The Farm Credit Bank of Baltimore is holding merger talks with a sister institution in Columbia, S.C., that could lead to the creation of a new cooperative banking system extending from Pennsylvania to Florida.
Gene L. Swackhamer, president of the Sparks-based bank, said yesterday that the state's largest agriculture lender has been holding merger discussions with the Farm Credit Bank of Columbia since March. He said it was too soon to determine if there would be a consolidation.
Mr. Swackhamer said that a merger is just one form of restructuring being considered as the bank seeks to cut its operating costs and to boost its lending power. The bank needs to be more competitive with commercial lenders that are becoming more aggressive in vying for loans to farmers to pay for such things as planting crops, equipment, land and houses, he said.
Another alternative, Mr. Swackhamer said, is to downsize into what he called a "wholesale bank" that would offer limited services to its 16 affiliated Agricultural Credit Associations that actually make the loans to farmers.
In either case, he said, some jobs "at all levels" would be lost. The bank has 160 full-time workers and 10 part-time employees.
Mr. Swackhamer said the goal of the restructuring plan is to reduce the bank's annual operating cost by between $6 million and $7.5 million.
The Farm Credit Bank of Baltimore is part of the nationwide Farm Credit System, a cooperatively owned banking organization formed by Congress in 1917 to serve the agriculture community. It serves Maryland, Pennsylvania, Virginia, West Virginia, Delaware and Puerto Rico.
Last year it posted a net profit of $32.9 million. Loans outstanding totaled $3.3 billion and total assets were $3.6 billion at year-end.
The Farm Credit Bank of Columbia, with outstanding loans of about $4.4 billion, serves North and South Carolina, Georgia and Florida.
Unlike most other banks, the Farm Credit banks do not accept deposits. Funds for loans come from selling bonds on the international money market.
Mr. Swackhamer said that since the law was changed in 1987 to allow mergers of Farm Credit banks, there already has been some consolidation. In 1992 the St. Louis bank merged with the St. Paul bank, and they were joined by the Louisville, Ky., bank earlier this year. The new entity, called AgriBank, serves an 11-state region.
Mr. Swackhamer said previous merger talks between the Baltimore bank and the Springfield, Mass., Farm Credit Bank, which serves New England, and with the Columbia bank ended with no agreement.
The bank's future is expected to become clearer when its board of directors meets in late July.
Should the bank merge with Columbia, the headquarters probably would move to a more central location.
For customers, about the only change would be the name on the door. Mr. Swackhamer said that "interest rates would not change. The loan office will not change and the loan products won't change. What will change," he said, "is the profitability of the bank."