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Photo: Carroll Daily Times Herald
Community bankers in the rural city of Carroll unanimously agree that their local economy is stronger than the national one, and that capital will be available to support the farm economy in 2009.
“The ag economy is in great shape,” says Scott Steffen, vice president at United Bank of Iowa in Carroll. “The money’s going to be there.”
Added Tom Loeck, vice president at Commercial Savings Bank in Carroll, “I think it’s safe to say there is money available for farmers.”
Iowa’s state banking superintendent Tom Gronstal, formerly an executive with his family’s Carroll County State Bank, says Iowa’s 323 state-chartered banks are in solid shape as there is “very little” exposure to the sub-prime mortgage issue — a major problem in the economy stemming from lenders reaching out to homebuyers with enticing interest rates for properties they ultimately couldn’t afford.
“All we can do out here is rejoice in the fact that the events that are taking place will have at most a trickle-down effect,” Gronstal said.
At Iowa Savings Bank in Carroll, vice president Michel Nelson says the tumultuous times offer opportunities for the wise and prudent.
“Western Iowa is a good place to be right now and we will do better than the country as a whole,” Nelson said. “Local housing prices have remained rational; our agricultural assets are a bedrock; strong community banks providing local credit are in place — and, this area’s economic drivers are not over-leveraged.”
Carroll County State Bank vice president and chief loan officer Jeff Scharfenkamp said the one-on-one, old-fashioned approach taken by community banks pays off over time — a fact that is highlighted by the meltdown of larger financial entities in New York that were too cute for their own good with the handling of a basic American deal: the home mortgage.
“We’re not making sub-prime loans,” Scharfenkamp said. “We’re not buying pools of sub-prime loans.”
Scharfenkamp, who is the chief loan officer for CCSB overseeing agriculture and commercial business, said much of the current mess has been driven by mortgage brokers who don’t approach loans the same way as community banks. Banks rely on cash flow and collateral, not making deals as quickly as possible to collect commissions.
“Community banks in this area just didn’t do stuff like that,” Steffen said.
He said the lesson of the last few weeks is this: deal with your community banks.
“We know farming,” Steffen said. “We understand it and we want to pass it along. That’s why we’re so successful at what we do.”
Scharfenkamp said high land prices and the troubled credit market are far from setting up a situation similar to the farm crisis of the 1980s because for the most part the people picking up land can afford it and aren’t overleveraged.
“A lot of the people buying the ground today are in pretty strong hands,” Scharfenkamp said.
This doesn’t mean the farm economy is immune from national economic trends.
As oil prices have fallen so have those for corn and beans.
Some local bankers say they think that commodities have dropped because of links to other troubled bundled investments.
The bankers say the times are no doubt anxious, and they are fielding calls and questions from apprehensive customers.
But the bankers talked of only one Depression-era scenario in which a depositor came into a bank and demanded all of his money in $100 bills.
That’s why the recent increase of the FDIC ceiling on protection of deposits at banks from $100,000 to $250,000 has been so important for Carroll, Scharfenkamp said.
“I’ve gotten more of those questions over the last 30 days than I have over the last 17 years,” he said.
There are no reports of increased defaults on loans, large or small, in Carroll.
“We really haven’t seen an increase in past-dues,” said Tom Laing, vice president at Commercial Savings Bank in Carroll.
Laing said he is guardedly optimistic about farm prices and expects Carroll to emerge from the national crisis in better-than-average shape.
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