The Town the Economic Downturn Forgot

Colesburg, Iowa – During the same week in September when the government took over Fannie Mae and Freddie Mac, the Farmers Savings Bank in eastern Iowa opened its fifth branch. The number of foreclosures the bank’s had? Zero. Tightening its credit? Not at all.

“At the local banks, you don’t see those problems. We’re fine,” said Mark E. White, the bank’s president and CEO.

The area around Colesburg, Iowa, seems impervious to the nationwide economic downturn. The farms are doing well. Farm equipment dealers can’t keep tractors in stock. Property prices are good. As banks elsewhere in the country restrict lending or recall equity lines of credit, the Farmers Savings Bank is continuing lending as if nothing is happening.

“The types of customers that have gotten loans through our institution in the past will continue to get loans through us,” said Michael J. Funke, the senior vice president, a loan officer and part-time farmer.

The bank was founded in 1907 and was one of the few in this area that made it through the Great Depression. It prides itself on being conservative in lending and knowing exactly how the loan is going to be used. Recently, as other banks allowed financing for homes up to 90 or even 100 percent of the home’s value, the Farmers Savings Bank kept the traditional 80/20 rule, which means buyers had to have 20 percent of the down payment in cash. They kept all their mortgages in-house.

During the real estate boom, they lost business to out-of-town banks, which offered better deals. Now some of those banks have folded and the customers are returning.

“We’ve been a little more conservative, which has really paid off,” said Funke.

On a rainy Thursday afternoon, Joel Lindaman, a local farmer and businessman came into the bank. Lindaman said he already has more than half dozen loans from the bank and was looking for more. He needed some money to buy farm equipment and some land on which he was hoping of building a campground for tourists. Lastly, he wanted money for a church that he wanted to fix up and lease out to a Hispanic congregation.

“I’ll work through those numbers, but I don’t expect there’d be a whole lot of problems,” Funke said about the first proposal.

But Lindaman wasn’t expecting any difficulties.

“I’ve been able to get loans for everything,” he said. “I’ve had a really good month.”

By Travis Fox  |  October 24, 2008; 12:21 AM ET  | Category:  In-Depth
Previous: Small Town Bank Failure | Next: A Retail Slump Threatens an American Dream


In all likelihood, this bank actually checks employment and income before writing the loans and doesnt let people who cant afford it take on mortgages. They probably also limit their mortgages to the prices the buyers can afford on their income and with their credit history. Yes, they probably also offer a fixed interest rate commiserate with the credit history of the borrower. Crazy, I tell ya!

Posted by: tunatofu | October 24, 2008 11:38 AM | Report abuse

Ahh, common sense, good to see it still around, though not so common any more. My husband and only go to banks that will not sell off our morgage. Investment that stays in the community is never poorly spent.

Posted by: job22 | October 24, 2008 11:48 AM | Report abuse

To the people of Iowa:

Praise, baby, praise!

Posted by: Genefox1 | October 24, 2008 11:55 AM | Report abuse

What a fascinating piece. I could have read another 1,000 words.

Posted by: christinaasquithyahoocom | October 24, 2008 12:17 PM | Report abuse

I grew up six miles from Colesburg, IA. While this article paints a solid picture of quaint small town American life, ala Grant Wood's "American Gothic" it's only a small snapshot of a larger panorama. Yes, farming is booming thanks to Atkins diets and the thirst for ethanol and these banks have made solid financial decisions during the sub prime orgy, but the reality is this small town community and others around it are dying a slow death.

The lack of employment opportunities has driven off the majority of the young and educated. These communities fret over, who - if anyone, will take the place of the next retiring doctor or teacher. The younger generation that does stick around has little employment opportunities. Most of the factory jobs are now overseas and white collar jobs are so scarce one has to wait for the either retirement or death for an opening.

Drug abuse, particularly meth, has become the scourge of these areas. Alcohol has long been abused in this county, but the younger generation has turned to elicit drugs to salve their boredom and take temporary flight from their small town. It's safe to say there are probably more meth labs operating in the county than banks.

Posted by: socaltransplant | October 24, 2008 12:46 PM | Report abuse

I am shocked the WP put this story in such a prominent place on your website. It supports those old fashioned ideas of not buying or borrowing what you can't afford, and of banks being careful in their lending practices. These are the principles that the Democrats tossed out when they passed the Community Reinvestment Act and when the Clinton Administration pressured Fannie Mae and Freddie Mac to get into subprime loans. I don't see the Post making such a big deal of that information, along with the disgraceful actions of Barney Frank and Chris Dodd. I wonder how this story slipped through their Obama/Democrat/Liberal Only filter?

Posted by: lostein | October 24, 2008 12:55 PM | Report abuse

I am from South Louisiana and this article is much more reflective of our economy than what we see on the national news. The front page of our local newspaper today had an aricle about the state trying to get out of state labor here to work because employment is so high. As long as LSU football is more important than nationial politics, I think we will be ok.

Posted by: ddavid1 | October 24, 2008 1:24 PM | Report abuse

Subprime loans were meant to help people with solid jobs and work history to qualify for loans who may have not had stellar credit. They were grossly abused by the banking industry AFTER, (2005-2007) most other qualifying home buyers had been snapped up by banks.

"Nor does the law require institutions to make high-risk loans that jeopardize their safety. To the contrary, the law makes it clear that an institution's CRA activities should be undertaken in a safe and sound manner."

But thanks again, bitter man/woman for being a parrot of misinformation and defecting the blame.

Posted by: socaltransplant | October 24, 2008 1:47 PM | Report abuse

As an act happening throughout the country, I think there is a sign here that any plan to use tax money to help mortgagors who made bad home buying decisions is going to be met with a lot of concern.

I see the wagons circling on the Hill to come up with a home owner life jacket plan but they better be able to explain to folks like these Iowans as to why any plan makes sense both fiscally AND morally.

Posted by: tslats | October 24, 2008 1:53 PM | Report abuse

I work with a lot of credit unions, and most of them are telling the same story. They've been consertative lenders, so they aren't seeing many of the problems that are facing others. Good for that Iowa bank! This was a well-done piece that tells the other side of the story. Nice job, Post!

Posted by: | October 24, 2008 2:29 PM | Report abuse

Wait until they go to sell their corn crop and find it's down by 50% in the last few weeks.

Posted by: majorteddy | October 24, 2008 5:22 PM | Report abuse

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