Southwest Bank of Jennings, La., is only three years old, but it is already one of the most active lenders in a federal program for agricultural loans.
Last year, the bank wrote $21 million of loans under a program through which the Farmers Home Administration guarantees 90% of the loan amount. This year, bank officials expect to double their volume, selling the bulk of the loans on the secondary market.
Southwest, with assets of $23 million, was founded in 1990 with an FmHA-lending specialty in mind. It has become a leading Farmers Home Administration lender because many other ag lenders, pointing to burdensome paperwork and tough restrictions, avoid the program.
But the FmHA is about to issue new rules intended to speed up the process. And Southwest hopes a streamlined system will enable it to expand its farm lending, largely the domain of small banks, throughout its region.
"We're studying the bank regulations in Arkansas and Mississippi" with a view to lending there, said CEO Tom Pousson. "And we just got an O.K. to set up loan origination offices in 75 counties in Texas - which is a land area larger than the state of Louisiana."
Southwest was founded in 1990 explicitly to concentrate in lending under the federal program. It focuses on the area's rice, dairy, and crawfish farmers.
So far, the lending is turning out to be profitable pursuit, Mr. Pousson said.
"We bought a troubled bank from the FDIC to start Southwest, and selling bad assets at a discount wiped out our profits in '92. But we earned $500,000 in '91, and we expect to return 1% [on assets] this year, 2% next year, and even more down the road."
Mr. Pousson spent nine years as an FmHA county supervisor before joining his first bank in 1979. He hopes the streamlined rules will help his bank make $ 1 00 million in ag loans annually.
The rules will be published on Friday, and while it is not known precisely what they will do, Mr. Pousson said they are vital to farmers because they will make borrowing easier for them. Their land values have plummeted - and their collateral has dwindled with it.
Streamlining was mandated by the Agriculture Improvement Act of 1992. Bob Bonnet, who heads lending programs at the agency, said the new rules will improve lending, to a point.
"You'll see things picking up somewhat, but we'll have to see how much demand is really out there."
Mr. Bonnet said guaranteed real estate lending is up 15% this year because of favorable interest rates, and guaranteed operating loans are up about 2%. However, he still expects to have money left over for operating loans at the end of the year.
He agrees that Southwest is probably the program's most active participant, but does not think paperwork alone is stifling loan demand.
"Paperwork is part of it, but I think a lot of banks oppose their 10% exposure [to the unguaranteed part of the loan]. Some banks think a loan isn't worth making if it wouldn't stand on its own, and other banks don't want the aggravation of servicing a loan that's weak."