Iowa Bankers survey shows a bright future

To help Iowans assess the state of our economy and what to anticipate moving forward, the Iowa Bankers Association has created a new survey of Iowa banks. No one is better equipped to provide the 'main street” perspective of our economy than Iowa bankers. They see firsthand the impact global economic trends have on consumers and businesses.

Iowa banks are often the lead economic drivers in their communities. They remain the principal source of credit for home purchases, small business expansion and agriculture. They provide over $60 billion in loans, safe-keep $78 billion in deposits and contribute over $30 million to local community organizations and projects. Most importantly, there's an Iowa bank in nearly every Iowa community.

In January, we selected 21 Iowa banks that represent the geographic diversity of our state, from rural Iowa to our larger metro markets. We asked for their predictions on the Iowa economy - and their local economy - in the next six months. We also asked about factors that could impact the economy, such as the hiring outlook and potential marketplace changes.

We found that Iowa bankers are generally optimistic about the economy. The majority surveyed, 52 percent, anticipated the Iowa economy would grow in the next six months. Even more were optimistic about their local economy, with 57 percent believing it would grow. In contrast, 14 percent expected their local economy to weaken and 4 percent expected the state economy to weaken. The rest thought the economy would remain unchanged.

Why the optimism?

The job outlook is one reason bankers are optimistic. Most, 57 percent, felt the job market would remain stable in the next six months, and another 38 percent thought businesses would hire. Only 4 percent anticipated businesses would lay off employees.

With job stability, consumers are able to contribute to the economy in other ways - such as buying a home, taking a vacation or enjoying a dinner out. Most bankers, 43 percent, expected housing and service business sectors to expand in the next six months.

There were two caveats: If businesses can't find and retain employees with the skills needed to meet job demand, it could hamper business growth.

And, with net farm income projected to be down over 30 percent in 2015, farmers will be facing tighter cash flows during the year ahead. As a result, the demand for credit will rise. The majority of bankers surveyed, 48 percent, felt loan demand would be strongest in the next six months for agricultural operating loans. 52 percent felt it would be weakest for agricultural real estate loans. This would indicate a shift in farmers' focus - from buying land and equipment to financing for crop inputs. Strong farm balance sheets, low interest rates and livestock diversification will help farmers weather lower commodity prices.

This first survey gives us a benchmark. It indicates steady growth ahead. We plan to keep an eye on changing trends by conducting this survey every six months. We will report back in July of this year.

' John Sorensen is president and CEO of the Iowa Bankers Association, Iowa's largest banking association representing 339 Iowa banks and savings institutions. Comments: jsorensen@iowabankers.com or 515-286-4313.