- The first time that data
from the call reports on agricultural lending have been
made available to the public, farmers and the banks that
serve them.
- The first time that data
on farm lending have been available on a state-by-state
basis.
- The first time farm lending
analysis has been done by loan size.
The USDA’s report Credit
in Rural America, as an overview, states, "not all markets
and market segments are well served." This study provides
the data to help the family farm owner find the bank most
likely to meet their needs. It further raises concern about
the supply of credit to small farms with the decline of
the number of banks in the United States.
The following statistics illustrate
Advocacy’s concern:
- the smallest banks (<$100
million) have the largest average small farm loan to asset
percentage (11.4%);
- the largest banks (>$10
billion) have a small farm loan to asset percentage, some
100 times smaller (0.1%);
- the smallest banks make
53.5 percent of small farm loans, whereas the largest
banks make only 5.6 percent; and
- the smallest banks have
a small farm loan to total farm loan percentage of 79.4
percent, whereas the largest banks have a small farm loan
to total farm loan percentage of 29.6 percent.
Since this is the first study
on farm lending the practical question of how these figures
are changing over time, whether the supplies of bank credit
for the small family farm are growing or declining, cannot
be assessed. Plans to repeat this study next year will provide
preliminary findings on the changing credit availability
for the small family farm on a state-by-state basis.
Among the highlights of the
study are the following:
- Small farm loans totaled
$48.4 billion, and 1.7 million loans were made. Total
farm loans were $68.6 billion. Thus small farm loans were
70.6 percent of total farm loans. (Comparable figures:
Small business loans total $184 billions and total business
loans total $923 billion for a percentage of 19.9 percent.)
- The study identifies 446
banks that are small-farm-friendly—that is, have the highest
total rank of the variables Advocacy uses to measure farm
lending activity with loans of less than $250,000.
- These 446 banks hold only
1.6 percent of total bank assets, but 13.1 percent ($6.3
billion) of the dollar value of small farm loans outstanding
from all U.S. banks.
- Seven banks had at least
$50 million in small farm loans outstanding as of June
1997. These banks were in Idaho, North Dakota, North Carolina,
South Dakota, Nebraska and Wyoming.
- Five large banks with assets
in excess of $1 billion were found to be small-farm-friendly
lenders. These banks were in Alaska, Hawaii, North
Carolina, Rhode Island and Vermont.
The Office of Advocacy has
recently published three companion reports, the 1997 editions
of Small Business Lending in the United States, The
Bank Holding Company Study and Micro-Business-Friendly
Banks in the United States. The first study rank-orders
(within each state) all 9,293 U.S. banks in terms of their
small business lending. The second lists bank holding companies
that are top lenders to small business. In both studies,
a small business loan is defined as a loan of less than
$250,000. The third study rank-orders banks but uses a $100,000
loan size. Another report of interest is The Impact of
Bank Mergers and Acquisitions on Small Business Lending:
A Conference Report. It is the proceedings of a conference
the Office of Advocacy held October 9,1997 with the leading
researchers on the impacts of mergers on small business
credit availability.
Our readers have made many
helpful suggestions about the format of these reports, and
a number of them have been incorporated in past editions
to improve their usefulness, while preserving comparability
with earlier editions. Your comments and suggestions are
welcome on this new effort.
For those with access to the
Internet, the studies are available at http://www.sba.gov/advo/stats/lending/.
Copies of all four reports are also available by calling
the National Technical Information Service at (703) 605-6000.
Jere W. Glover
Chief Counsel for Advocacy
U. S. Small Business Administration
Introduction
The Small-Farm-Friendly
Banks in the United States, 1997 Edition, is a new study
published by the Office of Advocacy. This first edition
of the report provides information to identify the small-farm-friendly
banks in the United States. Because small businesses have
found our other studies useful, similar information is being
provided to small farms to help them meet their credit needs.
This report is a companion
to the more comprehensive study, The 1997 edition of Small
Business Lending in the United States, also known as
the "small-business-friendly banks" study. The small business
lending study ranks 9,293 reporting commercial banks that
provided small business lending data in their June 1997
"call reports" to federal banking regulators.
It is also a companion to
Micro-Business-Friendly Banks in the United States, 1997
which identifies the micro-business-friendly lenders—banks
with significant lending activity in loans of less than
$100,000, as well as The Bank Holding Company Study,
1997 which provided national data that consolidates
the information for multi-state bank holding companies.
This report goes beyond the
Department of Agriculture’s recent study, Credit In Rural
America, which covered aggregate data from the call
reports and other data sources and concluded that "not all
markets and market segments are well served" and there is
a "lack of competition in some markets."
This more detailed study should
encourage more competition among the banks that do not find
themselves listed and will help farmers find banks that
are interested in making small farm loans. The more successful
small farms are because of the increased competition to
meet their credit needs, the more successful small businesses
will be in their local communities.
This study follows the format
used in our other banking studies—the use of four criteria
to rank the small farm lending activities of banks. The
four variables are (1) the ratio of small farm loans to
total bank assets, (2) the ratio of small farm loans to
total farm loans, (3) the dollar value of small farm loans,
and (4) the number of small farm loans.
A total ranking for each bank
is derived from the bank’s decile rankings in these four
categories. Decile rankings range from 1 to 10. A 10 means
that the bank is in the top ten percent of all the banks
in the state, and a 1 means that the bank is in the lowest
ten percent of all the banks in the state.
Small-farm-friendly banks in
each state are identified based on their total ranking (column
1 of the master table). Included in his small-farm-friendly
listing are the top 10 banks or the top 10 percent in each
state—whichever number is smaller.
It is difficult to say categorically
which banks are best in lending to small farms; but these
are the most small-farm-friendly banks given the limitations
of the call report data base.
Small-Farm-Friendly
Banks in 1997
A total of 446 banks were identified
as small-farm-friendly lenders in the United States in 1997
(Table A). These banks, holding just 1.6 percent of total
commercial bank assets, had 13.1 percent ($6.3 billion)
of the total value of small-farm loans outstanding in June
1997 (Table B).
The dollar amount of small
farm loans ranged from $37,000 to $124 million in the 446
banks. The seven leading agricultural lenders with small
farm loans outstanding in excess of $50 million are:
|
First-Citizens B&TC |
Raleigh |
NC |
|
Bankwest |
Pierre |
SD |
|
First Intrst BK |
Sheridan |
WY |
|
Adams B&TC |
Ogallala |
NE |
|
Security St Bk of ND |
Hannaford |
ND |
|
First Fidelity Bk |
Burke |
SD |
|
Farmers NB |
Buhl |
ID |
Table A. Distribution of Small-Farm-Friendly
Banks, June 1997
Table A. Distribution of
Small-Farm-Friendly Banks, June 1997
|
|
|
| <
$100 million |
324 |
6047 |
| $100–$500
million |
113 |
2590 |
| $500
million –$1 billion |
4 |
292 |
| $1–$10
billion |
5 |
300 |
| >
$10 billion |
0 |
64 |
| Total |
446 |
9,293 |
Notes: SFF - small farm friendly
banks
Table B. Total Assets and Small-Farm
Loans Outstanding of All Banks and 446 Small-Farm-Friendly
Banks, June 1997
| |
| 446
Small-Farm-Friendly Banks |
$65.8 |
$6.34 |
220 |
| All
Banks |
$4,046.4 |
$48.4 |
1,667 |
| SFF
Banks as Percent of All Banks |
1.6% |
13.1% |
13.2% |
Almost all 446 banks had their
farm lending in small farm loans (i.e., the ratio of small
farm loans to total farm loans for these banks is 1). Only
40 banks have their share of small farm loans to total farm
loans less than one. The share of small farm loans to total
assets ranged from less than 0.1 to 75 percent, for an average
value of 21.4 percent. Over 200 banks have more than 20
percent. Only 85 banks had a percentage below 5 percent.
Table C: Ratios of Small Farm
Loans to Assets and to Total Farm Loans by Bank Size, June
1997
| <100
Million |
0.1146 |
0.794 |
| $100
Mil-$500 Mil |
0.0323 |
0.619 |
| $500
Mil-$1 Bil |
0.0117 |
0.499 |
| $1
Bil-$10 Bil |
0.0049 |
0.411 |
| >$10
Bil |
0.0013 |
0.296 |
Notes: SFL - small farm loans;
TA - total assets; TFL - total farm loans
Table D raises concern at what might be happening to small
farm credit with the mergers and acquisitions that are occurring.
For example, while small firms only rely on the smallest
banks for 18.9 percent of their bank loans, small farms
rely on the smallest banks for 53.5 percent of their loan.
Table D: Bank's Share in Small Farm Loans, by Bank Size,
June, 1997
| <100
Million |
34.81 |
18.9 |
25.85 |
53.5 |
273.22 |
6.8 |
6,047 |
| $100
Mil-$500 Mil |
52.19 |
28.3 |
13.91 |
28.8 |
508.25 |
12.6 |
2,590 |
|
$500 Mil-$1 Bil |
13.82 |
7.5 |
2.26 |
4.7 |
199.15 |
4.9 |
292 |
|
$1 Bil-$10 Bil |
34.68 |
18.8 |
3.64 |
7.5 |
914.28 |
22.6 |
300 |
| >$10
Bil |
48.77 |
26.5 |
2.7 |
5.6 |
2,151.48 |
53.2 |
64 |
|
All Banks |
184.28 |
100.0 |
48.36 |
100.0 |
4,046.39 |
100.0 |
9,293 |
Note: SF SBL - small business
loans
L - small farm loans
TA - total assets
$ - dollar amounts in millions
The Table: Small Farm-Friendly
Banks in the United States
The following table lists at
least one small-farm-friendly lender in each state. Included
in this listing are the top 10 banks or the top 10 percent
of the banks whichever is smaller. Because of different
banking structures in each state, as well as interstate
differences in the number of banks, their size distribution
and demand for small farm loans, the levels of small farm
lending for these top lenders differs greatly from state
to state.
Explanation of Columns
Column 1, Total Rank.
The total in the first column represents the bank’s overall
farm lending score within the state in which it is listed.
The number is the sum of the four decile rankings found
in columns 2 through 5. The best possible score is 40, which
indicates that the bank is in the top decile—the top 10
percent—in each of the four variable categories.
Column 2, Rank of the
Ratio of Small Farm Loans to Total Bank Assets (SFL/TA).
This column displays the bank’s ranking in the state for
the ratio of small farm loans to total bank assets. A ranking
of 10 means that the bank is in the top decile of all banks
in the state.
Column 3, Rank of the
Ratio of Small Farm Loans to Total Farm Loans (SFL/TFL).
The third column displays the bank’s decile ranking for
the ratio of small farm loans to total farm loans. A ranking
of 10 means that the bank is in the top decile of all banks
in the state.
Column 4, Rank of Total
Dollar Amount of Small Farm Loans Lent by the Bank (SFL($)).
This column shows the decile ranking of a bank’s dollar
value of small farm loans outstanding. A ranking of 10 means
that the bank is in the top decile of all banks in the state.
Column 5, Rank of Total
Number of Small Farm Loans Issued by the Bank (SFL(#)).
This column displays the bank’s decile ranking for the total
number of small farm loans. A ranking of 10 means that the
bank is in the top decile of all banks in the state.
Column 6, Bank Asset
Size Class. Here the asset size class of the bank
is defined.
- Under $100 million (<100M)
- $100 million to under $500
million (100M–500M)
- $500 million to under $1
billion (500M–1B)
- $1 billion to under $10
billion (1B–10B)
- $10 billion and over (>10B)
Column 7, Rank by Bank
Asset Size Class.
This column displays how well a bank is doing in its respective
asset size class based on the summary ranking found in column
1. Thus, a 1 in this column means that the bank ranks first
in its asset size class.
Column 8, Total Dollar
Amount of Small Farm Loans Outstanding (SFL($)).
This column shows, for each bank, the dollar value in thousands
of dollars of small farm loans outstanding.
Column 9, Total Number
of Small Farm Loans Issued by the Bank (SFL(#)).
This column displays the total number of small farm loans
outstanding.
Column 10, Rank of
the Ratio of Very Small Farm Loans to Total Assets (SSFL/TA).
This column is the decile ranking for the ratio of very
small farm loans of under $100,000 to the bank’s total assets.
Thus, a farmer looking for a micro loan would want to contact
a bank that ranks high in this column.
Column 11, Rank of
the Ratio of Larger Small Farm Loans to Total Assets (LSFL/TA).
Displayed here is an additional decile ranking of the ratio
of loans under $1 million to the bank’s total assets. A
farmer looking for a larger loan ( greater than $250,000)
should select a bank that ranks high in this column.
Bank Lending through
U.S. Small Business Administration Loan Programs
Small businesses seeking loans
from small-farm-friendly-banks should also seek out banks
that participate in the U.S. Small Business Administration’s
lending programs. If a bank participates in the SBA’s loan
programs and uses secondary markets extensively, the bank’s
ranking in this study may be artificially low. Banks participating
in the SBA’s Preferred or Certified Lender Programs should
be considered small-farm-friendly.
Limitations of the
Study
It is important to note that
the call report data tell only part of the story about lending
to small farms. Call reports do not reflect a major factor
affecting a bank’s ability to make loans to small farms:
the demand or lack of demand for small farm loans. This
phenomenon occurs on a regional basis. Banks in one area
of a state may have a strong demand for small farm loans,
which increases their score in comparison with other banks
in the state. Banks with a similar capacity to lend may
have little or no demand for small farm loans, resulting
in a lower ranking.
In addition, some lending information
may not be reported in the call reports or may not be discernible
as small farm lending. For example:
Banks may issue consumer credit
cards or other forms of consumer credit to small farm owners
for business purposes. These may be reported as consumer
lines of credit or consumer loans by some banks.
Large banks may make loans to small farm owners through
their consumer loan divisions, thereby classifying the loans
as consumer loans.
Large banks may send the farmer to a subsidiary finance
company.
Lending statistics by state for multi-state banks are becoming
less meaningful as these banks consolidate their accounting
and reporting systems.
Banks may list farm loan as business loans or business loans
as farm loans.
Despite these limitations, call report data provide sufficient
information to present a fairly accurate picture of lending
to small firms in the U.S. economy, and they are currently
the only source of small business lending data available
to the public.
Suggestions
Suggestions on how to improve
the study are welcome. Comments may be addressed to Dr.
Robert Berney, chief economist, telephone (202) 205-6875
or Charles Ou, economist, telephone (202) 205-6966, Office
of Advocacy, U.S. Small Business Administration. Or you
can reach us by e-mail at robert.berney@sba.gov or charles.ou@sba.gov.
Written comments may be sent
to: Office of Advocacy, U.S. Small Business Administration,
Mail Code 3112, 409 Third Street S.W., Washington, DC 20416,
or faxed to (202) 205-6928.
Accessing the Study
This study and the 1997 editions
of the companion studies, Small Business Lending in the
United States, The Bank Holding Company Study, and Micro-Business-Friendly
Banks in the United States are on the Office of Advocacy’s
home page on the Internet’s World Wide Web at http://www.sba.gov/advo/stats/lending.
The studies are also available
for purchase on paper or microfiche from the National Technical
Information Service, 5285 Port Royal Road, Springfield,
VA 22161, telephone (703) 605-6000.
