For the first time since June, the overall index for the Rural Mainstreet economy moved above growth neutral 50.0, according to the November survey of bank CEOs in a 10-state region.

Overall: The Rural Mainstreet Index (RMI), which ranges between 0 and 100, increased to 53.3 from October’s much weaker 48.4 and September’s 47.6. This is the highest reading recorded since May of this year and is well above the reading for November 2009.

Creighton University economist Ernie Goss said, “The Rural Mainstreet economy is behaving like the nation with a lot of zigzags in growth. However, I expect very healthy farm income to begin to have positive but somewhat muted impacts on businesses on Rural Mainstreet. Businesses heavily dependent on the farm economy continue to do quite well though.” Goss and Bill McQuillan, CEO of CNB Community Bank of Greeley, Neb., created the monthly economic survey in 2005.


The farmland price index soared for the month with the index moving above growth neutral for a 10th straight month to 68.1 from 60.0 in October. This is the highest recorded index since May 2008. The farm equipment sales index likewise bounced higher with a November reading of 68.1, up significantly from October’s 61.0 and moving to its highest level since May 2008.

Scott Tewksbury, CEO of Heartland State Bank in Edgeley, N.D. said, “One area farm equipment dealer told me he had record sales for October.” He added that operating loans were being repaid quicker than normal due to high commodity prices and decent yields.

“While growth for businesses on Rural Mainstreet has been fragile at best, farm indicators remain very strong, including farmland prices and the sale of agricultural equipment. This month, we asked bankers how much prices for irrigated farmland had expanded in their area over the past year. Approximately 23 percent indicated that prices had grown between 11 percent and 20 percent with average growth of almost 8 percent,” said Goss, the Jack A. MacAllister Chair in Regional Economics at Creighton.


Flush with cash, farmers have significantly reduced their borrowing. Loan volumes plummeted for a second straight month to 35.3 from October’s 48.4. For the ninth straight month, the other two banking indicators stood above growth neutral. The checking deposit index improved to 76.3 from October’s robust 73.0. The index for certificates of deposit and other savings instruments expanded to 55.8 from October’s 54.9.

This month, bankers were asked what factors were limiting their lending. “The most frequently cited reason- with 37 percent indicating that is was the number one issue– was a lack of demand from potential borrowers. Only 13 percent indicated that bank regulator concerns was the prime factor limiting lending, while 19 percent reported that the credit quality of applicants was the chief impediment to greater lending,” said Goss. Pete Haddeland, CEO of First National Bank in Mahnomen, Minn., said, “The regulators are overreacting to the small banks. At the same time, they are handing money out left and right to the big banks.”

On the other hand, Kurt Henstorf, president of the First National Bank in Shenandoah, Iowa, indicated that loan ratios had declined for several reasons, but foremost among them being lack of borrower demand. “However, credit quality since 2008 has been impacted by the economy and banking regulators are very restrictive, especially with regards to commercial real estate,” said Henstorf.


Once again the region lost jobs with a November hiring index rising slightly to a still weak 46.8 from October’s 46.0. “Many areas in the Rural Mainstreet area are still losing jobs,” said Goss.

Ethanol blenders’ tax credit

The federal blenders’ tax credit of 45 cents per gallon of ethanol produced is set to expire on Dec. 31. Bankers were asked what action Congress should take regarding the program. Only 13 percent of bankers supported extending the program permanently, while 18 percent called for the expiration of the program at the end of the year. One-third support extending the credit for three to five years, while the remaining 36 percent support extending it for one to two years.

However, many bankers expressed strong support. For example, Kathy Thuman, president of Farmers State Bank in Maywood, Neb., said, “Biofuel credits have been a real boon to the southwest Nebraska economy and to the farm economy in general. I'd like to see alternative fuels continue to get support from Congress.”


Despite a slow-growth rural economy, bankers continue to be optimistic regarding future economic prospects. The economic confidence index, which reflects expectations for the economy six months out, advanced to 63.8 from 57.3 in October. This is significantly up from the weak 46.0 recorded three months ago.

Home and retail sales

Home sales remained weak with a November reading of 45.1 which was up from October’s 42.1. This is the fifth straight month the reading was below growth neutral 50.0. In a very unexpected turn, the retail sales index moved above growth neutral with a November reading of 50.1, up from 45.1 in October.

Each month, community bank presidents and CEOs in nonurban, agriculturally and energy-dependent portions of the 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.

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.