ARKANSAS BANKERS ASSOCIATION. Ed Elfmann, Vice President for Congressional Relations American Bankers Association

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ARKANSAS BANKERS ASSOCIATION Ed Elfmann, Vice President for Congressional Relations American Bankers Association

American Bankers Association Founded in 1875 First convention was held in September, 1875 in Saratoga Springs, New York. The entire convention fit into this building.

100 Years Ago the ABA Agricultural and Rural Bankers Committee was Formed The First National Bank in Champaign, IL was founded by Benjamin Franklin Harris in 1865. B.F. Harris, the bank founder s grandson, served as the first Chairman of the ABA Agricultural Bankers Committee from 1912-1916.

After WII, Modern and Capital Intensive Farming Practices Demanded Credit Bankers supplied the credit that enabled modern agriculture to develop and ABA helped

ABA in Washington, D.C. Work with all 541 Congressional Offices 100 Senators 435 Voting Representatives 5 Delegates and 1 Resident Commissioner (Puerto Rico) Focus in House: Financial Services, Ways and Means, Energy and Commerce, Agriculture, Appropriations, Judiciary, Small Business and Oversight Committees Focus in Senate: Banking, Finance, Commerce, Agriculture, Appropriations, Judiciary, Small Business and Oversight If it involves money we probably have an opinion!

Farm Debt is Increasing Source: Federal Reserve Bank of Kansas City

Decline in Farm Income has become a Trend Net farm income and net cash farm income are below the 10- year average, in both nominal and inflation-adjusted terms. Before recent dips, the 10-year averages for both income measures have largely trended upward. Over the 2010 to 2013 period, surging crop and animal (including animal-product) cash receipts led net cash farm income and net farm income higher. Prices are expected to decline for a broad set of agricultural commodities in 2017.

Farm Size and Production Continues to Change 10% of farms account for 66% of production and 52% of acres Where do your farm or ranch customers fall on this spectrum? Source: USDA, ARMS

Farming Isn t the Only Thing Consolidating Number of FDIC Insured Institutions Source: Federal Deposit Insurance Corporation

Debt Trends by Lender Source: Economic Research Service, USDA

Inflation Adjusted 2012, $ Billions Bank Farm Lending vs. FCS Inflation Adjusted Portfolios $160 $140 $120 $100 $80 $60 $40 $20 Commerical Banks Farm Credit System $0 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 Source: United States Department of Agriculture ERS

Share of Total Farm Debt Share of Total Farm Debt 50% 40% 30% 20% 10% Commerical Banks Farm Credit System 0% 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 Source: United States Department of Agriculture ERS

Share of Total Farm Real Estate Debt Farm Real Estate Lending 50% 40% 30% 20% 10% Commerical Banks Farm Credit System 0% 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 Source: United States Department of Agriculture ERS

Share of Total Farm Nonreal Estate Debt Farm Non Real Estate Lending 60% 50% 40% 30% 20% 10% Commerical Banks Farm Credit System 0% 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 Source: United States Department of Agriculture ERS

ABA Agricultural Finance Issues in DC USDA Political Appointees Farm Credit System Farm Bill USDA Loan Programs Enhancing Credit Opportunities in Rural America Act Farmer Mac Rural Appraisers Crop Insurance Commodity Futures Trading Commission

Senate Ag Committee Confirmations USDA Secretary Sonny Perdue USDA Deputy Secretary Steve Cesky USDA Undersecretary for Trade Ted McKinney CFTC Chairman J. Christopher Giancarlo CFTC Commissioners Republican Brian Quintenz Democrat Rostin Russ Behnam Nominations Farm Credit Board Member: Glen Smith Undersecretary for Research, Economics and Education: Dr. Sam Clovis Undersecretary for Farm Production and Conservation: Bill Northey Undersecretary for Marketing and Regulatory Program: Greg Ibach General Counsel: Stephen Vaden Still waiting for 17 more appointments 2 CFTC Commissioners, 5 Farmer Mac Board Members, 10 Administrators and Deputy Administrators

Farm Credit System The Farm Credit System has grown to over $314 billion FCS is a government sponsored enterprise (GSE) that competes directly with community banks. The FCS tax subsidy will cost taxpayers at least $6.7 billion over the next five years. FCS tax rate is now under 4% ABA is closely monitoring FCS and it s regulator the Farm Credit Administration

Farm Credit System Despite their massive growth, it took Congress years to have oversight hearings House Agriculture Committee had an oversight hearing on December 2 nd 2015 Senate Agriculture Committee had an oversight hearing on May 19 th 2016 First oversight hearing in over 10 years House Agriculture Appropriations had an oversight hearing on February 28 th 2017 First oversight hearing in over 19 years House Agriculture Committee had an oversight hearing on March 29th, 2017

2018 Farm Bill FSA Loan Programs Rural Development Farmer Mac Technical Changes Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) Exploring the use of Risk Management Agency (RMA) instead of National Agricultural Statistics Service (NASS) Data Dairy Conservation Reserve Program Cotton

FSA Loan Programs FSA Guaranteed Loan Programs Guaranteed Operating Loan Program Guaranteed Farm Ownership Program Modernization of FSA Loan Programs Staffing for FSA Loan Programs Interest Assistance Cap of 2% Young and Beginning Farmers National Environmental Policy Act (NEPA) Succeeded in increasing the funding levels GFO - $2 billion to $2.5 billion GOL - $1.2 billion to $1.6 billion

Beginning Agriculturist Lifetime Employment (BALE) Act H.R. 831 Introduced by Congressman Mike Bost (IL-12) Increases Guaranteed Operating Loan and Guaranteed Farm Ownership Loan limits to $3.5 million Increases Direct Operating Loan and Direct Farm Ownership Loan limits from $300,000 to $600,000 Would decrease the guarantee by 1% for every $100,000 of loan over $2.5 million For example, 90% guaranty on $2.5 million loan, 80% guaranty on $3.5 million loan Would provide a 5% higher guaranty for young and beginning farmers

Capital for Farmers and Ranchers Act S. 1736 Introduced by Senator John Hoeven (R-ND) Cosponsored by Senator John Boozman (R-AR) and Senator Luther Strange (R-AL) Increases Guaranteed Operating Loan and Guaranteed Farm Ownership Loan limits to $2.5 million Increases Direct Operating Loan and Direct Farm Ownership Loan limits from $300,000 to $600,000

FSA Loan Guarantee Bill S. 1921 Introduced by Senator Mike Rounds (R-SD) Increases Guaranteed Operating Loan and Guaranteed Farm Ownership Loan limits to $3 million Increases the total funding for FSA loan programs from $4.2 billion to $11 billion This authorizes a total of $8 billion for guaranteed loans, up from $3 billion (set in 1979). The $8 billion for guaranteed loans will make more credit available as bankers increase lending up to the $3 million guarantee per loan $4 billion for guaranteed farm ownership loans, up from $2.5 billion $4 billion for guaranteed farm operating loans, up from just over $1 billion This updates the authorization to a total of $3.03 billion for direct loans, up from $1.2 billion (set in 1979) $1.5 billion for direct farm ownership loans, up from $350,000,000 $1.53 billion for direct operating loans, up from $850,000,000

Rural Development and Small Business Administration Business and Industry Guaranteed Loan Program Working to protect the program from cuts Community Facilities Guaranteed Loan Program 6% of total funding is for guaranteed program Advocating to increase the guaranteed portion Rural Energy for America Program (REAP) Need to be able to combine REAP with B&I Cap needs to be increased from $25 million Small Business Administration Advocating for SBA to continue guarantees on agricultural loans

Enhancing Credit Opportunities in Rural America H.R. 2205 Also know as ECORA Introduced by Congresswoman Lynn Jenkins (KS-2) Removes taxation on farm real estate loans Applies only to institutions that have deposits insured by the Federal Deposit Insurance Corporation Any residence in a rural area or city of less than 2,500 is eligible

Farmer Mac ABA supports two technical changes Farmer Mac is seeking in the next Farm Bill Ability to purchase all USDA guaranteed loans Farmer Mac is currently eligible to only purchase FSA guaranteed loans and Rural Development Community Facilities loans 1,000 Acre Rule Farmer Mac is unable to purchase loans of more than $13 million that are secured by more than 1,000 acres No limit if secured by less than 1,000 acres

Rural Appraisers and Crop Insurance Rural Appraisers De Minimis is likely to be increased to $400,000 ABA continues to work with other groups to change the qualifications needed to become a certified appraiser Crop Insurance ABA is part of a larger crop insurance coalition ABA continues to fight for crop insurance as a risk management tool that protects producers

What is ABA doing about Dodd-Frank? H.R. 10 - The Financial CHOICE Act Passed the House on June 8 th Awaiting hearings in the Senate H.R. 1116/S. 366, the Taking Account of Institutions with Low Operation Risk The TAILOR Act. Many provisions within H.R. 10 Weighed in on the Senate Regulatory Relief Package

So what is our message? Banks are a pillar of local communities Banks are an important part of rural America An increasingly difficult regulatory environment has made the most conventional loans difficult Banks are willing to work with customers to help them through the difficult times successful customers make successful banks Banks want a level playing field with their competitors

Questions? Photo Credit: Scott Hagan, the barn artist Harvesting, Stuttgart, Arkansas Photo Credit: Stuttgart Chamber of Commerce

ABA National Agricultural Bankers Conference

Thank you! Ed Elfmann ABA Center for Agriculture And Rural Banking American Bankers Association Washington, DC 202-663-5018 edelfmann@