(Source: By Carol Hazard, Richmond Times-Dispatch, Va. (MCT) – Greg B. Farmer spent four fun days this spring handing out refund checks to farmers.
He and senior loan officers from a farm credit company in Mechanicsville traveled the Virginia and southern Maryland countryside, finding farmers often in fields on their tractors where they were given their patronage checks.
The average refund this year for borrowers was $997.
Farmer, 57, is president and chief executive officer of Colonial Farm Credit, an association owned by its customersnot just farmers but also rural homeowners and people in the timber and other agribusiness industries.
“We lend money that raises the crops that feed our children,” Farmer said.
The company also shares its profits, hence the patronage checks.
From $9.7 million in net profit last year, more than halfor $5 millionwas returned to customers who borrowed money from Colonial Farm Credit for livestock, cars, farm equipment or improvements.
“Our customers own the business; we manage the business,” Farmer said.
Customers were refunded 16 percent of the interest they paid in 2011. If a customer paid $5,000 in interest on a $100,000 loan at a 5 percent rate, for example, he or she received a check for $800.
The company has returned $69 million of profits since 1998, when it started the patronage refund program.
In effect, it’s a way of reducing interest rates, said J.N. Mills Jr., a grain, beef cattle and timber farmer in Hanover and King William counties.
“We can’t foresee what rates are going to be, and it’s easier to give money back than it is to raise the rates,” said Mills, a member of Colonial Farm Credit’s 17-person board, who are all farmers.
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Colonial Farm Credit is part of the Farm Credit System, made up of about 85 individually owned and managed companies covering every county in the country. The system’s total loan nationwide is $175 billion.
The Farm Credit System was founded in 1916 because farmers had difficulty getting credit on the terms they could afford, Farmer said. “Congress realized the importance of agriculture to the country and set up a customer-owned cooperative.”
The Mechanicsville cooperativewith a loan value of $600 million and 5,000 customersserves all of eastern Virginia and southern Maryland.
“When you call here, you won’t get a recording. And you don’t have to press 1 to get English. We don’t care if it costs extra money,” Farmer said.
Colonial Farm Credit offers competitive interest rates, not necessarily lower than anywhere else. It differentiates itself in its expertise.
“We’re the experts of rural financing,” Farmer said. “We understand farming and we understand the country.”
They know a tractor can cost a quarter of a million dollars and a cotton picker can be as much as $675,000.
Farm Credit loan officers also realize farmers don’t get paid weekly or monthly, but when their crops are harvested or their livestock is sold. Those cash flows are figured into the payments on their loans and how often they pay.
“Our credit officers understand all aspects of agriculture, whether it’s a small farm selling to the local farmer’s market or a 3,000-acre grain operations that locks in early in the year on a price for the crop,” Farmer said.
“It’s a lot easier dealing with someone who knows your business,” said Mills, whose father, also a farmer, borrowed money from Farm Credit and sat on the local board.
The Farm Credit System’s federal charter restricts the cooperative’s business to loans for rural properties and agriculture.
Most loan officers have degrees in agriculture or forestry. Many grew up on farms.
Farmer jokes that he’s been a Farmer his whole life. His home in Hanover County overlooks a golf course, where he spends some spare time.
But his tractor and bush hog are on a property in Bedford County, where he and his wife, Joyce, go for weekends and vacations. Their log cabin is heated by a fireplace and wood stove. “I like to cut wood and split it,” he said.
Farmer grew up in Salisbury, Md., where his father was a general manager of a newspaper. They lived next to a poultry, grain and cattle farmer and Farmer worked there through middle and high schools and during breaks from University of Maryland, where he earned a bachelor’s degree in agriculture in 1976.
“I did just about everything in the worldcleared manure with a pitch fork, planted, hoed and picked watermelons, spread manure on the fields, harvested grain, worked the cows, castrated the bulls.”
Farmer’s first job out of college was at a farm credit cooperative in Farmville. He and his bride came to live there a week after they were married in 1977.
“We both enjoyed Farmville from the beginning,” he said. Their daughter, Sarah, was born there.
The family moved to Mechanicsville in 1988, when four associations were merged into Colonial Farm Credit. Farmer became the credit manager. He was named president and CEO in 2000.
Colonial Farm Credit employs 80 people. A third has been there more than 20 years, Farmer said.
The association has offices in Tappahannock, Windsor, Farmville and Hughesville, Md., in addition to its mainand plainoffice in Mechanicsville.
Farm credit associations operate like credit unions where the customers are the owners. But unlike credit unions, the cooperative is not a depository institution nor is it nonprofit.
It is regulated by the Farm Credit Administration, which is similar to the Office of Thrift Supervision, the primary regulator of all federal and many state-chartered thrift institutions. However, the budget for the Farm Credit Administration regulator is paid through annual assessments of associations, not government funds.
Colonial Farm Credit, like other associations in the system, makes its money from three sources:
Interest rates on loans.
“We hold and service all of the loans we make,” Farmer said. “We don’t sell them to anyone. When we make a loan, we know it’s our asset. We are not laying off the risk to someone else. And if it’s a loss, it’s our loss.”
Stock sold to borrowers.
For each loan, the borrowers invests 2 percent of the loan amount or a maximum $1,000 investment in Farm Credit stock, which is repaid when the loan is paid off. A $10,000 loan, for example, would require a $200 investment.
Notes and bonds issued in the international money market and handled centrally from the Farm Credit System.
The farm system has never missed a payment to an investor since its founding nearly 100 years ago, Farmer said.
“We’re a little bit weird and proud of it,” said Jim Belfield, chief information officer at Colonial Farm Credit.
“I feel like I am helping our farmers feed the world,” Belfield said. “We help them produce crops and buy equipment and that is pretty cool.”
The company also makes mortgage loans. Farmer notes that it never made trashy mortgage loans that were packaged and resold on Wall Street, where the taxpayer ended up with the losses.
Farmer said he can count on two hands the number of mortgage loans that the association has foreclosed on since the housing bubble burst in 2007.
“We deal with a very honest group of people in farmers who still have a mindset that they need to meet their obligations and not run and hide,” he said.
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Clem Horsley, a grain farmer in Gloucester, said the people at Colonial Farm Credit are more than business partners. They are friends. Loan officers, including Farmer, often visit his operation.
“They know what you need,” Horsley said. “They understand the mentality of a farmer. You need the money when you need it and you pay it back when you can.”
Horsley became a full-time farmer in 2000 when he retired after 31 years as a construction supervisor with Dominion Virginia Power. He farms 1,200 to 1,500 acres with his son, Keith, also a full-time farmer.
“It’s so much to do. I don’t know how we get it all done.”
He recalls doing business in the old days on a handshake with fertilizer and grain companies. The money was borrowed and paid back when the crop was harvested.
Colonial Farm Credit checks everything out and borrowers fill out all the paperwork. “But it’s like doing business on a handshake,” Horsley said
“They are so easy to work with. It’s just unbelievable. They understand the farm from Greg (Farmer) on down.”
Farmers who grow crops such as corn, soybeans, wheat and peanuts have made decent profits in the past couple of years, Farmer said.
That said, people in the timber and wholesale nursery businesses have been hurt since demand for their products fell in the wake of the housing downturn, he said.
Farmers have seen a silver lining in the down economy. Farmland is not as threatened as it was when the economy was roaring.
“We are not seeing anywhere near the loss of farmland in recent years,” Farmer said. “We are seeing farmers who are able to come back and buy land that was destined for development. Farmers got outbid for years.”
Also, a movement to conserve farmland through conservation easement has helped farmers hold onto their land, he said.
“The Virginia Department of Agriculture is pressing hard to preserve farmland,” he said.
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In good times or bad, the Mechanicsville cooperative has never strayed from its conservative underwriting standards, Farmer said.
He noted that Colonial Farm Credit did not loan money on the county fair property in Caroline County or the Kluge Estate Winery and Vineyard near Charlottesville, although other associations were involved.
For Colonial Farm Credit, the investments were considered too risky. Both ventures ended up in bankruptcy.
“We will be financially sound to lend to our children, grandchildren and great grandchildren when the time comes,” Farmer said.
“Greg (Farmer) is very passionate that we stick to our niche of serving farmers and rural customers,” Belfield said.
He described Farmer’s management style as focused. “He has the amazing ability to understand all aspects of our business and analyze how they are doing at any one time.
“He is not a micro manager. He gives us the freedom to come up with ideas and strategies and implement them.”
Board member Mills said Colonial Farm Credit is strong under Farmer’s management. “Greg has been the best CEO and the association is the best managed.”
“We are driven by what’s best for our customers, not what is best for stockholders who live in New York,” Farmer said.
As mortgage interest rates fell, for example, Colonial Farm Credit initiated and repriced 488 mortgage loans at lower interest rates in 2011, saving customers $700,000 in interest payments over a 12-month period, Farmer said.
Also, the cooperative gives $91,000 every year to rural youth to attend colleges or trade schools.
“We try to be good corporate citizens,” Farmer said.
©2012 the Richmond Times-Dispatch (Richmond, Va.)
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