Pub. 7 2018 Issue 2

February/March 2018 21 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 the rate of growth in outstanding FCS debt, which in turn is largely driven by the rate of FCS loan growth. What is going on at Lone Star Ag Credit? As the August 2017 FCW first reported, Lone Star Ag Credit, headquartered in Fort Worth, Texas, in August of last year withdrew its financial reports and call reports back to the beginning of 2016 after Lone Star’s management “discovered appraisal and accounting irregularities affecting a segment of [Lone Star’s] lending portfolio.” These problems appear to be similar to what afflicted FCS Southwest, which served most of Arizona; prior to its acquisition by Farm Credit West in November 2015. In a Nov. 9, 2017, letter posted on its website, Lone Star stated that its investigation of accounting irregularities was “ongoing, with its conclusion anticipated during the fourth quarter of 2017.” That means it should soon be issuing audited financial statements for 2017 as well as corrected financial statements back to 2016 as well as filing corrected call reports with the FCA. It will be interesting to see if that occurs as well as whether Lone Star survives or is forced to merge with another FCS association. Perhaps that merger would have to be assisted financially by the FCSIC. CoBank makes another investment in a private equity fund In a Jan. 25 press release, CoBank announced that it had made a $7.5 million commitment to a new rural private equity fund, joining five other FCS institutions “to participate in the first round of financing for Open Prairie Rural Opportunities Fund.” The fund will invest in “target areas such as crop protection, ingredients, processing, storage, data management and logistics.” With the fund’s initial commitments of $55 million, CoBank probably is one of its larger investors. The fund will be managed by Open Prairie, which has been licensed by the USDA as a Rural Business Investment Company (RBIC) under USDA’s Rural Business Investment Program. As the news release noted, “this is the third time CoBank has invested in a rural-focused equity fund under the [RBIC] since 2014.” CoBank has invested a total of $52.5 million in these funds. Leaving aside whether a GSE should be making risky, equity-capital investment, this very reasonable and logical question arises: How well have these RBIC investments performed, both in terms of meeting pre- established objectives as well as profitability? I posed this question to a CoBank representative. His emailed answer: We don’t put out a report on the performance of the funds. So much for CoBank transparency. Now that it’s almost time to execute a plan, are you ready? This half-day workshop will be a hands-on, in-depth discussion on how to prepare for your bank’s CECL implementation, giving you the practical application and direction you’ll need to be successful when the standards go into effect. Space will be limited. 785-232-3444 www.ksbankers.com CECL Workshop: Discussion Data Decisions May 8, 2018 - Wichita May 17, 2018 - Overland Park May 22, 2018 - Hays