The financial crisis that ripped through most of the countryduring the past four years had left the state of Iowa virtuallyunscathed.

Earlier this summer, unemployment was relatively low, homeprices were stable and farm incomes were on the rise.

And Iowa credit unions reported one of the nation's highestreturnon average assets during first quarter of 2012, according tothe NCUA's Quarterly U.S. Map Review.

But now, with the worst drought since 1936 bearing down on theHawkeye state, the first quarter's annualized 112 basis pointsworth of ROA could quickly evaporate.

THE WHOLE PICTURE: See the NCUA Quarterly U.S. Map Review

“The future for many of our members is very bleak right now,”said Denny Siemers, president/CEO of the $15 million Town andCountry Credit Union in Harlan, Iowa. “We live in the heart of farmcountry where a good crop helps the entire community and a bad cropcauses considerably less expenditures throughout the county.

“Right now, as in so many communities across the country, thedrought will be costing everyone dearly.”

Town and Country recently moved into a larger and more modernbuilding after posting a 3.11% ROA during the first quarter of thisyear.

“We are fortunate that our loans to shares are so high comparedto our peers,” Siemers said. “We try our best to provide the bestpossible rates in town.”

Siemers said that his credit union continuously markets to thecommunity through the newspaper, community involvement, radio,cable television and monthly newsletters.

“We have a solid reputation in the community,” he added. “Ibelieve this helps our bottom line.”

Siemers also credits risk-based lending with helping hisnumbers.

“I know this (risk-based lending) isn't the true credit unionmentality,” he said. “But we are still providing great ratesand service to our membership. Non-interest income andkeeping our staff numbers as low as possible has helped (ROA) aswell.”

But Siemers worries about his members who are affected by damageand losses caused by drought and excessive heat.

“Fortunately in our area right now, the crops can be still savedif we get some rain soon, but the yields will be down considerablyfrom our record last year,” he said. “Only time will tell thesenext 60 days how everything turns out.”

To offer the state some relief, in early August, AgricultureSecretary Tom Vilsack announced two new pieces of disasterassistance for farmers and ranchers impacted by the nation'sworsening drought, which included Iowa.

During the 2012 crop year by August, the USDA had designated1,584 unduplicated counties across 32 states as disasterareas—1,452 due to drought—making all qualified farm operators inthe areas eligible for low-interest emergency loans.

“Responding to my request, crop insurance companies indicatedthat producers can forego interest penalties to help our nation'sfarm families struggling with cash flow challenges,” said Vilsack,the former governor of Iowa. “The administration intends tocontinue helping those who farm or ranch and live and work in ruralAmerica through this period of hardship.”

Ottumwa, Iowa, where the $398 million Community 1^stCredit Union is located, is not on the Department of Agriculture'slist of disaster areas.

There, CFO Jim Holle is a little more optimistic.

“The economy of Iowa is primarily agricultural driven,” he said.“To continue to grow, Iowa as a whole will need to be able toattract and support additional and diverse industries. Theinfrastructure is in place so it's now just a matter of being ableto communicate the value of the educated workforce and the workethic of the Iowa population to businesses looking to locate.”Holle attributes his second quarter ROA of 74 basis points to thecredit union's growth.

“There were two new branches and a call center added in 2011,and another branch in 2012,” he said. “These operationsexpansions create a temporary drag on earnings, but all arecurrently on course to contribute positively to earnings. Wealso aggressively funded the (loan loss) allowance during thefourth quarter of 2011.”

Loan delinquency and charge offs have decreased over last yearfor Community 1^st and Holle saw this as a positive signfor his members and community charter.

“The economic indicators in our area suggest that the economicdecline is decreasing and is flattening,” he said. “While that isnot necessarily economic improvement, the reduction of the speed ofthe decline is an improvement.

“I believe that we are going to continue to bounce along thebottom for a while longer, and then slowly improve.”

In the Fort Dodge area, the retail center for north-centralIowa, the drought is not immediately affecting the $155 millionCitizens Community Credit Union, either. However, thecredit union is located in an agriculture-dependent area, sothe drought has the potential to adversely impact membership,President/CEO Sean Hanley said.

“Our membership has been primarily moderate-income, blue-collarindividuals,” Hanley said. “I think the economic crisis opened manyconsumer eyes in the world of financial institutions. We havedefinitely seen an addition in our demographic to includehigher-income, white-collar individuals.”

The credit union's 1.63% ROAA exceeds peer averages due tostrong loan demand and a loan to shares ratio of more than87%. Risk-based pricing also contributes to ROA, Hanleysaid.

“CCCU is a well-known indirect lender,” Hanley said, “and ourused auto loans are our most popular.”

Citizens Community's loan delinquency and charge offs havedecreased over last year and Hanley feels that this is a signthings are improving.

“Businesses are expanding again, as opposed to the last coupleof years where most businesses had a “bunker” mentality,” Hanleysaid. “This helps the local and state economy tremendously.”