Pub. 1 2012 Issue 5

July 2012 25 l e a d i n g a d v o c a t e f o r t h e b a n k i n g i n d u s t r y i n k a n s a s AD INDEX ATM Maintenance Integrated Coating Systems..................................pg 22 Banks Bankers Bank of Kansas (BBOK)..........................pg 2 First Bankers’ Banc Securities, Inc......................pg 27 First National Bank of Hutchinson.......................pg 26 INTRUST Bank....................................................pg 17 Certified Appraisers/Consultants Marketing Consultant Services, Inc.....................pg 26 Core Processors DCI.......................................................................pg 28 CPA/Accountants BKD........................................................................pg 3 Financial Services Pulse.....................................................................pg 23 The Kansas Bankers Surety Company.................pg 15 Insurance Providers BlueCross BlueShield of Kansas..........................pg 17 Integrated Services Diebold...................................................................pg 5 are affiliated with organizations which are FCS borrowers. The follow - ing table, based on data taken from the FCS’s 2011 Annual Information Statement, will give FCW readers an insight into these borrowings, as of the end of 2011: FCS Bank Number of Directors Total amount of director borrowings (millions) Average borrowings per director (millions) U.S. AgBank, FCB 17 $ 709 $41.71 CoBank, ACB 16 $ 315 $19.69 FCB of Texas 7 $137 $19.57 AgFirst, FCB 20 $347 $17.35 AgriBank, FCB 18 $285 $15.83 Totals, average 78 $1,793 $22.99 A review of the bank-director data in the FCS’s 2010 and 2009 Annual Information Statements show similar results, with one interesting excep- tion – the total amount of borrowings attributed to CoBank’s 16 directors has varied significantly over the last three year-ends – from $481 million at the end of 2009 to $617 million at the end of 2010 to $315 million at the end of 2011. Thirteen of CoBank’s 16 directors at the end of 2009 were still CoBank directors at the end of 2011, so it is likely that the borrowings attributed to some of CoBank’s directors have fluctuated quite a bit in recent years. It cannot be determined, though, for which directors this was the case. Total borrowings and average borrowings per director were much more stable at the other four banks, with average borrowings at U.S. AgBank (since acquired by CoBank) approximately double the average borrowings at the other banks. It is interesting to note that the borrowings attributed to these 78 individuals accounted for 1.03% of the FCS’s total outstanding loans at the end of 2011. For some unstated reason, the FCS does not provide a similar disclosure for the 13 directors of the Federal Farm Credit Banks Funding Corporation, which is the FCS’s link to the capital markets. Six of these 13 directors also serve as a director of an FCS bank while another three of the directors are the CEO of an FCS bank. No information is provided in the Annual Information Statement about the borrowings attributable to the more than one thousand indi- viduals who serve as directors of the 83 FCS associations. Assuming an average borrowing of $1-$2 million, a few billion dollars of FCS loans have gone to those directors. Supposedly these loans, as well as loans to senior management in FCS associations, are “made on the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated borrowers.” I would welcome reports about loans to directors and senior officers of FCS associations, or to their affiliated organizations and close family, where this is not true. Report FCS Lending Abuses to: green-acres@ely-co.com. Bankers are continuing to send FCW reports of FCS lending abuses, such as FCS loans for rural estates, weekend getaways, and hunting preserves. Email reports of similar lending abuses in your market to: green-acres@ely-co.com . Please provide as much detail as possible about any loan which violates the spirit, if not the law, governing FCS lending.