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News Center - Agriculture |
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June 30, 2011
BANKS CONTINUE TO MEET RURAL AMERICA’S NEEDS
Banks specializing in agricultural lending extended more than $127.4 billion in farm loans, accounting for the majority of U.S. farm credit outstanding as of year-end 2010, according to the AmBA Center for Agricultural and Rural Banking’s annual Farm Bank Performance Report.
The report shows that the nation’s 2,236 farm banks are small farmers’ major source of credit. Such banks held $68.7 billion in small farm loans -- with an original value of $500,000 or less -- on their books, and $22.7 billion in micro-small loans with an original value of $100,000 or less.
Farm banks also increased ag loans by 4.9 percent in 2010, despite extremely challenging economic conditions, and held almost 1.2 million small farm loans -- almost 900,000 of which were under $100,000, the report said.
“Thanks to the banking industry, rural Americans -- especially the owners of small farms -- are finding opportunities to finance their farms, ranches, businesses and homes,” said John Blanchfield, director of the
ABA
Center
for Agricultural and Rural Banking. Read the report. For more information, contact
AmBA
's Blanchfield.
AmBA SUGGESTS STEPS TO HELP AG LENDING SECTOR
Banks are well-positioned to continue meeting the credit needs of their farm and ranch customers, but Congress can take additional steps to strengthen the agricultural lending sector, AmBA Vice Chairman Matt Williams told House Agriculture’s Operations, Oversight, and Credit Subcommittee on April 14.
“Banks … are actively looking for good farm and ranch loans. Since the financial crisis, the banking industry stepped up and increased their share of farm and ranch lending from … [2007 to 2010] by over $13 billion. During the same period farmers and ranchers have reduced their total indebtedness by nearly $6 billion,” said Williams, who is chairman and president of Gothenburg State Bank and Trust Co.,
Gothenburg
,
Neb.
Concerns about an asset bubble in the agricultural sector are overblown, he said. “While … farmland prices have escalated in some areas … there is no evidence that this is being fueled by credit. Farmers are responding to market signals, and those signals are extremely positive,” Williams said. He explained that prosperity is driving the demand for farmland and retained earnings are providing the cash to buy it.
Williams also lauded the “resounding success” of the USDA Farm Service Agency’s guaranteed farm loan programs, and he urged Congress to support ABA-backed legislation (H.R. 1422) that would extend the deadline on guaranteed loan term limits, which restrict the period during which farmers and ranchers are eligible for such programs.
On the negative side, Williams cited the risk the Farm Credit System poses to the rural economy. For example, the FCS’ investment bond pilot program diverts the system’s farmer-owned capital into commercial projects that have no connection to the FCS mission. This puts the farmer-owned capital in jeopardy, and Congress should end the program, he said. “If Congress intended for the FCS to finance hotels, dental clinics, and general manufacturing, it would have provided that authority to the FCS,” Williams said.
He also emphasized that while banks continue to be the key source of financial strength in local communities, the massive weight of the Dodd-Frank-generated rules severely threatens their ability to provide crucial local credit. Read more. Read the testimony.
AmBA
ASKS FDIC TO REGULATE LOAN SALES TO FCS INSTITUTIONS
AmBA
on June 8 asked the FDIC to establish written procedures for selling loans to Farm Credit System institutions. The association’s request was made in response to an ABA-opposed final rule the Farm Credit Administration adopted on May 12 that authorizes FCS institutions to purchase loans the FDIC retains after a bank fails.
“The intent of the FCA rule is to ensure that only eligible loans will be sold to FCS institutions, and then only in circumstances where there is no other buyer,” AmBA said in a letter to FDIC Chairman Sheila Bair. “The proposed written standards would ensure that the practical effect meets the intent of the FCA rule.”
The written procedures should establish a framework under which the FDIC -- before selling the loans -- would obtain certification from the FCS institution that they are Farm Credit Act-eligible, and also verify that a loan market is not available outside of the Farm Credit System, AmBA said.
AmBA
had strongly opposed the FCA rule on the grounds that the Farm Credit Act does not authorize FCS institutions to buy loans from the FDIC. Read AmBA’s letter. For more information, contact
AmBA
's John Blanchfield.
BILL WOULD SUSPEND BORROWER TERM LIMITS
Rep. Leonard Boswell (D-Iowa) on March 31 introduced an AmBA-supported bill (H.R. 1233) that would suspend borrower term limits through 2013 for the Agriculture Department’s Farm Service Agency guaranteed loan program.
Borrowers participating in the FSA guaranteed farm loan program are subject to term limits that would make them ineligible for guaranteed loans after a certain period of years. The 2008 Farm Bill suspended those term limits through the end of 2010, but they resumed on Jan. 1, when Congress did not pass legislation extending the suspension.
The FSA estimates that more than 4,100 farmers and ranchers became ineligible for additional loan guarantees when the suspension expired. The agency projects that another 1,500 farmers and ranchers will lose eligibility by the end of this year if the term limits remain in place. Rep. G.K. Butterfield (D-N.C.) and the entire Iowa House delegation -- Reps. Bruce Braley (D), Dave Loebsack (D), Tom Latham (R) and Steve King (R) -- are original co-sponsors of H.R. 1233. Sen. Herb Kohl (D-Wis.) introduced similar legislation (S. 368) in the Senate on Feb. 16. Read more. For more information, contact
AmBA
's Seaver Sowers.
PRELIMINARY OK GIVEN TO COBANK-U.S. AGBANK MERGER
The Farm Credit Administration Board on June 22 granted preliminary approval for the Farm Credit System’s $69 billion-asset CoBank to merge with the $25 billion-asset U.S. AgBank. The preliminary approval allows Greenwood Village, Colo.-based CoBank and Wichita, Kan.-based U.S. AgBank to submit the merger proposal to their stockholders for a July vote. The deadline for returning completed merger ballots is Sept. 7.
The combined bank will do business under the CoBank name and CoBank President and CEO Robert Engel will be chief executive of the institution, which will be headquartered in
Greenwood Village
,
Colo.
The merger will reduce the FCS to four institutions. Read more.
May 13, 2011
FCA Allows FCS Institutions to Buy Failed-Bank Assets
The Farm Credit Administration Board adopted an AmBA-opposed final rule that would authorize Farm Credit System institutions to purchase loans that the FDIC retains after a bank fails. FCA officials said they modified the proposed rule so that FCS institutions are authorized to purchase only agricultural loans that are eligible for system financing.
Under the original proposal FCS lenders would have been eligible to bid on FDIC nonfarm consumer and commercial loans.
AmBA
emphasized, however, that the final rule still would divert the FCS from its congressionally mandated mission.
“It’s still an expansion of the Farm Credit System through the regulatory process that we do not believe Congress authorized,” said John Blanchfield, director of the
AmBA
Center
for Agricultural and Rural Banking. Read more. Read AmBA’s comment letter. For more information, contact
AmBA
's John Blanchfield.
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