Quarterly Report on 

FCS Condition 

June 9, 2022

Yuri Katrinic

Hal Johnson

FCA Board Meeting 

June 2022

1
Topics for Open Session

▶ Economic Conditions Affecting the Farm Credit System

▪Macroeconomic outlook 

▪Farm equipment shortage and diesel prices

▪Grains, livestock, and timber

▶ Farm Credit System Condition and Performance

▪System growth and loan portfolio

▪Earnings and capital

▪Financial Institution Rating System (FIRS)

2
Economic Conditions Affecting 

the Farm Credit System

Yuri Katrinic

Senior Economist 

Office of Data Analytics and Economics

3
Growth and inflation create unclear economic 

outlook

▶ Rising interest rates, supply chain 

disruptions, and the war in Ukraine 

create a climate of economic uncertainty.

▶ Latest indicators:

▪1st Quarter GDP down at 1.5% rate.

▪April consumer spending up at 0.7% 

rate.

▪Falling consumer confidence and 

sentiment.

▪ Wholesale inflation is far ahead of 

consumer prices.

▪Slowing consumer inflation in April.

4

CPI, 13%

PPI, 43%

0%

10%

20%

30%

40%

Producer Price Index vs. Consumer Price Index 

Change since April 2020

Source: FRED, Bureau of Labor Statistics, Bureau of Economic 

Analysis, University of Michigan
Extremely tight labor market due to very low 

unemployment and smaller workforce

5

3.5%

14.7%

3.6%

0%

5%

10%

15%

Apr-19 Oct-19 Apr-20 Oct-20 Apr-21 Oct-21 Apr-22

Unemployment 

Source: FRED, Bureau of Labor Statistics

63.4%

60.2%

62.2%

60%

61%

62%

63%

64%

Apr-19 Oct-19 Apr-20 Oct-20 Apr-21 Oct-21 Apr-22

Labor Force Participation
Supply chain crunch limiting availability, 

raising prices of farm equipment and parts

▶ Supply chain and labor disruptions have 

led to farm equipment shortages.

▶ Sales down 25% and inventory down 5% 

compared to April last year.

▶ New equipment often sold out; parts and 

used equipment prices skyrocketing.

▶ Shortages likely to continue into 2023.

Source: FRED, Bureau of Labor Statistics

Association of Equipment Manufacturers 6

180

200

220

240

260

Producer Price Index: Parts for Farm Machinery

(1982 = 100)
Production costs play a larger role in today’s 

farm equipment prices

7

4 Wheel Drive 

Large Row Crop

Small Row Crop

Producer Prices

-25%

0%

25%

50%

75%

100%

125%

150%

2005 2007 2009 2011 2013 2015 2017 2019 2021

Source: Bureau of Labor Statistics, Iron Solutions

Retail tractor prices vs. Producer Price Index for Agricultural Machinery

Change since Feb 2005 

▶ In 2013, tractor prices increased 

due to strong farm profits despite 

stable production costs.

▶ In contrast, today’s price increases 

also reflect rising production costs.
Rising diesel prices driven by crude oil prices, 

refining capacity, and exports to Europe

8

Source: Energy Information Administration

1

1.1

1.2

1.3

1.4

May-21 Aug-21 Oct-21 Jan-22 Apr-22

Price ratio: Diesel vs Regular Gasoline

East Coast

Midwest

California

3

4

5

6

7

May-21 Aug-21 Oct-21 Jan-22 Apr-22

Regional No. 2 Diesel Prices
Continued volatility in grain markets

▶ War in Ukraine continues to keep commodity prices high 

and raises risk of food shortages and export controls.

▶ Drought in western plains and California impacting 

sorghum, winter wheat and rice.

▶ Wet planting conditions in Minnesota and eastern 

Dakotas impacting corn and spring wheat.

▶ Strong soybean crop expected due to favorable planting 

weather and farmers choosing it over corn because of 

lower fertilizer requirements.

9
Drought has caused poor pasture conditions 

and low hay supplies for ranchers

10 Source: https://www.usda.gov/sites/default/files/documents/AgInDrought.pdf

▶ Challenging cow-calf profit 

outlook for much of the 

country. 

▶ Producers reducing herds to 

cope with high input costs. 

▶ Consumers could switch to 

cheaper proteins in response 

to rising prices.
Highly Pathogenetic Avian Influenza pushes 

egg prices to record high

11

▶ Worst impacts on egg and 

turkey farms in Iowa and 

Minnesota. 

▶ Disease moved north as wild 

birds migrated.

▶ Limited impact in the South 

but could happen during fall 

migrations.

▶ Better monitoring and 

management practices today 

compared to 2015 outbreak.

Source: Distribution of Highly Pathogenic Avian Influenza in North America, 

2021/2022 | U.S. Geological Survey (usgs.gov)
Demand for lumber supports high log prices 

for timberland owners

▶ Housing starts up 14.6% compared to 

April 2021, driving up demand and 

prices for lumber.

▶ Log prices initially lagged retail lumber 

prices but are catching up.

▶ Demand for lumber could eventually 

slow down with rising mortgage 

interest rates, housing prices, and 

construction costs.

12

500

600

700

800

900

1000

Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21 Jan-22 Apr-22

Douglas-fir #2 saw price, Washington state

($ per thousand board feet)

Source: Washington Department of Natural Resources, US Census Bureau
Questions

THANK YOU

13
Farm Credit System 

Condition and Performance 

as of 

March 31, 2022

Hal Johnson

Sr. Financial Analyst

Office of Examination

14
Topics ▶ System Growth ▶ Loan Portfolio ▶ Earnings ▶ Capital ▶ FIRS

15
Agribusiness lending drives 1st quarter 

loan growth

Source: FCS Information Statements

16

+3.9% Qtr +4.7% Qtr

+12.0% 12M +11.9% 12M

Total 

Assets

3/31/22

$453.0

billion

Gross

Loans

3/31/22

$360.2

billion

0.3%

0.8%

0.0%

3.9%

2.0%

1.6% 1.5%

4.6%

2.0%

0.4%

0.8%

5.6%

4.7%

Quarterly System Loan Growth

2.0%

1.3%

-4.2%

8.7%

2.0% 2.2%

-6.1%

10.1%

4.7%

1.2%

-8.8%

30.1%

-10%

-6%

-2%

2%

6%

10%

14%

18%

22%

26%

30%

34%

Total Loan

Portfolio

RE Mortgage

(46%)

Prod. & Intermediate

(16%)

Agribusiness

(22%)

Q1 '20

Q1 '21

Q1 '22

Loan Growth by Loan Type

% change from prior quarter
Portfolio loan quality is very good; credit 

risk measures remain favorable

(1) accruing loans 30 days or more past due as a % of accruing loans

Source: FCS Information Statements 17

$1.651 Qtr chg. +73M or 4.6%

billion 12 month

chg. - $254M or -13.3%

Q1 '21 0.31%

Q4 '21 0.27%

 Nonperforming 

Assets

(3/31/22)

 Delinquencies (1)

(3/31/22) 0.29%

3.8

3.6

6.0

4.7

0.7

4.3

4.1

6.4

5.5

0.8

5.6

5.5

8.5

6.6

1.2

0.0 2.0 4.0 6.0 8.0 10.0 12.0

Total

Portfolio

Real Estate

Mortgage

Production &

Intermediate

Agribusiness

Rural

 Infrastructure

Mar-22 Dec-21 Mar-21

% of Loans Classified Less than Acceptable
Nonperforming assets were marginally higher 

in the 1st quarter; overall level remains low

▶ Nonperforming assets were 

0.46% of loans outstanding and 

other property owned, 

unchanged from year-end.

▶ Nonperforming assets equaled 

2.40% of System capital, up from 

2.27% at year-end.

▶ Nonaccrual loans totaled $1.141 

billion, down 3% from last 

quarter and 22% from a year ago.

▶ 64.8% of nonaccrual loans were 

current as to principal and 

interest.

Source: FCS Information Statements

(1) calculated as a percentage of gross loans outstanding and other property owned (OPO)

18

$2,022

$2,282 $2,347

$1,897

$1,578 $1,651

0.78%

0.83% 0.82%

0.60%

0.46% 0.46%

Dec-17 Dec-18 Dec-19 Dec-20 Dec-21 Mar-22

Nonaccrual Loans

Accrued Restructed Loans

Accruing 90 days+ Past

Due Loans

OPO

% Nonperforming Assets

% of Nonperforming Assets(1)
1st quarter earnings climb on strong asset 

growth

Source: FCS Information Statements 19

Average Earning Assets 

(% change from the same period a year ago)

1,244 1,266 1,288 

1,432 

1,693 1,758 

37 69 65 57 28 

(5)

System Net Income

Provisions for Loan Losses

Quarterly System Earnings ($M)

6.3%

3.6%

5.2% 4.8%

10.3% 9.6%

1Q-17 1Q-18 1Q-19 1Q-20 1Q-21 1Q-22

3.75 

4.21 4.40 

3.56 

3.16 3.09 

1.50

2.09 2.36

1.30 0.83 0.82

2.25 2.12 2.04 

2.26 2.33 2.27 

2.48 2.46 2.42 2.46 2.46 2.39 

2017 2018 2019 2020 2021 Q1 '22 **

% Rate: Earning Assets % Rate: Interest-Bearing Liab.

% Net Interest Spread % Net Interest Margin

Net Interest Spread | Net Interest Margin

** annualized
System is strongly capitalized; capital-to-assets 

ratio declines

▶ Total Regulatory Capital levels:

- Banks: 13.6% to 17.9%

- Associations: 11.2% to 34.1%

▶ FIRS Capital Benchmarks

- 83% of institutions are in the benchmark 1 range

- all institutions are in the benchmark 1 or 2 range

Source: FCS Information Statement; FCA’s FIRS ratings database

(1) year-over-year

(2) restricted capital represents capital associated with the FCS Insurance Fund

(3) accumulated other comprehensive income

20

50.0 

53.4 56.2 59.7 63.4 

66.5 68.8 

16.4% 16.7% 16.9% 17.1%

16.4% 16.4%

15.2%

Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22

System Capital

Total Capital less Restricted

Capital-to-Assets Ratio

Total System Capital ($B)

System Capital

 (in millions)

Mar-18 Mar-19 Mar-20 Mar-21 Mar-22

Capital-to-Assets ratio 16.9% 17.1% 16.4% 16.4% 15.2%

% YOY (1) chg. Total capital 5.1% 6.3% 6.1% 5.0% 3.5%

% YOY chg. Total assets 4.0% 4.7% 11.1% 4.4% 12.0%

% YOY chg. Retained earnings 1.8% 6.0% 5.7% 5.6% 5.1%

Capital Components

Preferred stock 3,093 3,187 3,170 3,180 3,772

Capital stock 1,870 1,928 1,889 1,989 2,073

Additional paid-in capital 3,712 3,712 3,738 3,790 4,266

Restricted capital(2) 4,742 4,966 5,212 5,581 6,096

AOCL (3) (1,969) (1,484) (764) (960) (2,991)

Retained earnings 44,721 47,413 50,105 52,920 55,602

Total Capital 56,169 59,722 63,350 66,500 68,818
System Composite FIRS ratings remain favorable

FIRS Ratings

( based on 3/31/22 financial reporting )

▶ Composite FIRS ratings reflect the 

System’s strong financial 

condition.

▶ Over 94% of System Banks and 

Associations have a Composite 

FIRS rating of 1 or 2.

▶ Institutions rated 3 or lower 

account for less than 1.0% of 

System assets.

Composite FIRS Ratings

Farm Credit System Banks and Associations

Source: FCA’s FIRS ratings database 21

46 44 39 34 30 32 33 35

29 31

29

32 35 35 32 30

3 2

5 7 7 4 4 4

0

10

20

30

40

50

60

70

80

90

100

Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 Dec-21 Mar-22

Number of Rated Institutions

1 Rated 2 Rated 3 Rated or lower
Summary and final points

▶ Commodity prices are strong, but producers are challenged by 

inflationary pressures, tight labor markets, supply chain 

problems, and a strong dollar.

▶ Drought and water availability concerns continue for the 

Western half of the U.S, especially for cattle producers.

▶ The System’s portfolio continued to perform well, with 

continued strong loan growth and low credit risk.

▶ System institutions are well-positioned to meet borrower 

funding and liquidity needs. 

▶ The Farm Credit System is safe and financially sound. 22