Lending and Leasing Limits - Proposed Rule - Summer 2010
On Thursday, December 16, Barry Mardock of the FCA called Tim McDonald, President and CEO of Great Plains Ag Credit (Great Plains), to ask him some follow-up questions on the comment letter Mr. McDonald submitted in response to the FCA’s Lending and Leasing Limits and Risk Management Proposed Rule. Specifically, Mr. Mardock wanted to further understand the impact that reducing the lending limit from 25 percent to 15 percent would have on Great Plains. The following comments summarize the content of the discussion.
Mr. McDonald stated that Great Plains serves a significant number of large agricultural operations that continue to have growing credit needs.
Commercial banks in Great Plains’ service area have consolidated and are very competitive for large loans. (This was not the case in the past with small community banks.)
Great Plains currently has an in-house lending limit of 16 percent and sells participations in excess of $300 million on loans over that amount.
Mr. McDonald believes allowing more time to bring loans into compliance would be of significant benefit to Great Plains.
Great Plains is currently discussing the possibility of merging with another association to increase its lending capacity.
Mr. McDonald is concerned that future consolidation in agriculture and among Great Plains’ borrowers will increase the number of large loans exceeding 15 percent and it may not be able to complete with commercial banks to keep those customers.
Mr. McDonald was not seeking an exception to this rule for small institutions. (Great Plains has over $500 million in loan volume)