Rabobank Group has no retail operations in the Midwest, but just the thought of the world's largest agricultural lender moving into the nation's heartland is making community bankers there a little nervous.
The Dutch giant has emerged as a force in California since entering the state with its acquisition of the $1.3 billion-asset Valley Independent Bank in late 2002, and it has made no secret that it is looking for acquisition opportunities east of the Rocky Mountains.
The $600 billion-asset company has not specified where it wants to expand and has set no timetable. But in a conference presentation this month, its head of U.S. operations told a gathering of agricultural lenders that Rabobank wants to be the "one-stop shop" for farmers in the United States that it is in the Netherlands, Australia, Brazil, and other countries.
"We better pay attention to them, or they have the potential to consume us very easily," said Steve George, the vice president of lending at the $158 million-asset Bank of Tescott in Nebraska, and a conference attendee.
Added Rick Adkins, the president and chief executive of the $126 million-asset Security National Bank in Laurel, Neb., "We as community bankers are going to have to sharpen the pencil, and start looking at our costs and our pricing."
Agricultural lenders in California, the nation's largest farm state, already know how aggressive Rabobank can be.
Since buying Valley Independent, which it has since renamed Rabobank, its assets in California have nearly tripled, to $3 billion, and its farmland loans have increased a whopping 2,900%, to $720 million. And it will probably be an even more formidable foe in that state when it completes a deal announced last month for the $1.2 billion-asset Central Coast Bancorp in Salinas.
At the American Bankers Association's agricultural lenders conference, community bankers got a glimpse of Rabobank's ambitions the minute they arrived in Omaha. The company recently launched its first retail campaign, and 400 bankers were greeted at the airport by eight Rabobank billboards that said, "Bring us your vision, we'll bring it to life."
Rabobank was also a sponsor of the conference. Its booth in the exhibit hall was among the most visited, according to John M. Blanchfield, the Director of the ABA's Center for Agricultural and Rural Banking.
But it was a presentation by Cor Broekhuyse, the head of the Americas for Rabobank, that most captured other bankers' attention.
Rabobank has been lending in the United States for more than two decades, but until recently it focused mostly on large loans to agribusinesses such as Archer Daniels Midland Co. and Cargill Inc. In his speech, Mr. Broekhuyse said Rabobank aims to replicate its success with retail banking in California in other markets.
Mr. Blanchfield said, "It was the most attentive I have ever seen an audience that big."
In a telephone interview, Mr. Broekhuyse said that Rabobank was focusing on closing its latest California deal and that it was not in talks to acquire other banks in the Midwest. (Rabobank has a finance company in the Midwest that lends to agribusinesses and makes operating loans to farmers.)
Mr. Broekhuyse said that Rabobank's size would give it an edge in lending to large farms, especially as the industry consolidates. But even if it does start buying Midwest banks, he said, community banks would still have an edge with their local farmers.
"There are always farmers who will stay at the community banks," Mr. Broekhuyse said.
Rabobank has such deep pockets, though, that it has the potential to make an acquisition that could shake up a market.
Last year Rabobank boldly tried to buy the $7.6 billion-asset Farm Credit Services of America in Omaha. It would have been the first acquisition of a Farm Credit System lender by a private-sector bank, but Farm Credit Services ultimately backed out of the deal amid fierce opposition from shareholders, farmers, and lawmakers. Bankers were put on notice, however, that Rabobank was dead serious about becoming a much bigger retail player.
For that reason, community banks have to stay on their toes, said Bank of Tescott's Mr. George.
Community banks could vie with the likes of Rabobank by sharing loans and emphasizing their relationships with customers, but they cannot take their positions in the market for granted, Mr. George said.
"There are banks out there that get lazy and think, 'Our customers are never going to leave,' and those are the ones that Rabobank is going to go after," he said.
Not all bankers see Rabobank as an 800-pound gorilla.
Gayle Kaalberg, the president and CEO of the $94 million-asset Farmers and Merchants Savings Bank in Iowa City, said that community banks successfully compete with larger banks and the Farm Credit System every day.
On the lending side, Mr. Kaalberg continued, community banks compensate for lower lending limits by participating in loans with other banks, and they compete on the funding side by using products offered by Farmer Mac and the Federal Home Loan banks. They also will be able to use their knowledge of farmers' operations and local decision making to win customers, he said.
"I think realistically, there is some apprehension and concern naturally, but I would not say I am terrified" of Rabobank, Mr. Kaalberg said.
