.0 from September’s 57.3. The October retail sales index decreased to 44.4 from 49.9 in September. “Much like the national economy, the Rural Mainstreet economy is experiencing sub-par retail buying conditions,” said Goss.

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. The survey is supported by a grant from Security State Bank in Ansley, Neb.

This survey represents an early snapshot of the economy of rural, agriculturally and energy-dependent portions of the nation. The Rural Mainstreet Index (RMI) is a unique index covering 10 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. Goss and Bill McQuillan, former chairman of the Independent Community Banks of America, created the monthly economic survey in 2005.

Colorado: Colorado’s Rural Mainstreet Index (RMI) remained above the 50.0 threshold for the eighth straight month, with the index advancing to 52.1 from 51.8. The farmland and ranchland-price index fell to 38.2 from September’s 55.9. Colorado’s hiring index for October dropped to 66.9 from 72.7 in September.

(Rural Mainstreet continued on next page)

Table 2: The Rural Mainstreet Economy, October 2014Percentage of bankers reporting

Decline Greater than

9%Decline of4% - 9%

Decline of0.1% - 3.9%

Increase of 0% - 3.9%

Increase Above 3.9%

How much growth do you expect for cash rent per acre for cropland (not pasture) in your area for next year?

18.9% 26.5% 16.9% 28.2% 9.5%

Less than 5% 5% - 9.9% 10% - 19% 20% - 32% Greater than 32%

What percent of farmland purchases in your area do you estimate are cash sales (not financed)? 5.8% 17.3% 26.8% 25.0% 25.1%

Decline of More than 9%

Decline of6% - 8.9%

Decline of2%- 5.9%

Decline of0.1% - 1.9%

Increase of0% - 3.9%

How much growth do you expect for cropland prices per acre (not pasture) in your area for next year? 28.3% 13.2% 33.9% 1.9% 22.7%

Tables 1 and 2 summarize survey findingsNext month’s survey results will be released on the third Thursday of the month, Nov. 21.

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

October 2013

September 2014

October2014

Area economic index 54.3 48.2 43.4Loan volume 64.7 75.9 71.7Checking deposits 48.3 56.4 49.1

Certificates of deposit and savings instruments 35.4 42.8 40.4Farmland prices 50.9 33.7 20.2Farm equipment sales 44.6 17.6 15.1Home sales 58.0 57.3 49.0Hiring 56.1 56.5 55.7Retail business 52.6 49.9 44.4Confidence index (area economy six months out) 44.7 33.4 34.6


(Rural Mainstreet continued from previous page)

Illinois: For a fourth straight month, Illinois’ RMI fell, moving to 39.4 from September’s 41.2. The state’s farmland-price index sank to 17.9 from 31.1 in September. The new-hiring index fell to 50.7 from 52.8 in September. As indicated by Jeff Bonnett, president of Havana National Bank in Havana, “Overall we expect the majority of our farmers to cash flow their 2014 crop. Going forward, we cannot have a sustained period (more than 3 years) of such low commodity pricing, 2015 looks to be a challenging year for farming and farm financing.”

Iowa: The October RMI for Iowa sank to 40.5 from September’s 47.2. The state’s farmland-price index for October slumped to 18.9 from 34.1 in September. Iowa’s new-hiring index for October slipped to 53.9 from September’s 55.2. James Brown, president of Hardin County Savings Bank in Eldora, reported, “We are just beginning to see recognition from farmers that cash rent prices need to be renegotiated and land prices will drop at least 10 percent.”

Kansas: The Kansas RMI for October sank to 43.9 from September’s 50.3. The state’s farmland-price index for October dropped to 26.3 from September’s 38.7. The state’s new-hiring index fell to a still solid 57.4 from 58.9 in September.

Minnesota: The RMI for Minnesota declined to 44.2 from September’s 50.9. Minnesota’s farmland-price index for October plummeted to 28.5 from 41.2 in September. The new-hiring index for the state decreased to 59.2 from September’s

60.9. Pete Haddeland, CEO of the First National Bank in Mahnomen, said, “We think cropland prices have peaked in our area. Cash rents will slowly decline.”

Missouri: The October RMI for Missouri sank to 41.2 from September’s 47.8. The farmland-price index for October plummeted 18.6 from September’s 54.1. Missouri’s new-hiring index fell to 54.5 from 71.2 in September. Nebraska: The Nebraska RMI for October fell to 43.0 from 44.3 in September. The state’s farmland-price index for October sank to 13.1 from 23.8 in September. Nebraska’s new-hiring index decreased to 46.9 from September’s 47.0.

North Dakota: The North Dakota RMI for October decreased to 53.4 from September’s 55.9. The farmland-price index fell to 53.2 from 65.1 in September. North Dakota’s new-hiring index was unchanged from September’s 62.5.

South Dakota: The October RMI for South Dakota slumped to 44.1 from September’s 49.6. The farmland-price index for October dropped to 15.8 from last month’s 32.8. South Dakota’s new-hiring index advanced to 54.9 from 54.2 in September.

Wyoming: The October RMI for Wyoming sank to 44.4 from September’s 50.5. The October farmland and ranchland-price index fell to 19.2 from September’s 31.2. Wyoming’s new-hiring index for October rose to 52.4 from September’s 50.5.

Locknet® Managed IT Services –

The IT Answer for Hiawatha Bank

The #1 ChallengeKeeping information secure with limited in-house IT resources and expertise.

The SolutionLocknet® Managed IT Services Keysuite™ complete IT services offering.

“I’m not an IT person,” says Tim Vipond, Senior Vice President of Hiawatha Bank. “We needed someone who understood the ins and outs of the IT issues our industry faces. For us, the best solution is to find an appropriate third party vendor, and that partner is Locknet®. The advising and consultation I get from Locknet® is critical. We simply don’t have the IT expertise we need in-house. Locknet® provides that for us.”

800.967.2645 | eojohnson.com

“To me, it is 24 / 7 peace of mind. I know experts are watching our system, and it is secure.” — Tim Vipond

Senior Vice President Hiawatha Bank

BUSINESS PROFILE:Hiawatha Bank started in 1998 as a DE Novo bank and serves the Cedar Rapids, IA area.


the squeeze on

you? Is your EFT provider putting

(855) 314-1212 • shazam.net/money

Every time your EFT provider cranks up its fees, it’s like another clamp-down to your bottom line. But SHAZAM turns it the other way — more than $10 million in price reductions

and complimentary new products to our partners over the past two years!

Take the pressure off your business. Call SHAZAM today.

There’s a better way... call SHAZAM

Add it up!

Solutions that ICBA Securities can provide to your bank:

• BankAdvisory-Capital raises, mergers/acquisitions, strategic planning, valuations, ESOPs, stock options & more (offered through ICBA Securities’ affiliate, Vining Sparks Community Bank Advisory Group)

• Asset/Liability-More than typical data analysis, reports & reviews, ALCO meetings (your partner all the way through review, strategy & execution)

• InvestmentPortfolio-Strategies, analysis, Fixed Income sales/support & investment subsidiary asset management support (offered through ICBA Securities’ affiliate, Vining Sparks Asset Management, LLC)

• LoanTrading-Market makers in all loan types for community banks (SBA, USDA, Ag, Residential & Commercial, Performing & Non-Performing, etc), profit maximization, origination support, etc

• WholesaleFunding- Full-service wholesale funding support (issuing Brokered CDs, Repos/Reverse Repos, FHLB Advances Analysis, etc)

• InterestRateProducts- Increasing spread and income in the loan portfolio through interest rate swaps & support of all types (offered through ICBA Securities’ affiliate, Vining Sparks Interest Rate Products, LLC)

• ExecutiveBenefits&BOLI-Analysis, consulting, administration

• Software&Support-Online Portfolio Management, Asset/Liability Reporting, Bond Accounting, Safe Keeping, Total Return Modeling

• Education&Research-Ongoing education, industry leading research, proprietary analytics

A name you’ve known and trusted for over 20 years.

Your Iowa Balance Sheet Solutions Team:

Jonathan Ferebee • Gray Allison

800-786-1276ICBA Securities is a member of FINRA/SIPC

Providing Iowa Community Bankers comprehensive balance sheet solutions.

Exclusively Endorsed by

Securities execution services are offered by ICBA Securities Corporation a registered broker-dealer and Member FINRA/SIPC. Other services and products mentioned are not insured by SIPC and may be offered by separate but affiliated companies. Please visit our website for additional important disclosures and information. www.icbasecurities.com

Documents

TECHNICALLY SPEAKING - Community Bankers of Iowa (CBI) · SPEAKING. RECAP: Fall Community. Bank Summits. Is the next big thing the. Next Big Hassle? GOBANK. Walmart’s Check-out