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Remarks by

The Honorable Jill Long Thompson 

Board Chair and CEO, Farm Credit Administration

Annual Meeting of the Farm Credit Bank of Texas

Point Clear, Alabama

April 4, 2013

Good morning. Thank you for that kind introduction. And thank you, Chairman Dodson, for inviting 

me to speak with you this morning at the 2013 annual meeting of the Farm Credit Bank of Texas.

As I said at the Farm Credit Council meeting in February, the Farm Credit System has much to be 

proud of. Despite the lingering effects of the recent recession and financial crisis, and the persistent

drought, the System remains fundamentally safe and sound. 

And the Farm Credit Bank of Texas and its associations can be especially proud of their success 

over the past year. From December 31, 2011, to December 31, 2012, net income for the Texas 

district increased by almost 11 percent, total capital increased by almost 6 percent, and the volume 

of nonperforming loans declined by almost 24 percent. What’s more, the composite FIRS ratings of 

five Texas associations improved from 2011 to 2012. 

The Texas district has done a particularly admirable job in the past year of reducing the volume of 

its criticized and high-risk assets. 

These improvements are commendable under any circumstances, but you managed to achieve 

them when a significant portion of your lending territory was in severe drought. The efforts you have 

taken to strengthen your credit review process and to tighten loan underwriting standards are 

clearly paying off. I congratulate you, and I encourage you to keep up the good work.

For almost 100 years, Farm Credit institutions have served American farmers and ranchers. The

System began by offering long-term mortgage lending and later evolved to meet farmers’ other 

credit needs—from one-time purchases of farm equipment to annual purchases of seed and 

fertilizer. Without this reliable source of credit, American agriculture would not be the industry that it 

is today. 

Not only do American farmers feed Americans, they feed people all over the globe. Plus, because 

of exports, American agriculture remains a consistently bright spot in the national economy—one of 

the few American industries to provide a trade surplus year after year. 

As Board Chair and CEO of the Farm Credit Administration, I am proud to be a part of it all, and I 

know you are too. The Farm Credit System has provided credit to American farmers for almost a 

century, and I am proud to work with you to help ensure that, 100 years from now, the Farm Credit 

System will still be serving the credit needs of America’s farmers and ranchers.
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But preserving the Farm Credit System to serve future generations of farmers is no small ambition. 

The System faces many challenges. 

Serving agriculture is like hitting a moving target. It’s not easy. Lenders must adapt to changes in 

the industry. 

Another challenge is demand. According to the United Nations, the world population will increase 

from about 6.8 billion people today to 9.2 billion by 2050. For farmers to rise to the challenge of 

feeding this many people, lenders like you must rise to the challenge of meeting the credit needs of 

these farmers. 

Another challenge—a particularly daunting one—is the weather. Now it’s true that farmers have 

always been at the mercy of weather, but as you know all too well, some of the weather we’ve seen 

in recent years has been devastating, and climatologists predict that extreme weather events will 

grow evermore frequent as the planet warms.

How can a System institution overcome these challenges? It won’t be easy, but you don’t have to 

face them alone. As the arm’s length regulator of the Farm Credit System, we are committed to 

ensuring the safety and soundness of System institutions.

Since becoming Chair, I have spent a great deal of time meeting with and listening to senior 

staff at FCA. And for many years, as a farmer, a Member of the House Agriculture Committee, 

and an Under Secretary at USDA, I have also spent time reading the literature on the 

agricultural economy, both nationally and globally.

Based upon these discussions and readings, I have identified strategic priorities I believe must be 

addressed by FCA over the next year. Recognizing we exist in an ever-changing environment, I 

also realize we must be flexible, and we will likely need to re-prioritize from time to time. It is 

important, however, for us to have our strategic priorities in place so we are most prepared to 

expect, and effectively address, the unexpected.

As Board Chair and CEO, I have identified five priority areas. The first area involves capital 

requirements. The System as a whole, including the Texas district, has done an admirable job of 

building capital. Keeping capital levels strong is an important part of maintaining safety and 

soundness. 

And as your regulator, we will do our best to make sure our regulations reflect capital 

requirements that are appropriately consistent with U.S. standards and the Basel Accords, 

recognizing the unique aspects of the Farm Credit System. I have directed FCA staff to finish its 

work of revising the capital rules in Part 615 of FCA’s regulations. Of course, our pace of 

adopting revised rules is largely dependent on the work of other prudential regulators. 

Nonetheless, I want to have our proposed revisions in place as soon as possible.
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Furthermore, we must finish our part of the interagency rulemaking on margin and capital 

requirements for non-cleared swaps, and address other changes consistent with the spirit of 

Dodd-Frank. We must also finish the capital planning rule, as well as the liquidity management 

rule, for Farmer Mac.

As important as capital is to sound financial management, so is borrower equity and risk. And 

that leads me to my second priority: evaluating and assessing risk associated with farmland 

values and loan-to-value ratios in the System. In order to accomplish that task, we will 

continue to focus on, and provide support for, data collection and analysis. 

There’s an oft-quoted maxim in the banking industry, and I’m sure you’ve heard it: “Bad loans 

are made in good times.” I think it’s important to be particularly vigilant in monitoring farmland 

values now ... when we are in a period of good times, with strong commodity prices and low 

interest rates. As experience has taught us, interest rates do eventually rise, farm incomes may 

dip, and farmland prices may adjust. That’s why it’s important to resist competitive pressure and 

to maintain strong underwriting standards even during times like these. 

Talk of farmland values leads me directly to my third priority: the Young, Beginning, and Small 

Farmer program. As we all know, higher real estate prices make it harder for young and 

beginning farmers to buy land and build their farms. 

But that’s not the only challenge they face. In the wake of the recession and the recent crisis in 

the financial markets, lenders have understandably tightened their underwriting standards. This 

makes it all the more difficult for young, beginning, and small farmers to find the credit they need 

to build their operations. 

Yet, as Congress has long recognized, with an aging farmer population, these men and women 

are key to feeding the world’s ever-expanding population. It is our congressional mandate—both 

FCA’s and the System’s—to ensure that creditworthy and eligible men and women who are 

young, beginning, or small producers have access to the credit they need to be successful. 

I commend the Texas district on its service to YBS farmers. From 2011 to 2012, loan volume 

increased to YBS farmers in your district. That’s good news—not just for the farmers you serve

but for everyone. If agriculture is to meet the food demands of the future, it must encourage and 

support YBS producers. 

In addition, the Texas district provided thousands of dollars last year in sponsorships and 

scholarships to the FFA, 4-H, and other organizations that benefit young, beginning, and small 

producers. I applaud your efforts. Since my days in Congress, I have been a supporter of the 

YBS program, and believe it must always be on the list of priorities for the Farm Credit 

Administration. 

Although young, beginning, and small farmers face many challenges, they also face some new 

opportunities. And that leads me to my fourth priority—the local foods sector.
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In the past, unless you inherited a farm or married someone with a farm, it was difficult to start 

farming—because, to be successful, you generally had to have a large operation. If you didn’t 

already own the land and equipment, farming was probably not a career option for you.

However, in recent years, more and more American consumers are choosing locally grown and 

organic foods, many of which are grown on small farms. This new trend in consumer demand 

has made it possible for individuals to choose to become farmers, even if their parents were not. 

That’s because the capital demands to start a small farming operation are not as daunting, and 

this, of course, creates opportunities for young, beginning, and small farmers.

Service to these borrowers supports not only the YBS demographics, but it also supports a 

promising trend in agriculture. I am pleased to hear that the Texas district has begun to serve 

producers of local and organic foods. I am particularly pleased to commend Texas Land Bank, 

Capital Farm Credit, and Southern Ag Credit for reaching out to these producers, and I 

encourage the district, as a whole, in its efforts to serve this increasingly important market 

segment.

The final strategic priority involves the Investments in Rural America program. Living in a 

rural community and having served as Under Secretary of Rural Development at the U.S. 

Department of Agriculture, I have a strong commitment to rural America. That said, as a former 

Member of Congress, I also want to be sure that the Agency and the System operate within the 

authorities that Congress has provided. 

Several System institutions are participating in the Investments in Rural America pilot program, 

which has been in place since 2005. It is now time for the FCA Board to take a hard look at the 

key legal and policy questions, and make a decision on the future direction of this pilot program 

and the related Rural Community Investments rulemaking project. 

These are the regulatory and examination priorities I have identified as important for us to 

address in the next year. There are, of course, other issues of importance, as well. Diversity, for 

example, remains an important issue for me, as it is for my fellow Board members Ken 

Spearman and Lee Strom. 

In fact, I am pleased to personally thank the Texas district—both the bank and the 

associations—for supporting FCA’s diversity initiatives. I am particularly pleased to recognize 

Bank Director Betty Flores and Vice President of Human Resources Ivory Tate for the solid 

leadership they have provided to the System’s diversity workgroup. By reaching out to embrace 

diversity both in your workplace and in your customer base, you’re not only doing the right thing, 

you are practicing good business. And you are helping fulfill the mission for which Congress 

created the System—to serve the credit needs of all eligible and creditworthy farmers and 

ranchers. 

Often, when we talk about the System, we stress the importance of cooperative principles—and 

rightly so. They are the cornerstone of the System and the business model that Congress chose 
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when it set up the System 100 years ago, and I am pleased to see that the Farm Credit Bank of 

Texas prominently displays the seven cooperative principles on its website. 

Just as cooperation is an important value for a System institution to embrace, so too is 

independence, and I know that, as representatives of the Texas district, you are strong believers in 

the value of independence. After all, the State of Texas is famous for its independent spirit. 

At FCA, we believe that each System institution—each bank and association—is unique, with a 

unique lending territory. We believe that nobody can serve your territories better than you can serve 

them, and we want to encourage you to preserve the independence of your district.

As I mentioned in my remarks at the Farm Credit Council, the System, as a network of lenders, 

and FCA, as the arm’s length regulator, play very different roles, but our ultimate goal is the 

same—to ensure that farmers and ranchers have the credit they need to be successful.

You help meet this goal by extending credit to agricultural borrowers, and we help meet this 

goal by adopting regulations and conducting examinations to protect the safety and soundness 

of the System and to ensure that the System fulfills its public mission. 

As an arm’s length regulator, we always strive to adopt rules that are reasonable and 

necessary—rules that ultimately help the System succeed in its public mission. I appreciate the 

cooperation you’ve demonstrated over the years and the recognition you’ve shown of the value 

of the work we do. We will continue to work hard to fulfill our role effectively and with integrity 

and goodwill. 

Today, despite the many challenges before us, the future looks bright—for the Texas district, for 

the System as a whole, and for agriculture. I encourage you to continue your good work—to 

embrace diversity in your workforce and your lending practices, to be wary of collateral risk, and 

to look for ways to fulfill your public mission more effectively than ever ... as you meet the 

challenges of tomorrow. Thank you.