Shareholders of five mid-Atlantic cooperative banks, including three in Maryland, have approved a merger plan that will form the largest agriculture lender on the East Coast.
F. Robert Frazee, president and chief executive of Central Maryland Farm Credit, said yesterday that the merger is scheduled to be completed July 1, and the new institution will be headquartered in Westminster.
The consolidation will unite Central Maryland Farm Credit of Westminster; Chesapeake Farm Credit of Denton; Delaware Farm Credit of Dover; Keystone Farm Credit of Lancaster, Pa.; and Marva Farm Credit of Salisbury.
When the merger is complete, the new financial entity will be called MidAtlantic Farm Credit, and Frazee will be its president and chief executive.
The five banking cooperatives -- known officially as associations -- are affiliated with AgFirst Farm Credit Bank, the Columbia, S.C., cooperative formed as a result of the 1995 merger of Farm Credit Bank of Baltimore and Farm Credit Bank of Columbia.
Frazee said that MidAtlantic Farm Credit will have assets of $1 billion and will serve more than 9,000 agriculture borrowers in Maryland, Pennsylvania, Virginia and Delaware.
Eighty-six percent of the shareholders, who also are the cooperatives' borrowers, voted in favor of the merger, according to Walter Hopkins, who will serve as board chairman of the new association.
Frazee said the merger, which is subject to regulatory approval, will create a stronger financial lender with a diverse loan portfolio serving a wider geographic area.
"Our combined association will have the resources to continue to provide the exceptional service our members are accustomed to, while increasing our lending capacity and enhancing the services that are available to the membership," Frazee said.
Explaining an advantage of a more diversified loan program, Frazee said that a majority of the loans to be made by the new association won't go to a single segment of agriculture, such as the Delmarva poultry industry, that can be subject to a financial downturn.
He pointed to the drought that had a major impact on farm finances in Central Maryland and southern Pennsylvania during the summer.
Administrative costs are reduced with the elimination of about 30 jobs throughout the banking region.
"Instead of five CEOs, we will have one," said Frazee. He added that most of the jobs will be eliminated from the management ranks. "Most of the customer contact people will remain in place."
The new association will have 170 employees. As a cooperative, it will return a percentage of its profit to each year to borrowers.