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Rural communities have tools for success at handBy Larry Dreiling Global recession. Subprime mortgage crises. Bankrupt banks. In short, the economy's a mess right now. Right? Well, just don't tell that to the banker on Main Street in rural America. Don't tell that to the folks who monitor them or work with them or lobby for them. They'll say things are looking good for country banks right now. Because rural banks are in good shape that means that local businesses, including farms and ranches are, on the whole, in good shape too. Perhaps because rural America's relative isolation from big city investors who played with and were burned by things like credit default swaps, and because of lessons learned years ago when things weren't so good, they say things are likely to stay good in rural America for a while. Dr. Alan Barkema, senior vice president of the Regional, Public and Community Affairs Division at the Federal Reserve Bank of Kansas City, said banks are generally in good condition. "The farm economy has been very strong. Energy interests in rural parts of the (area of the country the KC Fed covers) are strong," Barkema said. "Because of those things, rural banks are generally in good condition." Agreeing in that assessment is John Blanchfield, senior vice president for the Center for Agricultural and Rural Banking of the American Bankers Association. Three questions Blanchfield said he's been answering three questions from the public and the media about rural banks. "We've been flooded with calls of people asking, first, if they can get loans in 2009. The answer is yes. We've been asked next: 'How can I know my bank is safe?' The answer again is that 95 percent of all banks are rated highly capitalized by the banking regulators," Blanchfield said. "The third question is: Have things changed? Absolutely. What we've been telling folks is don't go in to your bank in 2009 and expect business as usual. Producers have to realize that circumstances have changed in the whole financial services industry and they ought to be prepared for the fact bankers may have additional questions about what it is they're borrowing for. There will be questions about your marketing plan. There may be requests for an equipment inventory review on the farm." Blanchfield added that he's been telling people, when all those questions are asked, not to take it personally. "Understand that things have changed in this industry. It is in a state of flux, but if everyone just sort of settles down and understands that things are different, the whole process is going to be a lot easier than what it could be if you just get all worked up and flummoxed." Public-private partners From the farm and ranch to the Main Streets that serve those producers, economic development leaders are looking to the local banks to make these pockets of commerce thrive. "Our commercial bank partners are in great shape and didn't get wrapped up in the things that led to the downturn. We at USDA Rural Development have been great partners with these lenders because of our guaranteed loan program," said Chuck Banks, state director, Kansas Rural Development of the U.S. Department of Agriculture. "In some markets, if credit is getting tight or if regulators are starting to pressure lenders to do things differently, there might be a way to use us. Our water programs, housing programs, our community facilities programs, our business programs, all have a guaranteed loan program. There are lots of opportunities for commercial lenders to use this program than they have had in the past because of the unique situation they see in the credit markets." It is programs like the guaranteed loan programs that encourage local lenders to get involved in larger projects in their communities, creating a win-win situation for all, Banks said. "Infrastructure, affordable housing and accessible health care are really needed in rural areas. Many times, those are the limiting factors to development in rural communities," Banks said. "That's why we've been focusing so aggressively in those areas. We have great programs and great partners to do more." Adding new jobs Today's way of doing business in small town America is changing. Those that can embrace this change are proving to be the most successful, Barkema said. "Many of our rural communities were founded 100 years or more ago to service a farm economy that has changed so dramatically since then," Barkema said. "The number of people in agriculture has declined with the capital for labor substitution, and rural communities are adjusting to that. "They are facing the challenge of finding what value they are going to add in the economy of the future. They are looking for new ways of adding value and they are looking to share resources across communities. "Rural economic development is facing a paradigm shift toward jobs following people rather than people following jobs," Barkema said. "Today, high-skilled people pretty much live where they want to live, based on the kind of quality of life a community might offer. Jobs follow those people to those places," Barkema said. "Rural communities are making that adjustment, recognizing that they can create an environment with good schools and a safe living environment that are very attractive and so they attract people to build their communities around that base." Assets at hand Banks acknowledges the difficulties rural areas have in bringing in new jobs. When the situation arises, however, his part of USDA is there to assist. "For a business to move to a rural community, there must be assets in place for that business to prosper. We need to have those foundation assets in place," Banks said. "Over the years, I've heard a lot of community leaders say 'I've missed this business opportunity because we didn't have enough affordable housing for our workers.' "Consider the growth of Fort Riley, Junction City and Manhattan. That area hasn't seen that sort of growth since World War II. We've put together a model for success in other military communities." Banks, who'll likely be leaving office with a change in administrations, offered his compliments to all the people his office has worked with over the years. "Besides the military, the partnerships created in the aftermath of Greensburg are national models as well," Banks said. "I can't say enough about all the county and city leaders, the lending community and other partnerships we've created. I'm very proud of them." Barkema also noted the strides rural communities have made in infrastructure improvements over the last few years. "I think being remote can be attractive for people to get away from the hustle and bustle of the urban centers. However, I've never met anyone who wanted to be isolated," Barkema said. "Access to broadband Internet is extremely important and rural communities have made big strides in the last decade." Producers also are coming off one of the most profitable years in history, paying off land and equipment, building a financial cushion for themselves should they need to borrow if prices are lower. All this is leading to a very favorable borrowing climate on the Main Streets of rural America, Blanchfield said. "Country banks know if they aren't making loans, they don't have a business," Blanchfield said. "Country bankers are in the best shape they've ever been in and lead the whole financial sector for liquidity and the understanding that they have to continue to make loans to Main Street because they don't have too many other loans other than making loans to Main Street. Small business people, farmers and ranchers will be pleasantly surprised." "I keep getting calls asking if there is a crisis. I say 'no and please stop trying to make one.'" Larry Dreiling can be reached by phone at 785-628-1117 or by e-mail at ldreiling@aol.com. 12/1/08 Date: 11/26/08 Advertisement
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