PNC Should Commit To Farm Lending

If PNC wants to make a splash in North Carolina, it would do well to finding a way to turn around the record established by RBC when it comes to making loans to farmers. A good portion of eastern North Carolina’s economy is driven by agriculture. It would not be a stretch to say that most of the money in the area is a product of farming.

Severn is a good example. Even though Severn only has about 1,000 people, it is home to one of the three roasting facilities for Hampton Farms. Hampton Farms is a producer of ultra high quality Virginia peanuts. Their peanuts are sold throughout the country. They make a good share of the peanuts that are sold by concessionaires at any major league baseball game. Severn, which is located in Northampton County, is not the only local roasting facility. Hampton Farms has another in Edenton (Chowan County) and then one in Missouri.

There are immediate opportunities to lend

All of those big farms mean lots of jobs. Just this week, the owners of a chicken plant in Siler City, North Carolina announced that they will shut down operations in October. The plant employs about a thousand people. Those are the only households that will be hurt, though. There are scores of local suppliers that raise chickens and then deliver them to the processor under feeder contracts.

The managers pointed to a lack of demand for chicken and in particular for the dark meat that they had planned to sell abroad. But should that mean that the business is extinguished. Recent news reports said that some local leaders are looking into establishing a farm co-operative which would buy the plant. This is a classic opportunity for a bank to make a difference by funding a business plan that is somewhat outside of the box. It isn’t a simple bit of work, but it is just the kind of enterprise that a good community development loan department should be able to accomplish.

RBC has lagged other banks in farm lending

The standard for gauging the sum of lending that a local bank should be offering could be commensurate with the share of deposits put in the bank by the local community. Any degree of under-performance means that the bank is essentially exporting capital out of the community.

This table compares the share of farm loans that RBC made in 2009 in a cross-section of Northeastern North Carolina counties with the share of deposits held by branches in the same places. The deposit data is from the FDIC and the loan data is from the FFIEC.

In Northampton, RBC has more than half of the deposits. That is why its record of lending only one of every five dollars to small farmers in the area should be seen as lackluster. RBC is being being not just by Southern Bank & Trust but also by Midland.

According to the USDA’s research service, there were fewer farms in North Carolina than in Pennsylvania in 2007. This data is the most recent available. In all there were approximately twenty percent more farms – 52,900 versus 63,200.