LANCASTER, Pa. — When Mike Firestine became a banker more than 30 years ago, only a handful of lenders in the Lancaster-Lebanon area catered to farmers.
Now most of the banks in Lancaster County advertise that they serve farmers, and major ag lenders have entered the the state’s top agricultural county in the past few years.
“Banks know the value of lending to the No. 1 industry in Pennsylvania,” said Firestine, a senior vice president and ag lender at Fulton Bank.
This competition for farm customers has heated up despite a multiyear slump in the farm economy punctuated by oversupply, lost export markets and bad weather.
Ag lenders have many reasons to be interested in Lancaster, from the traits of the local market to the character of farmers themselves.
The simplest explanation is that Lancaster is a major hub in the Mid-Atlantic for agricultural services of all kinds — farm equipment, and seed and fertilizer sales as well as lending.
“It’s kind of like making the big leagues,” said Jay Shannon, the ag banking lead for BB&T in Lancaster. Shannon previously worked as an ag lender in northwestern Pennsylvania and the Delmarva.
In addition, Lancaster is a desirable market for banking in general, said James Malfregeot, BB&T’s market president who is based in the county.
Commercial banks hold almost $12 billion in deposits in the Lancaster market, an increase of $2 billion from 2010, according to the Federal Deposit Insurance Corp.
The county of a half million people has a diversified economy, plenty of wealth, and dollars coming in to the county.
It’s connected to the nearby economic engines of Philadelphia, Baltimore and Harrisburg, but it isn’t dependent on those cities, Malfregeot and Shannon said.
Five of the nation’s 100 largest agricultural lenders by dollar volume are active in Lancaster County, according to data from the FDIC and American Bankers Association.
The Farm Credit system, USDA Farm Service Agency and credit unions are not included in this count.
Most of the big lenders have entered the Lancaster market fairly recently.
BB&T came in 2015 with the purchase of Susquehanna Bank and expanded by buying National Penn Bank the following year.
Both of the local banks had agricultural lending operations, as did BB&T.
The North Carolina-based bank is the nation’s 15th largest ag lender, with $860 million in ag loans.
Souderton-based Univest landed in Lancaster County in 2016 and hired an ag lending director who had worked at National Penn.
Univest ranks 82nd nationally with $310 million in ag loans.
First Citizens Community Bank, ranked 60th, has one-third of its loan dollars committed to agriculture, by far the largest share of the five heavyweights.
The Mansfield-based bank entered southeastern Pennsylvania in late 2015 with the purchase of First National Bank of Fredericksburg. The company has $360 million in ag loans.
While BB&T, Univest and First Citizens all saw agriculture as a major selling point for Lancaster, the nation’s largest commercial-bank ag lender came to the county in 2008 for a very different reason.
Wells Fargo acquired Wachovia, which had 17 branches locally, to save it from collapse during the financial crisis.
Wells Fargo holds $6.6 billion in ag loans nationwide, though only 4% of its branches are in Pennsylvania.
Of the nationally ranked lenders, Fulton Bank has been in the county the longest.
The nation’s 14th largest agricultural lender was founded in the county over a century ago and is the biggest ag lender based in the Northeast.
The bank has $900 million in agricultural loans and is also the largest deposit holder in Lancaster County.
BB&T’s arrival in Lancaster County five years ago marked a new stage in competition among the county’s financial institutions.
In May 2016, LNP | Lancaster Online reported that four local banks, representing nearly a third of deposits in the county, had been bought by more distant institutions — BB&T chief among them — in little over a year.
Another set of banks from southeastern Pennsylvania quickly established a toehold in the county.
At least several of them said the many acquisitions might have disrupted customers’ relationships with their existing banks and prompted them to seek a new one.
In addition to banks entering from other counties, the Bank of Bird-in-Hand was founded in Lancaster County in 2013. The bank caters to Plain Sect customers, including farmers.
Despite the recent turnover, the number of commercial banks in Lancaster County has remained fairly stable for a quarter-century.
Of the 22 banks in the market today, more than a dozen advertise services for agricultural customers, and several banks in neighboring counties offer ag loans too.
Main Street Feel
BB&T has gone through its own changes. The bank recently merged with SunTrust to create Truist, the nation’s sixth-largest bank, though the new branding won’t appear immediately.
Pennsylvania is the northern extent of the bank’s territory, which extends south to Texas and Florida.
The combined company is managed as 24 regions that function largely like individual community banks. Local managers, such as Malfregeot, determine the types of clients to take on.
Lancaster hosts the headquarters for the region that covers the entire state besides Philadelphia. The location choice reflects the county’s desirability as a banking market and as a place to live, Shannon said.
Malfregeot and Shannon’s territory is one of several Truist regions that focuses on agriculture. The bank also serves swine producers in North Carolina and citrus growers in Florida, Shannon said.
The regional structure helps the bank maintain a Main Street feel while offering clients the certainty of a bank with a large balance sheet, Malfregeot said.
Farmers could use some certainty as they try to dig out from several years of trade wars and low prices.
Though well below historical highs, 2019 bankruptcy filings in the special category for family farms hit an eight-year high, according to the American Farm Bureau Federation.
The Chapter 12 process can be used to reorganize a farm’s finances, so these operations didn’t necessarily go out of business.
Still, 18 of the roughly 600 farm bankruptcy filings last year were in Pennsylvania.
Despite these challenges, Shannon said BB&T’s ag portfolio — including dairy loans made by the local banks that the company bought — has been doing well.
BB&T has added some dairy loans since entering the market, and is open to all sectors of ag, from poultry to mushrooms.
The bank also emphasizes lending to the Lancaster region’s plentiful agribusinesses.
While Truist generally looks for commercial projects with at least $1 million of credit exposure, Shannon prefers $2 million and up.
BB&T also offers insurance and credit card processing for these clients.
To Firestine, from Fulton Bank, there’s a lot to like about farmers as creditors.
They work hard to repay their loans and take only a modest amount out of the business for living expenses.
And with the average age of a farmer at 57, many farm transitions will likely take place in the coming years. Banks will need to help with many of those transactions, he said.
The way to succeed in ag banking, Shannon said, is to choose customers carefully and stick with them.
Shannon and Firestine both said agricultural lending requires a long-term commitment and bankers who know the industry.
Agriculture isn’t the only industry with up and down cycles, but it’s also not an arena a bank can just dabble in when farmers are having a good year.
“You can’t run hot and cold,” Shannon said.
While banks are keen to win farmers’ business, Shannon said farmers still need to present loan officers with a solid plan. That means, ideally, a quality of financial reporting that’s in line with the rest of the business world.
Shannon doesn’t expect a farmer to be an expert in accounting, but he does want that person to have a relationship with an accountant.
“They’re coming to borrow a million dollars. That’s a pretty big number. They should have a good understanding of what their business looks like on paper,” Shannon said.
Firestine said he has seen farmers improve at recordkeeping. He encourages farmers to set financial goals for themselves, and he appreciates those who keep an open mind and are willing to say, “I never thought of that.”
In the end, ag lenders say they hope to develop relationships that work out for both the bank and the farmer.
“Where can we really provide tremendous value to our clients? I mean, that’s really what this is all about,” Shannon said.