Borrowers Hard to Find, Farm Lenders Tell the ABA

WASHINGTON - Agricultural bankers say they have plenty of credit available but good borrowers are scarce, according to an American Bankers Association survey.

Virtually all the 250 bankers in the survey - 97% - answered affirmatively when asked if there was enough credit available in their areas.

But echoing the responses of commercial bankers to what has been characterized as a business and real estate credit crunch, 43% of the farm lenders said the number of qualified farm borrowers has declined.

Difficult Times

The ABA took the poll at its agricultural bankers conference in Kansas City last month.

"Creditworthiness of our customers has been hurt by a number of factors this year," said Jay T. Goodwin, chairman and chief executive officer of First State Bank of Canadian, Tex., which has $45 million in assets.

"We've had a substantial loss in cattle profitability and the drought has affected a number of areas of the nation, especially in the Midwest and in California," added Mr. Goodwin, chairman of the ABA's agricultural banking division.

Improving Risk Management

But while the pool of qualified borrowers may be shrinking, bankers may also be improving their management of credit risk.

Only 24% of those surveyed said their delinquencies are going up. A year ago, 39% reported a higher level of problems.

More than half said they have seen no change in delinquencies, the ABA said.

But farm lenders cited a number of potential problems for 1992, from increased Federal Deposit Insurance Corp. premiums to added competition from the federal Farm Credit System, nonbank lenders, and others.

In addition, new regulations - such as the requirement in the 1989 thrift bailout law that insured institutions obtain independent appraisals from licensed appraisers for larger loans - are causing worries.

The federal regulatory agencies have proposed rules that would require appraisals for properties valued at more than $50,000. They are considering whether the threshold should be raised to $100,000.

Sixty percent of the bankers in the ABA poll said there are not enough appraisers in their areas, and 75% said the appraisal requirement will add more than $200 to the cost of a loan. Of that group, about two-thirds saw the cost increasing more than $300.

Only 2% saw the impact under $100, and 18% said $100 to $200.

Certification More Difficult

"There's no question but that it's a greater expense," said Murry D. Lull, president and chief executive officer of Smith County State Bank and Trust Co., Smith Center, Kan. He estimated the added cost at $100 to $150 per loan.

While Smith County State Bank, which has $62 million in assets, began using independent appraisers several years ago, the appraisal law's certification requirement will make it more difficult even for banks that want outside estimates.

"We have only one qualified appraiser in our county, and he's spending a lot of his time going to school" to meet standards.

Other government programs are likely to prove increasingly helpful to ag bankers, however.

PHOTO : 1992 Trouble Spots For Farm Lenders "Biggest Issues" cited by agricultural bankers

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