Quarterly Report on 

FCS Condition 

December 8, 2022

Yuri Katrinic

Hal Johnson

FCA Board Meeting 

December 2022

1

Tab 2
Topics for Open Session

▶ Economic Conditions Affecting the Farm Credit System

▪Macroeconomic update

▪Supply chains and input costs

▪Production risks for 2023

▶ 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
Inflation slows, interest rates continue to climb

4

Core CPI

6.3%

Effective Federal Funds 

Rate

3.1%

0%

1%

2%

3%

4%

5%

6%

7%

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

Inflation and Interest rates

Sources: Bureau of Labor Statistics and Board of Governors of the Federal Reserve System

▶ Inflation has plateaued in 

response to higher interest 

rates. 

▶ Pressure to raise rates will 

continue until inflation falls.

▶ Consumers’ response to 

high rates and prices will 

play an important role in 

2023.
Wages and wholesale prices

5

Producer Price 

Index 10.3%

Wages

4.7%

0%

5%

10%

15%

20%

25%

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

PPI and Wages

Change from a year ago

Source: Bureau of Labor Statistics

▶ Wholesale inflation and

wage growth are leading

indicators for inflation.

▶ Declines suggest

consumer inflation will

continue to cool off.
Higher interest rates cool off housing market 

amid weakening sub-prime credit quality

▶ Higher rates slowing 

demand for refinance.

▶ Early payment defaults for 

FHA-backed loans have 

doubled in the past year.

▶ Weakness in housing 

creates headwinds for 

economic growth and 

employment.

6

Source: US Census Bureau , Freddie Mac

Housing Starts

Mortgage rates

2%

3%

4%

5%

6%

7%

1,300

1,500

1,700

1,900

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

Thousands

Housing starts and 30 year fixed mortgage rates

last 12 months
Natural gas and fertilizer outlook remains 

volatile

7

▶ EU boosted gas storage to lower

risk of rationing this winter.

▶ Continued risk of disruptions

and ensuing shortages.

▶ Natural gas is the primary input

for nitrogen fertilizer.

▶ Fertilizer and other inputs will

be crucial for margins in 2023.

Source: New York Mercantile Exchange

$3

$4

$5

$6

$7

$8

$9

$10

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov

Henry Hub Natural Gas, $/million BTU 
Supply chains have improved, but still 

problematic for farm equipment and parts

8

Class 8 

Combines

High Capacity 

Sprayers

Large Tractors

0%

10%

20%

30%

40%

Jan 20 Jul 20 Jan 21 Jul 21 Jan 22 Jul 22

Equipment price changes since January 2020

Sources: Federal Reserve Bank of New York and Iron Solutions

-1

0

1

2

3

4

5

Global Supply Chain Pressure Index
Drought continues in much of the United States, 

including cattle and wheat regions

9

▶ Cattle producers continue to

face poor pasture conditions in

many areas and high feed costs.

▶ A poor start for winter wheat

crop makes it more vulnerable

to winter damage.

▶ Longer term water concerns

continue in California and

Colorado Valley.
Drought has dropped Mississippi River water 

levels, snarling barge traffic

10

11

12

15

17

18

27

31

47

59

66

Animal Feed

Sand and gravel

Nitrogenous Fertilizer

Petroleum Coke

Gasoline

Coal

Crude Oil

Corn

Distillate Fuel Oil

Soybeans

Top 10 Mississippi River commodities 

Millions tons shipped in 2019 

Sources: NASA SPoRT-Lis data and U.S. Department of Transportation
High transportation costs affect farmers 

through local grain prices

11

Source: USDA AgTransport data, GeoGrains

2022

2021

$0

$20

$40

$60

$80

$100

Aug 30 Sep 14 Sep 29 Oct 14 Oct 29 Nov 13

Memphis-Cairo Barge Rates, $/ton 

Gulf - Louisiana

Iowa Elevator Bid

$6

$7

$8

$9

Aug 26 Sep 10 Sep 25 Oct 10 Oct 25 Nov 09

Corn Prices, $/bushel
Commodity prices have fallen and stabilized 

despite war in Ukraine and drought

12 Sources: Chicago Board of Trade

Soybeans

Corn

Wheat

-10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov

Change in Price, YTD
Highly Pathogenic Avian Influenza (H5N1) 

returns along with wild birds

13

▶ Disease has spread since 

spring.

▶ Over 50 million birds killed.

▶ Potential endemic disease.

▶ Record high turkey and egg 

retail prices.

▪Turkey: +73% year-on-year

▪Eggs: +87%

▪Chicken: +30%
Questions

THANK YOU

14
Farm Credit System 

Condition and Performance 

as of 

September 30, 2022

Hal Johnson

Sr. Financial Analyst

Office of Examination

15
System growth reflects a strong farm economy 

Source: Federal Farm Credit Banks Funding Corporation Information Statements

16

+1.8% Qtr 1.2% Qtr

+6.6% YTD +5.2% YTD

+13.2% 12M +11.0% 12M

Total 

Assets

9/30/22

$464.7

billion

Gross

Loans

9/30/22

$361.7

billion

7.5%

1.7%

0.2%

12.8%

7.8%

0.6%

-5.3%

5.1%

4.0%

-1.1%

7.8%

11.6%

RE Mortgage

(47%)

Production &

Intermediate

(17%)

Agribusiness

(18%)

Rural

Infrastructure

(11%)

2020

2021

2022

Loan Growth by Loan Type

(% change year-to-date through September)

3.5%

4.5%

2.6%

1.0%

2.4%

1.0%

5.1%

3.3%

5.2%

System Portfolio Growth

(% change year-to-date through September)
System portfolio continues to perform well

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

Source: Federal Farm Credit Banks Funding Corporation Information Statements 17

Qtr chg. +61M or 3.4%

YTD chg. +252M or 16.0%

12 month

chg. +46M or 2.6%

Q3 '21 0.22%

Q4 '21 0.27%

 Nonperforming 

Assets

(9/30/22)

 Delinquencies (1)

(9/30/22) 0.24%

$1.830

billion

3.4%

3.0%

5.3%

4.8%

1.1%

4.8%

4.6%

7.5%

5.8%

1.2%

6.6%

6.6%

10.3%

6.0%

1.8%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0%

Total

Portfolio

Real Estate

Mortgage

Production &

Intermediate

Agribusiness

Rural

 Infrastructure

Sep-22 Sep-21 Sep-20

% of Loans Classified Less than Acceptable
Nonperforming assets rise but overall level 

remains low

▶ Nonperforming assets were 

0.51% of loans outstanding and 

other property owned 

compared with 0.46% at yearend.

▶ Nonaccrual loans totaled $1.291 

billion, up 9.8% from year-end, 

but down 3.7% from a year ago.

▶ 68.5% of nonaccrual loans were 

current as to principal and 

interest, compared with 63.7% 

at year-end.

Source: Federal Farm Credit Banks Funding Corporation 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

$1,830

0.78%

0.83% 0.82%

0.60%

0.46%

0.51%

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

Nonaccrual Loans

Accrued Restructed Loans

Accruing 90 days+ Past Due

Loans

OPO

% Nonperforming Assets (1)

(Amounts in millions)

Nonperforming Assets
System earnings increase on strong asset growth

Source: Federal Farm Credit Banks Funding Corporation Information 

Statements 19

** year-to-date annualized

3.75 4.21 4.40 

3.56 3.16 3.48 

1.50

2.09 2.36

1.30 0.83 1.27

2.25 

2.12 

2.04 

2.26 2.33 

2.21 

2.48 2.46 2.42 2.46 2.46 

2.39 

2017 2018 2019 2020 2021 Q3 '22 **

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

% Net Interest Spread % Net Interest Margin

Net Interest Spread | Net Interest Margin

9.8%

4.1% 4.2% 5.2%

7.2% 8.0%

11.2%

3Q-16 3Q-17 3Q-18 3Q-19 3Q-20 3Q-21 3Q-22

Average Earning Assets 

(% change from the same period a year ago)

$3,589 $3,716 $4,012 $4,055

$4,446

$5,201 $5,449

$218 $188 $146 $95 $165

-$142

-$9

System Net Income

Provisions for Loan Losses

(Amounts in millions)

System Earnings

(year-to-date through September)
Capital and Liquidity

( as of September 30, 2022 )

▶ Total Regulatory Capital levels:

Banks: 13.7% to 17.1%

Associations: 11.6% to 31.7%

▶ Days of liquidity for the four 

funding banks ranged from 159 

to 214 days

▶ 83% of System institutions are 

in the Capital benchmark 1 

range and all are in the 

benchmark 1 or 2 range

Source: Federal Farm Credit Banks Funding 

Corporation Information Statements Note: Restricted capital represents capital associated with the Insurance Fund. 20

The System continues to be strongly capitalized

$52.4 $55.5

$58.2

$62.4

$66.0

$69.5 $69.4

16.7%

17.3% 17.4% 17.6% 17.1% 16.9%

14.9%

System Capital ($B)

Total Capital less Restricted

Capital-to-Assets Ratio

Total System Capital
Strong asset growth and rising interest rates 

impact capital-to-asset ratio

Source: Federal Farm Credit Banks Funding Corporation Information 

Statements

21

14.9%

0%

4%

8%

12%

16%

20%

year-over-year asset growth

capital-to-asset ratio

(720) (1,108) (1,226) (1,390) (2,132)

(1,005) (437) (1,051)

(5,299)

16.9% 16.8% 16.7% 17.3% 17.4% 17.6% 17.1% 16.9%

14.9%

17.2% 17.2% 17.1% 17.7% 18.0% 17.9% 17.3% 17.2%

16.1%

AOCL capital-to-asset ratio capital-to-asset ratio excluding AOCL

Impact of asset growth on 

the capital-to-asset ratio

Impact of AOCL(1) on the 

capital-to-asset ratio

(1) Accumulated other comprehensive loss
Composite FIRS ratings remain strong

FIRS Ratings

( based on 9/30/22 financial reporting )

▶ Composite FIRS ratings reflect the 

System’s sound financial 

condition.

▶ Almost 94% of System banks and 

associations have a Composite 

FIRS rating of 1 or 2.

▶ Institutions rated 3 or lower 

represent less than 1.5% of 

System assets.

Composite FIRS Ratings

Farm Credit System Banks and Associations

Source: FCA’s FIRS ratings database 22

46 44 39 34 30 32 33 34

29 31

29

32 35 35 32 28

3 2

5 7 7 4 4

4

0

10

20

30

40

50

60

70

80

90

100

1/1/16 1/1/17 1/1/18 1/1/19 1/1/20 1/1/21 1/1/22 11/1/22

Number of Rated Institutions

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

▶ Rising interest rates slow inflation but raise borrowing costs.

▶ Input price risk and supply chain uncertainties an ongoing

challenge for ag producers.

▶ Drought persists in the Western U.S.; pasture conditions remain

poor in many areas.

▶ The Farm Credit System continues to be safe and financially strong.

Portfolio quality is very good, but risks are elevated for certain

sectors and geographic regions.

▶ System institutions are strongly capitalized and well positioned to

meet the credit needs of agricultural producers and rural America.

23