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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.
Oct. 19, 2021
The Farm Credit Administration posted its latest regulatory projects plan. The plan cites pending regulations on a Farm Credit System bridge bank; an annual strategic plan on young, beginning, and small farmers; collateral evaluation regulations; and more.
Appraisals: On the proposed collateral evaluation regulations, ICBA this year told the agency that it should not provide Farm Credit System lenders with lower standards for appraisals and valuations than those required of community banks.
Grassroots: ICBA continues encouraging community bankers to use ICBA’s Be Heard grassroots alert urging congressional support for legislation to exempt from taxation interest income on community banks’ farm real estate and rural mortgage loans.