Farm Credit System –

U.S. Agricultural Credit Conditions

Glen R. Smith

Farm Credit Administration Board

Farm Credit System Insurance Corporation 

Board of Directors

February 6, 2019
Spring 2017: Interviews with White House 

personnel

2
Fall 2017: Senate Ag Hearing/ 

Senate Confirmation

3
Introduction of Smith Family

4
Introduction by Senator Ernst 

and Senator Grassley

5
Taking the Oath of Office

6

On December 14, 2017, Glen R. Smith was sworn in as a member of the 

FCA Board by Chairman Dallas Tonsager, assisted by Glen’s wife, Fauzan. 
Farm Credit Administration Board

7

Jeffery S. Hall 

FCA Board Member

FCSIC Board Chairman

Glen R. Smith

FCA Board Member

Dallas P. Tonsager

FCA Board Chairman 

and CEO
Farm Credit Administration 

Mission and Responsibilities

The Farm Credit Administration ensures that Farm Credit System 

institutions and Farmer Mac are safe, sound, and dependable 

sources of credit and related services for all creditworthy and 

eligible persons in agriculture and rural America.

We fulfill this responsibility by 

– developing policies and regulations to help ensure the 

safety and soundness of System institutions, and 

– examining institutions to ensure that they operate in a safe 

and sound manner and comply with applicable laws and 

regulations. 

FCA headquarters are in McLean, VA, with field offices in McLean; 

Bloomington, MN; Dallas, TX; Denver, CO; and Sacramento, CA.

8
Overview of the Farm Credit System

Government Oversight

Farm Credit System

9

FCS Banks

FCS Associations Farmer Mac

Borrowers / Stockholders

U.S. Congress 

(Farm Credit Act)

Farm Credit 

Administration

FFCB Funding Corporation

Farm Credit System

Insurance Corporation
Financing the U.S. Farm Sector – Market Share

• Commercial banks (41.2% share in 2017)

• Farm Credit System (40.4%)

• Life insurance companies (3.8%)

• U.S. Department of Agriculture (2.6%)

• Farmer Mac (1.6%)

• Individuals and others (10.4%)

10

Source: USDA Economic Research Service.
Overview of the System

11

Source: Federal Farm Credit Banks Funding Corporation.
525,000 

Borrowers/Owners

69 Farm Credit

Associations

4 Banks

System Total Loans: $261 B

System Total Assets $334 B

Systemwide Total Debt Securities: $269 B 

System Total Capital: $57 B

System Annualized Net Income: $5.3 B

What is today’s cooperative structure?*

12

* As of June 30, 2018. Income annualized first 6 months. 

FCS Funding 

Corporation
13

Farm Credit System territories
The number of System institutions has 

declined since the 1980s 

14

4 banks and 

69 associations
Two dozen FCS associations have assets 

greater than $1.5 billion

15

CoBank District

Northwest FCS ($11.5 bil.)

Farm Credit West ($10.3 bil.)

American AgCredit ($10.0 bil.)

Farm Credit East ($6.9 bil.)

Yosemite FC ($2.9 bil.)

Frontier FC ($2.1 bil.)

FC of New Mexico ($1.7 bil.)

Golden State ($1.6 bil.)

AgriBank District

FCS of America ($28.0 bil.)

FC Mid-America ($22.5 bil.)

Compeer Financial ($19.5 bil.)

GreenStone FCS ($8.5 bil.)

AgCountry ($7.4 bil.)

FC of Illinois ($4.3 bil.)

FCS Financial ($4.0 bil.)

AgFirst District

MidAtlantic FC ($2.8 bil.)

First South FC ($2.1 bil.)

AgCredit ($2.0)

AgChoice FC ($1.9 bil.)

FC of the Virginias ($1.9 bil.)

AgSouth FC ($1.8 bil.)

Carolina FC ($1.5 bil.)

Texas District

Capital FC ($7.5 bil.)

AgTexas FCS ($1.9 bil.)

Source: 2017 Annual Information 

Statement of the FCS.
System’s loan portfolio is diversified 

geographically and by commodity

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Cash 

Grains

16.7%

Rural 

Infrastructure

10.8%

Cattle

9.2% Food 

Products

7.0%

Dairy 

Farms

6.7%

Rural Home

6.2%

Forestry

6.0%

Field Crops

Tree Fruits, Nuts 5.6%

& Grapes

5.5%

Farm 

Supply & 

Marketing

4.7%

Poultry & 

Eggs

2.7%

Hogs

2.3%

Other

16.6%

California 10.6%

Texas 6.9%

Iowa 5.4%

Illinois 5.0%

Minnesota 4.9%

Nebraska 3.9%

Ohio 3.7%

Wisconsin 3.0%

Kansas 3.0%

Indiana 3.0%

FCS Loan Portfolio 

Geographical Distribution

as of December 31, 2017

Source: 2017 Annual Information Statement of the FCS.
System gross loans

17

Source: Federal Farm Credit Banks Funding Corporation.
How is credit delivered?

1. Borrower requests funds

2. FCS institution reviews application for creditworthiness

• Assesses eligibility, scope, purpose

• Assesses five C’s of credit (capacity, character, capital, 

collateral, condition)

• Identifies appropriate loan controls, terms, and conditions

• May use credit scoring models

3. FCS institution approves credit, completes legal 

documentation, secures collateral, and advances funds

• Bases interest rate on funding costs, capital needs, operating 

costs, marketplace, and credit risk profile of the borrower

• Provides follow-up loan review and monitoring

4. Borrower becomes voting stockholder of the FCS 

institution

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Structure/Ownership

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Source: Federal Farm Credit Banks Funding Corporation.
Farm Credit ratings

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Source: Federal Farm Credit Banks Funding Corporation.
FCSIC & the Farm Credit Insurance Fund

• Farm Credit System Insurance Corporation

– Created in 1988 through an amendment to the Farm Credit Act.

– Primary responsibility is managing the Farm Credit Insurance Fund.

– Has authority to provide assistance to System institutions, including 

providing liquidity to System banks when exigent market circumstances 

threaten the banks’ ability to pay maturing obligations.

– Has secured a $10 billion line of credit to be used as additional liquidity 

assistance if needed.

• Farm Credit Insurance Fund

– Primarily to insure the timely payment of principal and interest on 

Systemwide debt securities (provides additional protection for 

investors). – Funded by premiums assessed on System banks, which may be passed 

on to the associations. – Insurance Fund target is 2% of aggregate outstanding insured debt. – Insurance Fund invested only in U.S. government securities. – Assets of $5 billion in the Insurance Fund (at 12/31/18). – Insurance Fund has never been used for the payment of principal or 

interest on Systemwide debt securities.

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System total assets and loans have grown 

substantially over time

0

50

100

150

200

250

300

350

1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

$ billion

Total loans

Total assets

22

Source: FCS Information Statements.
Much of the loan growth is real estate 

mortgage lending

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2.6%

4.9%

-1.1%

1.0% 1.0%

2.8%

0.1%

-3.4%

1.9%

3.2%

-0.1%

0.6%

-5%

0%

5%

10%

Total Loan

Portfolio

RE Mortgage

(47%)

Prod. &

Intermediate

(20%)

Agribusiness

(16%)

09/30/16 09/30/17 09/30/18

Loan Growth by Loan Type

(% change year-to-date through September)

Source: FCS Information Statements.
System earnings are up year-over-year

24

System Earnings ($ millions)

(year-to-date through September)

2,633 

2,994 3,158 3,499 3,569 3,481 3,589 3,716 4,012 

474 352 188 

9 7 87 218 188 146 

System Net Income

Provisions for Loan Losses

Source: FCS Information Statements.
System is well capitalized

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Capital and Liquidity

as of September 30, 2018

• Retained earnings as a 

percentage of total 

capital equaled 80.1% of 

total capital.

• The System’s liquidity 

position equaled 171 

days of coverage. 

Days of available liquidity 

for the 4 funding banks 

ranged from 144 to 226 

days.

Restricted capital represents capital associated with the Insurance Fund.

35.9 

38.5 

41.7 

45.8 

48.9 

52.4 

55.5 

15.8%

16.1% 16.5% 16.9% 16.8% 16.7%

17.3% 17.4%

Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Sep-18

Restricted Capital

Total Capital less Restricted

Capital-to-Assets Ratio

58.2

Total System Capital ($ billions)

Source: FCS Information Statements.
U.S. farm income and debt

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Source: Federal Farm Credit Banks Funding Corporation using 

USDA data as of 11/30/18.
System credit quality is slipping but 

remains favorable 

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

2005 06 07 08 09 2010 11 12 13 14 15 16 17 18

$ bil. Percent

Farm Credit System Loans

Nonaccrual loans ($ bil.) Nonaccrual share of total loans (%)

27

Source: Consolidated Reporting System year-end data, except September for 2018.
System credit quality varies by district

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

2005 06 07 08 09 2010 11 12 13 14 15 16 17 18

Percent

Nonaccrual share of loans

Texas District AgFirst District AgriBank CoBank

28

Source: Consolidated Reporting System year-end data, except September for 2018.
Modest deterioration has occurred for 

real estate mortgage loans

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% of Loans Classified less than Acceptable

Source: FCS Information Statements.

6.5

7.0

10.6

4.5

6.4

6.4

10.9

4.6

5.6

5.0

9.4

5.4

0.0 2.0 4.0 6.0 8.0 10.0 12.0

Total

Portfolio

Real Estate

Mortgage

Production &

Intermediate

Agribusiness

Sep-18 Sep-17 Sep-16
Program Volume by Business Line

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Farmer Mac Financial Highlights:
Farmer Mac Financial Highlights: Asset Quality

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Farmer Mac Financial Highlights: Capital

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System mission for young, beginning and 

small farmers

• Farm Credit Act – 1980 Amendments

– FCS institutions must have programs to furnish 

sound and constructive credit and related services 

to YBS farmers and ranchers.

– Requires the reporting of YBS activities.

• How do associations carry out their mission?

– Develop strategies to identify and reach out to 

creditworthy YBS farmers.

– Understand demographic diversity and financial 

needs of current and potential YBS farmers.

– Coordinate credit and delivery of related services 

with third parties. 

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Concluding thoughts 

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• Challenges for agriculture:

– General economic factors: higher interest rates; strength of 

the dollar; rising consumer, business, and government debt 

levels; labor availability; weakening global economies

– Farm sector concerns: trade policies; rising input costs; 

commodity prices below the cost of production

• Challenges for the Farm Credit System:

– Five year trend of credit stress and decreasing loan quality

– Potentially fragile land values

– Large vs. small associations

– Aging borrower/customer

– Reputation risk/GSE status

• Hopefully, the system is financially able and sufficiently 

capitalized to meet these challenges.
Thank you!

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