October 2, 2008 / 8:38 PM / 11 years ago

Rural banks seen strong with money to lend

KANSAS CITY, Missouri (Reuters) - Rural banks in U.S. farm country are not freezing credit to customers like large money center banks, offering a bright spot in an otherwise gloomy economy, industry experts said on Thursday.

“It is a completely different story out there for the farm sector,” said Federal Reserve Bank of Kansas City economist Jason Henderson.

The Kansas City Fed has been meeting with and surveying bankers throughout the Great Plains recently, he said.

Despite a cascading credit crisis that has locked up loans for businesses and consumers around the country, small community banks in rural areas generally continue to hold interest rates steady, lines of credit open and are offering new loans, Henderson said.

The banks are able to do so because they rely on core deposits for funding rather than commercial financing from Wall Street investors, Henderson added.

They have also largely steered clear of the subprime housing loans that have battered the balance sheets of larger companies and they have low to no exposure to the derivative instruments that got many banking companies in trouble.

Henderson said bountiful harvests have largely kept farmers who borrow from rural banks financially strong and good credit risks, especially amid high grain prices.

The bright outlook stands in sharp contrast to the gloomy days on Wall Street and in Washington as U.S. lawmakers debate a $700 billion plan to rescue banking companies crushed by soured loans and investments.

Exotic, hard to price mortgage-based securities have created waves of fear about worthless or sharply devalued paper held by big banks and other financial firms.

The paralyzing freeze on new credit by big banks that followed has sent shockwaves through the economy and hit commodity prices and agricultural stocks hard on Thursday.

The shares of tractor maker Deere & Co, seed maker Monsanto Co and fertilizer producer Mosaic Co all tumbled.

Still, the view from the farmyard amid this turmoil is far less dire, credit market watchers said.

Agrium Inc, the largest U.S. retailer of fertilizer, chemicals and seed, has not seen any signs farmers face tighter credit, Agrium chief financial officer Bruce Waterman said on Thursday.

In Kansas, the largest U.S. wheat-growing state where farmers are now planting the new hard wheat crop that is used to make bread, Wall Street’s woes seem very distant.

Mark Lair, president of the family-owned Bank of Commerce in the southeastern Kansas town of Chanute, said loan quality was good, backed by assets such as farmland and machinery that were holding their value.

“There aren’t any alarms going off here,” said Lair. “Our loans are of very good quality today and our farmers are in good condition. There is not an economic Armageddon here.”

Reporting by Carey Gillam, Editing by Peter Bohan and Andre Grenon

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below