Several years ago, First Security State Bank of Charleston, Mo., was just another agricultural-oriented community bank looking for a way to survive the vicissitudes of the farm world.

Today the $82 million-asset bank has a new lease on life. It has developed a promising lease-financing business, as well a consultancy that teaches other community banks how to do the same.

First Security and its sister bank in Caruthersville "are in the two highest-unemployment counties in the state of Missouri," said Don Burnett, president and chief executive of First Security and its holding company, Security State Bancshares. Their survival prospects probably wouldn't "be good at all if we didn't have something we could hang our hat on," he said.

Financing leases - predominantly for agricultural equipment, but also for commercial and municipal equipment and smaller items, including copiers - also has given the 25-employee bank a competitive edge, he said.

"I've been in this business 20 years," Mr. Burnett said, and until now "I have never had a product that the guy down the street didn't have."

He was attracted to leasing in 1988, after his bank bought about $1 million in leases from brokers. Though First Security had no leasing experience, management realized that there was lots of demand, he said.

Mr. Burnett now claims the "largest leasing department between St. Louis and Memphis," with a $12 million portfolio that includes roughly 20% of First Security's credits and relationships with 28 equipment dealers.

Mr. Burnett calls the risks of lease financing minimal. Delinquency rates on leases are no worse than on regular loans, he says, and his bank underwrites both the same way.

He cautions that bankers must be able to determine the value of the equipment at the end of the lease, when they will sell it to the borrower or elsewhere. First Security likes to stick to types of borrowers it knows, such as farmers, so it has turned down requests to finance leases in such high-growth categories as medical equipment.

As news of First Security's program spread, other banks started calling for advice, Mr. Burnett said. That's where the idea of the consulting service came from, he said. Leasing has different tax and accounting implications for borrowers and requires new knowledge and systems for bankers, he observed.

Investing about $150,000 in start-up costs for research, software, and facilities, the bank set up a subsidiary, BancLease, in early 1994. By the end of this month, the five-person operation will have trained people from 100 banks ranging from $10 million to $400 million in assets, Mr. Burnett said.

One of those bankers is Jerry Adams, president and chief executive of $22 million-asset Oakland State Bank, in Oakland, Iowa, which signed on in late 1994. It now has about 5% of its credits in agriculture-related leases and hopes to expand that to 20% in the next 18 months.

"It's been just a super, super program for us," said Mr. Adams, adding that lease financing brings his bank 300 to 400 basis points more than other kinds of lending.

"Net interest margins in all community banks are shrinking," Mr. Adams said. "They need fee income, they need alternate financing programs. This is another tool in the toolbox."

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