What is Lone Star Ag Credit?
Lone Star Ag Credit — officially chartered as Lone Star, ACA — is an Agricultural Credit Association offering long-term rural real estate loans and short- and intermediate-term agricultural operating loans. Established in 1917, Lone Star Ag Credit is a cooperative (often referred to simply as an association) that is owned by its borrowers. It is part of the Farm Credit System, the largest single source of rural financing in the United States.
Does Lone Star Ag Credit make home loans?
Yes, we make loans for the purchase, construction and improvement of homes located in rural areas. We also finance rural homesites upon which a house will be built in the future.
What is an Agricultural Credit Association?
An Agricultural Credit Association (ACA) is a financial services provider that owns two subsidiaries — in this case, Lone Star Ag Credit, FLCA, and Lone Star Production Credit, PCA.
The Federal Land Bank Association (FLCA) subsidiary provides loans for farm and ranch real estate, recreational property, timberland, agribusiness firms and rural homes. The Production Credit Association (PCA) subsidiary specializes in loans for livestock and equipment purchases, farm and ranch operating expenses, and all types of agribusiness needs.
What type of loans does Lone Star Ag Credit make?
We make loans to purchase real estate, refinance existing mortgages and other debts, construct and repair homes and other buildings, make property improvements, construct or improve agribusiness facilities, purchase machinery and equipment, purchase livestock, provide operating funds and any other needs where financing is appropriate.
Read more about our Loan Programs.
What does it mean that Lone Star Ag Credit is cooperatively owned?
Lone Star Ag Credit is a cooperative. Therefore, everyone who obtains a loan through the Lone Star Ag Credit becomes an owner of the association through the purchase of stock equal to 2 percent of their loan amount or $1,000.00, whichever is less. Funds for the stock can be included in the loan. Ownership of this stock gives you the right to participate in the business affairs of the association, including election of the board of directors.
Traditionally, borrowers receive
patronage refunds and/or dividends, which are paid into their interest-bearing Funds-Held Account. The Funds-Held Account is typically applied to the loan balance, thus further reducing the cost of borrowing for customers.
What is a patronage refund?
Lone Star Ag Credit follows the fundamental cooperative principle of sharing its earnings with its customer-stockholders in the form of patronage when it does well. Thus, a patronage refund is a distribution of the association's earnings — minus net expenses and necessary reserves — made to the cooperative's stockholders. The board of directors determines annually if the association will pay a
patronage refund and the total amount of that refund.
Who operates the association?
Lone Star Ag Credit is supervised by a board of directors elected by the borrowers of the association. The directors employ professional personnel to manage the operations of the association. The association operates under policies and procedures adopted by the board of directors and management team.
Who is eligible to borrow?
Any person or legal entity that currently owns or is purchasing rural real estate (land outside the city or within a town of 2,500 population or less) is eligible to apply for a loan. In addition, Lone Star PCA provides funds for part-time and full-time farmers, ranchers and agribusinesses needing financing for their operations. Loan approval and terms are subject to the creditworthiness of the applicant.
What collateral is required?
Long-term loans must be secured by a first lien mortgage on real estate, generally on the farm, ranch or agribusiness facility that is financed by the loan. Operating and production loans are generally secured by inventory such as crops or livestock, equipment, receivables and other assets involved with the operation being financed.
How much can I borrow?
All long-term loans require some level of equity, which is the difference between the appraised value of the real estate offered as collateral and the loan amount. The appraised value, financial strength and repayment ability of the applicant will determine the total amount to be borrowed. Down payment or equity requirements generally range between 15 and 20 percent.
Equity requirements for production loans vary depending on the timing of the production cycle and type of loan. Generally, equity requirements are a minimum of 20 percent. Intermediate-term loans require equity between 20 to 25 percent, depending on the type of collateral.
How much can I afford?
Before beginning the loan process, determine how much you can afford. This step can save you time and frustration by helping you focus on a property in your price range.
Simply enter the figures in the fields provided.
Does the association accept deposits?
Lone Star Ag Credit does not accept deposits in the traditional sense of savings accounts and certificates of deposit. However, we do offer an interest-bearing “Funds-Held Account" for our borrowers. Interest earned is applied to the interest due on the next loan installment. Borrowers can use the money in the Funds-Held Account to pay loan installments or withdraw it for other purposes.
Where does Lone Star Ag Credit obtain funds to make loans?
Lone Star Ag Credit is affiliated with the Farm Credit Bank of Texas, located in Austin, Texas, and is part of the nationwide Farm Credit System. The Farm Credit Bank receives its funding for loans primarily from the sale of Farm Credit System securities to investors in the nation's money markets.
What is my investment in Lone Star Ag Credit?
Lone Star Ag Credit is part of the Farm Credit System, serving agriculture in the Texas Farm Credit District. Because the lender is organized as a cooperative, borrowers invest in the capital stock of participation certificates of Lone Star Ag Credit as a condition to receiving a loan. Lone Star Ag Credit in turn invests in the capital of the
Farm Credit Bank of Texas, which provides the funding for the loans that Lone Star originates.
What is voting stock, and who can buy it?
Voting stock is stock required to be purchased as a condition to receiving a loan. Stock ownership provides the right to vote on all matters that stockholders have the right to decide under the Farm Credit Act, Farm Credit Administration regulations or your association's bylaws. Voting stock can be purchased only by farmers, ranchers/producers, harvesters of aquatic products, and other rural property owners. Following cooperative principles, each member normally has only one vote regardless of the number of shares owned. The par value of each share is $5.00, which is also the purchase price.
What rights does voting stock ownership give me?
A holder of voting stock is entitled to nominate and vote in the election of directors to the association's board of directors. They are also entitled to vote to select members of the Nominating Committee, to make motions and second motions at the annual stockholders' meeting, to vote on measures brought before the meeting, and to vote on certain other matters relating to corporate governance. In addition, a voting stockholder is generally eligible to serve as a director or as a member of the Nominating Committee.
What are participating certificates?
Lone Star Ag Credit makes rural home loans and certain farm-related business loans. These borrowers are not eligible to hold voting stock but must instead purchase participation certificates as a condition of receiving a loan. Owners of participation certificates do not have voting rights except when stockholders authorize the issuance of preferred stock and are not eligible to serve on the association's board of directors. In all other respects, stock and participation certificates have the same rights and restrictions.
What determines the amount of stock I must buy?
The minimum level of stock purchase requirements is determined from time to time by the association board of directors within a range set forth in the association's capitalization bylaws, which are subject to the approval of stockholders. Currently, the association stock requirement is 2 percent of the gross loan amount or $1,000.00, whichever is less.
How do I buy stock?
The money needed to buy the required amount of voting stock or participation certificates can be included in your loan request. If your loan request includes stock, the promissory note that you sign will include the amount necessary to purchase the required stock or participation certificates. In that case, you will also pay interest on the stock portion of your loan. The total amount of your loan, including stock or participation certificates, must be repaid in full.
In what form is my stock issued?
The association issues a receipt for stock and participation certificates at the time they are issued. Ownership of the stock or participation certificates is recorded on the books of the association.
Does voting stock earn dividends or patronage refund?
Ownership of voting stock may make you eligible to receive
patronage refunds based on business done with the association or dividends based on the number of shares of voting stock or participation certificates you hold. This will take place when the association board, at its sole discretion and upon review of the association's financial performance, declares a dividend or patronage distribution.
Does stock change in value?
The $5.00 per share par value of your association stock or the $5.00 face value of your participation certificates does not change, but the book value could increase or decrease depending on the financial condition of your association. Any retirement, however, will be at the lower cost of par value or book value.
How does default affect my investment?
The association has a first lien on your stock or certificates as additional collateral for your loan(s). In the event of a default on the loan(s), all or part of the stock may be applied to the loan(s), or under certain circumstances, may be otherwise disposed of when approved by the association.
Is there a risk associated with my stock investment?
Yes. Your ownership of stock or participation certificates is an investment that allows you to share in the association's earnings through patronage refunds and/or dividends. But it is also subject to certain risks that could result in a partial or complete loss of the investment. It is not a compensating balance. The ultimate value of the stock is dependent on the future financial performance and condition of the association over time. Therefore, you cannot assume that stock will be redeemed on demand or upon a certain date or upon the happening of any event, such as repayment of the loan (as could be the case if the investment were considered a compensating balance). You are responsible for the full amount of your loan including the amount borrowed to pay for your stock or certificates, regardless of their book value.
What happens to the stock if the association is liquidated?
If an association is liquidated, the law prohibits stock retirements until the assets of the association are used to meet liabilities of the association. The remaining assets of the association when the liquidation is completed are all divided on a pro rata basis among current stockholders according to the proportion of stock they own.
What happens to my stock when the loan is repaid?
Provided that the capital strength of your association permits it, and unless used by you to capitalize other indebtedness, your stock may (at the board's sole discretion) be retired and the proceeds repaid to you upon final payment of the indebtedness or at such future date as the board may determine that the association's financial strength permits.
Does the association meet its capital adequacy standards?
As of the date of this disclosure, the association meets or exceeds the minimum permanent capital adequacy standard established by the Farm Credit Administration and the standard set by the association board. The association board of directors knows of no reason that would cause the association to fail to meet the capital standard established by the board or the minimum established by Farm Credit Administration at fiscal year-end.
What are the typical fees incurred when obtaining a Lone Star Ag Credit loan?
The typical fees incurred on a real estate loan are the association stock requirement of 2 percent of the gross loan amount or $1,000.00, whichever is less, 1 percent of the gross loan amount or $500, whichever is greater, and a processing fee which ranges from $300 to $475. The typical fees incurred on an operation or production loan are the association stock requirement of 2 percent of the gross loan amount or $1,000.00, whichever is less, and a $100 application fee. The fees on rural home loans under our secondary market program are typical for the industry and competitive with the fees incurred by a mortgage company.