Own Huge Amounts of Foreclosed Land : Some of the Top Farmers Are Banks

“We’re in the banking business, not the farming business,” proclaims Mike Fitch, vice president for agribusiness lending at Wells Fargo Bank. But these days, Wells Fargo and many other California farm lenders might be selling almonds or cotton along with loans or certificates of deposit.

That is because the high number of farm failures has left the state’s farm lenders owning what is believed to be the largest amount of foreclosed California farmland since the Depression, Fitch says. At the end of 1985, the state’s banks owned 157,000 acres--or about 0.5% of total California farmland--worth about $182 million, according to a survey by the California Bankers Assn.

The amount grows higher when land owned by insurance companies, the federal Farm Credit System and other lenders is added. (No such total figures are available; no figures for bank farmland owned are available earlier than 1984.)

Banks and other lenders prefer to sell the land as soon as possible rather than farming it. But with today’s depressed farmland market, that is not easy. Many potential buyers are waiting for farmland prices to hit bottom.

And if the banks try to sell their land all at once, “that’ll just further drive down prices,” Fitch says.

“It’s definitely a buyers’ market,” says Russell Cremer, a Bank of America vice president who handles management of farmland owned by the bank. Consequently, bankers say, they are primarily leasing their land, usually to neighboring farmers or, in some cases, to the farmer who was the previous owner.

By leasing, the land stays productive and the bank can buy time until farmland prices improve.

The farmers who lease their land back often show just as much initiative as they did when they owned the land, partly because they want to make enough profit to buy the land back, some bankers say.

But banks have not been successful in finding farmers to lease all of their land. That is particularly true for land in poor condition or if the crops grown on the land are not in full production or suffering poor market conditions, Cremer says.

In such cases, the banks manage the land themselves. Bank of America, for example, is forced to farm about 8,000 of its 114,500 acres; it does this by hiring farmers or professional farm management firms. These professional farm management firms are relatively new in California, compared to the Midwest, and can range from an individual farmer to groups of farmers pooling equipment, Cremer says.

Among the products grown by Bank of America: grapes, almonds, walnuts, prunes and peaches.