Some Midwest, Plains bankers wary of economic rebound

Thursday, June 17, 2010 | 7:51 p.m. CDT; updated 8:53 a.m. CDT, Friday, June 18, 2010

OMAHA — A survey of rural bankers in 10 Midwest and Plains states released Thursday showed continued signs of a rebounding economy, though some bankers remain cautious about the future.

The overall index for the Rural Mainstreet economic report decreased to 52.6 for June, from 54.3 the month before. The June 2009 index was 34.0.

The index ranges between zero and 100. A score below 50 suggests the economy will contract in the next few months; above 50 indicates the economy will expand.

After 26 months below neutral growth, the index in June marked its second month above neutral, said survey organizers Ernie Goss, a Creighton University economist, and Bill McQuillan, CEO of CNB Community Bank of Greeley, Neb.

But some bankers were skeptical that the economic improvement would continue. Larry Rogers, president of Nebraska's First Bank of Utica, said home loans and student loans could prompt another serious downturn.

"I don't think we are out of the woods yet," he said.

Bankers from Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wyoming are surveyed.

The monthly confidence index, which tracks bankers' economic outlook six months out, dropped in June to 56.1 after three straight months of increases. The May index was 63.

Bankers reported continued growth in the two farm indicators. The farmland-price index rose to 54.7 from May's 52.7. The farm equipment-sales index rose to 53.1 from 50.9.

All three bank indicators — loan volumes, checking deposits and CDs — were at or above 50 for a fourth straight month.

Kathy Thuman, president of Farmers State Bank in Stanton, Neb., said her bank has seen "a significant increase" in deposits over the first half of this year. She cited "a combination of reluctance to invest long-term, a slow start on crop inputs and increased activity in bank IRA accounts."

Bankers reported continued growth in home sales despite the April expiration of federal tax credits for first-time buyers. The index was 56.3 in June, down slightly from 58.8 the month before.

However, Dale Bradley, chief executive officer of Citizens State Bank in Miltonvale, Kan., said he thinks housing problems will continue for quite a while.

The new-hiring index slipped from May's 56.1 to 50.9.

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