Walmart, American Express to offer yet another option to people without bank accounts

American Express and Walmart have teamed up to launch a card-based banking system aimed at low-income customers who don't have bank accounts or only limited accounts, many of whom live in rural areas. The system, known as Bluebird, will allow for check deposits and payments by smartphone, has no minimum balance or monthly fees, and is Walmart's latest "foray into financial services," Barney Jopson and Tom Braithwaite of The Financial Times report. Customers will be able to make deposits at Walmart cash registers, and won't have to pay for overdrafts.

The announcement caused a 20 percent drop in shares of Green Dot, a card-based banking company that has already partnered with Walmart. American Express would not comment to The Financial Times about its investment in the program or how it would make a profit from it. Walmart previously tried to enter the banking world by acquiring a banking license in 2007, but failed. Its efforts have "triggered fierce opposition from some U.S. lawmakers and community banks wary of its power," Jopson and Braithwaite report. (Read more)

People moving away from traditional banks, loading pre-paid debit cards instead

A significant percentage of Americans have abandoned traditional banking, with 8.2 percent of households managing finances without a bank, according to Census Bureau data compiled by the Federal Deposit Insurance Corp. That's up from 7.7 percent in 2009. Another 28.3 percent of households -- an increase from 25.6 percent -- are "underbanked," or still have a bank account, but step outside traditional banking systems by using payday loans or prepaid cards, Gary Fields and Maya Jackson-Randall of The Wall Street Journal report.

The unbanked and underbanked may be disproprotionately rural. Some who have forsaken banks are irritated over banking charges, including overdraft fees that cost customers $31.6 billion last year, and others are spurred by the financial crisis and a loss of confidence in traditional institutions.

The fastest growing type of nontraditional banking is prepaid debit cards offered by NetSpend and Green Dot Corp. Customers can buy cards at grocery stores and load money onto them to pay for "a wide variety of purchases -- just as they would do with a regular credit or debit card," Fields and Jackson-Randall report. But, customers must buy the card and pay a monthly fee to keep it. (Read more)

Index of rural bankers lowers economic forecast for Plains states because of drought

This month's Rural Mainstreet Index from Creighton University in Omaha fell to its lowest level since September 2010, breaking a 10-month streak of being above growth-neutral, Marc Schober of Farmland Forecast reports. The RMI is now 47.9, down from 56.7, and persistent drought is believed to be the main culprit. The index comes from a survey of community bank presidents in rural areas of a 10-state region including from Missouri to Wyoming. it focuses on about 200 rural communities with an average population of 1,300.

Creighton Economist Ernie Goss told Schober, "The drought is putting a dent into the economies of the agriculturally dependent areas of the 10-state area ... We are now detecting warning signals of a significant economic reversal for rural areas." Goss added that weaker economic conditions are slowing farmland-price growth, and that farmers are reducing the amount of equipment they are buying.

The farmland price index decreased slightly in June, but remained above growth-neutral. The farm equipment sales index decreased "significantly," Schober reports. It's down to 46.1 from 54.7 since June, its lowest level since 2009. Bankers weighed in on the impact on ethanol and biodiesel production and of those with plants in their areas, 64 percent reported negative impacts, 21 percent indicated plant closures and 42 percent reported operations cutbacks. To read the full RMI report for this month, click here.

Farm economies dim as drought continues

The drought ravaging crops from Indiana to Arkansas to California is taking its toll on rural economies and threatening to drive food prices to record levels, Bloomberg reporters Joshua Zumbrun and Mark Drajem write. (Photo of Morse Reservoir near Cicero, Ind., by Daniel Acker for Bloomberg)

Agriculture had been one of the most resilient industries in the past three years as the country struggled to recover from the recession; now it could be a drag. “It might be a $50 billion event for the economy as it blends into everything over the next four quarters,” said Michael Swanson, agricultural economist in the Minneapolis office of Wells Fargo & Co., the nation's largest commercial agriculture lender. “Instead of retreating from record highs, food prices will advance.”

The Department of Agriculture declared last week that more than 1,000 counties in 26 states are natural-disaster areas, the biggest such declaration ever, report Zumbrun and Drajem. This makes them eligible for low-interest loans. Corn prices rose Monday to the highest in 10 months, and soybeans increased to the costliest since 2008. Ernie Goss, a professor of economics at Creighton University in Omaha, said farm income, which has underpinned the growth of many rural states, will be under “significant downward pressure."

Next year, though, farmers are expected to boost equipment, seed and fertilizer purchases as they try to recoup in production what they lose this year, said Ann Duignan, analyst for JPMorgan & Co. This year’s lost crops will force some farmers to take out new loans to get through a poor season. “In those areas hit the hardest by drought, we will have to work with those farmers to do some additional financing because they’ll be missing the revenue they were expecting,” Well Fargo's Swanson said. “Farmers have always said to me $7 corn is no good if I have no corn,” Duignan added.

Community banks likely to consolidate, shrink in number during the next few years

http://bizlex.com/2012/06/well-run-community-banks-will-endure-but-consolidations-are-likely