Magazine article American Banker

Farm Credit Banks, Leaner and Meaner, Heat Up Loan Battle

Magazine article American Banker

Farm Credit Banks, Leaner and Meaner, Heat Up Loan Battle

Article excerpt

Pennsylvania banker Bob Badger doesn't know if the consolidation of two key Farm Credit Banks in the Mid-Atlantic region has made them tougher to compete against or not.

All he knows is that the new, bigger bank has taken away some of his best business.

"Just in the past 30 days, I've lost two fairly large accounts to them because of rates," said Mr. Badger, vice president for ag lending at $630 million-asset Bank of Lancaster County in Strasburg. The loans totaled about $1.5 million.

At the beginning of April, the Farm Credit Bank of Baltimore and the Farm Credit Bank of Columbia (S.C.) merged into AgFirst Farm Credit Bank, based in Columbia. The merger resulted in 120 jobs being cut. Management believes the merger will save $9 million this year, mostly from salaries.

The merger is the latest in a consolidation of the Farm Credit System that could force a new competitive dynamic in the agricultural lending business.

At its height in the 1980s, the Farm Credit System had 37 banks and about 1,000 local lending associations.

The subsequent farm crisis forced the organization to slim down. Recent mergers, including St. Louis-St. Paul in 1992 and Omaha- Spokane last year, were done to decrease overhead.

Further, geographic diversification is a way to spread the risk, which officials said was one reason for the Baltimore-Columbia merger.

The system now encompasses six regional farm credit banks and two specialized banks.

AgFirst and its 40 affiliated community lending organizations have assets of $10. …

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