With exports to Asia dwindling, a window manufacturer in Wisconsin has closed its doors. Steelworkers in Nebraska are worrying about their jobs. Hog farmers and cattle ranchers in the Plains states are struggling to stay in the black.
And across the United States, the community banks that serve such local businesses are feeling the effects of economic upheaval half a world away.
For some small banks, particularly those active in agricultural lending, the crisis in Asia threatens to cut profits significantly. Others are preparing for smaller but still noticeable ripple effects through their customer bases and communities.
Community bankers, fixing their attention on businesses that market their wares in Asia, are carefully monitoring loan portfolios. The crisis has driven home "that we truly are a global economy," said Thomas J. Sheehan, president and chief executive officer of Grafton (Wis.) State Bank.
Economists predict that the Asian meltdown will slow U.S. growth by 0.5% to 1% in 1998. For most bankers, the slowdown would feel much like an interest rate hike from the Federal Reserve, said Keith Leggett, an economist with the American Bankers Association.
Community banks with borrowers in agriculture or manufacturing would feel more of a pinch, Mr. Leggett said. Farm exports are expected to tumble 2.2% this year, according to the Department of Agriculture. And orders for exports of manufactured goods have fallen 5.3% since yearend, the National Association of Purchasing Management said.
Slackening demand from Asia has already claimed one victim in tiny Stratford, Wis. A window manufacturer closed down last month after orders from Asia dipped, said Allie Knoll, president and chief executive officer of Stratford State Bank. The company employed 20 workers, many of whom have accounts at the bank.
Cheryl Bishop, co-chief executive officer at Skagit State Bank, Burlington, Wash., said she is closely monitoring a borrower who manufactures earthquake detection equipment and exports to Hong Kong. So far, the customer has not missed any loan payments, but Ms. Bishop said she will continue to be cautious.
In other towns, small banks are concerned that retail customers who work at manufacturing plants may face unemployment as exports slow.
In Henry, Ill., many customers at Henry State Bank work at Caterpillar Inc., headquartered in nearby Peoria. The machinery manufacturer has been troubled by an ongoing workers' union strike and now Asian demand for equipment may fall as well.
Fred Lamkey, Henry State Bank's president, fears many of his Caterpillar-employee customers may not have jobs to return to when the strike is finally settled.
"They could be in real trouble," he said.
And in Norfolk, Neb., a local steel mill's Asian business has fallen off so sharply that its employees-depositors at Elkhorn Valley Bank-are worried about losing their jobs, said Fred Otten, the bank's president.
In the farm sector, fewer crop exports and lower commodity prices mean farmers with slim margins may not turn a profit this year. Such is the case for some hog producers in Iowa.
Charles K. Kummerfeld, vice president of Security State Bank, Sutherland, Iowa, said he does not expect local hog farmers to be in the black this year, which could be bad news for his $30 million-asset bank and other local businesses.
"If the farmer doesn't make money, nobody makes money," he said.
Bankers are worried that the Asia crisis could cause some cattle ranchers-who have been dogged by low export prices and poor weather conditions for years-to fall behind on loan payments.
Larry N. Nelson, president of Burt County State Bank, Tekamah, Neb., said cattle farmers who have loans from his bank are already hurting. "No one is going under, but we haven't seen the end of this."
A survey of agricultural banks by the ABA indicates that while crop prices have been dropping, bankers have been reeling in their own performance expectations for the first half of the year. The bankers expect the number of new loans to decline by 4.9% and loan delinquencies to rise by 3.2% during the first half of the year when compared with the later half of 1997.
Mr. Leggett, who analyzed the survey for the ABA, said that expectations may be even lower when the trade group issues another round of questionnaires later in the year. That's when bankers such as Donald Daggett, vice president of Inland State Bank, Hermiston, Ore., expect to know more about Asia's impact on the bank.
Mr. Daggett said much depends on how much local alfalfa and hay growers are paid for their fall crops, many of which are exported to Japan. If prices remain low, he said, there may be some trickle-down effect to the bank.
The link between the concerns of community bankers and events in Asia was vividly underscored at the annual gathering of the Independent Bankers Association of America in Honolulu earlier this month.
Two major speakers-Federal Reserve Chairman Alan Greenspan and Deputy Treasury Secretary Lawrence Summers-appeared via satellite and focused on the economic crisis.
Mr. Summers, appealing to community bankers to support funding for the International Monetary Fund, emphasized their stake in the outcome of the crisis. Nearly one-third of U.S. exports are to Asian countries and jobs in export businesses pay higher-than-average wages, he said. Also, U.S. workers have invested heavily in companies that operate in the region, he said.
"The better we can contain this situation, the safer our savings will be," Mr. Summers said.