Pub. 5 2016 Issue 8

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 16 ©2016 Bert Ely THREE BIG FCS ASSOCIATIONS MOVING AHEAD WITH THEIR MERGER BERT ELY’S FARM CREDIT WATCH ® SHEDDING LIGHT ON THE FARM CREDIT SYSTEM, AMERICA’S LEAST KNOWN GSE A S THE JUNE FCW first reported, three large, midwest FCS associations are moving forward with their planned merger; regulatory approval by the Farm Credit Administration (FCA) is almost certain. They are AgStar, serving eastern and southern Minnesota and northwest Wisconsin; Badgerland Financial, which serves southern Wisconsin; and 1st Farm Credit Services, which serves northern and western Illinois. The merged institution will serve 144 counties spreading from the northern tip of Minnesota to just north of St. Louis. Rod Hebrink, the current AgStar CEO, will lead the merged association, which will be called Compeer Financial and headquartered in Sun Prairie, Wisconsin, not far from Badgerland’s present headquarters and about midway, north and south, in the combined territory. Based on June 30, 2016, numbers, Compeer would have had $18.5 billion in assets, making it the third largest FCS association, behind Omaha-based FCS of America ($25.4 billion of assets) and Louisville-based Farm Credit Mid- America ($22.4 billion). All three associations are funded by AgriBank, which is headquartered in St. Paul. The current CEO of Badgerland said that the goal of the merged association, “is not to be bigger, it is to be better.” However, given its large size and geographic spread, Compeer is a far different animal than the typical FCS association of several decades ago or as still exists in the area from Kansas south to Texas, which is served by 18 associations of varied sizes. Note, too, that the term Farm Credit or Farm Credit Services is absent from Compeer’s name, indicating its likely intent to expand further outside of agricultural lending. This merger will reduce the FCS to 72 associations, but the then three-largest associations will hold 36% of the total assets owned by FCS associations while the ten largest will hold nearly two-thirds of all association assets. Undoubtedly, the FCS merger wave will continue, leading to the formation of a relative handful of very large, multi-state mega-associations bearing no resemblance to the FCS that Congress created 100 years ago or that existed even a few decades ago. FCS has dramatically increased its share of total farm debt FCW readers are keenly aware of how rapidly FCS lending has grown in recent years – its total loans more than doubled from year-end 2005 to year-end 2015, rising from $106 billion to $236 billion. Less well understood is the extent to which the FCS has increased its share of total farm debt. As the chart shows below, since 2000 the FCS share of total farm debt has increased by nearly 50%, rising from 28.3% to 40.4%. The FCS share of debt secured by real estate