Although credit unions aren't known for making agricultural loans, the cooperatives are increasingly on the mind of farm bankers this year.

The Farm Credit System has caused controversy by attempting to open a credit union in Wisconsin. Though farm loans still make up a tiny portion of total credit union loans and agriculture lending in general, total credit union presence in the sector is growing at a rapid clip.

And some bankers expect credit unions to expand their reach.

"They want to get into small-business lending, and ag would fall into that category," said John "Gof" Thomson, chief executive of Wisconsin's $59 million-asset Bank of New Glarus, who said an area credit union recently undercut his bank on a quarter-million agricultural land loan.

Of the approximately $151 billion in farm debt at yearend 1995, credit unions' agricultural loans totaled $339 million. However, that's up nearly 46% from yearend 1993, much larger than the increase in banking industry farm loans and farm debt as a whole.

Commercial banks held $39.7 billion in farm loans at yearend 1995, according to Sheshunoff Information Services, an increase of just 9.6% from yearend 1993.

However, credit union executives said the industry in general isn't seeking big growth in the agricultural sector.

"I don't think there are any credit unions who are really interested in ag lending who aren't in it now," said Jack Sheets, president of Elkhart County Farm Bureau Credit Union in Goshen, Ind., one of the nation's top 10 credit union farm lenders. "I don't think that's a threat to any bank."

Farm lending remains a minuscule portion of credit unions' overall loan portfolio: Since 1993, just 0.2% of all credit union loans have been to agriculture, according to the Credit Union National Association. And 2.7% of all credit unions offered agricultural loans at yearend 1995.

Many credit unions don't target farm loans for several reasons, executives said.

For one, most credit unions are focused on serving a company's or organization's employees, not individual businesses, said Linda Givan, president of $22 million-asset Co-op Credit Union of Montevideo, Minn.

Rural credit unions like hers, with farmers in large numbers among its membership, see such lending is a natural. "We have been farm-oriented from day one," said Ms. Givan, who has a quarter of her loans in farming.

Mr. Sheets, who also heads an association of 13 similar institutions in Indiana, said many credit unions are hindered by their size.

"Credit unions in general are smaller than the community banks and really couldn't get involved in the risk of ag lending," he said.

However, his $165 million-asset institution has about $10 million in farm loans, or 10% of its portfolio.

Orlin Pankratz, loan manager of $75 million-asset Town and County Credit Union in Minot, N.D., said credit unions have advantages in the arena as well, though bankers might disagree with his reasoning.

He said the nonprofit institutions don't focus on making money. "The fact that we are member-driven, our primary goal is to try to meet the needs of our farm borrowers and keep them prosperous and on the farm," he said.

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.