Briefing Packet for House Committee on Financial Institutions and House Committee on Agriculture...

Briefing Packet for

House Committee on Financial Institutions and

House Committee on Agriculture

Presented by:

Randall S. James

Banking Commissioner

June 4, 2002

Texas Department of Banking

Prepared by: Texas Department of Banking - June 2002

House Committee on Financial Institutions House Committee on Agriculture

Agricultural Operator DebtSource: 1997 Census of Agriculture - U.S. Department of Agriculture

Ten States with Highest Debt Amounts Providers of Agricultural Operator Debt - Texas

Rank StateAmount

(thousands) ProvidersAmount

(thousands)

% of Total Debt

1 California $14,348,140 Commercial and Saving Banks $ 4,250,049 52.0%

2 Texas $8,173,239 Farm Credit System $ 1,235,407 15.1%

3 Iowa $7,784,378 Other Lenders $ 745,615 9.1%

4 Minnesota $7,454,840 Mortgage Debt from Seller $ 577,946 7.1%

5 Nebraska $7,013,277 Implement Dealers and Financing Corp. $ 442,309 5.4%

6 Illinois $5,776,621 Farm Service Agency $ 307,512 3.8%

7 Kansas $5,402,916 State/County Government Lending Agencies $ 196,241 2.4%

8 Missouri $5,200,428 Land Purchase Contract $ 155,797 1.9%

9 Wisconsin $5,178,450 Other Debt (Unpaid Bills) $ 106,598 1.3%

10 Indiana $4,327,012 Life Insurance Companies $ 63,133 0.8%

Co-ops, Merchants and other Input Suppliers $ 46,752 0.6%

Small Business Administration $ 38,701 0.5%

Contractors $ 7,179 0.1%

Total $ 8,173,239 100.0%



Providers of Agricultural Operator Debt - Texas

15.1%

9.1%

7.1%

5.4%3.8% 2.4% 1.9%

1.3%0.8%

0.6%0.5%

0.1%

52.0%

Commercial and Saving Banks Farm Credit System Other Lenders

Mortgage Debt from Seller Implement Dealers and Financing Corp. Farm Service Agency

State/County Government Lending Agencies Land Purchase Contract Other Debt (Unpaid Bills)

Life Insurance Companies Co-ops, Merchants and other Input Suppliers Small Business Administration

Contractors



Farm Loans by Texas Banks (State and National)($ in thousands)

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

Total Number of Banks 1,089 1,011 980 935 877 838 798 753 709 686

Farmland Loans $921,254 $965,753 $1,035,311 $1,112,554 $1,173,778 $1,235,363 $1,236,443 $1,387,882 $1,563,721 $1,609,276

Farm Loans - Production $2,637,371 $2,967,327 $3,099,904 $3,165,973 $2,944,367 $3,397,136 $3,022,208 $3,005,591 $3,522,596 $3,073,428

Total Farm Loans $3,558,625 $3,933,080 $4,135,215 $4,278,527 $4,118,145 $4,632,499 $4,258,651 $4,393,473 $5,086,317 $4,682,704

Source: FDIC website - bank published financial reports.

$0

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

(in

th

ou

sa

nd

s)

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

Farm Loans by Texas Banks (State and National)

Farmland Loans Farm Loans - Production



Total Farm Loans as Percentage of Total Assets (State and National Banks in Texas)

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

Total Number of Banks 1,089 1,011 980 935 877 838 798 753 709 686

Farmland Loans 0.52% 0.52% 0.55% 0.55% 0.57% 0.53% 0.69% 0.76% 0.94% 1.11%

Farm Loans-Production 1.50% 1.61% 1.65% 1.56% 1.43% 1.44% 1.68% 1.66% 2.12% 2.12%

Total Farm Loans 2.02% 2.13% 2.20% 2.11% 2.00% 1.97% 2.37% 2.42% 3.06% 3.23%

Source: FDIC website - bank published financial reports.

Total Farm Loans as Percentage of Total Assets (State and National Banks in Texas)

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

Total Farm Loans



Agricultural Lending Concerns of Texas Bankers

Government assistance programs and subsidies are necessary to partially offset lending risks and keep independent farmers in business;

Normal production expenses, particularly irrigation costs, are continuing to rise;

Environmental issues associated with pesticides and herbicides may also increase production costs;

The availability of water for crop irrigation may be a serious problem in the immediate future; and

The ability of young farmers to effectively compete and enter the industry is being seriously jeopardized because of high capital entry requirements.



Finance Commission Agricultural Business Lending Study

Comprehensive research project of Texas agricultural business covering:

A 20-year history of statistical and demographic agricultural lending information;

A historical review of government sponsored agricultural price, conservation, guaranty, and direct lending support programs; and

A current survey of lending experiences by agricultural producers or “first handlers” in Texas.

The process will include: In-depth interviews with industry experts to obtain relevant information; Survey of about 400 producers meeting the study’s population definition; and A comprehensive report with narrative analysis and statistical support to be

issued by November 30, 2002.

Briefing Packet for House Committee on Financial Institutions and House Committee on Agriculture...

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