Robert Gaskill built The Bank on the failures of others.
He got his start in bank ownership in 1961 by buying a failed institution in Winona, Kan., from the Federal Deposit Insurance Corp. He went on to buy five more wrecked Kansas farm banks from the government or individuals in the 1970s through the early 1990s.
Mr. Gaskill had only a year of banking experience when he bought his first bank, but he has built all those broken pieces into a successful farm lender based in Oberlin and serving a 100-mile territory in northwest Kansas, a region heavy with corn, milo, and cattle producers. Indeed, according to American Banker research, The Bank is the best all-around ag lender in the country, based on a variety of loan and bottom-line performance indicators.
"I'm optimistic that we can continue to finance agriculture better than any production credit association (a Farm Credit affiliate) or local bank can," said the 67-year-old chief executive officer, who has been involved in the livestock industry for most of his life.
The Bank, which has $87.4 million of assets, certainly finances agriculture more profitably than most farm banks, according to figures from Sheshunoff Information Services.
Through the third quarter of 1996, 42% of The Bank's $56 million loan portfolio was invested in agriculture, according to Sheshunoff. The Bank generated a 1.77% return on assets through the first nine months of 1996 and a 20.5% return on equity, putting it in the 88th and 92d percentiles of its peer group, respectively.
From 1993 through 1995, its average return on assets was 1.72% and its average return on equity 20.3%, according to Sheshunoff.
The Bank even earns plaudits from a competitor, Russell J. Mullikin, chief executive of Farmers National, the other bank based in Oberlin, which has fewer than 2,500 people.
"They're good folks," Mr. Mullikin said.
Every good community bank has a niche, and The Bank is no different. It has found profit in financing young farmers in northwest Kansas.
The Bank considers these loans an investment in the future, Mr. Gaskill said. He estimated that most farmers in the region are pushing 60.
"We have a real problem with young farmers staying on the farm," he said. "It's a real problem facing us for the future of agriculture."
Mr. Gaskill is a stickler for underwriting. The bank requires three years - preferably five - of tax and financial statements. It then uses an in-house program designed in the early 1990s to analyze loan applicants' cash flows, efficiency, and expenses.
Nevertheless, drought and low beef prices in recent years have taken a toll on the northwest Kansas farm economy and, in turn, credit quality at The Bank.
In the third quarter of 1996, The Bank had a nonperforming-loan-to- total-loan ratio of 2.48%, putting it in the 18th percentile of its peer group, according to Sheshunoff. That's up from a 0.67% ratio at the end of 1995.
Mr. Gaskill said that ratio is being driven down, thanks to improving conditions. In any event, these delinquencies are nothing compared to what midwestern agriculture lenders saw during the farm crisis of the 1980s. Mr. Gaskill hung on back then, but he said that credit analysis alone didn't save him.
"It's always luck; it isn't anything but luck," he said. "It wasn't any brilliance on my part or advance planning on my part or that I knew it was coming."