Briefing Packet for House Committee on Financial Institutions and House Committee on Agriculture Presented by: Randall S. James Banking Commissioner June 4, 2002 Texas Department of Banking

Prepared by: Texas Department of Banking - June 2002 House Committee on Financial Institutions House Committee on Agriculture Page 2 Agricultural Operator Debt Source: 1997 Census of Agriculture - U.S. Department of Agriculture Ten States with Highest Debt AmountsProviders of Agricultural Operator Debt - Texas RankState Amount (thousands) Providers Amount (thousands) % of Total Debt 1California$14,348,140Commercial and Saving Banks $ 4,250, % 2Texas$8,173,239Farm Credit System $ 1,235, % 3Iowa$7,784,378Other Lenders $ 745,6159.1% 4Minnesota$7,454,840Mortgage Debt from Seller $ 577,9467.1% 5Nebraska$7,013,277Implement Dealers and Financing Corp. $ 442,3095.4% 6Illinois$5,776,621Farm Service Agency $ 307,5123.8% 7Kansas$5,402,916State/County Government Lending Agencies $ 196,2412.4% 8Missouri$5,200,428Land Purchase Contract $ 155,7971.9% 9Wisconsin$5,178,450Other Debt (Unpaid Bills) $ 106,5981.3% 10Indiana$4,327,012Life Insurance Companies $ 63,1330.8% Co-ops, Merchants and other Input Suppliers $ 46,7520.6% Small Business Administration $ 38,7010.5% Contractors $ 7,1790.1% Total $ 8,173, %

Prepared by: Texas Department of Banking - June 2002 House Committee on Financial Institutions House Committee on Agriculture Page 3 Providers of Agricultural Operator Debt - Texas

Prepared by: Texas Department of Banking - June 2002 House Committee on Financial Institutions House Committee on Agriculture Page 4 Farm Loans by Texas Banks (State and National) ($ in thousands) Total Number of Banks 1,0891, Farmland Loans $921,254$965,753$1,035,311$1,112,554$1,173,778$1,235,363$1,236,443$1,387,882$1,563,721$1,609,276 Farm Loans - Production $2,637,371$2,967,327$3,099,904$3,165,973$2,944,367$3,397,136$3,022,208$3,005,591$3,522,596$3,073,428 Total Farm Loans $3,558,625$3,933,080$4,135,215$4,278,527$4,118,145$4,632,499$4,258,651$4,393,473$5,086,317$4,682,704 Source: FDIC website - bank published financial reports.

Prepared by: Texas Department of Banking - June 2002 House Committee on Financial Institutions House Committee on Agriculture Page 5 Total Farm Loans as Percentage of Total Assets (State and National Banks in Texas) Total Number of Banks1,0891, Farmland Loans0.52% 0.55% 0.57%0.53%0.69%0.76%0.94%1.11% Farm Loans-Production1.50%1.61%1.65%1.56%1.43%1.44%1.68%1.66%2.12% Total Farm Loans2.02%2.13%2.20%2.11%2.00%1.97%2.37%2.42%3.06%3.23% Source: FDIC website - bank published financial reports.

Prepared by: Texas Department of Banking - June 2002 House Committee on Financial Institutions House Committee on Agriculture Page 6 Agricultural Lending Concerns of Texas Bankers Government assistance programs and subsidies are necessary to partially offset lending risks and keep independent farmers in business; Normal production expenses, particularly irrigation costs, are continuing to rise; Environmental issues associated with pesticides and herbicides may also increase production costs; The availability of water for crop irrigation may be a serious problem in the immediate future; and The ability of young farmers to effectively compete and enter the industry is being seriously jeopardized because of high capital entry requirements.

Prepared by: Texas Department of Banking - June 2002 House Committee on Financial Institutions House Committee on Agriculture Page 7 Finance Commission Agricultural Business Lending Study Comprehensive research project of Texas agricultural business covering:  A 20-year history of statistical and demographic agricultural lending information;  A historical review of government sponsored agricultural price, conservation, guaranty, and direct lending support programs; and  A current survey of lending experiences by agricultural producers or “first handlers” in Texas. The process will include:  In-depth interviews with industry experts to obtain relevant information;  Survey of about 400 producers meeting the study’s population definition; and  A comprehensive report with narrative analysis and statistical support to be issued by November 30, 2002.