South Dakota banks finished 2014 in solid financial shape

Farm Forum

PIERRE — The regional director for the Federal Deposit Insurance Corporation spoke on May 15 to the state Banking Commission about bank conditions in South Dakota and the current agricultural economy.

Jim LaPierre said less than 5 percent of South Dakota banks were adversely rated at the close of 2014, meaning they scored 3 to 5 on the FDIC’s 1 to 5 scale.

Nationally 12 percent were adversely rated, while the regional average was below 7 percent, he said.

The national number hit as high as 30 percent during the recession approximately five years ago.

The Kansas City region covers South Dakota, North Dakota, Minnesota, Iowa, Nebraska, Kansas and Missouri.

South Dakota banks were right around the national averages for leverage ratio and return on assets and were nearly the lowest in the region for loans past due and in arrears, according to LaPierre.

Those conditions put South Dakota banks generally in position “prepared for a challenging year” because of low prices for key crops, he said.

Dick Westra, a state commission member and banker from Aberdeen, said his trust department is experiencing a harder time renewing agricultural land leases at the 2014 rates.

LaPierre said producers who own their land and have low expenses should be able to get through the low prices for corn, soybeans and wheat.

“We’re not panicking yet,” he said.

Likewise for farmers who didn’t spend through what LaPierre described as “extraordinary earnings” from recent years.

Cattle prices are strong and that’s good for cow-calf ranchers but not so much for feedlot operators, he said.

LaPierre said the emphasis by FDIC in his region is cyber-security. He said it’s the top priority for all of the federal government’s financial regulatory agencies.

The theme, he said, is “protect, detect and recover.” FDIC is hiring 30 technology experts for the region to analyze and advise vendors who provide security services to banks.

FDIC also is encouraging bankers to join a public-private partnership that constantly analyzes financial security and issues alerts throughout each day, he said.