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Take advantage of reduced rates


More than 22,000 farmers in Iowa and three other states are realizing the benefits of lower interest rates, totaling more than $56 million in first-year savings, thanks to a program by one of the region’s leading ag lenders.

Since 2009, Farm Credit Services of America has offered a loan conversion program for existing customers who would benefit from decreasing interest rates on long-term, fixed-rate notes. FCSAmerica is a farmer-owned cooperative lender, serving farmers and ranchers in Iowa, Nebraska, South Dakota and Wyoming.

“As market interest rates have declined, so has the cost of our funding,” says Craig Kinnison, senior vice president and chief financial officer of FCSAmerica. “As a mission-driven cooperative, we are owned by our customers and uniquely positioned to take a long-term view. We use this opportunity to help our customers reduce their interest rates, while also improving the financial strength of their cooperative due to favorable funding costs and the resulting positive impact on profitability.”

Key Points

Farmers taking advantage of refinancing at historically low interest rates.

Loan conversion program lets borrowers reduce the amount of interest they pay.

Program saved farmers in four-state region more than $56 million in first year.


Local staff of the cooperative lender alerts customers of the opportunity to refinance. About 8,100 took advantage of the program in 2009, he says, reducing their interest rates by an average of 1.13% and cutting interest payments by about $17.5 million collectively in the first year.

The conversion program’s pace picked up through the first 10 months of 2010 as interest rates continued to decline. Through Oct. 31, 2010, more than 14,300 additional customers had loans converted to lower rates (an average interest rate reduction of just over 1%) while reducing total interest payments by about $38.8 million in the first year the new rates were in effect.

This program will continue

“Most of the converted loans are for real estate, primarily land, but include other fixed-rate loans such as for buildings and equipment as well,” says Kinnison. “Customers have saved more than $56 million in interest payments during this program’s first year and 10 months. And, since the interest savings continue each year for the life of the converted loans, which may vary from three to 30 years, the long-term impact will be significantly greater than our first-year calculations.”

The conversion program is simple. FCSAmerica retail offices send customers with eligible fixed-rate loans a short letter noting current loan principal balance, fixed-rate period expiration date, loan maturity date, current interest rate and the new rate. Customers have five days to accept the conversion offer to take advantage of the specified rate savings.

“Since there is a conversion fee, we make the offer only to customers whose interest savings would cover the fee in two years or less,” Kinnison says. “The loan conversion has to make financial sense for a customer and the organization before we offer it.”

Don’t miss out on refinancing

Customer reaction has been very positive. “We had quite a few people asking whether the offer was legitimate. Customers couldn’t believe a lender was calling them to reduce their interest rates,” he says. “We assured them that yes indeed, it is a legitimate offer. It demonstrates the value of a customer-focused, cooperative lender that consistently offers market-based interest rates.”

Kinnison says the conversion program will continue as long as the interest rate environment is beneficial to customers and the cooperative. If they haven’t already been contacted, he says customers should call their local FCSAmerica office to discuss financing opportunities during this period of historically low interest rates.

The cooperative helps finance growth in rural America, including young and beginning producers. With more than 85,000 customers and assets of $15.3 billion, it is a leading provider of credit and insurance to farmers, ranchers and agribusiness.

Source: Farm Credit Services

This article published in the February, 2011 edition of WALLACES FARMER.

All rights reserved. Copyright Farm Progress Cos. 2011.