The FDIC has finally unveiled the community bank leverage ratio. This will have a significant impact on capital requirements for community banks if they choose to opt in. If you need help understanding how this new ratio will affect your bank, don’t hesitate to call!

Farm income is down, and farming bankruptcies are on the rise. Make sure you are discussing these trends with your board, especially for those banks with ag concentrations.

Lastly, chances for a US recession continue to increase. Every day that passes means we are one day closer to the next recession. Bankers should be stress-testing everything – loans, interest rates, liquidity, capital – to make sure their bank is ready to withstand the next downturn.

If you need help understanding how any of these news items could affect your bank, please don’t hesitate to reach out to us at (918) 791-0699 or by emailing us at


FDIC unveils long-awaited community bank leverage ratio (source)

  • The FDIC voted November 20th to release a proposal designed to provide a simple capital regime for small banks. This plan would create a community bank leverage ratio for institutions with less than $10 billion of assets, which smaller banks could comply with in lieu of more complicated Basel risk-based capital standards.
  • Under the proposal, the ratio was set at 9% of tangible equity to total assets, striking a middle ground from the 8% and 10% regulators were considering.
  • The FDIC estimated more than 80% of the country’s 5,400 community banks could qualify for the simplified leverage ratio.
  • “ICBA is disappointed that regulators have proposed capital standards that are higher than necessary for main street community banks,” said Rebeca Romero Rainey, president and CEO of the Independent Community Bankers of America, in a press release. Rob Nichols, the head of the American Bankers Association, agreed. “Unfortunately, the 9% leverage ratio proposed by regulators will still leave too many well-capitalized community banks forced to follow capital rules always intended for more complex institutions,” he said in a press release.


Farm bankruptcies are on the rise, and bankers worry that far more are on the way (source)

  • The increase in Chapter 12 bankruptcy filings reflects low prices for corn, soybeans, milk, and even beef.
  • The number of bankruptcies in Minnesota doubled over the past four years from 8 to 20.
  • Farmers use Chapter 12 bankruptcy because it combines the simplicity of Chapter 13, and the higher debt levels allowed with Chapter 11. Chapter 12 typically allows for repayment of debt over 3 years.
  • A new report from the Federal Reserve Bank of Kansas City, which covers Colorado, Kansas, Nebraska, Oklahoma, Wyoming and portions of Missouri and New Mexico, showed that more than half of bankers in the district reported lower farm income than a year ago. They also said they expect farm income to weaken in coming months.
  • The worst ag banking conditions were in states with the heaviest concentrations of corn and soybeans. Almost all bankers in those states reported that farmers plan to sell land or equipment to try and make loan payments.


As US recession chances increase, the Fed may deliver fewer rate hikes: Reuters poll (source)

  • The probability of a US recession in the next two years, while still low, also nudged up to a median 35% from 30% in the latest monthly Reuters survey of economists taken from November 13th to 19th. 12 respondents in the latest poll said there was a greater than 50% chance of a recession in the next 2 years.
  • Gross domestic product (GPD) will expand at an annualized rate of 2.7% this quarter, down from 4.2% in the 2nd quarter and 3.5% in the 3rd GDP growth is forecast to slow to 2.0-2.5% throughout 2019 and down to 1.8% by mid-2020; about half the latest reported rate.
  • Economists in the latest poll unanimously said the Fed will raise the federal funds rate by 25 basis points to 2.25-2.50% in December.
  • Median forecasts show 3 more increases next year, taking the federal funds rate to 3.00-3.25% by the end of 2019.