Lending and Leasing Limits - Proposed Rule - Summer 2010
On Wednesday, December 15, Barry Mardock of the FCA called Ron Milbach, President and CEO of Progressive Farm Credit Services (Progressive), to ask him some follow-up questions on the comment letter Mr. Milbach and his chairman submitted in response to the FCA’s Lending and Leasing Limits and Risk Management Proposed Rule. Specifically, Mr. Mardock wanted Mr. Milbach to quantify the impact that reducing the lending limit from 25 percent to 15 percent would have on Progressive. The following comments summarize the content of the discussion.
Mr. Milbach stated that AgriBank limits Progressive to 20 percent of the lending limit base today. He is concerned that if FCA lowers to 15 percent, then AgriBank will lower the limit to 10 percent.
Progressive has one loan that exceeds 20 percent of the lending limit base today, which is participated with CoBank to lower it to below 20 percent.
Progressive has 4 or 5 loans that exceed 15 percent today.
Mr. Milbach does not believe allowing more time to bring loans into compliance would change much for Progressive.
Mr. Milbach is concerned that future consolidation in agriculture and among Progressive’s borrowers will increase the number of large loans exceeding 15 percent.
Mr. Milbach does not believe that participations are the answer—referenced comments finding partners that will match patronage payments.
Mr. Milbach does not believe AgriBank provides fair treatment to smaller institutions and that AgriBank would like to see further mergers of associations.
Mr. Milbach would like to see an exception made to this rule for small institutions. (Progressive FCS had $527 million in loan volume at 9/30/2010.)