Think Global, Act Local

Growing for Agriculture—Suncrest Bank executives Peter Nutz, left, and Claran McMullan are spearheading a growth and acquisition strategy to serve the bank’s increasingly larger credit needs of its agricultural business customers.

Growing for Agriculture—Suncrest Bank executives Peter Nutz, left, and Ciaran McMullan are spearheading a growth and acquisition strategy to serve the bank’s increasingly larger credit needs of its agricultural business customers.

California bank grows to meet agricultural-market changes

By Karen Epper Hoffman

In the traditional market of agricultural lending, Suncrest Bank is an iconoclast.
Headquartered squarely in California’s mid-state farming center of the San Joaquin Valley, halfway between the urban meccas of San Francisco and Los Angeles, Suncrest Bank has been smoothly but assertively climbing its way up the community bank lending growth ladder, focusing on a combination of small-business and commercial lending and, most importantly, agricultural lending.

In fact, the Visalia, Calif. -based community bank has pursued an ambitious strategy of hiring young, talented loan officers and giving them lots of room to grow, and buying up smaller competitors in the region. As a result, it has quadrupled its asset size in the past three years to about $425 million in assets.

Most recently, Suncrest Bank acquired the $66 million-asset Sutter Community Bank in Yuba City, Calif., in mid-December 2015 and the $105 million-asset Security First Bank in Fresno, Calif., in September. As it stands, the bank is well on its way to meeting its goal of topping more than $500 million in assets by the fall of 2018, according to its CEO and President Ciaran McMullan.

“We’ve seen great strength in the agricultural industry here,” says McMullan. “It’s allowed us to build a more diversified portfolio and reduce concentration risk in all the major agricultural categories.”

Both McMullan, who joined Suncrest Bank in mid-2013, and the bank’s chief credit officer, Peter Nutz, who came on board a year later, entered the world of U.S. community banking through an unusual route. McMullan spent several years as an executive at National Australia Bank, and Nutz worked in various senior risk jobs at the Netherland’s Rabobank—all large foreign banks with an extensive history in growing their own agricultural lending portfolios.

And while both men admittedly bring a “global outlook” to their roles at Suncrest Bank, McMullan says that their approach also has been shaped by other positions they have held at banks in the Midwest and California. “We’ve learned about how to be good at identifying different kinds of credit risk, seeing things that work and don’t work, and approaching things from different angles,” he adds.

Their combination of international agricultural lending and their risk acumen and understanding of the U.S. community banking market has helped Suncrest Bank successfully navigate the agricultural market, deepening its position in agricultural lending and growing it to around one-third of its loan portfolio, according to Nutz.

Overseas and Midwest banking may have prepared McMullan and Nutz for their roles at Suncrest Bank, but California’s farming market is also different than their past experiences. California farms tend not to focus on the same mainstay crops, such as corn, wheat and cattle, as Midwestern farms and ranches do. Instead, the California farms that make up Suncrest Bank’s agricultural borrowers tend to grow table and wine grapes, citrus fruits and nuts. (California produces 80 percent of the world’s almonds, for example.)

These farms in the Golden State, which do not receive as much in the way of subsidies as Midwestern farms, are not as affected by the upcoming farm bill or traditional commodity prices. But they are affected by the worldwide exchanges for fruit and nuts, on which Nutz and his team keep a close watch.

“In California, farmers are growing 400 different crops,” Nutz says. “Each needs to be approached from a different financing perspective—pistachios to strawberries—all underwritten differently. It takes good training and experience to understand those risks.”

Under McMullan and Nutz, Suncrest Bank has become more sophisticated in how it views the international markets, on which its farmer-borrowers are more and more actively trading. “The challenge as lenders is that [our borrowers] have expanded to increasingly sell to China and the Far East and other markets,” says Nutz. “So we need to be able to act as both lender and advisor to them.”

Karen Epper Hoffman is a financial writer in Washington state.