Two farm credit lenders get stockholder approval to merge

Two farm credit lenders said their stockholders have approved their plans to merge at a special meeting Saturday. The combination will create a $5.9 billion institution serving five mid-Atlantic states. 

The $2.8 billion-asset AgChoice in Mechanicsville, Pennsylvania, and the $3.1 billion-asset MidAtlantic Farm Credit in Westminster, Maryland, expect to close the deal July 1. Both are cooperatively owned, and financial terms were not disclosed. 

MidAtlantic CEO Tom Truitt will lead the merged company, which will rebrand as Horizon Farm Credit. 

The boards of the two farm credit associations began discussing a merger early in 2022, Truitt said Monday in a statement to American Banker. 

“They realized the potential for a stronger Association with specialized local staff who have more resources and capabilities from joining forces,” Truitt said. “Combining the staff from both associations will allow our teams to become subject matter experts in the agriculture within their local area and the specific needs of our borrowers.” 

The planned Horizon Farm Credit would be the 11th- largest farm credit association, according to Bert Ely, principal at Ely & Co. in Alexandria, Virginia, and the author of the American Bankers Association’s Farm Credit Watch newsletter. The largest association, Farm Credit Services of America in Omaha, Nebraska, reported $37.8 billion of assets on March 31.

MidAtlantic and AgChoice were both profitable in the first quarter, with MidAtlantic reporting net income of $17.1 million and AgChoice reporting $11.6 million. 

Saturday’s deal comes as farmers around the country are grappling with challenges posed by inflation and drought. The merger also continues a decades-long trend of consolidation within the system that is expected to continue, Ely said Monday in an interview. In the early 1970s there were more than 1,000 farm credit institutions. As of March 31 the number had declined to 65.

“There are still some very small associations, which I assume over time will get consolidated into the bigger associations,” Ely said. “Arguably there are some efficiencies involved. I also think there is probably some empire-building going on within the system.” 

Earlier this month, the $17 billion-asset American AgCredit in Santa Rosa, California, announced an agreement to merge with the $2.1 billion-asset Albuquerque-based Farm Credit of New Mexico. That deal is expected to close in 2023.

The Farm Credit System includes four banks and 65 farm credit associations. As of March 31 it reported loans totaling $360.2 billion, up 2.9% since the end of 2021.