Pub. 8 2013-2014 Issue 1

May | June 2013 23 Extraordinary Service for Extraordinary Members. Bert Ely’s FARM CREDIT WATCH ® Shedding Light on the Farm Credit System, America’s Least Known GSE © 2013 Bert Ely How to Learn More About Your FCS Competitor B ANKERS KNOW WHEN THEY ARE competing against the Farm Credit System (FCS), but quite often they do not know which FCS association they are up against. It is important, though, for bankers to know which of the 82 FCS associations they are competing against because these associations differ dramatically in size, aggressive- ness, geographical reach, territorial overlap, and willingness to bend the rules of the Farm Credit Administra- tion (FCA) in competing against banks and other tax-paying lenders. For example, the two largest associations, FCS of America, with $19.61 billion of assets at the end of 2012, and Farm Credit Mid-America, with $19.06 bil- lion of assets at the end of 2012, each serve all or most of four states (includ- ing Nebraska). At the other end of the size spectrum, Delta ACA, with $32.46 million of assets at the end of 2012, serves all or part of only five counties in southeastern Arkansas while FCS of Hawaii, with $81.73 million of assets at the end of 2012, serves just the state of Hawaii. The easiest way to find out which FCS association or associations you are competing against is to review the map of FCS association territo- ries at www.fca.gov/info/directory. html. You may notice some color- coded cross-hatching and dots—that indicates two associations serve the same area and therefore are compet- ing against each other in that ter- ritory. The name of the association serving a particular area is shown next to a star, which indicates the location of the city where the asso- ciation is headquartered. Detailed information about each association can be obtained through links on an alphabetical listing of every FCS institution at www.fca.gov/apps/ instit.nsf/Active%20Institutions%20 Page?OpenPage. Clicking on a link on that webpage will bring up a page of information about the association, including a listing of the states and counties it serves, contact information, and the association’s organizational his- tory. In the upper right-hand corner of this webpage is a link to the as- sociation’s quarterly call reports, which are quite similar to bank call reports in structure and content. In the lower left-hand corner is a link to a detailed color map of the associa- tion’s territory. If the association has a website—and all but the smallest do—a link to it is shown. Association websites generally provide a wealth of information, including links to quarterly and annual reports to bor- rower/shareholders and information about the association’s lending and financial services activities as well as office locations. Because websites have become an important marketing tool for FCS associations, periodically visiting the websites of the relevant associations will keep a banker up- to-date on what its FCS competition is up to. AgDirect Grows in the Shadows of the FCS As previously reported, AgDirect (www.agdirect.com ), which is man- aged by FCS of America (FCSA), extends credit, through farm equip- ment dealers, to customers of those dealers, including customers who may not be eligible to borrow directly from an FCS association. The equip- ment dealer makes the loan and then sells a 100 percent “participation” in that loan (in effect, the entire loan) to AgDirect. AgDirect in turn resells that loan to AgriBank, the FCS bank that funds FCSA, with FCSA servicing the loan. The borrower, under a loan purchased by AgDirect, does not have to buy stock in an FCS association, does not receive patronage dividends, and is not protected by the FCA’s borrower-rights regulations. Organized as a “limited liability partnership” owned by the FCS as- sociations participating in the Ag- Direct program, AgDirect operates in the shadows of the FCS—it does not file a call report with the FCA nor does it publish financial state- ments. What can be parsed from the FCSA and AgriBank annual reports is that outstanding loans generated by AgDirect totaled $2.1 billion at year-end 2012, up from $1.3 billion at year-end 2011. Those loans accounted for approximately 1.1 percent of total outstanding FCS loans at the end of 2012, up from approximately .7 per- cent at the prior year-end. Q FCS Competitor — continued on page 24