estate financing, but it claims to be a bank helper rather than a competitor. "We see ourselves mostly as a cooperative entity with the banks instead of a direct competitor," said Michael Smith, vice president of investment operations for Equitable Agribusiness, St. Louis, a subsidiary of Equitable Life Assurance. Such an assertion is odd to many agriculture bankers, who consider insurance companies' main target - real estate lending - a key ingredient in the banker-farmer relationship "My personal view is that they are direct competitors," said Marc Degenhardt, executive vice president of $115 million Exchange National Bank, Marysville, Kan., which has no relationships with insurance companies. "Unfortunately," he asserted, "I think they are not the type of lender that has the long-term commitment to the communities like the local bank." Insurers are longtime lenders on farm mortgages, mainly seeking the long-term credits as one of many investments for the premiums they receive from life insurance policyholders. Life insurance companies held $9.5 billion in farm mortgage loans at the end of the second quarter, according to the Washington, D.C.-based American Council of Life Insurance. Although that's a small portion of the life insurance industry's $211 billion in total property loans - most are for commercial real estate - insurers still have a nice slice of the roughly $70 billion-asset farm real estate market. Life insurance companies held 14% of all agricultural mortgage loans in late 1994, according to data Metropolitan Life Insurance Co. compiled from the U.S. Department of Agriculture. Commercial banks had 29% of farm real estate loans and the Farm Credit System 34%. The insurance industry's history in farm loans dates to the beginning of the century. Many initially entered the arena around World War I, after government pleas for help to finance the production of food and fiber, said Leo Rasmussen, senior vice president of MetLife's agriculture investment department. "There was a big build-up of insurance companies doing a lot of agriculture mortgages up until the late 70s and early 80s," said Mr. Rasmussen, whose department is based in Overland Park, Kan. "Then, when the recession hit ag in the early 80s, a lot of companies got out." In 1980, life insurance companies had $12 billion in farm mortgage loans, according to USDA data provided by MetLife. Their farm loans have been between about $9 billion and $10 billion for the last five years, according to the American Council of Life Insurance. Only four insurance companies have maintained more than a $1 billion portfolio of farm loans since 1980, according to the data: MetLife, Equitable Life Assurance, Prudential Life Insurance Company of America and John Hancock Mutual Life Insurance Co. Equitable's Mr. Smith said that in the last two years, some insurers have re-entered the business. "That's primarily because the return on an ag investment looks pretty good compared with the alternative investments," he commented. Insurers say that historically they have worked with community banks rather than against them. "Most of the smaller rural banks aren't interested in long-term financing," said MetLife's Mr. Rasmussen. "They're interested in the shorter-term operating loans." "We work well together with the rural bankers of America," he said, adding that the primary competitor of both banks and insurance companies is the Farm Credit System. Jerry Jones, president of $110 million-asset Farmers State Bank, Fort Morgan, Colo., concurred. "They typically are looking at much larger loan deals than what we would look at to fund," he said. "In many cases, we actually are working with them." Mr. Jones, himself a farm lender for MetLife for three years in the 1970s, said much of his business then was from bank referrals. Today, Farmers State gives farm mortgage customers it can't accommodate contacts at insurance companies and Farm Credit. "Unless you can develop another funding source, it really kind of locks banks out of being in direct competition for that type of business," he said. However, not all agriculture bankers see a friendly relationship with insurance companies. Mr. Degenhardt said Exchange National has had "extreme pricing pressure" from insurance companies on farm loans. "Ag at this time appears to be an arena they want to be in," Mr. Degenhardt said, predicting that "they'll be out of it in three or five years." David Tribble, president of $160 million-asset Farmers Bank of Northern Missouri, Unionville, said that insurance companies aren't a prominent lending threat in his area. He's more concerned about their recent foray into automobile credits. "They're doing two or three a week," he said. Asked about expanding into other types of farm lending, Mr. Smith said other credits likely would not be the longer-duration assets Equitable seeks for policy holders. However, Mr. Rasmussen said that MetLife would consider large operating accounts or other large deals. "We really don't expect any more head-to- head competition with the typical rural banks, because we are talking to clients that are larger than they would handle," he said.

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