For Immediate Release
January 26, 2016
Lori Bruce, MBA Communications Director
573-636-8151

Missouri Economy Suffers If Banks Cease Ag, Commercial Loan Operations

JEFFERSON CITY, Mo. — A new study reveals Missouri’s state and local economies would suffer significant losses if Missouri banks stopped loans for agriculture and commercial lending.

The Missouri Bankers Association commissioned a study to assess the economic impact of Missouri banks on their communities and the state’s economy. The study, “Why Banks Matter: Measuring the Impact of Banks on Missouri’s Economy,” examined how the real gross domestic product — the market value of goods and services purchased by individuals — would be affected if Missouri banks stopped lending money for capital investment projects.

Based on data from 294 banks that are MBA members, Missouri banks made loans totaling no less than $10.8 billion a year to Missouri businesses from 2012 to 2014. More than 25 percent of investment spending in Missouri is attributable to loans made by Missouri banks.

• If these banks stop making $10.8 billion worth of loans to Missouri businesses, the effects reverberate throughout local and state economies.
• Throughout 25 years (2015-2040), the economic impact of the loss of these loans in real GDP is $170.2 billion.
• The loss of $170.2 billion in real GDP translates to more than 130,000 jobs lost in Missouri.

With a smaller Missouri economy, state government will suffer lost revenues. The discounted sum of lost revenues throughout the 25-year period is $6.5 billion. As a result, roads, schools and other government services will shrink.
“I was shocked to learn that the economic impact of these banks was so significant,” said Joseph H. Haslag, Ph.D., study’s author. Haslag is the Kenneth Lay Chair in Economics at University of Missouri in Columbia and director of the Economic Policy Analysis and Research Center at MU.

“Banks are needed to finance local capital that is vital to the production of goods and services in Missouri,” Haslag said. “If these banks stopped making loans to further capital projects and improvements, it translates into substantial losses for our state and job growth.”

“The study proved what we already know … banks are vital to economic growth,” said Max Cook, MBA president and CEO. “Throughout Missouri, banks are the economic engines that spur business activity and support our communities.”

The study also assessed charitable giving from banks and the hours that bankers volunteer to civic and community organizations. Haslag estimated banks contributed $31.3 million to charities in 2014. This number is based on the average percent of corporate profits given to nonprofit organizations that was reported in a 2009 study from the Center of Philanthropy at Indiana University. This does not include the hours volunteered by bankers and their employees.

MBA’s study was released in conjunction with a video from the association, “Hometown Banks: The Foundation of Our Communities,” that shows how banks affect the livelihood of their communities. In the video, two Missourians share how their local hometown banks provided funding for their business and community projects.

Both the video and report are available at mobankers.com. 

The study and video was funded by a grant from the Financial Education and Advocacy Initiative Inc. (FEAI). Operating as an independent 501(c)(4), FEAI’s mission is twofold — to educate policymakers and the public on issues important to banking and to help elect candidates who will address those issues.
               
The Missouri Bankers Association is a statewide trade and professional organization in Jefferson City that represents the interests of more than 280 banks and savings and loans in Missouri. MBA serves as the principle advocate for the Missouri banking community and provides educational opportunities, products and services that assist bankers with enhancing their banking operations. For more information, visit mobankers.com.

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