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Community Banks Serve Rural America. Community banks are four times more likely to operate offices in rural counties and remain the only banking presence in over one-third of all U.S. counties. There are over 1100 agricultural banks (25 percent of portfolios in agriculture). While community banks hold 25 percent of total banking industry assets, they make nearly 90 percent of the banking industry’s farm loans.
In 2021, agricultural loans were extended by over 4,000 banks while 67 FCS institutions held agricultural loans. However, the FCS now holds 22 percent more farm loans than banks due to their rapid growth in tax-free real estate lending, which increased by 45 percent and $45 billion between 2015 to 2020, a growth rate over twice that of commercial banks. Congress should pass legislation similar to ECORA (H.R. 1977 / S. 2202) from the previous Congress (to be renamed the “Access to Credit for our Rural Economy Act of 2023” (ACRE) in the 118th Congress) to address this disparity.
Farm Credit System. As the only GSE competing directly against private lenders the FCS was granted tax and funding advantages by Congress to serve bona-fidefarmers and ranchers and a narrow group of farm-related businesses that provide on-farm services.
Through its regulator, the FCS has sought non-farm lending opportunities through “investment bonds” even though such lending exceeds the constraints of the Farm Credit Act. The FCS also seeks blanket authority to approve their “investments” in lieu of obtaining their regulator’s approval. ICBA opposes granting the FCS’s blanket approval authorities.
Congress should reform and refocus the FCS’s authorities in order to limit FCS’s non-farm and non-statutory lending.
March 01, 2021
ICBA-supported legislation allowing farmers and ranchers categorized as partnerships to use gross income to calculate maximum Paycheck Protection Program loan amounts was introduced in the House.
Background: Farmers and ranchers without payroll or positive net income in 2019 were shut out of the original Paycheck Protection Program. Congress changed this limitation to be based on gross income, but SBA guidance has required farm partnership applicants to use net income from their schedule K-1.
Pending: A pending revision to the SBA's loan calculation formula for sole proprietors, independent contractors, and self-employed individuals will reportedly use gross income instead of net income. A bipartisan group of lawmakers last week told SBA it has the authority to use gross income for farm partnerships.
What's New: A bipartisan bill from Rep. Jim Hagedorn (R-Minn.) and others would allow the use of gross income and retroactively enable producers who used net income to recalculate their PPP loans if they have not been forgiven.
ICBA Position: ICBA has long advocated using gross income in lieu of net income to show positive income and allow these entities to qualify for the PPP.