The community bank has more than doubled its agribusiness portfolio.
Heartland Bank is going back to its roots.
After a decades-long hiatus from serving farmers, the community bank is back in a big way. In just the past two years, the Heartland’s agribusiness portfolio more than doubled to $130.4 million, becoming a significant piece of the overall balance sheet.
“It’s more than worked out,” CEO Scott McComb says, “it’s now one of the strengths of our institution.”
Tracing the history of Heartland, now headquartered in Whitehall, McComb describes a tiny community bank founded in 1911 in Croton, about 40 miles northeast of downtown Columbus in Hartford Township. The bank remained heavily involved in agriculture for decades until McComb’s father, Tiney McComb, formed Heartland BancCorp in 1988 and purchased shares of Croton Bank, changing the name to Heartland.
Despite ties to farming, having grown up on a cattle ranch in West Virginia, Tiney guided expansion into small business and commercial lending as Franklin County boomed in the 1980s and 1990s. Agribusiness fell by the wayside.
Taking over leadership amid the Great Recession in 2009, the younger McComb sought new avenues of growth that would rebalance the bank’s portfolio. Community banks, he notes, are limited in their exposure to commercial real estate, facing greater regulatory scrutiny when it amounts to 300 percent or more of overall capital.
“Either you cut back on your commercial real estate or you accelerate other lines of business that would help dilute the 300 percent of capital,” McComb says.
They opted for the latter. And what better way to diversify than with a foray back into agriculture, still one of the state’s top industries by gross domestic product, according to the Ohio Development Services Agency.
“So we thought, geez, we have no agriculture on the books, we don’t have anybody that knows anything about agriculture in our company—but there’s a lot of room to grow,” McComb recalls. “Pretty much a hundred miles in every direction of Columbus is agriculture.”
In it for the long haul
Heartland invested in the space, beginning with the hiring of Joel Oney as vice president and manager of agribusiness banking. A veteran of the banking segment, Oney grew up on a dairy farm in northern Ohio and oversees a team of experienced agribusiness specialists who themselves are farmers.
But building out the operations would not be simple. Heartland’s agribusiness unit includes not only lending but investments, insurance and treasury management, among other services. And with agribusiness relationships in 55 of the state’s 88 counties—many customers are several hours’ drive from the nearest branch—online banking services needed to be robust.
On top of all that, earning trust would be critical to propping up the new business line.
“The farming community is a heck of a lot different than building apartments or, you know, selling craft beer or doing whatever,” McComb says. “These people study you for years. Farmers aren’t in a hurry to impress anybody... They are very solid long-term planners and critical thinkers.”
The patience is paying off. Heartland’s total managed agribusiness portfolio is growing leaps and bounds, from $58.7 million in 2016 to $96.3 million in 2017, and to $130.4 million last year. Overall income from loan sales and servicing grew 39 percent in 2018, which Oney says is substantially driven by the agribusiness strategy to sell loans to Farmer Mac, a government-sponsored enterprise akin to Fannie Mae and Freddie Mac that allows banks to hedge their exposure to interest rate movements.
“Our unit got into the position where we could make a meaningful contribution to the bottom line net income and to the returns for shareholders,” Oney says. “And we’ve accomplished that over the last three years.”
James Thurston, spokesman of the Ohio Bankers League, calls Heartland’s move to diversify “sensible.” The trade group is seeing interest from member institutions around the state and started an agribusiness lending committee. Recognizing the need for some type of education and networking event, the committee organized a new agribusiness lending conference in 2016.
“We thought we’d get 30 or 40 ag lenders, but it’s been more like close to 100 and growing every year,” Thurston says. “It’s been very well-received and the growth of the event bears that out.”
The interest from bankers is there even as many farmers struggle with low crop prices. Heartland, and apparently others, are taking a farmer’s approach to long-term planning.
“We think it’s been a good time to get in… (farmers) are having to reset their operation and determine how they’re going to survive in a different climate,” Oney says.
And perhaps it just feels right. After all, Heartland’s logo features a farmer tending his field, and the bank “broke ground” on its new corporate campus with an old school plow.
“Anytime you have a plow sitting in your lobby, you need to be a great agricultural bank,” Oney says. “I think we’re in the process of accomplishing that.”