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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.
July 16, 2021
Following the recent Senate introduction of legislation to provide rural lending tax relief, ICBA is calling on community bankers to urge their lawmakers in both chambers of Congress to co-sponsor the measure.
Grassroots: Community bankers can use ICBA’s Be Heard grassroots action center to urge support for the Enhancing Credit Opportunities in Rural America (ECORA) Act (H.R. 1977/S. 2202).
Details: The ECORA Act would exempt from taxation interest income on ag real estate loans and loans for rural housing in towns with a population of 2,500 or less.
Impact: The bill would allow banks to offer lower interest rates to their farm and rural home mortgage borrowers, helping sustain and revive rural economies affected by the pandemic. Contact Congress now.