Betting on the Farm

Top in Agricultural Lending—American State Bank’s lending team (from left) includes Dale Den Herder, the bank’s CEO and chairman; Mike Roetman, agricultural loan officer; Stan Speer, president; and Troy Broers, vice president.

Top in Agricultural Lending—American State Bank’s lending team (from left) includes Dale Den Herder, the bank’s CEO and chairman; Mike Roetman, agricultural loan officer; Stan Speer, president; and Troy Broers, vice president.

In tune with local to international developments, American State Bank lands as a top agricultural lender

By Karen Epper Hoffman

Acombination of increasing crop and livestock farming among new and existing customers, stable land prices and strong community ties have helped Iowa’s American State Bank beef up its agricultural lending portfolio last year. That local agricultural resiliency and strength also helped propel the bank—which posted a ratio of agricultural loans to total assets of 35 percent in 2014—to first place among this year’s top agricultural loan producing community banks with assets of $500 million or more.

The $746 million-asset American State Bank primarily serves the county surrounding its Sioux Center headquarters, a longtime leading area for both crops and livestock farming—including beef cattle, hogs, dairy farms and chicken farms. With crop and cattle prices increasing throughout the region lately, Stan Speer, American State Bank’s president, says he’s seen an unprecedented demand for loans to buy equipment and animals, upgrade and buy new facilities, and acquire more land.

“We have very strong land prices in Sioux County, among the strongest, if not the strongest in all of the state,” Speer says. Despite difficult economic times elsewhere, farmers in the Sioux Center area have been seeing a significant level of profitability in their operations in the last decade. Indeed, despite recent avian flu virus attacks, which forced farmers to euthanize more than 6 million chickens in the county already this year, Speer says that the varied nature of his customers’ agricultural business interests has kept the base quite stable.

“We’re seeing a lot of expansion of hog and cattle sheds, as well as chicken buildings,” he adds. “The strength in our market area is that we’ve always been diversified. Many parts of Iowa are row-crop farmers, and that’s all they do.”

But what differentiates American State Bank from its agricultural lending rivals in the area?

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Although Speer admits that loan demand for American State Bank has been strong all around, he believes that the bank’s particularly strong agricultural lending staff and loyal longtime customer base have buoyed its growth. “We want a customer for life,” Speer says. “So we know we are going to have good times and some not so good times. And we have stuck with customers as much as possible through progress and adversity.”

American State Bank has been frequently recognized as Iowa Farmer Lender of the Year. The bank’s lending specialists have been highlighted for their willingness to tap Beginning Farmer Program and other Farm Service Agency farm loan programs (often tax-exempt instruments to assist new borrowers to get lower interest rates) in an effort to get the best deal for the customer, Speer says.

Moreover, as a family-owned community bank, American State Bank typically is very responsive to its agricultural borrowers, which includes eliminating requisite layers of approvals. “We really use all the tools that are available to do what’s best for the customer,” Speer points out.

Also, the bank has made an effort to adjust its lending portfolio to meet the credit needs of its local agricultural and agribusiness community. A decade ago, American State Bank’s loan portfolio was roughly 45 percent agricultural, 45 percent commercial and 10 percent consumer. Today, the mix has shifted to a lower 35 percent commercial and 55 percent agricultural. “Our foundation is still agriculture,” Speer says.

To ensure that the bank stays the course of a balanced portfolio, Speer says earlier this year American State Bank formed a new executive risk committee, which will measure and track eight different types of risk (including, for example, cattle risk) that could affect the bank and its loan portfolio. The committee met in April to discuss the huge concern of avian flu, which has been mowing down entire flocks at some farms.

“We have always assessed risk,” says Speer, “but with commodity prices lower … we have to have those backstops in place to monitor risk more closely.”

How will American State Bank continue to grow its agricultural lending, in the face of pressure on U.S. farms and the risk of animal disease and crop loss? Speer says, “It goes back to good people in our ag leadership.” From a technical standpoint, he explains, the bank’s managers and staff really know their local marketplace and their specific region very well. They can spot and adapt quickly to shifts in local demand, moods and developments—which, in turn, can emanate from national and international developments.

“We have been very strategic and intentional in our efforts to handle loans for local people whom we know and we believe to be successful, rather than just buying a bond portfolio,” which might be more stable but offers weaker earnings than agriculturally based commercial loans, Speer says. “It is not at all wild and crazy; it is a very intentional strategy.”

In the same fashion, American State Bank’s agricultural borrowers are also evolving—continuing to become more sophisticated than the family farm of old. The bank’s typical farm customer is “more of a business with larger operations and more people in production and more people concentrating on marketing and financial decisions,” Speer offers. As a result, the bank is trying to meet those increasingly savvy business needs by providing agricultural businesses with continued education on agronomy and regulatory influence.

“Agriculture is going to face more cost and inconvenience by expanded regulatory issues,” he points out.


Karen Epper Hoffman is a financial writer in Washington state.

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