Agri Lending Slows Slightly

Farm Credit Services of Western Arkansas recently began distributing $4.5 million in patronage refund checks to its members for 2005. Patronage checks function like profit-sharing returns or dividends. County-by-county numbers were not available.

The firm distributed about the same amount to its members last year.

FCS is the largest of three farmer-owned financial cooperatives in Arkansas. It serves the state’s 41 counties west of Little Rock from Texarkana to Missouri.

Ken Knies, regional vice president of FCS in Fayetteville, said the firm saw its total portfolio at 2005’s end reach $600 million, up 7 percent from $560 million in 2004 and up 14 percent from $525 million in 2002.

Locally, FCS’s loan volume in was $56 million in Benton County and $60 million in Washington County, or a total of $116 million. Volume in the two-county market was $109.2 million in 2004, so 2005’s volume increased by 6 percent.

Knies said loan volume was up, but the number of customers is down slightly from the year prior.

FCS has branches in Fayetteville, Bentonville and Siloam Springs.

Officials at Rogers-based Pinnacle Bank had said they will pursue the agricultural lending market when the bank opened in August 2004.

Kevin Beasley, the bank’s executive vice president and chief credit officer, said that upon opening, the bank anticipated doing a lot of Farm Service Agency-guaranteed loans, but overall it hasn’t. However, the bank has done as many non-FSA loans as it had planned for.

The FSA, a division of the U.S. Department of Agriculture, guarantees up to 95 percent of the principal of loans for conventional lenders. The loans are most commonly used for beginning farmers who don’t qualify for conventional loans.

Beasley said one reason Pinnacle’s FSA program is sluggish, is because the price of farms has gone up recently. He said there’s a high demand for poultry operations by out-of-area folks looking to locate in Northwest Arkansas, therefore prices are up.

Beasley said land prices have skyrocketed in the market as both Benton and Washington counties transition into more urban areas.

And operation costs are up as well. The rising price of fuel and building materials has squeezed farmers’ margins, Beasley said, and making loans on a slim margin is harder to justify.

Pinnacle’s total agriculture loan volume is about $7 million, or about 10 percent of the bank’s overall loan portfolio, he said.

The largest agriculture lender in the area is First Financial Bank of El Dorado, which operates one loan production office in Fayetteville. Officials from the bank delined to reveal its agriculture lending volume for the two-county market.