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****Small-Farm-Friendly Banks in theUnited States****

This report contains research prepared by the Office of Advocacy of the U.S. Small Business Administration. The opinions and recommendations made herein do not necessarily reflect official policies or statements of the U.S. Small Business Administration or any agency of the U.S. Government. For further information, contact the Office of Advocacy, U.S. Small Business Administration, Mail Code 3112, Washington, DC 20416. Published October 1998.

The complete study is available on the Internet�s World Wide Web at *http://www.sba.gov/advo/stats/* or on microfiche from the National Technical Information Service, Springfield, VA 22161, tel. (703) 605-6000.

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Foreword

The U.S. Small Business Administration�s Office of Advocacy is pleased to release the first edition of *Small-Farm-Friendly Banks in the United States.*
Advocacy has followed small business lending in banks in different states since 1994, and reviewed how the mergers of banks impact the availability of credit to small firms.

This study extends coverage to highlight lending to the small farm. It provides information not otherwise available anyplace and helps small farmers identify banks in each state that are "small-farm-friendly" in terms of their lending in amounts under $250,000. Small farms are important to small business in rural America, and this study helps discern the changes occurring in this sector of the country.
***In essence this report is a first.
- 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. GloverChief Counsel for AdvocacyU. 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 NCBankwest Pierre SDFirst Intrst BK Sheridan WYAdams B&TC Ogallala NESecurity St Bk of ND Hannaford NDFirst Fidelity Bk Burke SDFarmers NB Buhl ID
Table A. Distribution of Small-Farm-Friendly Banks, June 1997

*Bank Asset Size**SFF Banks**All Banks*
< $100 million3246047
$100�$500 million1132590
$500 million �$1 billion4292
$1�$10 billion5300
> $10 billion064
Total4469,293
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

 *Total Assets (Billions of Dollars)**Small-Farm Loans (Billions of Dollars)**Small-Farm Loans (Number in Thousands)*
446 Small-Farm-Friendly Banks$65.8$6.34220
All Banks$4,046.4$48.41,667
SFF Banks as Percent of All Banks1.6%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 of21.4 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

Bank Size by AssetSFL/TASFL/TFL
<100 Million0.11460.794
$100 Mil-$500 Mil0.03230.619
$500 Mil-$1 Bil0.01170.499
$1 Bil-$10 Bil0.00490.411
>$10 Bil0.00130.296
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

Bank Size by AssetSBL$SBL$(%)SFL$SFL$(%)TATA (%)NO. BKs<100 Million34.8118.925.8553.5273.226.86,047
$100 Mil-$500 Mil52.1928.313.9128.8508.2512.62,590$500 Mil-$1 Bil13.827.52.264.7199.154.9292$1 Bil-$10 Bil34.6818.83.647.5914.2822.6300>$10 Bil48.7726.52.75.62,151.4853.264All Banks184.28100.048.36100.04,046.39100.09,293
Note: SF SBL - small business loansL - small farm loansTA - total assets$ - 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 *[email protected]* or *[email protected]*.

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. 

 
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