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ICBA: Congressional Oversight Panel Report Confirms That Farm Loan Restructuring Mandate Would Be Premature

Washington, D.C. (July 22, 2009)—The Independent Community Bankers of America (ICBA) today voiced support for the findings of the Congressional Oversight Panel on TARP report, “Special Report on Farm Loan Restructuring,” which said it is premature to conclude there is an immediate need for a mandate for banks receiving Troubled Asset Relief Program (TARP) assistance to restructure their farm loans. Congress required the report as part of the Helping Families Save Their Homes Act of 2009 (P.L. 111-22).

“Our nation’s more than 8,000 community banks continue to work every day with the farmers and ranchers in their communities so they can continue to do business,” said R. Michael Menzies, ICBA chairman and president and CEO of Easton Bank and Trust Co., Easton, Md. “Community bankers put their customers first and already work with those who may be struggling with their loans. We agree with the panel’s suggestion that Congress look to existing programs instead of creating any new burdens on community banks.”

ICBA supports the following key findings from the report:

  • Several factors, such as generally low delinquency and charge-off rates, a historically low farmer debt-to asset ratio and record U.S. farm operating income levels, suggest that an agricultural restructuring requirement may be premature.

  • Administrative costs associated with a mandatory restructuring program would “possibly be passed through to those borrowers.”

  • If Congress determines that the farm sector in part, or in whole, needs assistance, then such assistance could be delivered through existing programs.

  • Mandatory modifications might not be the most effective policy choice.

ICBA recently pointed out in testimony to the House Agriculture Committee and Senate Banking Committee that the community banking industry has ample credit available for agricultural lending, and community banks continue to provide credit to local farmers at historically low interest rates. In fact, community banks with less than $1 billion in assets provide more than 60 percent of the banking industry’s agriculture-related loans. Community banks with less than $500 million in assets provide more than 50 percent of these loans.

“ICBA looks forward to continuing the dialogue with Congress and regulators to ensure that community banks can continue to serve their local agricultural sector, which is key to the stability of local economies and the communities we proudly serve,” Menzies said.