Following the path it took in small-business lending, Zions Bancorp. is building itself into a nationwide player in agriculture lending.
Zions' purchase of a major farm mortgage lender in December, and a recent contract with Farmer Mac to service government-guaranteed loans, were intended to gain the Salt Lake City banking company a lucrative niche in what it expects to be a booming market.
On Jan. 3, the company announced it had bought the physical assets and employee services of the farm investment division of Ames, Iowa-based MBL Co. The unit, renamed Zions Agricultural Finance, now is a division of the holding company's lead subsidiary, Zions First National Bank.
In addition, Zions Bank contracted with Farmer Mac, formally the Federal Agricultural Mortgage Corp., to underwrite and service farm and ranch loans sold on the secondary market.
"We intend to significantly expand our agricultural lending sales force for this division in selected areas throughout the country," Zions chief executive Harris Simmons said in a press release. "Zions is poised to become the largest originator of farm and ranch loans sold through Farmer Mac."
The actions illustrated Zions' belief that government-guaranteed lending is a profitable niche, and they tie into the bank's strategy of carrying niche lending operations outside its western base.
"We have some product lines we have expertise with and can execute" anywhere, Mr. Simmons said in an interview. "As a bank we have focused on classes of loans we can originate and securitize and service without bulking up."
Zions' agriculture effort mirrors its small-business lending operation. Last year it created a St. Louis-based Small Business Administration lending subsidiary that expects to offer SBA loans in all 50 states before 1997 is over.
"It wasn't hard for us to figure this out because all we did was copy what we were doing in small business," Zions executive vice president David Hemingway said in an interview.
Joseph K. Morford, a banking analyst who follows Zions for Baltimore- based Alex. Brown & Sons Inc., applauded the bank's decision to wade into guaranteed farm lending.
"It fits in with Harris Simmons' approach of focusing on select businesses where they can gain a competitive advantage and add value," he said. "They see a tremendous opportunity here."
Before its sale to Zions for an undisclosed sum, the MBL unit had built up a nationwide farm and ranch loan portfolio of about $300 million, Mr. Hemingway said. Zions did not acquire the portfolio but did hire the roughly 10 employees.
Besides the principal office in Iowa, the division had sales offices in Illinois, Ohio, and Utah, as well as correspondent relationships in California, Oregon, and Florida.
