WEST DES MOINES - John Deere Credit in recent years has outpaced banks in farm-loan growth rates, revving up a multibillion-dollar equipment financing engine unmatched in the private sector.

Today, the financing arm of the giant maker of farm implements is the monster truck of equipment financing, claiming an agriculture credit portfolio second in size only to the Farm Credit System's.

Deere's success has broad implications for agriculture finance. Like the automakers, most major farm equipment companies have their own credit companies, which are significant contenders against agricultural banks for loans.

"The biggest competitor would be the equipment dealers," said Gary Meyer, executive vice president of $43 million-asset Peoples-Webster County Bank, Red Cloud, Neb.

John Deere Credit's parent, Deere & Co., Moline, Ill., has been financing the farm equipment it produces and sells for more than a century.

"I don't know that we really know when the first loan was initiated," said Deere's James R. Heseman, senior vice president, agricultural lending. "Some say John Deere did it himself."

Nonetheless, since Mr. Deere developed the steel plow 158 years ago, the company that bears his name has amassed an agricultural lending portfolio of about $3.2 billion.

Since 1986, when Deere & Co. consolidated all its lending under John Deere Credit, agriculture loans have jumped 50%, to $3 billion at the end of 1994.

In comparison, commercial banks' farm loans grew 23.7%, to $39.2 billion during the same period.

John Deere Credit's 1994 farm loans were up 7% from the total at the end of 1993; banks' grew 5.6%.

Deere's credit arm finances installment lending and leasing on Deere farm equipment. It also operates a revolving line of credit called Farm Plan based in Madison, Wis., that it offers through Deere dealers, other equipment dealers, and farm-related businesses nationwide.

Mr. Heseman, who joined John Deere in 1975 and held several posts nationwide before landing in Iowa last October, sees commercial banks and Farm Credit System lenders as his biggest competitors for farm financings, along with independent leasing companies, other equipment dealers - and cash.

John Deere Credit's edge, he said, is its relationship with its network of Deere equipment dealers and the convenience that lets customers buy and finance in one place.

The company also benefits from Deere dealers' incentive programs, such as deferred or low-interest-rate deals on equipment financing.

"If it increases the customer desire to buy ... we have the opportunity to finance that equipment for the customer," said Mr. Heseman from his corner office, looking not unlike a banker in his navy blue suit.

He acknowledged, however, that Deere lacks one thing that banks have: personal relationships and existing business with the borrower.

"I don't know that it's going to be a rate competition," Mr. Heseman said. "It's going to be a relationship competition."

Some bankers say they have more concern over borrowers' overall financial position than do equipment companies.

Dennis Themer, vice president of Kingfisher Bank and Trust in Oklahoma, said he feels that Deere sometimes loans money "to guys who probably didn't have any business buying a tractor."

"Then if the guy can't make his payment, he goes to the bank," Mr. Themer said. "If you don't loan him the money to make his payment, he doesn't have a tractor."

However, John Deere Credit maintains that it has a solid understanding of repayment ability though its dealers' long-term relationships with borrowers and its 14 credit analysts' evaluations of prospects recommended by dealers and sales managers.

"We're also relying very heavily on the piece of equipment," Mr. Heseman said. "The resale value of John Deere equipment is extremely high. That helps protect us against losses."

Loan losses for the credit company overall were 0.5% in 1994. Agriculture-related losses were "much less," Mr. Heseman said.

Today, agriculture comprises about 60% of lending, as the company expands its financing of commercial and consumer equipment and vehicles, including grounds care and construction equipment. But agriculture is still a main focus.

"I think there's opportunity for all of us," Mr. Heseman said. "I think competition is good for any industry. Obviously, I'm looking for a greater piece of the pie - and so are they."

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