Fending off a broad array of rivals, the top 50 agricultural banks boosted their lending markedly last year.
The banks increased their holdings of agricultural loans by more than 11%, well ahead of the 7% growth in such loans posted by the banking industry as a whole, according to an American Banker survey.
The 50 leaders, ranked in the table at left, were culled from the 1,964 banks nationwide that have at least 25% of their loans in agriculture.
The top 50, all with assets of less than $500 million, have been battling not only larger banks but Farm Credit System entities and newer competition like credit unions and farm equipment companies.
"Commercial banks have been aggressive in ag lending over the past few years and have been able to increase their market share rather substantially," said Marvin Duncan, a professor of agricultural economics at North Dakota State University in Fargo.
Banks seeking to build their businesses have been aided by stepped up capital expenditures by farmers, he suggested.
"Farmers this past year have been somewhat more aggressive than they have been in some time adding new equipment," Mr. Duncan said.
But the business could get tougher for banks this year. Farmers, Mr. Duncan said, have less cash flow and are bracing for sharp cutbacks in government support. At the same time, equipment companies may become more aggressive in offering reduced or no-interest loans.
For banks, "I think ag loan growth is going to be hard to come by," Mr. Duncan said.
In 1994, the survey found, more than half of the top 50 managed to post double-digit growth. And one - Iowa's Shelby County State Bank - hit the triple digits. It posted a merger-related increase of 295%.
Though some money-center and regional banks have larger agricultural portfolios, the 50 banks shown in the table are notable for their commitment to the business. For 10 of the institutions, agricultural loans accounted for more than half of total assets at yearend.
The survey was based on recently released data from regulatory reports filed by banks.
Some of the top 50 credited their growth last year to the strength of specific crops in their markets.
First American Bank in Crookston, Minn., for example, was lifted by a booming sugar beet business, said Rod Nelson, chief executive.
Feather River State Bank, Yuba City, Calif., said it boosted its business by opening a branch in an area with many tomato growers.
"We have been fairly aggressive in attracting (ag) borrowing," said chief executive Robert Mulder. "A lot of the big banks have backed away from it."
As they look ahead, agricultural lenders have a long list of concerns, including the 1995 Farm Bill, increased competition and rural development lending. Topping the list, however, is the performance of local farmers.
"A huge concern for us always is: Are our customers profitable?" said Philip M. Burns, president of $70 million-asset Farmers and Merchants National Bank, West Point, Neb. "(We) can't do well unless our customers do well."
As a result, agricultural bankers' outlooks for 1995 vary greatly based on where they are, what they bankroll and how the crop or industry has done recently.
Livestock producers took a beating in 1994 as an abundance of products sent cattle and hog prices plummeting.
"Our customers did not finish a quarter in 1994 where they saw black ink," said Mr. Burns, whose agricultural loans are nearly 70% livestock- oriented.
However, most livestock producers had accumulated enough cash and equity in recent years to head off serious problems for banks last year, said Mark Drabenstott, vice president and economist at the Federal Reserve Bank of Kansas City.
"Most lenders would agree their portfolios are in good shape," he said.
Some agricultural lenders say the key to safe lending is product diversification.
Ronald L. Brown, president and chief executive of the Farmers National Bank, Buel, Idaho, said his business has benefited from being able to finance a range of products that includes dairy products, potatoes, sweet corn and other grains, dry beans, and sugar beets.
"Because of our diversification, we have seen good results," said Mr. Brown, whose bank is No. 24 in the ranking. "Our loan portfolio is in better shape because of those results."
Nebraska banks led the pack in yearend holdings, taking four of the top five slots. Banks in that state enjoy a huge demand for credit from two predominant businesses: cattle and irrigated corn production, Mr. Burns said.
But Kenneth Slominski, a Nebraska banker with about 90% of his loans in agriculture, is worried about this year.
The president of $180 million-asset First National Bank of Holdrege said recent years have brought his market a destructive frost, 100-mile-an-hour winds that have killed corn, and the dive in livestock prices.
"Some of our customers are having to sell assets to stay in farming," he said.
Meanwhile, agricultural lenders are trying to come to grips with consolidation in farming, said Bill Helming, a Lenexa, Kan.-based financial consultant for the agricultural and food industries.
"Anybody doing ag lending today needs to focus on that fact," he said. "They're going to be dealing with fewer and larger operators. However many ag lenders there are today, 10 years from now there will be at least 50% fewer."
He predicted that some will disappear altogether, while others will pursue other kinds of business.
