Agriculture Lending Boosts Orrville Bank’s Profits
ORRVILLE, Ohio -- One-third of commercial loan portfolio of First National Bank of Orrville consists of loans to farmers, including some in western Pennsylvania, says its president and CEO, Mark R. Witmer.
Its agricultural portfolio of $52.5 million at March 31 has increased by $37.1 million since year-end 2011. “The agricultural economy has been strong,” the CEO notes.
Another third is composed of commercial and industrial (C&I) loans, including those to “medical facilities and hotels,” says Witmer, and the remaining third is real estate lending. “It’s a good mix,” he remarks.
The composition of the $342.4 million loan portfolio is an anomaly among banks that serve northeastern Ohio, despite the role agriculture plays in its economy.
Serving farmers in eastern Ohio and into western Pennsylvania has helped First National Bank see its loans grow 20% in 2012 and another 20% last year, Witmer relates, “and we’re on a pace to exceed that this year.”
Business is so good that the bank, with assets just a hair shy of a half-billion dollars, anticipates hiring another commercial lender. “In the last three years,” the CEO says, “we’re the fastest growing bank in the state of Ohio.”
Witmer continues, “Our credit quality has never been better.” A quarter of the C&I loans are less than $250,000. “We’re truly engaged in small-business lending and demand has been real strong.”
Making loans to farmers “really is a specialty and you have to have people with experience in agricultural lending” before serving this market, Witmer says. “It’s a different business. There’s a lot of swings in commodity markets” that compel an ag lender to “to take a much longer outlook” than in other commercial sectors.
Over time, the price of farmland is more subject to great swings and the oil and gas boom of late has made farmland atop the Utica shale in eastern Ohio much more valuable. So agricultural lenders are more willing to extend credit secured by farmland as they keep in mind the volatility of agricultural assets, he says.
Editor's Note: This story first appeared in the June edition of The Business Journal.
Copyright 2014 The Business Journal, Youngstown, Ohio.
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