The Farm Credit System is back.

After years of anemic growth, its government-sponsored enterprises are expected to post solid gains in 1996 and 1997, according to a recent report by the Department of Agriculture. At the same time, farm lending by banks is showing signs of slowing after years of frenetic growth.

"Last year, for the first time, we saw a fairly substantial jump in the Farm Credit System, especially in real estate lending," said Jim Ryan, a Department of Agriculture analyst. "The Farm Credit System may be getting more aggressive in getting share."

The resurgence of the Farm Credit System is another demonstration of how nonbank competition is stepping up in virtually every area of lending.

On the agriculture front, federal projections tell the story.

Driven by real estate loan growth, the Farm Credit System's portfolios will swell by between 4% and 10%, to as much as $44 billion, in 1997, according to the Department of Agriculture report. Portfolios grew by more than 5% in 1997.

The 1996 and 1997 estimates represent a sharp break from the system's stagnant performance in the wake of the farm debt crisis of the mid-1980s, when the Farm Credit System was wracked by loan losses and customer flight.

From 1988 to 1995, the system's agriculture portfolio remained stagnant, at about $37 billion, according to the department's report.

Meanwhile, banks' agriculture portfolios are expected to grow by between 1% and 5%, to as much as $64 billion, during 1997, the report said. Banks boosted portfolios an estimated 2% in 1996.

Such expansion is anemic compared with the whopping 46% growth banks' agriculture portfolios posted from 1988 to 1995, according to the report.

Competition from the Farm Credit System is not the only reason for the bank falloff, sources said. Banks face other competitors, such as finance companies. Also, farmers, flush with cash from record prices in 1996, are paying down their debts.

But the Farm Credit System, with its quasigovernmental status, is a prime target for banker gripes.

"Farm Credit is coming on strong," said John Blanchfield, an associate director for the American Bankers Association, who added he can envision increased tensions between agriculture bankers and the Farm Credit Banks.

Michigan is shaping up as a battleground between the two groups. According to a 1996 study by the Federal Reserve Bank of Chicago, 65% of farm bankers saw an increase in competition from the government-sponsored enterprises.

Charles W. Thorley, chief executive officer of $148 million-asset Eastern Michigan Bank, Croswell, said banks are hard pressed to compete with the Farm Credit System on rates.

"We have, on a few occasions, lost customers because of pricing; more than a few," Mr. Thorley said.

Dave Armstrong, chief executive officer of Farm Credit Services of Eastern-Central Michigan in Lapeer, said the enterprise has posted double- digit loan growth over the past years. That expansion should taper to single digits in the future.

"We've built some significant market share," he said. "We have focused on gaining some of the business we lost in the mid-1980s."

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