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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 14, 2022
With National Agriculture Day and Week set for next week, ICBA is offering customizable materials community banks can use to celebrate.
Custom Materials: Available on ICBA’s Tell Your Story marketing and communications toolkit, the custom news release, op-ed, and social media materials help celebrate the contributions of agriculture to local communities.
Grassroots: Meanwhile, community bankers can use ICBA’s Be Heard grassroots action center to urge support for legislation to make interest income on farm real estate and rural mortgage loans tax exempt.
More: Additional information and resources are available on the National Ag Day website.