StJohn Clinard

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Farm Credit: A Proud Heritage, A Promising Future 1916

World War I: 

World War I In 1916 the longest battle in World War I was fought. It was known as the battle of Verdun. The battle of Verdun lasted from February 21 to December 16. “Hell cannot be so terrible as this. Humanity is mad; it must be mad to do what it is doing.”  --A French Soldier


Baseball George Herman “Babe” Ruth, also known as “The Bambino” and the “Sultan of Swat” is playing for the Boston Red Sox. That year, he lead them to their second straight World Series title. “The way a team plays as a whole determines its success. You may have the greatest stars in the world, but if they don’t play together, the club won’t be worth a dime.” --Babe Ruth


Born in 1916… just to name a few Walter Cronkite Kirk Douglas Glenn Ford Dinah Shore Betty Grable Jackie Gleason “I can’t imagine a person becoming a success who doesn’t give this game of life everything he’s got.” --Walter Cronkite


How were farmers doing? Loans were hard to come by in agriculture. Banks charged exorbitant rates. A stable, reliable source of credit was needed for farmers.

And so begins the Farm Credit story…: 

And so begins the Farm Credit story… On July 17, 1916, President Woodrow Wilson signs the Federal Farm Loan Act, which created 12 Federal Land Banks and associations known as National Farm Loan Associations.

Farm Credit, through the years… : 

1923—The Federal Intermediate Credit Banks (FICB) were created to supplement Land Bank loans. The FICB’s could offer short and intermediate term credit to farmers. 1933—The Production Credit Associations and Bank for Cooperatives were created. They provided a more effective credit delivery system for farmers and their cooperatives. Farm Credit, through the years… 1916—The passing of the Federal Farm Loan Act in provided a much-needed source of long-term credit for farmers. The National Farm Loan Associations later became known as the Federal Land Bank Associations.


1950s—During this decade, there was a technological explosion in agriculture and marked a major period of growth for the Farm Credit System. By 1968, the System had repaid all federal capital borrowed and was now completely owned by its member/borrowers.


1971—The most sweeping update of the System’s charter was the Farm Credit Act of 1971. This act significantly expanded the range of services that System institutions could offer and expanded the authorities of the local associations. For the first time, Farm Credit could make home loans to those living in rural areas.

And the beat goes on…: 

And the beat goes on… The 1980s saw major consolidation of the System institutions. In the early ’80s, the System was made up of 37 banks and more than 1,000 local lending associations. By the early ’90s, there were 15 banks and fewer than 300 associations. Today there are five System Banks and less than 100 associations in the United States. AgFirst FCB AgriBank FCB CoBank FCB of Texas U.S. AgBank FCB


Farm Credit Serves Rural America through more than 100 lending associations all over the country.


Farm Credit is the leader in agricultural and rural financing in the United States. In fact, Farm Credit is the largest single lender to agriculture in the nation.

Farm Credit in Florida today…: 

Farm Credit in Florida today…


Gross Accruing Volume $1,860,000,000 Number of Stockholders 5,060 *as of 7/31/2006 Farm Credit Associations of Florida


Farm Credit is a Customer-Owned Cooperative.


What is a Cooperative? A cooperative is a business that has the following unique characteristics: User-owned - the people who use the cooperative’s services own the business User-controlled - the only people who can vote on cooperative matters are those who use the cooperative (and, thus, those who own stock in the cooperative) User benefits - users derive financial benefits from using the co-op’s services.

We’re different from other lenders. Our patronage refund program proves it!: 

We’re different from other lenders. Our patronage refund program proves it! Since 1988, the five Farm Credit Associations in Florida have declared more than $400 Million in Patronage Refunds! This can lower your effective rate by as much as 1.5%!

What exactly is a patronage refund?: 

What exactly is a patronage refund? A way of distributing the association’s net income to borrowers. A borrower’s refund is based on the proportion of interest earned on his loan to the total interest earned by the association (or other equitable method). May be paid in cash, allocated surplus, stock, or any combination of these items.


Most businesses return their profits to their investors, not their customers. Cooperatives, however, return profits to their customers, or member-users. The user-benefit principle is one of the basic cooperative principles. Patronage Refunds: The Cooperative Way of Doing Business


Financing Available from Farm Credit … Rural Property: Agricultural real estate (with or without improvements) Recreational property Hunting tracts Residential lots


Homes: Buying or building a home Refinancing Remodeling and home improvements


Barns, stables, sheds, grain bins Operating expenses Buying and leasing machinery, equipment, vehicles Livestock and horses

We offer Rates, Terms & Payment Options to Meet Your Needs: 

We offer Rates, Terms & Payment Options to Meet Your Needs *Variable Rate Options: Prime Rate Loans are indexed to the Wall Street Journal Prime Rate. LIBOR (London Interbank Offered Rate) is a market-driven rate; it reacts to changes in the money market more quickly than does Prime. (If you have a commercial farming operation, LIBOR may be a good fit because it moves with the market like the price of the commodities you buy and sell.) Variable Rate Loans* A variable rate loan will generally offer you the lowest interest rate available at any point in time.

We offer Rates, Terms & Payment Options to Meet Your Needs: 

We offer Rates, Terms & Payment Options to Meet Your Needs Adjustable Rate Loans Adjustable rate loans (ARMs) feature rates which are fixed for a specific term, normally 1, 3 or 5 years. Our ARMs have caps to protect you from broad swings in interest rates. Fixed Rate Loans With a fixed rate loan, your interest rate will remain the same for the term of your loan. No pre-payment penalties for most of our fixed rate loans.

Loan Terms and Payment Options: 

Loan Terms and Payment Options LOAN TERMS Farm Credit offers loan terms of one month to 30 years, and everything in between. You choose the term best for you. Generally, shorter the term, lower the rate. PAYMENT OPTIONS Monthly Quarterly Semi-Annual Annual Each option has an account draft feature that can save you time and money.


The Impact of Rural America Bonds Rural America Bonds allows Farm Credit to play a greater role in stimulating economic growth and development in rural areas.

Improving Quality of Life : 

Improving Quality of Life By making these investments, we seek to improve the quality of life in the communities in which our farmers and ranchers live and work.

Targets for Rural America Bonds: 

Targets for Rural America Bonds Projects that support rural communities include: Housing for low and moderate-income families Community revitalization and development projects Rural infrastructure, such as water, waste, utility and transportation projects Essential community facilities including schools, libraries, community centers, child-care facilities, police, fire and rescue stations, medical and assisted-living facilities.

Targets for Rural America Bonds: 

Targets for Rural America Bonds Rural businesses that create or preserve jobs and provide products or services primarily serving rural areas and their residents. *does not include major national corporations, religious organizations, or gaming operations

Targets for Rural America Bonds: 

Targets for Rural America Bonds Alternative energy projects, such as: Ethanol plants, Bio-diesel facilities Wind or hydro-energy projects Other projects that qualify under the USDA’s Renewal Energy and Energy Efficiency Program.

Financing Related to Alternative Energy Projects: 

Financing Related to Alternative Energy Projects Equipment Purchase/ Installation Costs Plant Construction Land Acquisitions


Farm Credit offers local service with credit decisions made locally, by local people. We live and work in the communities where our customers live and work. Our board of directors is made of our borrowers, who make decisions to benefit you and your lending cooperative. The Farm Credit Advantage

Financing Terms: 

Financing Terms Equity > 40% Loan Structure: Term Loan (75% of term debt) Revolving Term Loan (25% of term debt) Working Capital Loan ($1.50 per gallon) 10 year loan amortization with additional cash sweep requirement Collateral: All Assets


Example 50 mmgy Fuel Ethanol Facility Total Cost: $100,000,000 Equity: $40,000,000 Term Loan: $45,000,000 Revolving Term Loan: $15,000,000 Working Capital Loan: $7,500,000


Example Terms of Repayment: Term Loan: Quarterly installments of principal in the amount of $1,500,000 plus interest. Additional cash sweep. Revolving Term Loan: Quarterly interest payments. Once the Term Loan is paid in full, the commitment amount will be reduced by $1,500,000 each quarter. Working Capital Loan: Quarterly interest payments. Availability is subject to a borrowing base of inventory and receivables.

Financial Covenants: 

Financial Covenants Working Capital: $1.00 per gallon minimum Definition = current assets / current liabilities Equity Ratio: 40% minimum Definition = total equity / total assets Debt Service Coverage: 1.50x minimum Definition = EBIDA minus shareholder distributions and capital expenditures divided by current portion of term debt

Other Conditions: 

Other Conditions Limitations: Shareholder Distributions Capital Expenditures Change of Management Financial Reporting: Monthly - internal financial statements Quarterly - compliance certificate Annual - audited financial statements

Material Documents: 

Material Documents Feasibility Study Engineering, Procurement and Construction Builder’s Risk Insurance Permits Utility Supply Agreements Risk Management Policy Supply Origination Contracts Marketing Contracts

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