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Apr 6, 2000 - "Crop insurance serves as loan collateral," said Mike Scanlon, Director of Agricultural Finance for the Independent Community Bankers of America (ICBA). So it's easy to understand why the ICBA, which represents 5,500 independently owned banks, is praising the latest Senate Ag Committee crop insurance reform package, which promises to expand crop insurance to more producers. As the primary voice for the Nation's community banks, ICBA represents the interest of many agricultural lenders.

"Half of our member banks are considered agricultural banks by Federal Reserve standards," Scanlon said. To qualify for agricultural bank status, a bank's portfolio value must contain at least 17 percent in agricultural loans. "You can be sure these banks will be looking for crop insurance coverage."

But Scanlon also added that crop insurance coverage is just part of what lenders consider when they review loan applications. Bankers want an overview of the farm business and encourage their clients to practice risk management strategies. "Many of our bankers feel that today's farmer, when compared with the farmer of the 1980's, tends to view the farm as a business enterprise," said Scanlon. "When applying for a loan, these farmers bring in marketing plans and records that show cash flow and long-term survivability, as well as crop collateral. They have a clear picture of their financial status."

Loan officer John Williams of F&M Bank in Brodhead, Wisconsin, is also seeing this new business trend, with its emphasis on risk management strategies, affecting the evolution of the traditional family farm. "Since the enactment of the Federal Agriculture Improvement and Reform (FAIR) Act of 1996, the scope of the family farm is getting larger," said Williams."Narrowing margins and increasing income needs of families have led producers (and their bankers) to look more at the profitability of all the farm operations, more out of necessity than a change in attitude. There will also be family farms, but they will look totally different in the future."

ICBA bank members, who take pride in their customer service and lower fees, play an important role in providing agricultural loans for U.S. farmers. They hold more than $491 billion in insured deposits, $589 billion in assets, and more than $344 billion in loans for consumers, small businesses, and farms.