Banks Dont Fight For Ag Loans

July 21, 2003
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HOLLAND — A number of contacts with bankers in recent weeks indicated that such firms don’t often pursue agricultural lending as part of their book of commercial lending business.

In fact, some of them do no ag lending at all.

Yet it’s apparent that both family and corporate farm operations borrow heavily from time to time to finance anything from silo rows and irrigation systems to harvesting and planting combines — vehicles with six-figure price tags.

One firm that does work in the ag industry, however, is Holland-based Macatawa Bank.

Ray Tooker, chief lending officer, told the Business Journal that he suspects Macatawa probably does more agricultural lending than other commercial banks in the area.

“I don’t know that for sure,” he added, “and I can’t speak for the other banks, but that’s my impression.”

He said that the firm’s portfolio of agricultural loans probably is 7 percent to 10 percent of the company’s total commercial portfolio.

“So, out of a portfolio of $800 million,” he said, “ag lending probably would be $60 million, $70 million at any one time.”

“It’s not a huge amount,” he said, “but it certainly is an important part of our overall portfolio.”

He said Macatawa’s agricultural lending is a carry-over from the old FMB Bank in Holland, which did a great deal of farm business in the days before its acquisition by Huntington Bank.

“For us, it’s a throwback,” he said. “We had three or four fellows in the FMB days that did a lot of ag lending. And a couple of those guys have joined us over here at Macatawa.

“It’s something they know and are comfortable with,” Tooker said.

He explained the assessment of risk in agricultural loans could be daunting to a firm that does not have staff members who understand some of the ups and downs of ag lending.

“It can be a very tough business,” he said.

“A grower can do just about everything right, have a bumper crop — and the price isn’t there.

“A lot of variables come into play,” he added, noting that a late freeze in the spring can kill a fruit grower’s crop in the blossom stage.

Likewise, a hard rain at just the wrong time can remove so many petals that bees can’t recognize tree blossoms and thus fail to pollinate the next peach or apple crop.

“Or,” he added, “if you have drought during the summer and if you’re not set up to irrigate — well, the risk in farming just may be a bit higher than in other types of commercial lending.”

He said Macatawa’s farm portfolio has a mixture of client types.

“We have served a number of greenhouse operations — they’re an agribusiness — but we also still have a number of (customers) that are a little bit smaller in the dairy and poultry business. There’s quite a lot of turkey production in Ottawa County.”

But another factor also presents challenges to agriculture in Ottawa County.

“Because of all the development that’s going on,” he said, “a lot of agricultural land is simply becoming valuable for development purposes. So obviously that lends itself to smaller operators getting out of the business.”

Finally, he said, there’s also some stiff lending competition.

“Farm Credit Services is very active in West Michigan,” he said.

“We run against them quite often in ag deals and they’re very, very competitive from a pricing standpoint.”

He was referring to GreenStone Farm Credit Services, a Michigan-Wisconsin farmer-owned cooperative organized under the federal Farm Credit System that is a derivative of programs Congress originally established in 1917.

GreenStone, which was organized three years ago and is headquartered in East Lansing, claims to be a $2.6 billion entity with 15,000 members and 37 branches in the two states.           

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