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- Good morning, everyone. - [group response] Good morning. - Welcome to today's Agriculture Banking Conference. My name is Shayna Olesiuk. I'm the associate director for regional operations of the FDIC's Division of Insurance and Research, and we are excited today to be here in the nation's heartland to discuss the agriculture industry and its implications for banks. Thank you to the Kansas City Regional Director Jim LaPierre for his support of today's event, and also thank you to Bob Peterson and the Agriculture Business Council for their partnership with the FDIC today in our conference. I'm sorry to say that our Chairman will be unable to attend today's event. She was pulled away to another meeting, but I am pleased to share that our General Counsel Nick Podsiadly will be joining us for the keynote after our lunch today. The FDIC has a deep interest in the agricultural economy, especially as it relates to banks and agriculture producers. Furthermore, the agriculture sector is a key driver of many local economies, particularly in the center of the country. In fact, nearly 1 in 7 US counties is farming dependent. As the primary federal regulator for most of the community banks in the US, the FDIC closely follows the agriculture sector and monitors the conditions of the financial institutions lending to the sector. Nationwide, nearly 1300 banks or 1 in every 4 has a strong lending concentration in agriculture. We call these institutions farm banks and we'll be hearing more about them today as the conference goes along. The FDIC's interest in the agriculture sector and farm banks isn't new. In fact, we have held conferences in recent years and published research on issues affecting farm banks. For example, in 2011, we sponsored a conference entitled Don't Bet the Farm which focused on the boom in US farmland prices. As conditions in the agriculture sector became more concerning, we convened a roundtable discussion with FDIC executives and representatives of the agriculture industry in 2017. We've also produced several research studies on issues affecting rural communities, and we'll be talking about those later this afternoon. We published two studies on rural depopulation trends, first in 2004, and again, 10 years later in 2014. Because of the important role that farm banks play in many communities, we felt it was important to focus today's discussion on both the near-term trends and risks that affect the agriculture industry as well as long-term challenges faced by farm banks in the communities they serve. We hope you'll all join in the conversation today by asking questions of our panelists, engaging in conversation with one another during breaks, and participating in the conversation on social media. So, now please join me in welcoming Jim LaPierre, FDIC's Kansas City's regional director. - [applause] - Thank you, Shayna, and thank you all for coming today. It's great to have you all here. First thing I'd like to do is as a resident of the state of Missouri, I'd like to congratulate the St. Louis Blues for winning the Stanley Cup last night, 4 to 1 over the Boston Bruins. [applause] So Shayna kind of talked to you a little bit about kind of what the Ag sector looks like from a national level. My job as regional director in Kansas City is to oversee the banking sector in our seven states, and our seven states are Missouri, Kansas, Iowa, Nebraska, South Dakota, North Dakota, and Minnesota. So Shayna mentioned there's a little over 1300 banks nationwide that meet our definition of a farm bank at the FDIC. We define farm banks at the FDIC as 25% or more of the bank's loan portfolio in farm loans. So using that definition, of the just over 1300 banks nationwide that meet that definition, almost 800 are in our seven states. So to say that we focus on agriculture in the Kansas City region would be an understatement, but those of you who have ever had heard me speak at banker events, you know that I always sort of go down my list, and on my list, no matter how the Ag sector is doing, it's always number one. It's always number one for the very reason I just told you-- we have almost 800 banks that meet the definition of an Ag bank here in our region. We have a couple of things that we do unique in the Kansas City region as a result of that. Several years ago now-- actually in probably 2010, I believe-- we established something that we call an agricultural subject matter expert program in our region. So in each of our 16 field offices, we have people who are experts in agriculture. In places like Nebraska and Iowa, we have multiple people in each of those offices who are really-- I would argue almost all the people in the Kansas City region have a great feel for agriculture-- but we have these agricultural SMEs who are sort of our experts in the field. They have their finger on the pulse; they provide quarterly updates. We get a quarterly update of every single Ag exam, what they found, whether there were increases in adversely classified items, et cetera. So we have that program. We had our most recent Agricultural Summit here in Kansas City, actually in the room we're in right now in April. That's something we do every year and have been for many years now, but it's something where we actually brought in the other federal regulators and our state counterparts to participate this year along with the other FDIC regions. So, something we focus on very intently here in Kansas City. A couple other things that I just want to share with all of you: Past due non-accrual loan ratios for the Ag sector, they have increased, but they remain relatively low nationwide, and this is March 31 numbers, March 31 call data. Past due non-accrual ratio 0.79% for farm loans for all banks in the US, all farm banks in the US, not just here in the Kansas City region. Regained Ag loan losses continue to be zero. The reason for that is, of course, at the median, is that number right in the middle, and more than 50% of Ag banks had no Ag-related loan losses in the first quarter of 2019. So as a result, no loan losses means at the median for more than 50% of the banks means that the median was zero. Problem banks. At the FDIC, and for those of you not familiar with the FDIC or the banking sector-- I know we have participants here today that are not bankers-- the FDIC and the other federal regulators along with our state counterparts rank banks. We give them what's called a composite rating which is a combination of several different factors that we consider, and the composite rating ranges from 1 through 5, 1 being the best and 5 being the worst rating for banks that we supervise, that the other regulators supervise. And 3 is not like a C in college; it's not pass. A 3 is not something any banker wants to be rated. Bankers do not want to be rated 3, 4, or 5. They want to be rated 1 or 2. So 3, 4, and 5 are considered adverse ratings for banks in the rating structure we have. The Kansas City region, we have about 1360 banks in our region. That's just over 25% of all banks in the US are located in our seven states. Our banks that are rated 3, 4, or 5 continue to be below the nation. That has been true actually ever since 2008. In 2008 of course, the financial crisis hit the US, and we were relatively less impacted here in the middle of the country for the very reason we're talking about today-- agriculture. Those were some good years for agriculture, and as a result, we did not have a lot of problem banks here in our part of the country. And that's continued to be the case. So banks in our region continue to be rated relatively better than the rest of the country. That said, our numbers are pretty flat and they're not really moving in either direction. The rest of the country continues to improve slowly. So just to give you kind of a level set in terms of where we are, and the reason I say that is again, because we're so impacted by Ag here that clearly sort of as Ag goes, so goes the Kansas City region. So, just thought I would share some of those numbers with you to kind of set maybe some of your thinking, and I want to thank the Agricultural Business Council of Kansas City for working with us. A lot of people have come up to me today and said thanks for doing this. I assure you like everything happens in the Kansas City region, my primary job is to stay out of the way and let my staff do it, so credit to them and credit to all the people who worked on the planning committee; Rich Cofer, in particular, you'll meet this afternoon. He'll be co-moderating one of our panels, but Rich was really the brains behind this whole thing, and I think we started talking when Rich was actually back in D.C. back in November or December about this. So, a lot of work went into this. I appreciate everybody being here today. You know, before I introduce Bob, just finish with asking you to do exactly what Shayna asked you: Please ask questions, challenge things. If you don't agree-- I always tell people, if you agree, great; if you don't agree, I'm much more interested in hearing what your views are. So please, as you would go through the day, as the panelists make comments and stake out positions, if you would, if you don't agree with that, if that's not what you're seeing or not your perception of what's happening in your part of the market, please share that with all of us. It's really meant to be a learning opportunity for all of us. So thank you all for being here, appreciate you all coming. And with that I'd like to introduce Bob Peterson, and Bob's going to give us some final opening comments. Thanks again. - [applause] - Good morning, everyone, and welcome. Welcome to my colleagues from the Agricultural Business Council. Thanks to Kevin Anzio who does all the hard work for the Agricultural Business Council, and in full disclosure, I'm because of my oldest daughter. So we have a good working relationship and we have a good office environment. The Agricultural Business Council of Kansas City-- think of us as an Ag Chamber of Commerce. We're based here in an urban area. We like to think our urban area reaches from Manhattan, Kansas, to Columbia, Missouri, to St. Joe, and we try to tell our urban colleagues that agriculture continues to be not just a foundation 150 years ago but continues to be a driving force in the region's economy today. Having said that, let me tell you, if you've been watching your cell phones, this is a big day for Kansas City. Thirty minutes ago, the headline: "Hundreds of USDA Jobs Headed to KC After a United Effort by Kansas and Missouri". We are thrilled to be the new home for most of the employees of USDA's economic agencies, NIFA and ERS. So that will be happening and they're going to start moving people soon, maybe as much as July. In Kansas City, sometimes we have this small problem called a state line, and getting everybody to pull together, and let me tell you folks, this was a wonderful united effort on behalf of local governments and our senators and our governors and our land grant colleges. You'll hear from Allen who will moderate a panel here shortly, but Kansas State University and Missouri are absolute leaders, and we forget maybe sometimes how important these land grant institutions are to the underpinning of what we do. But our friends at the University of Missouri, Allen's colleagues, put together a joint letter signed by the University of Nebraska, my alma mater; Kansas State; Iowa State that went to Secretary and said this is the right place to put these economic agencies. Look at the 150-plus PhD students we produce a year, look at all of the economic happenings, you're going to be right here where it's all happening. So anyway, part of my job is being a bit of a cheerleader, and we get very enthused about all of the wonderful things happening in Kansas City. I left Washington D.C. 20 years ago; I decided to go straight, and we've had a wonderful time here, and the changes in Kansas City and in downtown Kansas City-- if you've not been, please do. To our friends from Washington D.C., be sure to try some barbecue. With that, let me just a few serious notes about agriculture and agriculture today. This is not your grandfather's agriculture focused on 80 acres. This is a dynamic sector adapting to new technology, massive amounts of data, improved genetics, continual innovation by a very bright, capable new generation that is taking charge. There are, however, some inevitabilities associated with agriculture: Weather, and we're seeing this year, cases of too much of it, and the devastating effects that it can have in some areas. Uncertain markets. Gone are the days of 2013 when many enjoyed $7 corn and $16 soybeans. I have a lot of relatives who say, "Oh, wouldn't that be nice." And if you add on top of that, the uncertain trade policy that we have in today's political environment. All of these things play into the well-being of the agricultural sector. With this in mind, Rich, Jim, Shayna, colleagues, it's a wonderful time for a conference. You've got a lot of near-term and long-term issues to talk about. We're thrilled to have you in Kansas City. Be sure and have some barbecue before you go home. Welcome. - [applause]