WASHINGTON -- The Farm Credit System continued its merger march with the announcement this week that banks in Denver and in Springfield, Mass., plan to merge.

If the banks' farmer/stockholders approve the move, as expected, the banks will consolidate at the beginning of next year, forming a $15 billion-asset Denver bank. It would be the system's largest regional bank.

Bankers said the new farm credit bank will mean more competition for midwestern bankers.

"Clearly, this should strengthen the bank, and so long as the bank is stronger, it will have more resources to compete with local bankers," said Ronald K. Ence, director of legislative affairs for the Independent Bankers Association of America.

The latest announcement continues a trend toward consolidation similar to that faced by the rest of the banking industry.

There have already been two mergers this year, and two are planned for next year.

The Louisville Farm Credit Bank merged with the St. Paul bank to form AgriBank FCB in St. Paul, And farm credit banks in Omaha and Spokane, Wash., merged to form AgAmerica. It is headquartered in Spokane, and serves farmers from Alaska to Nebraska.

Next April, the Columbia, S.C., and Baltimore farm credit banks expect to complete their merger, which was announced last week.

The Farm Credit System is a government-sponsored enterprise that competes with the nation's 4,000 agricultural bankers. Congress chartered the system in 1916 to provide credit to farmers by raising money on Wall Street at rates close to those on Treasury bonds.

It now consists of 11 regional banks and 250 local credit associations that lend to farmers, ranchers, and rural cooperatives. In the early 1980s, it had 37 regional banks and more than 1,000 local associations, according to the Farm Credit Council, a trade group for co-op agricultural lenders. After the current merger wave is completed next year, it will have just nine regional banks.

The Denver merger, "continues a long-standing trend within the system in recent years," said Stephen Blakely, a Farm Credit Council spokesman.

The new Denver bank will be called CoBank ACB and will be the system's first agricultural credit bank, blending the functions of a farm credit bank and a bank for cooperatives.

The system's eight regional FCBs lend wholesale to local lending associations, and individual farmers and ranchers borrow from the associations. The system's three banks for cooperatives lend directly to coop borrowers such as Ocean Spray, a farmer cooperative.

The Farm Credit Administration, the system's regulator, announced its preliminary approval for the merger on Monday. The Denver and Springfield banks' shareholders are due to vote on it Nov. 3.

The new bank's president will be Doug Sims, now president of the Denver bank.

The IBAA said the Farm Credit System unfairly competes with community banks. "Competition does not scare us so long as we have the opportunity to compete on a level playing field," Mr. Ence said. "But we still think that the rules ought to be the same."

Mr. Ence said system banks pay less in taxes, have privileged access to cheap federal agency funds, and do not face regulatory requirements such as the Community Reinvestment Act.

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