Iowan John McNutt is an agricultural banker's dream come true: He's stuck it out with the same bank for 21 years. In fact, the banking relationship probably goes back much further, said Mr. McNutt, who runs Elmira Farms, a midsize producer near Iowa City that raises about 3,300 hogs a year. His family has farmed the land since before the turn of the century, he said. Mr. McNutt believes a solid, long-term relationship with a bank committed to agriculture lending is worth more than a few basis points shaved off a line of credit. Mr. McNutt, on the board of directors of the National Pork Producers Council, recently discussed with American Banker the pitfalls both farmers and bankers encounter in the give-and-take world of agricultural finance.

Q.: What would make you leave a bank?

McNUTT: I know other farmers that have loan officers and people who are not in tune with the industry. One of the things that's difficult sometimes is that credit institutions sometimes have fads.

If there's something they really want to be involved with for a while, they say, "Let's lend money on this." Then all of a sudden things change and they go, "Oh, well, I guess we don't want to do that anymore."

That's not so much a personal problem, but I see that in the industry, especially the pork industry. People get really turned off by this in-and- out-type attitude on the part of credit institutions.

Q.: When did you last change banks?

McNUTT: I haven't.

Q.: Who is that?

McNUTT: Iowa State Bank and Trust in Iowa City.

Q.: What do you look for in a banking relationship?

McNUTT: Farming has lots of variances caused by markets and weather, so you need to have a pretty good understanding with your banker as far as flexibility. You need to have somebody you feel you can have a working relationship with, that you have a lot of trust in.

Q.: What have they done to keep your business?

McNUTT: They have personnel over the years that we have known and had a decent relationship with. We've had some changes in loan officers, and that was a problem for a while but that seems to have stabilized now.

Ag is not a real big part of their lending, but it's a portion they seem to want to take care of.

Q.: You're not looking to switch?

McNUTT: Again, it's long-term relationship. It's more than just a tenth- of-a-point of interest rate. As a borrower, if you're going to switch banks because somebody is a tenth less than your current bank, then it's pretty hard for you to bellyache if you have a poor crop year and you say, "I can't quite make all my payment this year" or "I have to refinance something a little bit."

You don't have a long-term relationship with them and they're more likely to say to you, "Gee, that's too bad, maybe you ought to find someplace else."

It's a give-and-take arrangement. You do shop a little bit, you try to stay competitive. But you don't try to cut it to its bare bones.

Q.: How have banks dealt with farmers' problems from the recent dip in livestock prices?

McNUTT: Generally, banks are pretty good about dealing with people in that respect. It doesn't do any good to be hard-nosed about such things.

A bank that sits there and says, "Well, gee I'm going to clean up here and I can't have any of this nonperforming debt on my books," then they don't have any customers in the future.

I think the smart banks are the banks that work with people and help them develop a plan to deal with whatever their current situation is. This is a long-term business. Most banks...know that it tends to be cyclical.

Banks may put the brakes on sometimes. They may say you have plenty of assets there, but your cash flow structure is getting to the point where you're going to have trouble meeting all your cash flow requirements. They may say, "Maybe you'd better slow down and deal with your current position (instead of) construction of new facilities" and that type of thing. That's a reasonable role for them to play.

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