Borrower Level Stock

Borrower Level Stock is here!  It's another way your Association is working to keep your money working for you.

What is Borrower Level Stock? Who needs it? What are the rules? These are questions that are normal for people to ask. 

For the entire history of Farm Credit of Southwest Kansas (Association), customers have purchased stock for each loan obtained. In 1995, stock requirements were reduced to 2% or $1000, whichever was less. Now, with Borrower Level Stock (BLS) the amount of stock required is based on the Borrower's total borrowing relationship with the Association.

In other words, with BLS no matter how many loans you have with the Association; mortgage loans, operating loans, and intermediate term loans, the most stock you will ever need is $1,000 because the stock requirement is at the borrower level.

Your loan officer can explain the details of the program, but the key elements of determining how BLS can work for you can be summarized in a few points.

• A Borrower is identified by the individual or entity to whom the loan is made and who receives the IRS Form 1098 or Interest Statement.
• Issuance of stock occurs when the lending relationship is first disbursed and in a sufficient amount, up to a maximum of $1,000, required for the total commitment on the loan.
• Stock is retired when the lending relationship with the Association is completed.
• Borrowers with more than one existing loan with the Association will be invited to convert their existing Loan Level Stock (LLS) to the new BLS program.
• Excess stock for existing Borrowers will be refunded.
• All new loans will be made under the BLS program and all renewing loans will be converted to BLS stock.

To illustrate the difference between the old stock requirement and the new BLS program, the following table assumes that John Q. Farmer has 3 loans with the Association.  The BLS requirements allow Mr. Farmer to receive a check for $1,800.

Borrower Name	Account Name	Loan Commitment	Old Stock Requirement	BLS Stock Requirement
John Q. Farmer	Stock Account			$1,000
John Q. Farmer	Operating Loan	$100,000	$1,000
John Q. Farmer	Land Loan	$250,000	$1,000
John Q. Farmer	Tractor ITL	$40,000	$800
Total Stock Required			$2,800	$1,000
Stock Retired (Saved)			$1,800

The next table illustrates the effect of the definition of a Borrower on the BLS requirements.  Assuming that Mr. Farmer also has formed a corporation, the BLS guidelines would require a separate stock account for the Corporation.  In this example $800 less stock would be required.

Borrower Name	Account Name	Loan Commitment	Old Stock Requirement	BLS Stock Requirement
John Q. Farmer	Stock Account			$1,000
John Q. Farmer	Operating Loan	$100,000	$1,000
John Q. Farmer	Tractor ITL	$40,000	$800
Farmer Enterprises, Inc.	Stock Account			$1,000
Farmer Enterprises, Inc.	Land Loan	$250,000	$1,000
Total Stock Required			$2,800	$2,000
Stock Retired (Saved)			$800

If you have any additional questions about Borrower Level Stock, please contact your loan officer or send an e-mail to info@fcswks.com