In Riverdale, a town of just over 200 in south-central Nebraska, State Bank of Riverdale has been a fixture since 1907.

That's the year LaVerne Pratt's father - and Tim Pratt's grandfather - started what today has become one of the best farm lenders in the country, according to an American Banker analysis of agricultural lenders.

The $21 million-asset, one-office bank averaged farm loans at 80% of total loans for the period analyzed and reported average return on assets of 1.69%.

"You've just got to pick your niche and go for it," said Tim Pratt, vice president, who does most of the bank's farm lending and who has worked there 30 years. "You can't service them all."

The top farm bank was culled from banks with $3 billion in assets or less, holding at least 25% agriculture loans, loans to deposits of at least 65%, and average return on assets of at least 1% for 1992 through September 1995.

State Bank of Riverdale topped the list based on its performance in profitability, agriculture loan concentration and growth, and overall loan portfolio performance during the period.

The bank, the only financial institution in its town, had a loan-to- deposit ratio last September of 75%. Total farm loans were 82.9% of the portfolio. The next highest concentration was consumer loans, at 8.7%, and real estate credits - more than half secured by farmland - at 7.5%.

The bank reported 17% average annual growth in agriculture loans for the period analyzed, with only 0.3% of its loans not performing. Its ROA at Sept. 30 was a whopping 2.66%

Regarding profitability, it helps that the bank doesn't pay high certificate of deposit rates but does pay about 3% on NOW accounts, said president and chief executive officer LaVerne Pratt.

In terms of agriculture, the bank said it stresses personal relationships, just as many other small, rural banks do.

"We've had good customers that stayed with us ... some of them probably 50 years," said LaVerne Pratt, 77, who has been at the bank since 1937.

The relationships a farm bank cultivates with its customers are perhaps the most important factor in its success, said Larry Bitney, a professor of agriculture economics at the University of Nebraska.

"If the farmers are profitable, then the bank will be," Mr. Bitney said. "I think anything that the bank can do to increase the management skills of the producers would ultimately pay off for the bank."

Riverdale-area farmers raise mainly cattle, hogs, corn, and soybeans, said Tim Pratt. "We've got some pretty diversified farmers," he said. "Most have some grain and a little livestock."

But the area's reliance on cattle could foreshadow trouble; the cyclical industry has reached a level of overproduction that softens prices.

The bank is "in a fairly heavy beef-producing area, which could raise some problems in the future," Mr. Bitney said. By contrast, he said, beef farming had gone through "eight years of a good period. That could have been a help" in the bank's recent success.

Tim Pratt agreed that low cattle prices coupled with rising expenses could bring woe to his farm customers in the next few years. "Of course, it's like everything else," he said. "The good managers will come through."

The Riverdale bank's other concerns about the agriculture industry mirror those of their counterparts nationwide.

Consolidation has brought bigger farms, both Pratts said. "It takes more money to finance a farmer now than it used to," said Tim Pratt. "We have lost some bigger ones that are too big for us to service."

The lenders also are watching how farmers try to reconcile rising costs to finance a crop with the price they ultimately get for it.

"It makes it harder for the smaller farmer to make a go at it," said the younger Mr. Pratt. "The survivors are going to have to be good marketers" in forward contracting for prices.

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