Bolstered by acquisitions in the heartland, regional banks probably have more agriculture credits than ever.
Community banks still hold most of the agricultural lending business - 81% of total bank-held farm loans as of June 30. But the big banks are picking up respectable shares of the farm business in several key states as they buy up traditional farm lenders.
"Some of the large operators are being pulled into the big banks," said Voyle Chance, president of Fowler (Kan.) State Bank. NationsBank Corp. is about to arrive in Kansas by acquiring Boatmen's Bancshares, and Mr. Chance sees bigger agricultural accounts at risk.
Bigger banks "are able to attract big credits with good terms," he said. On the other hand, "for the small credits, we're holding our own."
The march of the regionals marks a fundamental change in agriculture lending. Farm lenders used to have only other small banks to compete against; now they are increasingly bumping up against the NationsBanks, the Norwests, and the First Banks in grappling for market share.
Large banks have been gaining farm-loan market share in minuscule amounts for years as the industry consolidated. But in 1996 - one of the best years for farm lending since the 1970s - the trend picked up steam, particularly as the larger banks actively moved into new territory through acquisitions.
Total farm loans held by banks grew 3.2% in the year ended June 30, one of the best growth clips in years. That's because farmers have borrowed heavily in 1996, after several years of subpar revenues.
Much of that growth is showing up at banks with more than $3 billion in assets, whose farm-loan portfolios surged an average of 9.2% during the year ended June 30, according to an analysis of balance sheet data from Austin, Tex.-based Sheshunoff Information Services.
By contrast, small banks increased their farm portfolios just 1.9% in the same period.
At the end of the second quarter, banks larger than $3 billion in assets held 19% of total bank farm loans, up 1 percentage point from a year earlier.
The trend is most marked in Nebraska. In 1995, Minneapolis' First Bank System Inc. bought two Omaha banks that catapulted the $37 billion-asset bank to become the largest farm lender in the state. First Bank's Nebraska farm loans doubled in the last year, to $182 million; companywide agriculture loans leaped 19%, to $429 million.
Bill Strausburg, chief executive of First Bank Nebraska, said it an aggressive compensation plan to retain seasoned farm loan officers after its acquisition of Firstier in August 1995. The bank's strategy has been to go after large farm and cattle operations.
"We've tried to keep the best commercial and ag lenders here," he said. "And we've enjoyed a very high retention rate."
Michael Jacobson, CEO of Western Nebraska National Bank, North Platte, is competing with First Bank every day for farm credits.
"It's been on price, mostly," he said. "They're trying to buy back a lot of the business they lost after the merger. They've been very aggressive."
