Not long ago, Stockmans Bank of Commerce's very existence was mired in bureaucratic purgatory.

Its three-year quest, beginning in 1988, to become the first Farm Credit System institution to convert to a stockholder-owned commercial bank took it through the offices of several state and federal regulators, the courts and the minutiae of farm legislation and, finally, to success.

Born as the California Livestock Production Credit Association in 1933, the institution was a member-owned cooperative that financed livestock operators throughout California.

Gary W. Wright became president in 1981. His aggressive statewide marketing plan invaded markets of other California Farm Credit organizations, many of which argued the Farm Credit System should eliminate California Livestock. With that, Mr. Wright's clash with Farm Credit began.

"We could see that for our association to remain in the Farm Credit System was going to be very difficult," said Mr. Wright, who had been with the system since 1974.

So it applied for status as another Farm Credit entity - one having the vague name "other financial institution." It still would have received Farm Credit funding, but its charter would change. The request was denied.

Then, the Agricultural Credit Act of 1987 brought a new option: The law allowed a Farm Credit System entity to convert to a savings and loan, bank, or credit union, under certain conditions.

"This was sent from heaven," Mr. Wright recalled thinking.

Armed with approvals from the California Banking Department and the Federal Deposit Insurance Corp., California Livestock got bad news in February 1990: the Farm Credit Administration - Farm Credit's regulator - denied its termination application because the agency hadn't yet written its termination regulations.

In 1990, California Livestock sued the Farm Credit Administration to terminate and won.

The regulator appealed, but in the meantime, California Livestock had lobbied for legislation authorizing its Farm Credit termination. The provision made the 1990 Farm Bill.

So California Livestock dropped its suit and bid farewell to Farm Credit. It paid Farm Credit a $20,000 exit fee, instead of the $250,000 it first offered the agency in 1988. It paid its lawyers $300,000.

Farm Credit "shot themselves in the foot and the attorneys won," Mr. Wright said. "It was a bonehead decision on their part."

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