As head of Sanwa Bank California's agricultural lending department the 54-year-old executive has learned firsthand that one farmer's disaster can be another's bonanza. So when floods ravaged vegetable growers in some coastal regions of Northern California this year, he knew what effect the deluge would have on the bank's agricultural loan portfolio. "Some of our growers benefited greatly from the damage in the coastal areas because of the high prices caused by the shortages," said the 30-year banking veteran. Sanwa's agricultural lending department got its start in the same way. A major crisis in the mid-1980s launched the bank into the nation's upper echelon of ag lending. Changes in national tax law had eliminated much of the speculation that sent farmland prices soaring. Prices plummeted, from as high as $13,000 an acre to around $4,000. For Sanwa, the timing couldn't have been better. It meant that, as other banks retreated from the market, Sanwa was entering with a clean slate. Bank of America, for one, has cut its farm lending exposure from nearly $2.4 billion at yearend 1982 to about $1.5 billion early last year. Beginning in 1982, when his department was still part of Lloyds Bank California, Mr. Layne had 20 officers and a $47 million farm loan portfolio. Today the department has 30 bankers overseeing a $548.5 million book of ag loans. "In California, farmland prices didn't start to drop until about 1985 or 1986," said Bill Sayre, head of Agriculture Investment Associates and a farm banker retired from the former Continental Illinois Bank of Chicago. "Sanwa took the opportunity to jump in at that time, which proved to be very good timing." About the same time tax law changes were reducing land values, the state was coming into its own as an exporter of farm products. By 1993, California farmers and food processors were exporting $10.4 billion of agricultural products, or 12% of the national total. "This is an area (Sanwa) looked at 10 years ago and said, 'Japan and China will need high-value products in the future,' " said Eric Thor, a professor and director of the Center for Agribusiness Policy at Arizona State University in Tempe. As a result, Sanwa rose from ranking 44th nationwide in terms of dollars lent for agricultural purposes in 1982 to No. 3 for the past two years, the bank said. Only BankAmerica Corp., with $1.5 billion, and Wells Fargo & Co., with $827.2 million, ranked higher last year. Cumulatively, BankAmerica and Wells Fargo hold 58.4% of all ag loans in California, according to research by Bob Thompson, a professor of agribusiness at California State Polytechnic in San Luis Obispo. Throw in Sanwa, and the market concentration comes to a whopping 72.9%. By funding producers as well as processors who work with 70 to 80 crops, Sanwa was able to grab a growing share of a market that in 1993 generated cash receipts of $19.9 billion, well ahead of Texas' $12.2 billion and Iowa's $10 billion. Further, the California Department of Food and Agriculture estimates the industry generated $70 billion in related economic activities. It is the size and potential of this market that have lured back some players who left in the mid-1980s. While the latecomers are fighting an uphill battle against the Big Three and a thriving system of community banks, borrowers have been given a rare opportunity. "If a farmer does a good job, he can shop around for the best deal," said Cal State Poly's Mr. Thompson. "But the jury is still out on the overall availability of credit to the farm industry." And don't expect Sanwa to get caught up in the euphoria caused by the recent climb in produce prices. Mr. Layne and his team of lenders do not aim to make a killing in the heady times, nor will they pull up stakes when the market turns against them. "Our customers stick with us when things go well, and we stay with them when things get tough," Mr. Layne said. "As a result, we have a rolling chart instead of having peaks and valleys." But how does a conservative farmer react to a lender from a Japanese- owned bank? According to Mr. Layne, who has a dairy husbandry degree and owns a 30- acre citrus and ram farm outside Fresno, the name is not as important as the lender. "Initially, there were a few growers who expressed concern," he said. "But we've found that people are more interested in who their account officers are, not who the stockholders are." And those account officers come from a variety of backgrounds. Some have grown up with the bank, some have come from outside the industry, and still others have been poached from rival farm lenders in the state. Serving farmers with an average of 391 acres - compared with a national average of 473 acres, the common thread tying together Sanwa's bankers is a long-haul commitment to the business, Mr. Layne said. "We have been able to take a good deal of quality personnel away from our competitors because these people wanted to take a long-term approach to this market," he said. "And I have no question in my mind we have the best cadre of agribusiness lenders in the United States." So far, Sanwa's management is pleased with its investment. The bank has expanded to Nevada and Idaho and is looking at Oregon, New Mexico, and Arizona. As a result, the portion of the loan portfolio dedicated to agribusiness had grown to about 15% by yearend, Mr. Layne said, from 11% in the past several years. That share could grow to as much as 20% without sounding alarm bells in the executive suite, he added. "Our bank's executive management is totally comfortable with our exposure in the agribusiness portfolio," he said. "The bank has said this is one of our target market segments."

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