The Federal Agricultural Mortgage Corp. has raised the $65 million in capital it needed by a Tuesday deadline, but some bank trade groups are concerned that nearly all of the money came from Farm Credit institutions.
Zions Bancorp, the only banking company to participate, contributed $5 million.
For their $60 million infusion, five Farm Credit lenders won some influence over how the government-sponsored enterprise will operate, including who will run it and what new businesses it will pursue.
"We are concerned that it appears the Farm Credit System will have the ability to dominate it in the near term," said John Blanchfield, a senior vice president of the American Bankers Association.
Mark Scanlan, director of the Independent Community Bankers of America's office of agriculture and rural policy, said he hopes Farmer Mac continues to serve all agricultural lenders equally.
"That is the goal that needs to be kept in mind," he said. "There is some concern that these shareholders will have undue influence over the board."
Ken Auer, the president and chief executive of the Farm Credit Council, said concerns that the new investors might have too much influence are unfounded because Farmer Mac's board is still made up of a mix of Farm Credit lenders, bankers, and outsiders.
"That is not changing; they still retain control," Mr. Auer said. "The [Farm Credit System] is not controlling the direction …. The Farm Credit System stepped forward to save Farmer Mac, and the bank industry did not. Zions was alone."
Farmer Mac, as the government-sponsored enterprise is known, was created in 1988 to provide a secondary market for agricultural mortgages. The GSE announced last month that soured investments in Fannie Mae preferred shares and Lehman Brothers securities would force it to take nearly $92 million in charges.
If it had not raised capital by Tuesday, Farmer Mac would have ended the quarter below its baseline capital requirements and would have faced regulatory sanctions, including a suspension or scaling back of programs.
The company met the deadline through an offering of preferred shares. The Farm Credit System lenders AgFirst Farm Credit Bank, AgriBank FCB, CoBank ACB, Farm Credit Bank of Texas, and U.S. AgBank FCB bought shares, according to a press release from Federal Farm Credit Banks Funding Corp.
Clark B. Hinckley, a spokesman for the $55.4 billion-asset Zions, said the bank participated because it is a big customer, selling a significant amount of loans to Farmer Mac. "We've had a close relationship with Farmer Mac," he said. "It's been a very good one and a very profitable one."
Farmer Mac also announced that its chief executive officer had resigned. Henry D. Edelman had led the company since its creation. Michael A. Gerber was named acting president and CEO and will remain CEO of Farm Credit of Western New York.
For banks that rely on Farmer Mac to buy and guarantee farm mortgages, the news was seen as overwhelmingly positive.
"They are a valuable funding source for First Dakota National Bank," said Jeff Wolfgram, the vice president and manager of Dakota Mac, which offers agricultural real estate loans for First Dakota National Bank in Yankton, S.D. "They provide more liquidity and set off credit risk" for the bank.
News of the capital infusion sent Farmer Mac's shares soaring 65.6%, to $6.79 at Wednesday's close. The GSE's stock had plummeted 85% in September.
Farmer Mac declined to comment.
