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Four of Five Bank CEOs Report Loan Restructuring
USAgNet - 09/30/2016

The Creighton University Rural Mainstreet Index sank for September and remained below growth neutral for the 13th straight month, according to the monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy.

Overall: The index, which ranges between 0 and 100 fell to 37.3 from 41.1 in August. This month's reading is well off the index for September 2015 when it stood at 49.0.

"According to the USDA, 2016 net farm income is expected to decline by almost 12 percent from 2015 levels. Even with an anticipated 25 percent increase in government support payments for 2016, the Rural Mainstreet economy continues to falter according to our surveys of bankers," said Ernie Goss, Jack A. MacAllister Chair in Regional Economics at Creighton University's Heider College of Business.

"Even though loan defaults have changed little over the past year, downturns in farm income over the past three years are pushing bankers to change the terms of farm loans. According to Creighton's September survey, almost four of five, or 79.1 percent, of bank CEOs reported a significant upturn in loan restructuring due to weak farm income," said Goss.

Jim Eckert, president of Anchor State Bank in Anchor, Illinois, expects lower agriculture commodity prices to cause all but the best capitalized producers to only break even or lose money for 2016.

Farming and ranching: The farmland and ranchland-price index for September expanded to a frail 30.3 from 25.6 in August. This is the 34th straight month the index has languished below growth neutral 50.0.

The September farm equipment-sales index sank to 14.3 from August's 14.8. "Weakness in farm income and low agricultural commodity prices continue to restrain the sale of agriculture equipment across the region. This is having a significant and negative impact on both farm equipment dealers and agricultural equipment manufacturers across the region," said Goss.

One bank CEO indicated there would be substantial 2017 impacts from current conditions. The CEO is concerned that bank regulators will not provide necessary "breathing room" for banks to weather plummeting farm income.

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