1916: 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
Slide3: 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
Slide4: 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
Slide5: 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.
Slide8: 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.
Slide9: 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
Slide11: Farm Credit Serves Rural America
through more than 100
lending associations all over the country.
Slide12: 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…
Slide14: Gross Accruing Volume
$1,860,000,000
Number of Stockholders
5,060
*as of 7/31/2006 Farm Credit Associations of Florida
Slide15: Farm Credit is a Customer-Owned Cooperative.
Slide16: 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.
Slide19: 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
Slide20: Financing Available from Farm Credit …
Rural Property:
Agricultural real estate (with or without improvements)
Recreational property
Hunting tracts
Residential lots
Slide21: Homes:
Buying or building a home
Refinancing
Remodeling and home improvements
Slide22:
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.
Slide27: 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
Slide33: 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: 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: 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