Pub. 9 2014-2015 Issue 2

July | August 2014 19 Extraordinary Service for Extraordinary Members. which was approximately $300 million, conceivably CoBank could park within the FCS whatever portion of the Frontier credit risk it does not retain. Assuming all Frontier credit risk is retained within the FCS, the Frontier loan is estimated to nearly double the FCS’ total credit risk within Connecticut. What is amazing but perhaps not surprising is that the Farm Credit Administration (FCA) has not objected to either the Frontier or Verizon loans, yet clearly both loans lie outside the FCS’ lending authority, as specified in the FarmCredit Act, which the FCA is supposed to enforce. In fact, as previously reported, at one of the FCA’s secret symposia at which the future of the FCS was plotted, FCA Board member Leland Strom offered a rousing defense of CoBank’s Verizon loan. FCSA, Frontier Farm Credit Form Alliance Another Frontier is in the news: Frontier Farm Credit, the $1.7 billion FCS association serving eastern Kansas. On June 4, Frontier Farm Credit announced it had entered into a “strategic alliance” with Farm Credit Services of America (FCSA), the largest FCS association, with $21.3 billion of as- sets, which serves Nebraska, Wyoming, South Dakota, and Iowa. According to a joint news release, the two associations “will continue to exist as separate associations while integrat- ing their day-to-day business operations, technology systems, and leadership teams. Each association will continue to have its own board, with representatives participating in a coordi- nating committee to facilitate board governance between the two organizations.” This alliance will become effective Jan. 1, 2015, “subject to a vote of approval by Frontier Farm Credit stockholders.” The big question among Kansas bankers and others is simply this: What is the point of this deal when this “strategic alliance” will be a merger in all but name? Perhaps Frontier’s borrowers/stockholders are not prepared to agree to amerger at this time or perhaps a full merger will not be consummated until some of Frontier’s senior management has retired. An- other possible complicating factor is that FCSA is funded by AgriBank while Frontier is funded by CoBank. I welcome all speculations and insights as to why this deal is being struc- tured as a “strategic alliance” and not an outright merger. The FCSA-Frontier deal may be the first of a new wave of mergers within the FCS, as suggested in the May FCW, since the FCA seems to be encouraging consolidation within the FCS, as it signaled in the two secret symposia it held earlier this year. One indicator of the potential for consolidation  Bert Ely — continued on page 20 Contact: Tennyson W. Grebenar, Stephen T. Johnson, or Karen L. Witt 303.623.9000 · www.LRRLaw.com With a national reputation for our financial institutions practice, our goal is to assist clients in structuring and operating their institutions to meet business objectives and regulatory requirements. Our Financial Services Group will help your business run smoothly. Experience works. Albuquerque | Casper | Colorado Springs | Denver | Las Vegas | Phoenix | Reno | Silicon Valley | Tucson