The bank watchdog arm of a Wisconsin agricultural group is concerned that farmers will face an increasing credit crunch as big banks gobble up more market share from small community banks.
In a study of Federal Deposit Insurance Corp. data, the Wisconsin Rural Development Center of Monona, Wis., found that community banks with assets under $100 million lost market share for farm production loans between 1995 and the first quarter of 1999. Over that period, their market share dropped to 37.3% from 51%.
Meanwhile, combined market share of the state's six largest banks increased to 36.7% from 34.8%. But total farm production loans dropped by 10.8% to $1.1 billion in 1999 from 1995.
"The smaller hometown institution has been the traditional source of credit for farm borrowers," said Marv Kamp, community reinvestment research coordinator for the Wisconsin group. "As these banks are bought out, financial resources are shifting to larger banks in cities."
From 1995 to 1999, the six largest banks in Wisconsin also increased their farm real estate loan share to 38.2% from 37%.
Banks with assets under $100 million saw their market share drop to 33.9% from 46.2%.