The outlook for agriculture is strong, according to an American Bankers Association report, and some banks in the Ozarks are increasing their agricultural lending as operations expand, especially in poultry and row crops.
The ABA’s 2011 Farm Bank Performance Report, issued in March, cites U.S. Department of Agriculture statistics and shows a 2011 estimate of nearly $110 billion in net farm cash income – a record amount that is 19 percent higher than the previous record set in 2010 – attributed to high commodity prices and ample harvests.
The report also offers a 2012 forecast of $96.3 billion in the U.S., with rising crop receipts and a slight drop in livestock sales. Though lower than 2011, the forecast is still $15.9 billion higher than the 10-year average of $80.3 billion, according to the report.
Representatives of several local banks pinpointed rising values of farmland equity – land, equipment and cattle – as well as rising commodity prices and regional growth as three factors that create lending opportunity in agriculture.
David Cribbs, chairman of the board for Bank of Bolivar, said many farmers are experiencing rising values for farm assets, which makes them good loan candidates.
“If they wanted to sell out and had a loan that was initiated five or six years ago, they’re probably worth 20 [percent] to 25 percent more than they were,” Cribbs said.
Bryan Allison, a branch manager and senior vice president for Bank of Bolivar, said he expects more growth in farm lending, but drought is an ongoing concern.
According to data from Federal Deposit Insurance Corp. call reports, Bank of Bolivar’s loan portfolio was at $131.9 million as of March 31, with $23.5 million in agriculture loans. Since 2007, the overall portfolio and farm-loan portion increased at roughly the same rate of 26 percent, according to the call report data.
Allison noted that drought may inhibit increases in cattle values, but supply still favors beef producers. According to local bankers, taking land out of hay production to use for crops such as soybeans and corn helps row-crop farmers benefit from higher commodity prices, but it can lead to higher hay prices for beef producers.
Farmland values, however, haven’t suffered during the credit collapse of the last half-decade, said Brett Magers, credit officer at Legacy Bank in Rogersville.
“It’s actually not been bad to be an ag-heavy bank. It’s been the other stuff that hurt us,” Magers said.
Call reports show Legacy Bank had an $87.4 million portfolio, with $26.7 in farm loans, as of March 31, and while total loan values have held steady, farm loans have grown to 30 percent from 23 percent of the portfolio in the last five years.
Magers said loan activity has picked up this year after a few years during which many farmers weren’t expanding or buying equipment.
Keran Lemons, loan manager with Arvest Bank, and Billy Claiborn, senior vice president of Old Missouri Bank, both said their banks have increased agriculture lending as a result of regional poultry operation expansions.
Bentonville, Ark.-based Arvest, which landed at No. 25 on the ABA’s report, and ranks farm lenders based on dollar volume, had roughly $415 million in farm loans at the end of 2011. According to call reports, Arvest had an overall portfolio of $7.4 billion with $423.3 million in farm loans as of March 31. In the last five years, the bank’s portfolio has grown 18 percent, and farm loans are up 72 percent, the call reports show.
Lemons said he expects more farm lending this year, but he noted that as the portfolio grows, constant percentage increases become more difficult.
Old Missouri Bank showed an overall portfolio of $116.3 million, with $42.8 million in agriculture loans as of March 31. The earliest available call report for Old Missouri – from June 30, 2008 – showed a portfolio increase of 59 percent and a 90 percent jump in agricultural lending. Claiborn said the bank is working for 8 percent to 10 percent overall annual growth, and the agricultural portion of the portfolio may grow at the high end of that range as well.
Bank of Bolivar’s Allison said conventional loans secured by crops, crop insurance, cattle or equipment carry rates of at least 5 percent, with options varying based on need and individual qualifications. There also are low-interest fixed-rate loans with Fannie Mae or Freddie Mac, and home equity lines of credit that carry a floating rate tied to the prime rate, but with a floor of 5 percent. For those with small farms, Magers recommended U.S. Department of Agriculture-backed loans, in which the government and the bank share the risks of financing. Another option is the Missouri Linked Deposit Program, through which more than $136 million in loans to small businesses and farmers have been made statewide since January 2009.
In June, O’Bannon Bank partnered with the linked-deposit program to make a $100,000 loan to Martin Swartzentruber, a Polk County dairy farmer, to help him build a dairy barn on his farm. Swartzentruber said the 4.5 percent interest rate on the loan is lower than a conventional bank loan, which will help him repay the loan faster.
“If a dairy farmer’s going to start milking right now, he better make pretty sure he doesn’t go too deep in debt,” he said.
This installment of Springfield Business Journal’s Architects & Engineers Project Report showcases 26 endeavors by area design and engineering professionals.
