RESULTS OF BANKER'S SURVEY 



Questionnaires were mailed to all 175 commercial banks in Montana. Total re- 

 turns including those collected by phone were 119» or 68 percent of the total con- 

 tacted. Out of the 119 returns, 96 or 81 percent handled either farm real estate or 

 farm operating (non-real estate) loans. Twenty-three or 19 percent of those return- 

 ing questionnaires had no farm loan business. 



MORE OPERATING LOANS REFUSED THAN NORMAL 



Since January 1, 1984 an average of38 loans per bank were submitted for 

 formal loan approval. About 31 percent of the real estate loans were refused com- 

 pared with a normal reported average of 34 percent. Non-real estate loan applica- 

 tions are a different story. Twenty-seven percent of the operating loans were re- 

 fused compared with a normal of 21 percent. 



FEWER QUALIFYING FOR FINANCING THIS YEAR 



Seven percent of the farmers that obtained financing last year won't qualify 

 this year. This normally runs less than three percent. The reason named by 63 

 percent of the bankers was inadequate income prospects, with 23 percent turned down 

 due to insufficient equity. 



REASONS FARM BORROWERS FAIL TO QUALIFY FOR FINANCING 



1) INCOME PROSPECTS INADEQUATE: 63% 



2) BORROWER'S EQUITY INSUFFICIENT: 23% 



3) HISTORY OF POOR MANAGEMENT BY OPERATOR: 9% 



4) OTHER: 



5% 

 100% 



Over 70 percent of the dollar value of farm loans currently held by commer- 

 cial banks is for operating expenses. Twelve percent of the loan dollars are for 

 intermediate-term debt, while 8 percent are for refinancing short or intermediate- 

 term debt. 



When asked about the importance of off-farm income in securing a farm loan, 

 65 percent said it had become more important, 35 percent said it hadn't changed, 

 and none rated it less important. 



DELINQUENCY RATE and FORCLOSURES HIGHER 



About 4 percent of both real estate and operating loans held by Montana 

 banks are delinquent. Since banks held only about four real estate loans per bank, 

 the number of delinquent loans on land was also very low but had more than doubled 

 since 1981. Out of an average of 88 operating loans per bank, bankers reported an 

 average of four delinquent non-real estate (operating) loans per bank--about double 

 the 1981 count. The number of forclosures in 1984 averaged less than one for every 

 three banks, but has climbed steadily and is now five times higher than in 1981. 

 In addition, nearly two operating loans per bank are being considered for forclosure. 



Voluntary farm liquidations averaged less than one per bank during 1984, but 

 was eight times higher than in 1981. 



QUALITY OF FARM LOANS HAS DECLINED 



Fifty-four percent of the bankers rated their farm loan portfolios lower in 

 quality than a year ago, 43 percent said the qualiry hadn't changed, and 3 percent 

 rated the quality higher. Sixty-one percent of the bankers rated the farm loan 

 quality about the same as all other business loans, but 30 percent said quality was 

 lower and 9 percent ranked farm loans higher. 



The bankers ranked low market prices as the number one cause of today's farm 

 problems, followed by high interest rates. 



FUNDING PROVIDED BY THE GOVERNOR'S COUNCIL FOR ECONOMIC DEVELOPMENT 

 MONTANA DEPARTMENT OF COMMERCE 



