News Article | December 14, 2016
The St. Louis Fed has received another honor to recognize the organization’s inclusive culture. The Human Rights Campaign Foundation has honored the Bank with the 2017 Best Places to Work Corporate Equality Index Award. The Bank received a perfect score of 100 in the Corporate Equality Index, known as the national benchmarking tool on corporate policies and practices pertinent to lesbian, gay, bisexual, transgender and queer employees. The award follows other recent honors for the Bank, including being named the No. 1 Top Workplace in St. Louis by the St. Louis Post-Dispatch and receiving special recognition from the group PROMO (Promoting Equality for All Missourians). “The Corporate Equality Index Award is another honor that recognizes our diverse and inclusive environment,” said First Vice President and Chief Operating Officer Dave Sapenaro. He is also the executive sponsor of the Bank’s Lesbian, Gay, Bisexual, Transgender and Allies’ Partnership (LGBTAP). Appreciation of that commitment was expressed by Jim Swimm, an administrative assistant in the Supervision Division and a member of the LGBTAP. “It is monumentally affirming when one feels comfortable in bringing your whole self to the workplace, and this prestigious distinction publicly highlights the Bank’s commitment to establishing an inclusive culture that makes that possible,” Swimm said. In the 2017 edition of the Human Rights Campaign Foundation’s Corporate Equality Index (the 15th year of the index), a record 517 businesses achieved a top rating of 100 percent, including 12 of the Top 20 Fortune-ranked businesses. In all, 2,106 U.S. employers received invitations to take part in the survey. Of that number, 887 were officially rated by the HRC. The rating criteria for the 2017 Corporate Equality Index included: 1) Equal employment opportunity (35 points) 2) Employment benefits (30 points) 3) Organizational LGBTQ competency (20 points) 4) Public engagement (15 points) The St. Louis Fed is committed to building an inclusive workplace, where employees’ differences—in age, gender, race and ethnicity, sexual orientation, gender identity or expression, disability, as well as in cultural traditions, religion, life experiences, education and socioeconomic backgrounds—are recognized as strengths. At the St. Louis Fed, employee resource groups are led by employees and membership is voluntary. They are made up of individuals with common interests or shared characteristics. The five Bank employee resource groups support and develop their members and link objectives to an organizational business goal. They include: Headquartered in St. Louis, with branches in Little Rock, Ark., Louisville, Ky., and Memphis, Tenn., the Federal Reserve Bank of St. Louis serves the Federal Reserve’s Eighth District, which includes all of Arkansas, eastern Missouri, southern Indiana, southern Illinois, western Kentucky, western Tennessee and northern Mississippi. The St. Louis Fed is one of 12 regional Reserve banks that, along with the Board of Governors in Washington, D.C., comprise the Federal Reserve System. As the nation's central bank, the Federal Reserve System formulates U.S. monetary policy, regulates state-chartered member banks and bank holding companies, provides payment services to financial institutions and the U.S. government, and promotes financial literacy, economic education and community development. http://www.stlouisfed.org
News Article | February 28, 2017
Against the backdrop of the longest winning streak in thirty years on the Dow Jones Industrial Average, which nudged up a touch more to 20,837.44 by yesterday’s close and less than a percent off breaching the 21,000 theshold, all eyes are firmly on Donald Trump’s first appearance before Congress this evening. One wonders if the rally built up to date will fizzle out or possibly reach new heights. A day after the Dow extended its winning streak to twelve straight trading sessions - the longest in 30 years - US futures appeared a little flat prior to the open this Tuesday. The US index of blue-chip companies is now up some 26% over the past one year and a tad over 2,000 points (+10.7%) to the good since the US presidential election took place in early November. But big questions centre on how will Trump’s appearance before Congress go and will investors continue to tolerate all talk but not much detail? In addition to the U.S. President, three Federal Reserve officials are scheduled to appear through the day in Washington, D.C. The sustainability of this rally in the near term may well rest on how Trump performs this evening and whether promises of big spending and phenomenal tax reforms are accompanied by any insight into what they will actually entail. “Trump’s words, while lacking few if any actual details, have so far been effective in getting investors pumped up at the prospect of a stronger economy,” said Craig Erlam, a senior Market Analyst at OANDA, a multi-asset brokerage that has offices in eight major financial centers and clients in over 100 countries. The London-based analyst added: “But the longer this goes on, the less effective these promises are going to become and higher the risk is that the rally will run out of steam.” He could have a point there and in recent month I have written on irrational exuberance and the so-called equity 'melt-up'. From what we do know, just this Monday Trump told the National Governors Association meeting at the White House in Washington that that he would propose additional spending on public safety, including more initiatives directed at stopping illegal immigration. He certainly wants to 'Make America Great Again', as he espoused in his campaign, and that is exactly what he says he intends to do. On top of that the New York-born billionaire promised a big statement on infrastructure in the speech to Congress today and revealed he would call for extra investment to rebuild old roadways and airports as well as cut taxes. One could probably also throw bridges across America that are in need of repair going by the state of play on that front. As outlined to the governors he is also expected to discuss his plan to increase military spending by nearly 10% or $54 billion (c.£43bn) in 2018, offset by equal cutbacks in non-defense spending that are likely to include substantial reductions in foreign aid. That news helped to give the Dow Jones, S&P 500 and UK’s FTSE 100 a lift yesterday. It’s probable too that the 45th U.S. President will reiterate some of the comments made in a speech at Conservative Political Action Conference last Friday in Maryland. At this gathering he stated that: “We will reduce taxes. We will cut your regulations. We will support our police. We will defend our flag. We will rebuild our military. We will take care of our great, great veterans.” The last few sessions may have seen the Dow extend its winning streak but the gains have been paltry. Yesterday it rose a little over 15 points - equivalent to 0.08%. And, the market may well already be “experiencing Trump fatigue” as OANDA’s Erlam contended. He added: “Now he is in a position where he must deliver, and in a big way, or markets could quite quickly turn against him. I think Trump fully intends to deliver on the substantial promises and therefore in the longer term, these levels may be justified. The risk is that he is unable to do so as quickly as he hoped at which point doubt will set in and markets may be preparing for the prospect of that a little in recent days.” While Trump’s appearance today is the clear stand out event, there are a number of others that could have an impact on the markets prior to this. Three Fed policy makers are due to appear throughout the day. Only one of which though, Patrick T. Harker, current President of Federal Reserve of Philadelphia, is a voting member on the Federal Open Market Committee (FOMC) this year. The other two, namely John C. Williams, President of the Federal Reserve Bank of San Francisco, and James Bullard, President of the Federal Reserve Bank of St. Louis, are both be voters over the next couple of years and have insight and a voice in the discussions. “Most policy makers have broadly stuck to the same line over the last couple of months, that a hike sooner rather than later will be appropriate, while offering little insight on when exactly that would be referring to,” posited Erlam. He added: “Market pricing would suggest that means May or June  although the latter would make three hikes this year - as per the Fed’s own forecasts - very difficult." The next FOMC meeting is a 2-day affair scheduled for 14-15 March, which will be associated with a Summary of Economic Projections and a press conference by chair Janet Yellen. And, according to data from Reuters the probability of an interest rate hike of 0.25% (25 basis points(bps)) the FOMC’s upcoming gathering this March is put at 34.3% - versus ‘No Change’ (65.7%). The picture is similar when looking at CME Group’s FedWatch tool and Fed funds futures probability tree calculator. The CME’s data probabilities of possible Fed Funds target rates are based on Fed Fund futures contract prices assuming that the rate hike is 25 bps and that the Fed Funds Effective Rate (FFER) will react by a like amount. There is also a host of economic data due out today. The stand out releases on this front centre on US gross domestic product (GDP), consumer spending and oil inventories. These include the second release of US fourth quarter GDP, which is expected to be revised up slightly from 1.9% to 2.1%. There is also the Conference Board (CB) Consumer Confidence data as well as some other lower level releases. Having declined moderately in January 2017, the CB Consumer Confidence index rose this February, and now stands at 114.8 (1985 = 100), up from 111.6 in January. A CB consumer confidence reading that is stronger than forecast is generally supportive (i.e. bullish) for the US dollar, while a weaker than forecast reading is generally negative (bearish) for the greenback. Then later this evening, the American Petroleum Institute (API), the national trade association representing all aspects of America’s oil and natural gas industry with over 625 corporate members, will report its inventory figures for last week. The last few of these have been fairly consistent with the number from the U.S. Energy Information Administration (EIA), which was released on Wednesday. As at 11.59am (EST) in New York today the Dow Jones was barely changed from Monday’s close and stood at 20,834.51, off by 2.93 points or a mere -0.01%. Watch this space.
News Article | March 15, 2016
The recession turned out to be a boom time for starting new businesses. That’s when the U.S. economy lost more than 8 million jobs starting in late 2007, and the convergence of unemployed workers with no alternative job offerings created the most fertile environment for entrepreneurship in more than a decade, according to analysis of Census and Bureau of Labor Statistics data published in the Journal of Economics and Management Strategy. A second trend that emerged post-recession is the rise of minority entrepreneurship. According to the most recent government data, 2.2 million non-white Americans started their own businesses in the aftermath of the economic downturn—growing 38% between 2007 and 2012. That’s more than triple the population growth of minorities, government data show. But being a minority business owner has its challenges. Even though they now make up 29% of all U.S. firms, up from 22% in 2007, minority-owned businesses still only account for 4% of all business revenue in the U.S. Additionally, a recent report from the Minority Business Development Agency found that despite this growth, the average gross receipts for those firms dropped by 16%. That’s due in part to the fact that minorities—like women—have less access to capital. For example, according to CB Insights report in 2015, only 1% of venture-backed founders were black, while the census shows they make up the largest racial minority, or about 14.3% of Americans. There are some areas across the country that have proven to be more favorable toward minority business owners. Nerdwallet, a financial advice and tools site, analyzed government data to fine the best places for minority entrepreneurs to start and run their businesses. To do this, they first pulled together 178 metropolitan areas with populations of 250,000 or higher, then factored in the business climate from the Census Bureau’s Survey of Business Owners that comprised 55% of the overall score. They then looked at the health of the local economy based on three metrics from the Census Bureau’s American Community Survey for 20% of the score. Finally, access to financing that rounded out the remaining 25% of the score was garnered from data from the Small Business Administration (SBA) and the American Community Survey. NerdWallet’s data analyst Jonathan Todd points out that it was important to look beyond areas with high concentrations of minority-owned businesses. If they had, only five states would be represented. Judging by overall favorable conditions still has some states such as California well represented, but others such as Utah with a rising population rate of Hispanics, and Fayetteville, Arkansas; Anchorage, Alaska; and Cedar Rapids, Iowa. Other common favorability factors shared among the top 10 cities for minority entrepreneurs are employment rates and the number of SBA loans. Each city showed a stronger recovery than the rest of the country in the last three years, with unemployment averaging at 4.7% from 2013 through 2015, compared with 6.2% nationally. All top 10 cities additionally ranked in the top 25% based on SBA loan amounts per 100,000 residents. The case of Cedar Rapids mirrors a current diversity issue running through the tech industry right now. Attracting underrepresented minorities is only one part of a diversity effort. Like Intel, which made a massive investment in its initiatives to recruit more diverse talent, Cedar Rapids business leaders founded Diversity Focus in 2005 to change the face of a community that was 95.5% white. Like Intel, companies in the metro area were having a hard time getting minority employees to stay. Their efforts achieved some success. Cedar Rapids's white population has fallen to 91.2% white, but alongside this, SBA loans to minority businesses in the area increased by 111% from 2007 through 2012, according to NerdWallet. Todd notes that part of the bump was due to the 2008 flood, which boosted the number of government-backed loans to area businesses. Other metro areas such as No. 6 ranked San Francisco-Oakland-Hayward, California, have support systems such as Pacific Community Ventures, a nonprofit social enterprise that pairs founders with local business mentors, or No. 7 Santa Rosa, California’s minority business support groups such as the Hispanic Chamber of Commerce of Sonoma County. Utah’s burgeoning ethnic populations are bolstered by No. 9 ranked Salt Lake City’s chambers of commerce for Native American, Asian, and Hispanic communities, and Utah Diversity Connections. San Jose, California, provides a snapshot of what the future demographic makeup of the country is. In 2013, the metropolitan area’s minorities outpaced the white population for the first time—48.3% white compared with 51.3% the previous year, according to Census Bureau data. San Jose also clinched the No. 1 spot by having the highest minority median income—$83,406 in 2014. Coming in at No. 2 is an area that is also impacted by an influx of minorities. Fayetteville-Springdale-Rogers, which crosses from Arkansas into Missouri, has a fast growing economy thanks to being home to Walmart, Tyson Foods, and J.B. Hunt Transport. The NerdWallet report quoted analysis from the Federal Reserve Bank of St. Louis, which revealed, "Nearly 30% of residents in Springdale and Rogers are Hispanic or Latino, about twice the national rate. More than 10% of the firms in each of these cities are Hispanic-owned." Among these minority-owned businesses, a large cohort are owned by women. A separate, recent report issued by the National Women’s Business Council (NWBC), based on the most recent data set (2012) from the census, revealed that of all African-American businesses, the majority (58.9%) are women-owned. That’s more than 1.5 million businesses across the U.S., and the rate of growth represents a 67.5% increase. Additionally, there are 1.48 million Hispanic women-owned businesses in the U.S., an 87.3% increase since 2007. In comparison, the number of businesses owned by Hispanic men grew just 39.3%. The same holds true between Asian men and women. There are 754,874 Asian-American women-owned businesses, up 44.3% from 2007. That is less than the five years prior (54%), but still better than growth in businesses owned by Asian men, which capped out at 25.1%. Fast Company recently reported on NerdWallet's best cities for female entrepreneurs. Overall though, NWBC’s chairwoman Carla Harris chalked such growth up to a "perfect storm" of historically low interest rates, inflation, record amounts of cash on corporate balance sheets, an increasing presence of women on boards of directors, and female degree holders. "It could not be a better time to start and scale," she said.
News Article | February 28, 2017
Federal Reserve Bank of St. Louis President James Bullard discussed “The Role of the Fed’s Balance Sheet for the U.S. Monetary Policy Outlook in 2017” at the George Washington University Alumni Lecture in Economics on Tuesday. During his presentation, Bullard shared his views on the outlook for the Federal Open Market Committee’s (FOMC’s) key policy rate (i.e., the federal funds rate target) and the Fed’s balance sheet. He noted that inflation and unemployment are now in line with the Fed’s objectives, and that the low-safe-real-interest-rate regime that has characterized global financial markets in recent years is unlikely to change dramatically during 2017. “Therefore, the policy rate required to keep inflation near target is quite low,” he said. Bullard added that now may be a good time for the FOMC to begin allowing the balance sheet to normalize by ending reinvestment. “Ending balance sheet reinvestment may allow for a more natural adjustment of rates across the yield curve as normalization proceeds and for ‘policy space’ in case balance sheet policy is required in a future downturn,” he said. A core issue today is that the policy rate, at just 0.63 percent, appears to be too low when casually compared with past historical experience, Bullard said. He noted that, in the past, when unemployment was relatively low and inflation was close to target, the policy rate was much higher. “We at the St. Louis Fed concluded that what is different today is that the safe real interest rate is better thought of as being in a ‘low regime,’” he said.1 In discussing whether the low-safe-real-rate regime will go away naturally in 2017, Bullard said given that the low-real-rate regime is a global phenomenon and has been many years in the making, it is unlikely to turn around quickly. “This suggests that the regime will not go away naturally—therefore, a relatively low policy rate will remain appropriate,” he explained. Regarding the question of whether the new U.S. administration’s policies will drive the safe real interest rate higher, Bullard said, “the new administration’s policies may have some impact on the low-safe-real-rate regime if they are directed toward improving medium-term U.S. productivity growth.” He noted that potential policy changes in the areas of deregulation, infrastructure spending and tax reform could lead to improved productivity in 2018 and 2019. Other policy proposals, such as those related to trade and immigration, have the potential to affect the macroeconomy over the longer term, he said. Turning to the Fed’s balance sheet, Bullard noted that the FOMC has not set a timetable for ending its current reinvestment policy. “Now that the policy rate has been increased, the FOMC may be in a better position to allow reinvestment to end or to otherwise reduce the size of the balance sheet,” he said. “Adjustments to balance sheet policy might be viewed as a way to normalize Fed policy without relying exclusively on a higher policy rate path.” In addition, he noted that current policy is distorting the yield curve. “The current FOMC policy is putting some upward pressure on the short end of the yield curve through actual and projected movements in the policy rate. At the same time, current policy is putting downward pressure on other portions of the yield curve by maintaining a $4.47 trillion balance sheet,” he explained. Bullard added that a more natural normalization process would allow the entire yield curve to adjust appropriately as normalization proceeds. A contrasting view is that the balance sheet should not be reduced until the policy rate is higher. For example, Bullard cited a recent blog commentary by Ben Bernanke in which the former Fed chair highlighted two reasons for keeping the balance sheet at its current size—the effects of changing the size of the balance sheet are uncertain and the FOMC has not decided on a “final size” for the balance sheet. “I did not find the arguments put forward by the former chair to be compelling reasons for keeping the balance sheet at its current size,” Bullard said, noting that Bernanke did not address the unusual “twist” of the yield curve in his commentary. “The effects of balance sheet policy are uncertain, but are often attributed to a signaling effect that the FOMC intended to stay ‘lower for longer’ on the policy rate,” Bullard said. “That signaling effect may be important when the balance sheet is rising and the policy rate is near zero, but would not exist when the balance sheet is shrinking and the policy rate has moved away from the zero lower bound.” He added, “As for the final size of the balance sheet, few would argue that the current $4.47 trillion level is appropriate. Ending reinvestment would still leave the balance sheet very large for years.” Permitting some adjustments to the balance sheet may also create balance-sheet “policy space,” Bullard noted. “Some have argued that the size of the balance sheet should not be reduced until the policy rate is high enough that the policy rate can be reduced appropriately should a recession develop. This is sometimes called ‘policy space,’” he explained. Furthermore, the same “policy space” argument can be made for the size of the balance sheet, he said, adding, “we should be allowing the balance sheet to normalize naturally now, during relatively good times, in case we are forced to resort to balance sheet policy in a future downturn.” 1 For more information on the St. Louis Fed’s regime-based approach to near-term projections, see the “Key Policy Papers” section of Bullard’s webpage.
News Article | August 12, 2016
FRANKFORT, Ky., Aug. 11, 2016 (GLOBE NEWSWIRE) -- Farmers Capital Bank Corporation (NASDAQ:FFKT) (the “Company”) announced today that its Board of Directors approved a plan to consolidate the Company’s four bank subsidiaries (as well as the Company’s data processing subsidiary, FCB Services, Inc.) into one company. The merged bank will be named United Bank & Capital Trust Company (the “Bank”) and headquartered in Frankfort, Kentucky. The parent company will continue to operate under its current name. The merger, which is subject to approval by the Federal Reserve Bank of St. Louis and the Kentucky Department of Financial Institutions, is expected to be completed in January 2017. “We will be stronger as one bank to meet the demands of our growing markets,” said Lloyd C. Hillard, Jr., President and Chief Executive Officer of the Company. “We believe that operating as one bank will offer enhanced opportunities to better serve our communities and provide more value to our customers. By taking this step, we will become more efficient and competitive, increase shareholder value and streamline our regulatory reporting.” The Bank will be governed by a new Board of Directors consisting of some members from the boards of the current four subsidiary banks. The announcement of the new Board will be made at a later date. Mr. Hillard will serve as the Bank’s Chairman and Chief Executive Officer; J. David Smith, Jr. will serve as President. The structure of the Bank will include four regions headed by market presidents identified as follows: “Our customers will continue to receive outstanding service from our team of knowledgeable and friendly bankers at the same locations to which they are now accustomed,” added Mr. Hillard. The executive team of the new Bank consists of the following: The Company continues to assess the one-time nonrecurring costs it will incur and annual savings to be realized as a result of the consolidation. At this early stage in the process, those amounts have yet to be determined with a high degree of precision. Farmers Capital Bank Corporation is a bank holding company headquartered in Frankfort, Kentucky. The Company operates 34 banking locations in 21 communities throughout Central and Northern Kentucky, a data processing company, and an insurance company. Its stock is publicly traded on the NASDAQ Stock Market LLC exchange in the Global Select Market tier under the symbol: FFKT. This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based upon current expectations, but are subject to certain risks and uncertainties that may cause actual results to differ materially. Among the risks and uncertainties that could cause actual results to differ materially are economic conditions generally and in the subject market areas, overall loan demand, increased competition in the financial services industry which could negatively impact the ability of the subject entities to increase total earning assets, retention of key personnel, operational/integration difficulties, and obtaining approvals by regulators. Actions by the Federal Reserve Board and changes in interest rates, loan prepayments by, and the financial health of, borrowers, and other factors described in the reports filed by the Company with the Securities and Exchange Commission (“SEC”) could also impact current expectations. For more information about these factors please see the Company’s Annual Report on Form 10-K on file with the SEC. All of these factors should be carefully reviewed, and readers should not place undue reliance on these forward-looking statements. These forward-looking statements were based on information, plans and estimates at the date of this press release, and the Company does not promise to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.
News Article | December 5, 2016
Federal Reserve Bank of St. Louis President James Bullard discussed “The Low Real Interest Rate Regime Post-Election: Is There a Switch?” on Monday at Arizona State University’s annual economic forecast luncheon. In his presentation, Bullard discussed how the current state of the U.S. economy and monetary policy might be viewed in terms of a “low-safe-real-interest-rate regime” and whether the proposed policies of the incoming White House administration could impact this regime. “Bottom line: Whether the new policies being developed in Washington represent a ‘regime shift’ depends on whether these policies will impact productivity,” he said. The St. Louis Fed recently changed to a regime-based approach to near-term projections of the U.S. macroeconomy and monetary policy. Under this approach, the macroeconomy could visit a set of possible regimes, and monetary policy is regime-dependent. Bullard described two real interest rate regimes, noting that a high-real-interest-rate regime prevailed in the 1980s and 1990s, but a low-real-interest-rate regime prevails today. He explained that the real returns on safe, short-term assets, such as short-term government debt, are exceptionally low and are unlikely to return to their historical levels over the next two to three years. Bullard noted that the St. Louis Fed’s recommended policy rate (i.e., the federal funds rate target) depends mostly on the safe real rate of return. “With inflation and unemployment close to longer-run levels, a standard recommendation is to set the policy rate equal to the real interest rate plus the inflation target,” he said. “Because we are in the low-real-rate regime, the St. Louis Fed’s policy rate recommendation comes out to a low number,” he explained. The current policy rate setting is 38 basis points, or 0.38 percent. “I conclude that a single 25-basis-point increase in the policy rate – from 38 to 63 basis points – will get us very close to the standard recommended value over the forecast horizon,” Bullard said. (The forecast horizon runs through 2019.) The Impact of New Policies Brewing in Washington In discussing whether President-elect Donald Trump’s new policies being developed could impact the current low-safe-real-rate regime, Bullard said that if they are properly executed, the new set of policies may have some effect. In particular, he focused on their potential impact on productivity growth. Bullard explained that low productivity growth is one of several factors that may be putting downward pressure on safe real rates of return. “U.S. productivity growth is low and could conceivably be improved considerably. This could help to increase the real rate,” he said. Of the new policies being developed in Washington, Bullard said deregulation, infrastructure spending and tax reform could have some impact on the low-safe-real-rate regime over the next several years, but any impact from immigration and trade policy reforms will likely take longer. He then discussed the potential impact of the first three policies: He concluded, “New policies brewing in Washington may have some impact on the low-safe-real-rate regime if they are directed toward improving medium-term U.S. productivity growth.”
News Article | February 15, 2017
Federal Reserve Bank of St. Louis President James Bullard discussed “The 2017 Outlook for U.S. Monetary Policy” at the St. Louis Financial Forum on Thursday. Bullard noted that there has been a problem in recent years with the policy projections of the Federal Open Market Committee (FOMC), which continued to project a significantly rising policy rate (i.e., federal funds rate target) over the forecast horizon that did not materialize in the subsequent years. The St. Louis Fed concluded that the model behind this type of projection was questionable, Bullard noted, explaining how the St. Louis Fed came to its decision in 2016 to move to a regime-based approach to near-term projections. A core issue today is that the policy rate, at just 63 basis points, appears to be too low when casually compared to past historical experience, he said. He noted that, in the past, when unemployment was relatively low and inflation was close to target, the policy rate was much higher. “We at the St. Louis Fed concluded that what is different today is that the safe real interest rate is better thought of as being in a ‘low regime,’” he said, adding that it is unlikely to change in the near term. With this low-rate regime in mind, Bullard then addressed the following questions regarding the economy and monetary policy: Bullard said the answer to all of these questions is “no,” and then explained why this is the case. Regarding the first question, whether the low-safe-real-rate regime will go away naturally in 2017, Bullard said that given that the low-real-rate regime is a global phenomenon, and that it has been many years in the making, it is unlikely to turn around quickly. “This suggests that the regime will not go away naturally—therefore, a relatively low policy rate will remain appropriate,” he explained. He then addressed the question of whether the new U.S. administration’s policies have the potential to drive the safe real interest rate higher. “The new administration’s policies may have some impact on the low-safe-real-rate regime if they are directed toward improving medium-term U.S. productivity growth,” he said. He noted that deregulation, infrastructure spending and tax reform are three areas of policy change that could lead to improved productivity in 2018 and 2019. Other policy proposals, such as those related to trade and immigration, have the potential to affect the macroeconomy over the longer term, he said. Bullard then addressed the question of whether the U.S. economy is at risk of overheating in 2017. He first noted that inflation has been below the FOMC’s 2 percent target in recent years, due in part to commodity-price effects. Net of commodity-price effects, inflation is close to target, and headline inflation is expected to return closer to target in the quarters ahead. He also noted that market-based measures of inflation expectations remain somewhat low. “Consequently, it does not appear that undue inflationary pressure is building so far,” he said. In terms of implications for the policy rate in 2017, he reiterated that any effects from the new administration’s policies will likely not be observed until 2018 and 2019. In addition, the prerequisites for meaningfully higher inflation do not seem to have materialized so far, and real rates of return on short-term safe assets seem likely to remain low globally in 2017. “These considerations suggest that the policy rate can remain fairly low in 2017,” he explained. Regarding the question of whether the FOMC’s normalization program is limited to changes in the policy rate, Bullard said that “adjustments to balance sheet policy might be viewed as a way to normalize Fed policy without relying exclusively on a higher policy rate path.” He noted that the Fed’s balance sheet has been an important monetary policy tool during the period of near-zero policy rates, and that the FOMC has not set a timetable for ending the current reinvestment policy. “Now that the policy rate has been increased, the FOMC may be in a better position to allow reinvestment to end or to otherwise reduce the size of the balance sheet,” he said. In addition, Bullard noted that current FOMC policy is distorting the yield curve. “The current FOMC policy is putting some upward pressure on the short end of the yield curve through actual and projected movements in the policy rate,” he said, adding, “at the same time, current policy is putting downward pressure on other portions of the yield curve by maintaining a $4.45 trillion balance sheet.” He noted that this type of “twist operation” does not appear to have a theoretical basis and that a more natural normalization process would allow the entire yield curve to adjust appropriately as normalization proceeds. He concluded, “Ending balance sheet reinvestment may allow for a more natural adjustment of rates across the yield curve as normalization proceeds.”
News Article | February 15, 2017
ST. LOUIS – Midwest and Mid-South farm income and expenditures fell during the fourth quarter of 2016, according to the latest Agricultural Finance Monitor published by the Federal Reserve Bank of St. Louis. Meanwhile, quality farmland values and ranchland or pastureland values also declined. The survey was conducted from Dec. 15-Dec. 31, 2016. The results were based on the responses of 34 agricultural banks located within the boundaries of the Eighth Federal Reserve District. The Eighth District comprises all or parts of the following seven Midwest and Mid=South states: Arkansas, Illinois, Indiana, Kentucky, Mississippi, Missouri and Tennessee. The survey also included three special questions that focused on farmland sales. Agricultural lenders continued to report lower farm income levels compared with a year earlier. Based on a diffusion index methodology with a base of 100 (results above 100 indicate higher income compared with the same quarter a year earlier; results lower than 100 indicate lower income), the diffusion index for farm income during the fourth quarter of 2016 fell to 39. This represents the 12th consecutive quarter of the income index being below 100. Looking ahead to the first quarter of 2017, lenders’ farm income expectations remained low, with a diffusion index value of 41. “Cattle prices have negatively affected overall income for 2016. One large land-owning estate has liquated some real estate in 2016, but I expect this to slow down in 2017,” an Arkansas lender reported. In conjunction with lower income levels and in line with the recent downward trend, fourth quarter household spending and capital expenditures were lower than a year earlier. The household spending index came in at 77, while the capital spending index value was 45. Lenders said they also expect this trend to continue in the first quarter of 2017. After stabilizing in the third quarter, quality farmland values during the fourth quarter of 2016 were 8 percent lower than they were during the fourth quarter of 2015. Ranchland or pastureland values were 3.5 percent lower than a year ago. “We are experiencing the same effects of the lower corn prices that other financial institutions are experiencing,” according to an Illinois lender. “Farmland values have decreased slightly; however, they are still very high compared to what any farm can cash flow from straight commodity crop production.” Meanwhile, lenders reported an 11.6 percent year-over-year decline in ranchland or pastureland cash rents, and a 1.8 percent decline in quality farmland cash rents. “Most bankers expect further declines in the first quarter of 2017, as the diffusion indexes of land values and cash rents are below 100 for each type of agricultural land,” the report said. Due to reports of possible increases in farmland sales, the survey asked bankers three special questions to help characterize the farmland market in their respective areas. The first question asked lenders to choose, from four ranges of interest rates on fixed-rate farm real estate loans, the rate range that would trigger a slowdown in farmland sales. Close to 25 percent of lenders said they thought rates would need to reach 5.5 percent to 6 percent; 22 percent said 6 percent to 6.5 percent and 25 percent said 6.5 percent to 7 percent. However, 28 percent said rates would need to rise above 7 percent before impacting farmland sales. An Illinois lender remarked, “Regarding the special question on interest rates, I think overall farm profitability will be a bigger driving force than interest rates. The farm economy is preparing to shed the next layer of farmers--those who are near retirement age or at a point where their operations cannot sustain the current debt load and family living costs. This is about 20 percent of my portfolio in the next 5 years.” The second question asked lenders their views on how farmland sales will fare in 2017. Only 13 percent reported they believed farmland sales volume will increase in 2017. Meanwhile, 63 percent of respondents expected no change, and 25 percent reported they believed farmland sales will decrease. The third question asked bankers whether farmers remained the largest buyers of farmland in their respective areas in 2016. In response, 69 percent of the bankers reported that farmers bought more than 50 percent of the farmland, while 31 percent reported that farmers purchased less than 50 percent. “Hence, farmers remain the largest buyer group of District farmland,” the report said.
News Article | October 20, 2016
FRANKFORT, Ky., Oct. 19, 2016 (GLOBE NEWSWIRE) -- Farmers Capital Bank Corporation (NASDAQ:FFKT) (the “Company”) reported net income of $4.3 million or $.58 per common share for the third quarter and $14.1 million or $1.87 per common share for the first nine months of 2016. Net income for the current quarter increased $768 thousand or 21.6% compared with the current-year second quarter, which represents an increase of $.11 per common share. Compared to their respective year ago periods, net income increased $492 thousand or 12.8% for the current quarter and $2.7 million or 23.2% for the first nine months. On a per common share basis, net income increased $.07 or 13.7% when compared with the prior-year third quarter and $.40 or 27.2% in the nine-month comparison. Per common share earnings in the nine-month comparison include a pretax gain of $4.1 million ($2.6 million after tax) or $.35 related to the early extinguishment of debt that occurred in the first quarter of 2016. “Over the last month of the quarter, we completed a series of transactions to prepay $100 million of high-cost borrowings and reposition our investment securities portfolio to increase net interest margin,” says Lloyd C. Hillard, Jr., President and Chief Executive Officer of the Company. “Since the transactions occurred late in the quarter, the impact on our margin and certain other financial metrics for the current quarter is minimal. The impact of these transactions will be more apparent once a full quarter has passed.” “We continue to make progress reducing the level of our nonperforming assets, which decreased $1.6 million or 3.4% during the quarter,” Mr. Hillard continues. “Excluding performing restructured loans, our ratio of nonperforming assets to total assets remains unchanged at 1.3% due to a smaller asset base,” Mr. Hillard says. “Although loans declined $6.7 million or 0.7% during the quarter, primarily from two larger-balance early payoffs totaling $11.0 million during the quarter, we remain optimistic about overall loan demand.” The Company is progressing with its plan to consolidate its four bank subsidiaries and data processing subsidiary into one bank. As a result of the consolidation, the Company expects estimated annualized pre-tax savings of $3.0 million to $3.5 million once the merger is completed. This estimate consists primarily of reductions to salaries and employee benefits. The Company expects the merger to be completed on February 20, 2017, subject to approval by the Federal Reserve Bank of St. Louis, which has not yet been received. A summary of nonperforming assets follows for the periods indicated. Activity during the current quarter for nonaccrual loans, restructured loans, and other real estate owned follows: Total nonperforming loans are relatively unchanged from the prior quarter. Nonaccrual loans edged up $382 thousand or 6.0% driven by one credit relationship secured by multifamily residential real estate. The decrease in other real estate owned was driven mainly by sales activity and, to a lesser degree, impairment charges to adjust carrying amounts to their estimated fair value less cost to sell. Property sales for the quarter include one commercial real estate property sold for $1.2 million with a related gain of $182 thousand. Since acquiring this property in 2014, the Company has recorded total impairment charges of $119 thousand related to this property. Impairment charges in the current quarter include $267 thousand related to a commercial real estate property written down to its estimated fair value less cost to sell and $124 thousand related to a residential real estate development property as a result of entering into a sales contract during the quarter. The allowance for loan losses was $9.1 million or 0.96% of loans outstanding at September 30, 2016. At June 30, 2016 and December 31, 2015, the allowance for loan losses was $9.5 million or 0.99% and $10.3 million or 1.08% of loans outstanding, respectively. Net loan charge-offs were $149 thousand in the current three months compared with $187 thousand in the linked quarter. Net loan charge-offs as a percentage of outstanding loans were 0.02% for both the current and linked quarters. Loans were $951 million at quarter-end, a decrease of $6.7 million or 0.7% compared with $957 million for the linked quarter. Third Quarter 2016 Compared to Second Quarter 2016 Third Quarter 2016 Compared to Third Quarter 2015 Farmers Capital Bank Corporation is a bank holding company headquartered in Frankfort, Kentucky. The Company operates 34 banking locations in 21 communities throughout Central and Northern Kentucky, a data processing company, and an insurance company. Its stock is publicly traded on the NASDAQ Stock Market LLC exchange in the Global Select Market tier under the symbol: FFKT. This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based upon current expectations, but are subject to certain risks and uncertainties that may cause actual results to differ materially. Among the risks and uncertainties that could cause actual results to differ materially are economic conditions generally and in the subject market areas, overall loan demand, increased competition in the financial services industry which could negatively impact the ability of the subject entities to increase total earning assets, retention of key personnel, and the capability of the Company to successfully enter into, close, and realize the benefits of anticipated transactions. Actions by the Federal Reserve Board and changes in interest rates, loan prepayments by, and the financial health of, borrowers, and other factors described in the reports filed by the Company with the Securities and Exchange Commission (“SEC”) could also impact current expectations. For more information about these factors please see the Company’s Annual Report on Form 10-K on file with the SEC. All of these factors should be carefully reviewed, and readers should not place undue reliance on these forward-looking statements. These forward-looking statements were based on information, plans and estimates at the date of this press release, and the Company does not promise to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes. 1Represents total common equity less intangible assets divided by the number of common shares outstanding at the end of the period.
News Article | October 28, 2016
The Federal Reserve System and the Conference of State Bank Supervisors (CSBS) have released the findings from a national survey of community bankers presented at the fourth annual Community Banking in the 21st Century Research and Policy Conference, which was Held Sept. 28-29 at the Federal Reserve Bank of St. Louis. The survey findings, which can be found on the conference website at http://www.communitybanking.org, provide a comprehensive view of what bankers are thinking about the key issues facing their industry. Responses were obtained from 557 banks, almost all of which had less than $10 billion in assets, a level that often is used to categorize “community” banks. Embedded in thousands of local communities, these smaller institutions are crucial to the economic success of households and businesses across the country. Highlights from the survey indicate: The survey is augmented by excerpts of interviews conducted by state banking commissioners with community bankers in 29 states. Each commissioner asked five bankers detailed questions with respect to five key areas of interest involving economic trends, regulatory burden, examination processes, competition in small business lending and personnel issues. These “Five Questions for Five Banks” interviews offer unique insights that, in combination with the survey itself, can be used to better understand and further the development of the community banking industry.