End of the line
Growers Credit Corporation will shut its doors after returning its grower-owners most of their equity.
Growers Credit Corporation board members and staff leave their last board meeting. Pictured are (from left) Bob Petersen of Manson, Gary Roberts of Oroville, former manager Steve Joy, office manager Nancy Baker, Roger Hodgson of Omak, Gene Handley of East Wenatchee, and Floyd Stutzman of Wenatchee.
Board members of the Growers Credit Corporation, a grower-owned lending cooperative in Washington State, met for the last time in December at the small house in a residential area of Wenatchee that has served as their humble office for the past decade.
Growers Credit, once a thriving concern with a loan portfolio of $24 million, will dissolve this month.
The cooperative made its last loans to growers in 2000. Because of low returns on apples in the late 1990s, a number of the cooperative’s members were unable to repay their debts, and some declared bankruptcy. On top of that, its lender, CoBank, said it could no longer provide financing to the cooperative beyond the 2000 crop, as it was getting out of agricultural lending.
The co-op was unable to find alternative financing before growers needed their loans for the 2001 crop year, so the board decided to begin the liquidation process. It sold its office on Wenatchee Avenue and paid off what it owed to CoBank in 2002. Manager Ron Ward retired that year, but the organization has continued to work with its grower members to recoup $5 million in outstanding debts.
Steve Joy, who managed the cooperative from 1972 to 1998, said it was not a business failure. It was just a discontinuation of its lending business.
Since the members were owners, they had equities in the company. When some growers were unable to pay back their loans, that affected the equities of the other members.
“Historically, when co-ops went under, the equities were completely lost.” Joy said. “But rather than letting the members lose their equities and walk away, and let the bank take over, our board of directors felt that the member equities were collectable to a certain percentage, so they decided to continue to operate on a collection basis to return those equities to the members.”
Wait it out
Board member Gene Handley of East Wenatchee said the board felt it was not fair to allow a member who owed $5,000 to just walk away while other growers had managed to pay back their loans. “We felt we were in a position to wait it out.”
“It just took time,” Joy said. “It was pretty amiable. They knew they owed it, and it just needed to be worked out.”
Most members are still farming and have benefited from higher returns in recent years. With almost 80 percent of the equities now recovered and the rest considered not collectable, the cooperative is shutting its doors.
“It’s a chapter that’s closed,” said Bob Petersen, board president, who is a grower at Manson, Washington. “We thought Growers Credit was pretty good for the community, and small growers in particular, and it’s kind of sad in some ways to see it’s no longer available.”
Growers Credit was formed in 1944. In 1940, President Franklin Roosevelt had declared the agricultural industry in north central Washington to be in a disaster situation. The Regional Agricultural Credit Corporation was established to provide financing for fruit production, updating of marginal orchards, and adjustment of debts for a five-year period. Growers Credit Corporation was set up to take its place and became a cooperative in 1968.
Joy said the corporation was designed to help small growers. It provided production financing primarily. The board of directors, all growers, considered the loan requests. Advances were made to growers based on a pre-approved budget, and interest was charged only on the outstanding balance. Growers could call a toll-free number day or night to leave a message about some purchase they needed to make, and Growers Credit staff could mail out a check to them the next day to cover the cost.
“The people I see, and the old customers, always say what a good organization it was and how it helped maintain them in business,” Joy said. “That’s what it was designed to do. It was run by growers who understood the business, which made it different from the commercial banks. They understood the ups and downs of the business. Because it was a co-op, they were owners and had equity, so it was a reliable source of funding as long as they kept their part of the bargain. It worked well for many years.”
A security interest in the crops was required on all loans. All equipment was pledged, and when additional collateral was required, a real estate mortgage was taken. Petersen said the board members were their peers and would go to great lengths to help the growers—something that didn’t always happen with commercial banks.
But as the cost of equipment and other inputs increased, and smaller orchards were absorbed into larger ones, growers needed larger amounts of financing, Joy said.
“When I came to Growers Credit, we had some 5- to 10-acre customers, and 20 acres would work for a mom-and-pop orchard. But it kept requiring more and more acreage.”
Since 2002, Nancy Baker, who has served as assistant secretary-treasurer and office manager with Growers Credit for 34 years, has continued to work with members individually to figure out how they could repay their debts to the corporation. It’s involved some foreclosure or repossession of property and equipment.
The board has met twice a year during the liquidation process, and as funds have come in, they’ve been allocated back to the members. Baker believes it’s rare for a cooperative to be able to return equities to their members in such a situation.
She’s been packing up the cooperative’s documents and photos to put into storage and will lock the door of their office for the last time on January 31.
“I go through files and find things that are so interesting with the history of the corporation,” she said. “It’s hard to let go of them.”