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Current economic conditions present challenges, opportunities PDF Print E-mail

Adams Bank president discusses economy at forum

By Russ Pankonin
The Imperial Republican

    Today’s current economic conditions present challenges not seen in a generation. But the conditions also create opportunities, according to Chad Adams, president of Adams Bank & Trust.
    Adams conducted a forum in Imperial Tuesday on the state of the economy in southwest Nebraska, the state and the country. The forum drew more than 50 people representing a wide age demographic.     
    “We’ve never seen a year like this with challenges,” Adams noted, but added, “and we’ve never seen a year like this for opportunities.”
    The regional economy has been buoyed by record earnings experienced by farmers this past year, he said. But much still needs to happen for the farming economy to remain strong.
    Despite a struggling economy nationwide and worldwide, Adams believes these kinds of conditions provide new opportunity for growth.
    He believes the stock market, while battered and bruised, still provides opportunity for long-tem growth.
    With the market down, Adams advised people to spread out their investments  over a number of months, rather than trying to predict a low and dumping all their money in at once.
    He expected the 70 percent drop in the cost of oil from its high of $150 per barrel to have a huge impact on the markets. Unfortunately, that hasn’t happened yet.
    Grain prices hit record highs last year, but have since dropped off some. Adams said the demand for the U.S. dollar is helping to keep commodity prices from rising.
    A check with local bankers in Imperial indicated that about 30-40 percent of the 2008 corn crop has yet to be marketed as farmers weigh their options.
Bankers learned lessons in the ’80s
    One of the reasons the farm economy and related local economies have fared better in the current economic crisis came from lessons learned by bankers in the 1980s.
    With land prices rising then at unprecedented rates, bankers based their lending on balance sheets inflated by rising land prices.
    Then, when land prices began to fall, both banks and farmers were caught in a lending squeeze.
    Adams said they and other banks began making lending decisions based on cash flow and the ability to pay back the loan.
    That change has paid off tremendously, especially in the current economic conditions.
    In some regards, that’s what happened with the housing program in this country, he said.
    Loans were made based on anticipated appreciation in home values.
    To make matters worse, lenders were lending 100 to 125 percent of the value of a home to buyers with checkered credit histories.
    When the credit crisis hit, the exposure of these loans heightened the problem, forcing foreclosures and declining house values.
    While housing market declines have especially affected states like California, Arizona, Florida and Michigan, a local broker said this week the local market for homes remains good. What has changed is the price range people are buying in, with homes  priced under $100,000 getting the most activity.
    A limited number of foreclosures are also beginning to surface in the area, the broker said.
Unemployment the key
    Adams feels that unemployment will be a key factor in when the nation’s economy turns around.
    He said this generation has not experienced times like this since a generation ago endured the Great Depression.
    But Adams said this country is no where near where the country was during Depression.
    “We have to keep things in perspective. Unemployment was 24 percent during the Depression,” he noted.
    Perception can play a big role as well. Is the glass half full or half empty? One participant noted that while unemployment has reached 7 percent, the upside is that 93 percent of the workers in this country still have a job.
    Adams predicted that unemployment could reach the 10-12 percent level at some point, but still no where near the levels during the Depression.
Loan funds still available
    On a positive note, all three of the banks in Imperial said they continue to have loan funds available and are not suffering the fund squeeze that have plagued some of the nation’s largest banks.
    Adams said their loan volume actually increased more than $50 million last year and they are seeking new loan volume.
    Kelly Hammerlun, president of Pinnacle Bank in Imperial, said loan demand remains high and they have money to lend. “We’re looking for new loans all the time,” he added.
    Ryan Richman, president at First Bank & Trust Company in Imperial, said the flow of credit has not been a problem. He said they haven’t had any problems with availability of funds for renewals or new loans.
    On a related note, the U.S. Treasury has approved Adbanc, Inc, the holding company for Adams Bank& Trust and Adams Mortgage LLC, for participation in its voluntary Capital Purchase  Program as part of the first stimulus bill approved to increase the flow of credit.
    The Treasury will invest $12.72 million in Adbanc’s senior preferred stock. The preferred stock carries a 5 percent coupon for five years and 9 percent thereafter.
    Adams said they are pleased to be selected as one of the banks to receive approval. The funds will help meet increased loan demand and mortgage funding needs.
    The program is voluntary and available to the nation’s healthiest banks.
    million last year and they are seeking new loan volume.
    Kelly Hammerlun, president of Pinnacle Bank in Imperial, said loan demand remains high and they have money to lend. “We’re looking for new loans all the time,” he added.
    Ryan Richman, president at First Bank & Trust Company in Imperial, said the flow of credit has not been a problem. He said they haven’t had any problems with availability of funds for renewals or new loans.
    On a related note, the U.S. Treasury has approved Adbanc, Inc., the holding company for Adams Bank& Trust and Adams Mortgage LLC, for participation in its voluntary Capital Purchase Program as part of the federal government’s $700 billion financial rescue fund to expand their lending.
    The Treasury will invest $12.72 million in Adbanc’s senior preferred stock.
    Adams said his bank agreed to pay 5 percent interest and a 9 percent dividend on the federal investment in Adbanc, and the original $12.72 million must be repaid within five years.   
    Adams said they are pleased to be selected as one of the banks to receive approval.
    The funds will help meet increased loan demand and mortgage funding needs.
    “This is to make sure banks that are strong and vibrant out there can continue lending,’’ Adams said.
    “We think it will be very positive for our region,’’ Adams said.