When Jim Chambers worked at Farmers First National Bank, it was the No. 1 agricultural lender in Stephenville, Tex.

But since being acquired in the late 1980 by what is now NationsBank, Farmers First's agricultural focus has dwindled, he said.

If it weren't for the two local banks and the local Farm Credit System, farm borrowers "wouldn't have had anyone to go to," said Mr. Chambers, president and chief executive of $50 million-asset Town and Country Bank, Stephenville. He started the bank in 1978 after leaving Farmers.

Such views are not uncommon. Many community bankers in Texas say that some of their competitors in farm lending have pulled back after being acquired by bigger banks. And, like Mr. Chambers' bank, many have used this as opportunities to expand.

Mr. Chambers' bank picked up about $5 million in ag loans after the regional came to town and said other local lenders took on about $20 million in credits that the big bankers didn't want.

It's not just the out-of-state acquirers that are presenting opportunities. First National Bank of the Panhandle, for example, picked up a few new accounts when Texas-based institutions acquired banks in the area, said Gerald Berry, senior vice president, which contributed to a 17% jump in the bank's farm loans last year.

Overall, Texas banks with less than $1 billion of assets hiked their holdings of farm loans by about 8% last year, while banks with assets of more than $1 billion showed a decline of 1.7%, according to an analysis by the American Banker.

The question of farm loan availability was highlighted in the battle over legislation to opt out of the interstate branching component of the Riegle-Neal Interstate Banking and Branching Act of 1994.

Texas became the first state to opt out when Gov. George Bush signed the unanimously passed legislation on May 9.

Deputy Bank Commissioner Randall S. James told a special committee of the Texas House of Representatives examining small-business access to capital last year that the state's five biggest banks - NationsBank, Bank of America, Texas Commerce Bank, First Interstate Bank and Banc One - control about 50% of the state's deposits, but make about 8% of all loans to agriculture.

In testimony before the Texas House Financial Institutions Committee earlier this year, former Banc One chairman and chief executive Harvey Mitchell acknowledged, "Agricultural lending just isn't the market of the large Texas banks." But he said that the state's nine largest banks make 62% of all loans.

The Lone Star State first experienced interstate banking in the 1988, when NationsBank's predecessor agreed to take over the assets of Dallas- based First Republic Bank Corp., which had been seized by the Federal Deposit Insurance Corp.

Several regional banks have since entered Texas.

Some community bankers said agricultural lending was not affected by interstate banking.

Wade Porter said the Amarillo ag loan market still is dominated by his bank, $830 million-asset Amarillo National, and by Boatmen's Bancshares, which last year acquired the First National Bank of Amarillo.

And competition for larger cattle-related loans is intense from many lenders, although not from the local offices of other interstate banks, said Mr. Porter, executive vice president.

Though many of the big banks don't specialize in farm lending, many others - including banks, farm credit entities, government programs, and foreign bank agencies that lend but don't take deposits - make farm-related loans in the state.

"I don't think any quality ag loan went without a funding source if they tried hard enough," said Danny Bishop, senior vice president in charge of agriculture correspondent banking for Texas Independent Bank.

Still, many farmers who lobbied for the opt-out bill believe prohibiting interstate branching will benefit their businesses and communities.

"I see (opting out) as a great boon for small business and for the ag industry," said Jim Selman, president of the Independent Cattlemen's Association of Texas and a rancher in Gonzales. "It's going to keep money at home that will be available for small business and ag."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.