2020

Annual Report 

of the Farm Credit Administration

Regulator of the Farm Credit System
ii | Farm Credit Administration

Contents

About this report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

About FCA and the Farm Credit System . . . . . . . . . . . . . . . . . . . . . . . . 3

Examination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Our authorities and governance . . . . . . . . . . . . . . . . . . . . . . . . . 4

The Farm Credit System Insurance Corporation . . . . . . . . . . . . . 4

Message from the board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Our priorities and progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Current conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

In conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

FCS banks and associations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

FCS structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Borrowers served . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

System funding for other lenders . . . . . . . . . . . . . . . . . . . . . . . . 16

Farm debt and market shares . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Financial condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Serving young, beginning, and small farmers and ranchers . . . . . . . 29

Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Examining and regulating the banks and associations . . . . . . . . . . . . 35

Examination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

Farmer Mac . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Examining and regulating Farmer Mac . . . . . . . . . . . . . . . . . . . 41

Financial condition of Farmer Mac . . . . . . . . . . . . . . . . . . . . . . 42

FCA’s organization and leadership . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

Organization of FCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

FCA’s leadership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

Abbreviations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

Additional information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
About this report

This is the Farm Credit Administration’s annual report to Congress. Section 5.17(a)(3) of the Farm Credit Act of 1971, as amended, 

requires this report to include the following:

• An annual report to Congress on the condition of the Farm 

Credit System (FCS or System) and its institutions and on the 

manner and extent to which the objectives of the Farm Credit 

Act are being carried out

• A summary and analysis of the annual reports submitted to 

us by the FCS banks regarding programs for serving young, 

beginning, and small farmers and ranchers

The report also includes information about our agency and the 

work we do to ensure that the System continues to meet its mission 

and to operate safely and soundly. 

This report is available on the FCA website at www.fca.gov. 

If you have any questions about it, please contact the Office of 

Congressional and Public Affairs at info-line@fca.gov or 703-883-

4056. Also, please contact the office if you have accessibility issues 

with any of the charts in the report.

For more financial information about the Farm Credit System, 

go to the website for the Federal Farm Credit Banks Funding 

Corporation at www.farmcreditfunding.com. For information about 

the Farm Credit System Insurance Corporation, go to www.fcsic.gov.
FCA’s mission 

is to ensure that 

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.
2020 FCA Annual Report | 3

About FCA and the Farm Credit System

1 Although Farmer Mac is an FCS institution under the Farm Credit Act, we discuss Farmer Mac separately from the 

other institutions of the FCS. Therefore, throughout this report, unless Farmer Mac is explicitly mentioned, the Farm 

Credit System refers only to the banks and associations of the System. For more information about Farmer Mac, see 

page 41.

The Farm Credit Administration 

is an independent agency in the executive 

branch of the U.S. government. We are 

responsible for regulating and supervising 

the Farm Credit System (its banks, associations, and related entities) and the Federal 

Agricultural Mortgage Corporation (Farmer Mac).1

The System is a nationwide network of 

borrower-owned financial institutions that 

provide credit to farmers, ranchers, residents of rural communities, agricultural 

and rural utility cooperatives, and other 

eligible borrowers.

Farmer Mac is a federally chartered corporation that provides a secondary market 

for agricultural real estate loans, government-guaranteed portions of certain 

loans, rural housing mortgage loans, and 

eligible rural utility cooperative loans.

FCA’s mission is to ensure that 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 have two primary functions: examination and regulation. 

Examination 

We conduct onsite examinations at every 

System institution on a regular basis to 

• evaluate its financial condition; 

• evaluate its compliance with laws and 

regulations; 

• identify any risks that may affect the 

institution or the System as a whole; 

and 

• ensure it is fulfilling its public mission to serve the credit and related 

needs of farmers and ranchers, including those who are young, beginning, or small. 

If a System institution violates a law or 

regulation or operates in an unsafe or 

unsound manner, we use our supervisory 

and enforcement authorities to bring 

about appropriate corrective action. 

Regulation 

We issue policies and regulations governing how System institutions conduct their 

business and interact with borrowers. 

These policies and regulations focus on 

• protecting System safety and 

soundness; 

• implementing the Farm Credit Act; 

• providing minimum requirements 

for lending, related services, investments, capital, and mission; and 

• ensuring adequate financial disclosure and governance. 
4 | Farm Credit Administration

We also approve corporate charter changes, System debt issuances, and other financial and operational matters. 

Our authorities and governance 

FCA derives its powers and authorities 

from the Farm Credit Act of 1971, as 

amended (12 U.S.C. 2001 – 2279cc). The 

U.S. Senate Committee on Agriculture, Nutrition, and Forestry and the U.S. House of 

Representatives Committee on Agriculture 

oversee FCA and the FCS. 

FCA does not receive a federal appropriation. We maintain a revolving fund 

financed primarily by assessments from 

the institutions we regulate. Other sources 

of income for the revolving fund are interest earned on investments with the U.S. 

Treasury and reimbursements for services 

we provide to federal agencies and others. 

FCA’s access to the revolving fund, however, is regulated through congressional 

appropriations legislation.

FCA is governed by a full-time, 

three-person board whose members are 

appointed by the president of the United 

States with the advice and consent of the 

Senate. Board members serve a six-year 

term and may remain on the board until a 

successor is appointed. The president designates one member as chairman of the 

board, who serves in that capacity until 

the end of his or her term. The chairman 

also serves as our chief executive officer. 

For information about our current board, 

see page 47. 

The Farm Credit System Insurance 

Corporation 

FCA board members also serve as the 

board of directors for the Farm Credit System Insurance Corporation (FCSIC), which 

was established by the Agricultural Credit 

Act of 1987 in the wake of the agricultural 

credit crisis of the 1980s. The purpose of 

FCSIC is to protect investors in Systemwide 

debt securities by insuring the timely payment of principal and interest on obligations issued by FCS banks. 

It fulfills this purpose by maintaining 

the Farm Credit Insurance Fund, a reserve 

that represents the corporation’s equity. 

FCSIC reports the balance of the Insurance 

Fund in its quarterly financial statements, 

which are posted on its website at www.

fcsic.gov.

6 | Farm Credit Administration

Message from the board

On behalf of the agency’s board, it is our pleasure to present the 2020 

annual report of the Farm Credit Administration. We provide this message as an 

introduction to the annual report. In it, we outline three important priorities and 

the progress we’ve made toward achieving them. Here in this message, we also 

describe current conditions (as of late summer 2021) in the Farm Credit System, 

Farmer Mac, and in the general and farm economies. The balance of this report 

focuses on results from 2020.

FCA Board Chairman and CEO Glen Smith (left) and FCA Board Member Jeff Hall.

Our priorities and progress

The year 2020 will go down in the history 

books for the challenges it presented 

people and organizations the world over, 

and these challenges have persisted into 

2021. The global COVID-19 pandemic 

has claimed an estimated 4.3 million 

lives worldwide and weakened the global 

economy, creating tremendous disruptions in supply chains and causing many 

to lose their jobs. 

But the United States is a resilient 

nation, and agriculture is a resilient economic sector. We’re pleased to say that 

both our nation and the agricultural economy are in recovery. We’re also pleased to 
2020 FCA Annual Report | 7

report that, throughout this challenging 

period, FCA continued to fulfill its important mission. Thanks to the business 

solutions and support we received from 

our Office of Information Technology, our 

examiners continued to oversee and examine the institutions we regulate, and our 

policy analysts continued to provide them 

guidance. 

We also continued to make progress 

toward achieving our three greatest priorities: monitoring credit risk; improving service to young, beginning, and small (YBS) 

farmers and ranchers; and improving the 

timeliness and efficiency of our regulatory 

activities. These continue to be our priorities as we enter the fall of 2021. 

Monitoring credit risk

The Farm Credit System and Farmer Mac 

remain strong and financially sound 

despite the ongoing challenges of the 

pandemic, and monitoring credit risk 

remains the agency’s highest priority. To 

keep System and agency staff safe, we began conducting most of our examination 

activities remotely in 2020 and continue to 

do so in 2021. 

We have not allowed COVID-19 considerations to materially interrupt our examination activities or our monitoring of risk. 

With the expert knowledge and skills of 

our examiners and our information technology team, we have successfully monitored the safety and soundness of System 

institutions remotely. 

We recognize COVID-19 is not the only 

challenge facing the farm economy and 

farm lenders. Intensifying drought in the 

West and the Great Plains, wildfires in the 

western United States, and other regional 

adverse weather events have threatened 

the livelihoods of System borrowers. Low 

prices for several agricultural products 

and increases in input prices are also 

adding to the financial stress some borrowers are experiencing.

We will continue to closely monitor the 

effects on credit quality of these and other 

challenges. Our mission remains the safety and soundness of the System so it can 

continue to provide credit to future generations of farmers and ranchers — which 

leads us to our second priority.

Improving service to YBS producers

In 1980, Congress established a mandate 

for the institutions of the Farm Credit 

System to develop and maintain programs 

to provide credit and related services to 

young, beginning, and small farmers and 

ranchers. Congress recognized that, for 

the U.S. economy to remain strong, the 

country needs new entrants to agriculture. 

And because of the high capital demands 

of agriculture, these new entrants require 

affordable, dependable credit. For this reason, improving service to YBS producers is 

one of our highest priorities, and we have 

developed three initiatives for meeting this 

goal:

1. Work with System institution data 

workgroups to modernize YBS data 

collection and reduce the reporting 

burden.

2. Improve the agency’s ability to track 

System institutions’ service to YBS 

producers and identify best practices 

the institutions can use to serve them 

— such as working with other government agencies for the benefit of YBS 

producers.

3. Evaluate the effectiveness of each 

institution’s YBS program.

Over the past two years, we have improved 

our ability to track the System’s service 

to YBS producers. We continually strive 

to modernize the collection of YBS data, 

and we’re working with technical staff at 
8 | Farm Credit Administration

System institutions to do so. In addition 

to planning outreach events to YBS farmers, we’re participating in System events 

focused on the YBS mission. We’re also 

working with other government agencies 

to find better ways to meet the needs of 

YBS producers.

We have identified several practices that 

are common to institutions with strong 

YBS programs. Here are some examples: 

• Committing to provide discounts and 

concessions to producers who complete certain educational programs 

• Providing scholarships and grants to 

help YBS farmers improve their financial and operational management 

skills 

• Offering more flexible underwriting standards for qualifying YBS 

producers

• Developing strong relationships with 

federal and state programs that offer 

loan guarantees and other programs 

for the benefit of YBS producers 

• Coordinating with industry and 

commodity organizations to provide 

training events

We’re pleased with the progress we’ve 

made toward meeting this goal, and we 

look forward to further progress over the 

next year.

Improving the timeliness and efficiency of 

regulatory activities

Another important priority for our board 

has been to improve the timeliness and 

efficiency of our regulatory activities, and 

we’ve made significant progress on this 

front as well. The regulatory pause we took 

last year to allow the System and the agency to focus on COVID-19 concerns gave us 

an opportunity to reassess and streamline 

our approach to regulatory projects.

The FCA board believes in a strong 

regulatory presence, with efficient, timely 

processes for policymaking and rulemaking. Over the past year we developed a 

collaborative process to carry out the 

policy direction of the board. This process 

requires early discussion of regulatory and 

policy issues among agency leaders.

As a result, so far in 2021, we have accomplished the following: 

• Issued a direct final rule on receivership and conservatorship authorities 

granted by the Farm Bill 

• Issued a final rule to provide a principles-based update to the standards of 

conduct regulations

• Approved an investment in FarmStart, a limited liability partnership 

that assists beginning farmers who 

have good business plans but do not 

meet the underwriting standards for 

traditional loans

• Issued two proposed rules — one 

on risk weights for high-volatility 

commercial real estate loans and the 

other on collateral evaluations 

• Issued an advance notice of proposed 

rulemaking on bank liquidity

• Approved several requests to invest 

in critical health care infrastructure 

in chronically underserved areas in 

rural America 

FCA has also provided guidance to lenders 

on financing hemp production. In July of 

2021, we issued an updated informational 

memorandum that outlined several factors institutions should consider when 

extending loans to hemp producers and 

processors.
2020 FCA Annual Report | 9

Current conditions 

Following is a brief update about conditions in the Farm Credit System and 

Farmer Mac, as well as conditions in the 

general and farm economies.

The Farm Credit System 

Although the U.S economy is recovering, 

challenges remain for 2021. For U.S. farmers and ranchers, volatile market conditions, rising input costs, price uncertainty, 

and adverse weather conditions represent 

significant risks for certain agricultural 

sectors and geographic regions. In times 

like these, the System’s mission to provide 

reliable credit and related services in 

support of agriculture and rural America 

becomes more important than ever. Fortunately, System institutions are well-positioned to work with borrowers to meet 

funding and liquidity needs.

For the first half of 2021, the System reported strong earnings growth, increased 

capital, and high loan portfolio quality. For 

the six months that ended June 30, System 

net income equaled $3.4 billion, up from 

$2.9 billion for the same period a year 

ago. Strong earnings continued to support additional capital growth, providing 

System institutions the risk-bearing capacity to support U.S. farmers and ranchers 

during uncertain times. As of June 30, 

System capital totaled $68.4 billion, up 

5.5% from a year ago. Capital as a percentage of total assets increased to 16.8% compared with 16.4% at Dec. 31, 2020.

The System’s loan portfolio continued 

to perform well, and credit risk indicators 

remained favorable. Nonperforming assets 

(nonaccrual loans, restructured loans, 

loans that are 90 days or more past due, 

and other property owned) decreased 

$36 million during the first six months of 

2021 to $1.9 billion. At June 30, nonperforming assets represented 0.58% of the 

System’s $323 billion loan portfolio plus 

other property owned. Loans classified as 

less than acceptable amounted to 5.2% of 

loan volume at June 30, down from 6.8% a 

year ago.

Farmer Mac

Farmer Mac also remains safe and sound. 

For the 12-month period that ended June 

30, 2021, its portfolio grew $0.1 billion, or 

0.44%, to $22.2 billion. The Farm & Ranch 

portfolio was the primary contributor to 

this growth, increasing by $1.04 billion 

(12.95%) over the 12-month period. Rural 

utilities volume increased by $88.4 million 

(3.28%) while Institutional Credit and 

USDA Guarantees declined. Institutional 

Credit declined by $1.02 billion (11.8%) 

and USDA Guarantees declined by $8.4 

million (0.31%). Farmer Mac’s core capital 

was $1.2 billion, up 31% for the 12-month 

period; its core capital was $482.6 million 

above the minimum requirement. 

Farmer Mac’s credit quality remains 

manageable, and year-over-year trends 

show improvement. Loans classified as 

90 days past due decreased from 0.86% 

to 0.70% of loans outstanding. As a percentage of total outstanding loan volume, 

special-mention and substandard volume 

decreased from 9.4% to 6.7%.

The general economy

The COVID-19 pandemic had an immediate and unprecedented impact on communities, businesses, and markets around 

the world. Actions to contain the disease 

abruptly disrupted economic activity in 

the early days of the pandemic. Although 

we still have not yet fully returned to 

pre-pandemic levels of economic activity, 

the U.S. economy, as well as many other 

national economies, began to recover rapidly with the introduction of vaccines in 

early 2021. In fact, the U.S. economy grew 

 In times like 

these, the 

System’s mission 

to provide 

reliable credit 

and related 

services in 

support of 

agriculture and 

rural America 

becomes more 

important than 

ever. 
10 | Farm Credit Administration

by 6.4% in the first quarter of 2021, a pace 

rarely seen. Massive levels of monetary 

and fiscal stimulus supported this rapid 

growth. 

As more of the U.S. economy has reopened, a surge in demand for goods and 

services has often exceeded the ability of 

business to meet the higher demand. Supply chains, many of which are global, have 

struggled to fully recover from last year’s 

shocks. Businesses have faced shortages 

and higher costs for many key production 

components, as well as domestic and 

global transportation bottlenecks. Labor 

markets this year have tightened, causing 

personnel shortages in certain positions 

and regions, including rural areas. Overall, 

improving unemployment rates are a good 

sign for loan repayment in rural America 

because off-farm employment contributes 

significantly to farm household income. 

As 2021 continues to unfold, some economists are concerned that the continued 

mismatch between supply and demand is 

igniting inflation for the broader economy. U.S. inflation in the first part of 2021 

rose at its fastest pace in 13 years as the 

recovery from the pandemic gained steam 

and consumer demand drove up prices. If 

inflation gains a firmer footing, containment might require changes to monetary 

policies that would drive up interest rates. 

Of course, the Farm Credit System will 

continue to perform its vital role of providing competitive rates of financing to the 

agriculture industry.

The farm economy

The pandemic caused major disruptions 

to our food supply and delivery system, 

with many of these disruptions persisting 

in 2021. Like the economy in general, 

our food system today faces greater price 

volatility and rising production costs. Agricultural producers and processors, particularly in the Western and Plains states, 

are facing serious production challenges 

this year from drought and wildfires, while 

those in other regions face other adverse 

weather events.

Thanks to solid domestic demand and 

robust ag exports, we have seen a marked 

improvement in many ag commodity prices. Although higher production costs are 

offsetting the effect of some of the price 

increases, producers of most grains and 

oilseeds are expecting to be profitable. 

The higher prices, coupled with strong 

yields in areas unaffected by drought and 

restrictions on irrigation, create positive 

conditions for many producers. 

For livestock producers, however, the 

higher grain prices are unwelcome because they drive up feed costs, thereby 

reducing profitability. Limited supplies 

and strong domestic and export demand 

have shielded pork and poultry producers 

from the effects of higher feed costs, but 

dairy and cattle producers have been less 

fortunate. Also, the drought across the 

Western and the Plains states is a particular challenge to cattle producers because it 

reduces pasture and hay production. 

As a result of these challenges, government support will remain important for a 

wide diversity of agricultural enterprises 

in 2021.

In conclusion

For many years, the agency has ranked 

high on the Partnership for Public 

Service’s list of best places to work in the 

federal government. This year was no 

exception. Once again, we placed among 

the top five small federal agencies. But this 

year, we achieved something even more 

remarkable. For our response to the pandemic, we received the highest rating of all 

federal agencies regardless of size. 

We believe we received this rating because, at a time of widespread uncertainty 
2020 FCA Annual Report | 11

and fear, we took the measures necessary 

to protect our employees’ safety and 

well-being. At the same time, we never lost 

sight of our public mission to ensure the 

safety and soundness of the Farm Credit 

System and Farmer Mac. 

As leaders of this agency, we are very 

proud of the service our employees have 

rendered this past year. Thanks to their 

commitment and flexibility, we have no 

doubt that we will continue to fulfill this 

important mission for years to come. 

Glen R. Smith

FCA Board Chairman and CEO 

Jeffery S. Hall

FCA Board Member
Congress formed the FCS 

as a system of farmer-owned 

cooperatives to ensure 

that farmer- and rancherborrowers participate in 

the management, control, 

and ownership of their 

institutions.
2020 FCA Annual Report | 13

FCS banks and associations

The banks and associations of 

the Farm Credit System form a network 

of borrower-owned cooperative financial 

institutions and service organizations serving all 50 states and the Commonwealth 

of Puerto Rico. Created by Congress in 

1916 to provide American agriculture with 

a dependable source of credit, the FCS is 

the nation’s oldest government-sponsored 

enterprise.

As federally chartered cooperatives, 

the banks and associations of the Farm 

Credit System are limited-purpose lenders. 

Congress created them to “improve the income and well-being of American farmers 

and ranchers” by providing credit and related services for them, their cooperatives, 

and “selected farm-related businesses 

necessary for efficient farm operations.” 

Congress also gave the Farm Credit System 

the authority to support rural economic 

development by financing rural residences 

and rural utilities.

Congress formed the FCS as a system of 

farmer-owned cooperatives to ensure that 

farmer- and rancher-borrowers participate 

in the management, control, and ownership of their institutions. The participation 

of member-borrowers helps keep the institutions focused on serving their members’ 

needs.

The System helps to meet broad public 

needs by providing liquidity and competition in rural credit markets in both 

good and bad economic times. The accomplishment of this public goal benefits 

all eligible borrowers, including young, 

beginning, and small farmers, as well as 

rural homeowners.

The System obtains the money it lends 

by selling securities in national and 

international money markets through 

the Federal Farm Credit Banks Funding 

Corporation. Established under the Farm 

Credit Act, the Funding Corporation issues 

and markets debt securities on behalf of 

the FCS banks to raise loan funds. The 

System’s debt issuances are subject to FCA 

approval. The U.S. government does not 

guarantee the securities that the System 

issues.

The banks are jointly and severally 

liable for the principal and interest on all 

Systemwide debt securities. Therefore, if 

a bank is unable to pay the principal or interest on a Systemwide debt security and if 

the Farm Credit Insurance Fund has been 

exhausted, then FCA must call all non-defaulting banks to satisfy the liability.

FCS structure

The System is composed of the following 

four banks:

• CoBank, ACB

• AgriBank, FCB

• AgFirst Farm Credit Bank

• Farm Credit Bank of Texas

As of Jan. 1, 2021, these banks provide 

loans to 67 associations, which in turn 

make loans to farmers, ranchers, and other 

eligible borrowers. (See figure 1.) All but 

one of these associations are structured as 

agricultural credit associations (ACAs) with 

two subsidiaries — a production credit association (PCA) and a federal land credit 
14 | Farm Credit Administration

association (FLCA). The PCA primarily 

makes agricultural production and intermediate-term loans, and the FLCA primarily makes real estate loans. The other remaining association is a stand-alone FLCA.

The ACA’s parent-subsidiary structure 

offers several benefits. It allows the association to preserve the tax-exempt status 

of the FLCA and to build and use capital 

more efficiently. It also enables members to hold stock in only the ACA but to 

borrow either from the ACA or from one 

or both of its subsidiaries. This gives the 

ACA and its subsidiaries greater flexibility 

in serving their borrowers, and it allows 

them to deliver credit and related services 

to borrowers more efficiently.

Each ACA and its two subsidiaries operate with a common board of directors 

and staff, and each of the three entities is 

responsible for the debts of the others. For 

most regulatory and examination purposes, FCA treats the ACA and its subsidiaries 

as a single entity; however, when appropriate, we may treat the parent and subsidiaries as separate entities.

CoBank, one of the four FCS banks, is 

an agricultural credit bank (ACB). It has 

a nationwide charter to make loans to 

agricultural and aquatic cooperatives and 

rural utilities, as well as to other persons 

Figure 1

Chartered territories of FCS banks

As of April 1, 2021

' 

-

AgriBank District

1 FCB, 14 ACAs

AgFirst District

1 FCB, 19 ACAs

Texas District

1 FCB, 13 ACAs, 1 FLCA

CoBank District

1 FCB, 20 ACAs

CoBank, ACB

AgriBank, FCB

FCB of Texas

AgFirst FCB

Farm Credit System District Territories

Farm Credit System District Territories

As of January 1, 2021

Note: As of April 1, 2021, CoBank funds 20 associations in the indicated areas and serves cooperatives nationwide; Farm Credit Bank 

of Texas funds 14 associations; AgriBank, FCB, funds 14 associations; and AgFirst Farm Credit Bank funds 19 associations. The Farm 

Credit System contains a total of 71 banks and associations.
2020 FCA Annual Report | 15

or organizations that have transactions 

with, or are owned by, these cooperatives. 

The ACB finances U.S. agricultural exports 

and imports and provides international 

banking services for farmer-owned cooperatives. In addition to making loans to 

cooperatives, CoBank provides loan funds 

to 20 ACAs.

Borrowers served

Under the Farm Credit Act of 1971, as 

amended, the System has the authority, 

subject to certain conditions, to make the 

following types of loans:

• Agricultural real estate loans

• Agricultural production and intermediate-term loans (e.g., for farm 

equipment)

• Loans to producers and harvesters of 

aquatic products

• Loans to certain farmer-owned agricultural processing facilities and 

farm-related businesses

• Loans to farmer-owned agricultural 

cooperatives

• Rural home mortgages

• Loans that finance agricultural 

exports and imports

• Loans to rural utilities

• Loans to farmers and ranchers for 

other credit needs

Also, under its similar-entity authority, 

the System may participate with other 

lenders to make loans to those who are not 

eligible to borrow directly from the System 

but whose activities are functionally like 

those of eligible borrowers. Through these 

participations, the System diversifies its 

portfolio, reducing the risks associated 

with serving a single industry.

As required by law, borrowers own 

stock or participation certificates in System institutions. The FCS had over 1.2 

million loans and leases and over 588,000 

stockholders in 2020. Approximately 87% 

of the stockholders were farmers or cooperatives with voting stock. The remaining 

percent were nonvoting stockholders, 

including rural homeowners and other financing institutions that borrow from the 

System.

Nationwide, the System had $315.5 billion in gross loans outstanding as of Dec. 

31, 2020. Loans for agricultural production 

and agricultural real estate purposes represented by far the largest type of lending, 

with $205.6 billion, or 65%, of the total 

dollar amount of loans outstanding. See 

figure 2.

Figure 2

Farm Credit System lending by type

As of Dec. 31, 2020

Long-term real estate — 46.8%

Production and 

intermediate-term — 18.4%

Processing 

and marketing — 10.1%

Loans to cooperatives — 6.3%

Agricultural export finance — 2.2%

Farm-related business — 1.4%

Lease receivables — 1.4%

Other financing institutions — 0.3%

Rural power — 7.0%

Rural homes — 2.2%

Rural communications — 3.1%

Rural water/wastewater — 0.9%

Source: 2020 Federal Farm Credit Banks Funding Corporation Annual Information Statement.
16 | Farm Credit Administration

System funding for other lenders

Other financing institutions 

Under the Farm Credit Act, System banks 

may further serve the credit needs of 

rural America by providing funding and 

discounting services to certain non-System 

lending institutions described in our regulations as “other financing institutions” 

(OFIs). These include the following:

• Commercial banks

• Savings institutions

• Credit unions

• Trust companies

• Agricultural credit corporations

• Other specified agricultural lenders 

that are significantly involved in 

lending to agricultural and aquatic 

producers and harvesters

System banks may fund and discount agricultural production and intermediate-term 

loans for OFIs that demonstrate a need 

for additional funding to meet the credit 

needs of borrowers who are eligible to receive loans from the FCS. OFIs benefit by 

using the System as an additional source 

of liquidity for their own lending activities 

and by capitalizing on the System’s expertise in agricultural lending.

As of Dec. 31, 2020, the System served 18 

OFIs, down from 19 in 2019. Outstanding 

loan volume to OFIs stood at $839 million 

at year-end. OFI loan volume continues to 

be less than half of 1% of the System’s loan 

portfolio. About 70% of the System’s OFI 

lending activity occurs in the AgriBank 

district.

Syndications and loan participations with 

non-FCS lenders

In addition to the authority to provide 

services to OFIs, the Farm Credit Act gives 

FCS banks and associations the authority 

to partner with financial institutions outside the System, including commercial 

banks, in making loans to agriculture 

and rural America. Generally, System 

institutions partner with these financial 

institutions through loan syndications and 

participations.

A loan syndication (or “syndicated bank 

facility”) is a large loan in which a group 

of financial institutions work together to 

provide funds for a borrower. Usually one 

financial institution takes the lead, acting 

as an agent for all syndicate members and 

serving as a liaison between them and 

the borrower. All syndicate members are 

known at the outset to the borrower.

Loan participations are loans in which 

two or more lenders share in providing 

loan funds to a borrower. One of the participating lenders originates, services, and 

documents the loan. Generally, the borrower deals with the institution originating the loan and is not aware of the other 

participating institutions.

Financial institutions primarily use loan 

syndications and participations to reduce 

credit risk and to comply with lending 

limits. For example, a financial institution 

with a high concentration of production 

loans for a single commodity could use 

participations or syndications to diversify 

its loan portfolio, or it could use them to 

sell loans that are beyond its lending limit. 

Institutions also use syndications and 

participations to manage and optimize 

capital, earnings, and liquidity. Syndications and participations allow the System 

to more fully meet its mission by serving 

agricultural and rural borrowers who 

might not otherwise receive funding.

The System’s gross loan syndication volume grew by more than $2.7 billion over 

the past year to $23.3 billion at year-end 

2020. This figure includes volume from 

syndications that System institutions have 

with other FCS institutions and with nonFCS institutions.
2020 FCA Annual Report | 17

At year-end 2020, the System had $6.3 

billion in net eligible-borrower loan participations with non-System lenders. Net 

eligible-borrower loan participations have 

increased in recent years. The volume 

of eligible-borrower loan participations 

purchased from non-System lenders grew 

from $7.8 billion at Dec. 31, 2016, to $12.0 

billion at year-end 2020, and the volume of 

eligible-borrower loan participations sold 

to non-System lenders was $5.7 billion at 

year-end 2020, up $1.4 billion from the 

prior year.

In addition to participating in loans to 

eligible borrowers, FCS institutions have 

the authority to work with non-System 

lenders that originate “similar-entity” 

loans. A similar-entity borrower is not 

eligible to borrow directly from an FCS 

institution, but because the borrower’s 

operation is functionally similar to that of 

an eligible borrower’s operation, the System has authority to participate in the 

borrower’s loans (the participation interest 

must be less than 50%). Similar-entity 

loans contain other limitations as specified 

in sections 3.1(11)(B) and 4.18A of the 

Farm Credit Act.

The System had $16.6 billion in acquired 

similar-entity loan participations as of 

Dec. 31, 2020, up from $14.6 billion the 

prior year. As figure 3 indicates, the 

Figure 3

Loan participation transactions with non-System lenders, 2016 – 2020

As of Dec. 31

Dollars in billions

$0

$2

$4

$6

$8

$10

$12

$14

$16

$18

2016 2017 2018 2019 2020

Net loan 

participations 

involving eligible 

borrowers

Participations 

sold involving 

eligible borrowers

Participations 

purchased 

involving eligible 

borrowers

Net similar-entity 

loan 

participations

Similar-entity 

loan participations 

sold

Similar-entity 

loan participations 

acquired

Source: Farm Credit System Call Reports.
18 | Farm Credit Administration

volume of similar-entity participations 

that System institutions sell to non-System 

institutions is relatively small, amounting 

to around $500 million over the past several years.

Farm debt and market shares 

The U.S. Department of Agriculture’s estimate of total farm business debt for the 

year ended Dec. 31, 2019, was $419 billion, 

up 4.1% from its $402 billion estimate for 

year-end 2018. The System’s market share 

of total farm business debt rose from 

41.4% at the end of 2018 to 42.6% at the 

end of 2019. (See figure 4. Also, please 

note that 2020 data were not available at 

the time of publication of this report.)

Except for brief periods, the FCS has 

typically had the largest market share of 

farm business debt secured by real estate. 

At year-end 2019, the System held 47% of 

this $267 billion of debt; by comparison, 

commercial banks held 36.7%. Commercial banks have historically dominated 

non-real estate farm lending. At year-end 

2019, commercial banks held 46.3% of this 

$152 billion of debt, and the System held 

34.9%. 

Financial condition

Despite the pandemic’s immediate and 

unprecedented impact on agriculture and 

rural America, the System reported strong 

financial results in 2020, including higher 

earnings, increased capital, and stable 

portfolio credit quality. FCS banks had 

reliable access to debt capital markets and 

maintained liquidity levels well above the 

90-day regulatory minimum.

Tables 1 and 2 provide a summary of

the System’s major financial indicators. 

For more information on the condition 

and performance of the System, see the 

2020 Annual Information Statement of 

the Farm Credit System on the website of 

the Federal Farm Credit Banks Funding 

Corporation.

While the System is financially sound, 

a small number of individual FCS institutions displayed some weaknesses in 2020. 

As the System’s regulator, we addressed 

these weaknesses by increasing our oversight and supervision of these institutions. 

For more information on our supervisory 

and enforcement approach, see pages 35 

to 37. 

The hallmarks of U.S. agriculture — 

creativity, perseverance, and hard work 

— served U.S. farmers and ranchers well 

during a difficult year. Rapidly changing 

markets, price volatility, demand uncertainty, and processing disruptions were 

some of the many challenges facing U.S. 

farmers and ranchers. 

Figure 4

Estimated market shares of U.S. farm business debt

As of Dec. 31, 2019

Farmer Mac — 1.8%

Farm Service Agency — 3.0%

Life insurance companies — 4.0%

Individuals and others — 8.4%

Farm Credit System — 42.6%

Commercial Banks — 40.2%

Source: FCA’s Office of Data Analytics and Economics, based on Sept. 2, 2020, data from USDA’s 

Economic Research Service.
2020 FCA Annual Report | 19

Helping to stabilize the farm sector 

was a record level of government support 

in 2020. Payments were made available 

through traditional farm programs, USDA’s 

Coronavirus Food Assistance Program, 

and the Market Facilitation Program. 

Some producers also received funds under 

the Paycheck Protection Program.

Major cash crop prices surged higher in 

the fall of 2020 on tighter-than-expected 

world supplies and strong demand. Following years of low prices and declining 

cash flows, the strong price movements 

in corn and soybeans provided producers 

with attractive pricing opportunities.

Table 1

Farm Credit System major financial indicators, by annual comparison

Dec. 31, 2020

Dollars in millions

Item 31-Dec-20 31-Dec-19 31-Dec-18 31-Dec-17 31-Dec-16

Total assets $400,693 $365,359 $348,992 $329,518 $319,915

Gross loan volume $315,490 $286,964 $273,378 $259,888 $249,791

Bonds and notes $325,214 $295,499 $283,276 $267,119 $260,213

Nonperforming assets1 $1,897 $2,347 $2,282 $2,022 $2,037

Net income, full year $6,002 $5,446 $5,332 $5,189 $4,848

Nonperforming assets/Gross loans and other 

property owned 0.60% 0.82% 0.83% 0.78% 0.82%

Capital & insurance/Assets2 16.36% 16.90% 16.75% 16.81% 16.35%

Retained earnings/Assets 12.92% 13.41% 13.31% 13.24% 13.50%

Return on average assets 1.57% 1.54% 1.59% 1.62% 1.56%

Return on average capital 9.26% 8.91% 9.29% 9.49% 9.44%

Net interest margin3 2.46% 2.42% 2.46% 2.48% 2.49%

Efficiency ratio4 35.9% 36.2% 35.2% 35.1% 34.6%

Operating expenses/Average loans5 1.18% 1.18% 1.17% 1.17% 1.16%

Sources: FCA’s Consolidated Reporting System as of Dec. 31, 2020, and the Farm Credit System Quarterly Information Statement provided by the Federal Farm 

Credit Banks Funding Corporation.

1 Nonperforming assets are defined as nonaccrual loans, accruing restructured loans, accrual loans 90 or more days past due, and other property owned.

2 Capital excludes mandatorily redeemable preferred stock and protected borrower capital. Insurance refers to the funds in the Farm Credit Insurance Fund 

administered by the Farm Credit System Insurance Corporation.

3 Net interest margin ratio measures net income produced by interest-earning assets, including the effect of loanable funds, and is a key indicator of loan pricing 

effectiveness.

4 The efficiency ratio measures total noninterest expenses for the preceding 12 months divided by net interest income plus noninterest income for the preceding 

12 months.

5 Operating expenses divided by average gross loans, annualized.
20 | Farm Credit Administration

For the protein sector, 2020 was defined 

by price instability, major shifts in food 

product demand, business disruptions, 

and rising feed costs. Producers’ margins 

were generally weak to negative, with 

financial stress greatest on high-cost producers and those with significant leverage. 

Low interest rates, rising crop prices, 

and large government payments to producers helped push farmland values higher near the end of 2020. Prices will likely 

remain strong in 2021, reflecting continued farmer and investor interest, current 

income prospects, and the limited supply 

of land for sale.

Earnings

The System reported strong earnings in 

2020. For the year, System net income 

equaled $6.0 billion, up $556 million 

or 10.2% from 2019 (See figure 5). The 

Table 2

Farm Credit System major financial indicators, by district

Dec. 31, 2020

Dollars in millions

Institution 

Name

Total 

Assets

Gross 

Loan 

Volume

Nonaccrual 

Loans

Allowance 

for Loan 

Losses

Cash and 

Marketable 

Investments

Capital 

Stock1

Total 

Capital

Net 

Income

FCS banks

AgFirst $36,338 $26,225 $26 ($18) $9,729 $312 $2,478 $418

AgriBank $130,308 $109,786 $68 ($40) $19,847 $3,301 $6,580 $709

CoBank $158,586 $120,855 $117 ($635) $35,996 $3,918 $11,910 $1,263

Texas $28,228 $21,825 $1 ($10) $5,885 $420 $1,992 $251

Total $353,460 $278,691 $212 ($703) $71,457 $7,951 $22,960 $2,641

FCS associations

AgFirst $24,860 $23,930 $205 ($202) $41 $186 $5,122 $681 

AgriBank $122,794 $115,630 $620 ($471) $1,742 $167 $22,980 $2,322 

CoBank $71,183 $66,732 $371 ($335) $922 $52 $13,347 $1,403 

Texas $22,850 $22,077 $97 ($85) $91 $68 $3,506 $467 

Total $241,687 $228,369 $1,292 ($1,093) $2,796 $473 $44,955 $4,873 

Total FCS2 $400,693 $315,490 $1,504 ($1,796) $74,210 $1,977 $65,535 $6,002 

Sources: FCA’s Consolidated Reporting System as of Dec. 31, 2020, and the Farm Credit System Quarterly Information Statement provided by the Federal Farm 

Credit Banks Funding Corporation.

1 Includes capital stock and participation certificates, excludes mandatorily redeemable preferred stock and protected borrower capital.

2 Cannot be derived by adding the categories above because of intradistrict and intra-System eliminations used in Reports to Investors. Also, the total FCS numbers 

exclude mandatorily redeemable preferred stock and protected borrower capital but include restricted capital from the Farm Credit Insurance Fund.
2020 FCA Annual Report | 21

increase in net income was the result of 

a $780 million increase in net interest 

income, a $62 million decrease in loan 

loss provisions, and a $47 million increase 

in noninterest income, partially offset by 

increases in noninterest expenses of $264 

million and income tax provisions of $69 

million.

The increase in net interest income 

resulted from a combination of higher 

average earning assets and an increase 

in net interest spread. Driven largely by 

growth in the System’s loan portfolio, 

average earning assets rose $26.6 billion, 

or 7.8%, to $367.9 billion. Net interest 

spread increased 22 basis points to 2.26%. 

The sharp drop in interest rates in 2020 

allowed FCS banks to lower debt costs by 

calling $115 billion of debt. With the rise 

in net interest spread, net interest margin 

increased 4 basis points to 2.46%. The return on average assets was 1.57%, up from 

1.54% in 2019. The return on average capital increased to 9.26% from 8.91%.

As cooperative institutions, FCS banks 

and associations typically pass on a portion of their earnings as patronage distributions to their borrower-owners. For 

2020, System institutions declared a total 

of $2.9 billion in patronage distributions — 

$2.5 billion in cash, $276 million in allocated retained earnings, and $108 million in 

capital stock and participation certificates. 

This represents 48.1% of the System’s net 

income for 2020 as compared with 45.6% 

in 2019. The System also distributed $194 

million in cash from allocated retained 

earnings related to patronage distributions 

from previous years.

System growth

The System experienced strong growth in 

2020 as borrowers took advantage of the 

sharp decline in interest rates. Total assets 

increased to $400.7 billion, up $35.3 billion 

Figure 5

FCS net income, 2012 – 2020

As of Dec. 31, Dollars in billions

0%

2%

4%

6%

8%

10%

12%

$0

$1

$2

$3

$4

$5

$6

$7

$8

Return on 

average capital

Return on 

average assets Net income (loss)

2012 2013 2014 2015 2016 2017 2018 2019 2020

Rate of return

Source: Annual Information Statements of the Federal Farm Credit Banks Funding Corporation.

Figure 6

Annual growth rate of FCS loans outstanding, 2009 – 2020

-2%

0%

2%

4%

6%

8%

10%

12%

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Source: Annual Information Statements of the Federal Farm Credit Banks Funding Corporation.
22 | Farm Credit Administration

Table 3

FCS gross loans outstanding, 2016 – 2020

As of Dec. 31

Dollars in millions

Loan Type 2020 2019 2018 2017 2016 Percent 

Change 

from 2016

Percent 

Change 

from 2019

Agricultural real estate 

mortgage loans

$147,623 $132,215 $126,310 $120,561 $115,469 27.8% 11.7%

Agricultural production and 

intermediate-term loans

57,973 56,095 53,447 51,724 50,282 15.3% 3.3%

Agribusiness loans to the following:

Processing and marketing 

operations

31,939 28,205 24,832 21,582 21,166 50.9% 13.2%

Cooperatives 20,020 17,776 17,589 17,335 15,300 30.8% 12.6%

Farm-related businesses 4,453 4,068 3,692 3,293 3,162 40.8% 9.5%

Rural utility loans by type of utility:

Energy 22,066 19,432 20,100 19,689 19,577 12.7% 13.6%

Communication 9,708 7,847 6,755 6,311 6,023 61.2% 23.7%

Water/wastewater 2,703 2,390 2,305 1,965 1,840 46.9% 13.1%

Rural home loans 6,928 7,405 7,308 7,261 7,148 −3.1% −6.4%

Agricultural export finance 6,873 6,712 6,581 5,645 5,531 24.3% 2.4%

Lease receivables 4,345 3,902 3,630 3,665 3,480 24.9% 11.4%

Loans to other financing 

institutions

859 917 829 857 813 5.7% −6.3%

Total $315,490 $286,964 $273,378 $259,888 $249,791 26.3% 9.9%

Sources: Federal Farm Credit Banks Funding Corporation Annual Information Statements.
2020 FCA Annual Report | 23

or 9.7% from 2019. Gross loan balances 

were $315.5 billion at year-end, up $28.5 

billion or 9.9% in 2020. (See figure 6 and 

table 3.)

Most of the System’s loan growth in 

2020 related to real estate mortgages, rural 

infrastructure, and processing and marketing lending. Real estate mortgages, the 

largest segment of the loan portfolio at almost 47%, grew by $15.4 billion, or 11.7% 

for the year. Rural infrastructure loans, 

at 11% of the portfolio, increased $4.8 

billion, or 16.2% in 2020. Processing and 

marketing loans, representing 10% of the 

portfolio, increased $3.7 billion, or 13.2%.

Loan volume increased for most major 

commodity categories in 2020. The cash 

grains and cattle sectors were the System’s 

two largest commodity categories, equaling almost 25% of the total loan portfolio. 

For the year, lending to the cash grains 

and cattle sectors was up 9.2% and 6.7%, 

respectively. 

Asset quality

Despite the challenges facing U.S. farmers 

and ranchers, System loans performed 

well, and portfolio credit quality remained 

sound. Throughout 2020, agricultural producers were challenged by rapidly changing markets, significant price volatility, 

and sudden shifts in demand. Although 

strong export demand and favorable market fundamentals sent grain and oilseed 

prices soaring in the second half of the 

year, stress remained high in other agricultural sectors and geographical regions. 

As of Dec. 31, 2020, nonperforming 

loans totaled $1.9 billion, or 0.59% of gross 

loans outstanding. This is down from $2.3 

billion, or 0.79%, at year-end 2019. (See 

figure 7.) Loan delinquencies (accruing 

loans that are 30 days or more past due) decreased slightly to 0.28% of total accruing 

loans from 0.32% at year-end 2019. In total, 

94.0% of System loans were classified as 

acceptable, up from 92.9% at year-end 

2019.

The allowance for loan losses remained 

largely unchanged at $1.80 billion, or 

0.57% of loans outstanding, at year-end 

2020 compared with $1.81 billion, or 0.63% 

of loans outstanding, at year-end 2019. The 

System recognized provisions for loan losses of $107 million in 2020 as compared with 

$169 million in 2019. Net loan charge-offs 

increased in 2020 but remained low at $90 

million compared with $59 million in 2019.

Capital

Strong earnings continued to support System capital growth in 2020. At Dec. 31, total capital equaled $65.5 billion compared 

Figure 7

FCS nonperforming loans, 2015 – 2020

As of Dec. 31

0.00%

0.25%

0.50%

0.75%

1.00%

Nonaccrual loans Restructured loans Past-due loans

2015 2016 2017 2018 2019 2020

Percentage of gross loans

Source: Annual Information Statements of the Federal Farm Credit Banks Funding Corporation.
24 | Farm Credit Administration

with $61.7 billion at year-end 2019. (Please 

note that these numbers include restricted 

capital, which is the amount held in the 

Farm Credit Insurance Fund.) At year-end, 

the System’s capital-to-assets ratio was 

16.4%, compared with 16.9% a year ago.

As shown in figure 8, retained earnings 

is the most significant component of System capital, equaling 79.0% of total capital 

at year-end 2020 compared with 79.4% a 

year ago. FCA regulations establish minimum capital levels that each FCS bank and 

association must achieve and maintain. As 

of Dec. 31, 2020, capital levels at all System 

banks and associations were above the 

regulatory minimum capital 

requirements.

Funding and liquidity

During 2020, the System was able to maintain reliable access to the debt capital markets even at the height of unprecedented 

instability in the global capital markets 

caused by the COVID-19 pandemic and its 

effects. Investors continued to be strongly 

attracted by the System’s status as a government-sponsored enterprise (GSE) and 

its financial performance and strength. 

The significant reduction in overall GSE 

debt available was another incentive for 

investors to invest in System debt.

Risk spreads and pricing on System debt 

securities during most of 2020 were historically favorable. However, severe market 

volatility caused spreads to widen significantly as investors initially reacted to the 

Figure 8

FCS capital, 2013 – 2020

As of Dec. 31

$0

$10

$20

$30

$40

$50

$60

$70

$80

Capital/Assets

Capital stock and 

participation 

certificates

Additional 

paid-in-capital

Preferred stock

Restricted capital

Retained earnings 

and other*

2013 2014 2015 2016 2017 2018 2019 2020

Dollars in billions

Capital as a percentage of assets

12%

14%

16%

18%

20%

22%

16.3%16.4%

$42.6

$47.5

$48.8

$51.3

$55.4

$58.4

$61.7

$65.5

Source: Annual Information Statements of the Federal Farm Credit Banks Funding Corporation.

Note: Other includes additional paid-in capital and accumulated other comprehensive income or loss.
2020 FCA Annual Report | 25

potential economic impacts of COVID-19. 

The Federal Reserve, along with other 

central banks, managed to assuage these 

fears with numerous forceful monetary 

actions. Overall, regulatory requirements 

promote the use of GSE debt, whereby the 

System benefits from its GSE status. The 

System also benefits from its persistently 

strong financial performance and the 

continuing decline in debt issuances by 

the two housing-related GSEs, which are 

in conservatorship. (This decline is likely 

due to the increasingly lower caps on 

the amount of mortgage assets the GSEs 

have been permitted to hold during their 

conservatorship status.) During 2020, the 

System also benefited from the sizeable 

decline in the debt needs of the Federal 

Home Loan Bank System. As a result of 

the strong demand for System debt, the 

System was able to continue to issue debt 

on a wide maturity spectrum at highly 

competitive rates for all but a very limited 

portion of 2020.

The System funds loans and investments 

primarily with a combination of consolidated Systemwide debt and equity capital. 

The Funding Corporation, the fiscal agent 

for System banks, sells debt securities, 

such as discount notes, bonds, designated 

bonds, and retail bonds, on behalf of the 

System. This process allows funds to flow 

efficiently from worldwide capital-market 

investors to agriculture and rural America, 

thereby providing rural communities with 

ready access to global credit resources. At 

year-end 2020 Systemwide debt outstanding was $322.5 billion, representing a 10% 

increase from the preceding year-end.

Several factors contributed to the $28.9 

billion increase in Systemwide debt outstanding. Gross loans increased $28.5 

billion in 2020, while the System’s combined investments, federal funds, and cash 

balances increased by $5.9 billion during 

the year.

The System had $3.20 billion in outstanding preferred stock at the end of 

2020, an increase of $83 million from the 

previous year-end. It has had no outstanding subordinated debt since June of 2016.

The amount of debt issued by the System 

increased significantly in 2020. For the 12 

months ended Dec. 31, 2020, the System 

issued just under $421 billion in debt securities, compared with $364 billion in 2019. 

The System issued 15% more debt in 2020 

for three primary reasons: to take advantage of the pronounced increase in opportunities to exercise call options, to bolster 

liquidity portfolios, and to meet the increased credit needs of System borrowers.

The amount of outstanding debt on 

which the System exercised its call options increased dramatically because of 

the precipitous decline in yields during 

the first quarter of 2020 when the Federal 

Reserve rapidly decreased the target federal funds range to 0.0% to 0.25%, which 

it maintained through the remainder of 

2020. In addition, the Federal Reserve took 

several other significant monetary policy 

actions to help reduce longer-term rates as 

well. The System exercised calls on a record $115.2 billion of its outstanding debt 

during 2020, compared with $54.5 million 

in the preceding year.

Favorable investor sentiment and lower 

yields continued to provide the System 

with access to a wide range of debt maturities in 2020. The weighted average of 

remaining maturities increased slightly 

for 2020 to 2.9 years from 2.8 years. The 

weighted-average interest rates for insured 

debt decreased dramatically, plummeting 

from 2.15% as of Dec. 31, 2019, to 1.04% as 

of Dec. 31, 2020.

To participate in the issuance of an 

FCS debt security, a System bank must 

maintain — free from any lien or other 

pledge — specified eligible assets (available collateral) that are at least equal in 

The System 

funds loans and 

investments 

primarily with 

a combination 

of consolidated 

Systemwide 

debt and equity 

capital.
26 | Farm Credit Administration

value to the total amount of its outstanding 

debt securities. Securities subject to the 

available collateral requirements include 

Systemwide debt securities for which the 

bank is primarily liable, investment bonds, 

and other debt securities that the bank 

may have issued individually.

Furthermore, our regulations require 

each FCS bank to maintain a tier 1 leverage ratio (primarily unallocated retained 

earnings and certain common cooperative 

equities divided by total assets) of not less 

than 4%. In addition, FCA regulations 

provide for a leverage ratio buffer. Certain 

restrictions apply if the buffer does not 

exceed 1%. Throughout 2020, all System 

Figure 9

Financial Institution Rating System (FIRS) composite ratings 

for the FCS, 2017 – 2021

0%

20%

40%

60%

80%

100%

Rated 1 Rated 2 Rated 3 or worse

01/01/2017 01/01/2018 01/01/2019 01/01/2020 01/01/2021

Percentage of rated institutions

2 5 7 7 4

31 29 32 35 35

44 39 34 30 32

Source: FCA’s FIRS ratings database.

Note: Figure 9 reflects ratings for only the Farm Credit System’s banks and direct-lending 

associations; it does not include ratings for the System’s service corporations, Farmer Mac, 

or the Federal Farm Credit Banks Funding Corporation. Also, the numbers shown on the 

bars reflect the total number of institutions with a given rating; please refer to the y-axis to 

determine the percentage of institutions receiving a given rating.

banks maintained their tier 1 leverage ratios above the required minimum and the 

accompanying buffer, with 5.23% being 

the lowest for any single bank as of Dec. 

31, 2020.

All System banks have kept their respective days of liquidity above the required 

minimum levels. The lowest liquidity levels at any single bank as of Dec. 31, 2020, 

were as follows:

• 27 days (15 days regulatory minimum) 

of level 1 assets

• 76 days (30 days regulatory minimum) 

of level 1 and 2 assets

• 136 days (90 days regulatory minimum) of level 1, 2, and 3 assets

• 167 days overall (including the supplemental liquidity buffer)

In addition to the protections provided by 

the joint and several liability provisions, 

the Funding Corporation and the System 

banks have entered into the following voluntary agreements:

• The Amended and Restated Market 

Access Agreement, which establishes 

certain financial thresholds and provides the Funding Corporation with 

operational oversight and control 

over the System banks’ participation 

in Systemwide debt obligations.

• The Amended and Restated Contractual Interbank Performance Agreement, which is tied to the Market 

Access Agreement and establishes 

certain measures that monitor the 

financial condition and performance 

of the institutions in each FCS bank’s 

district. For all of 2020, all Farm 

Credit System banks maintained 

scores above the benchmarks in the 

Contractual Interbank Performance 

Agreement.
2020 FCA Annual Report | 27

Ratings

FCA uses the Financial Institution Rating 

System (FIRS) to assess the safety and 

soundness of each FCS institution. Similar to the systems used by other federal 

banking regulators, FIRS is a framework of 

component and composite ratings to help 

examiners evaluate significant financial, 

asset quality, and management factors. 

FIRS ratings range from 1 for a sound institution to 5 for an institution that is likely 

to fail.

As figure 9 shows, the financial condition and performance of the FCS remains 

strong. The System’s strength reduces the 

risk to investors in FCS debt, to the Farm 

Credit System Insurance Corporation, and 

to FCS institution stockholders. Based on 

the institutions’ financial reporting as of 

Dec. 31, 2020, 67 FCS institutions were rated 1 or 2 (94%) and 4 institutions were rated 3 or worse (6%). The institutions rated 3 

or worse represented less than 1.5% of the 

System’s total assets, which is well within 

the System’s risk-bearing capacity.
Each institution must 

report annually to FCA 

on the operations and 

achievements of its 

YBS program.
2020 FCA Annual Report | 29

Serving young, beginning, and small farmers 

and ranchers 

FCA supports the Farm 

Credit System’s mission to serve young, 

beginning, and small (YBS) farmers, 

ranchers, and producers and harvesters of 

aquatic products. We define young farmers 

as those who are 35 years old or younger, 

beginning farmers as those who have been 

farming for 10 years or less, and small 

farmers as those with less than $250,000 in 

annual sales.

The System’s YBS mission is outlined 

in the Farm Credit Act of 1971, as amended, and we have adopted regulations to 

implement the YBS provisions of the act. 

The Farm Credit Act and FCA regulations 

require each FCS bank to have written policies that direct each association to have 

the following:

• A program for furnishing sound and 

constructive credit and financially 

related services to YBS farmers

• A mission statement describing the 

program’s objectives and specific 

means to achieve the objectives

• Annual quantitative targets for credit 

to YBS farmers

• Outreach efforts and annual qualitative goals for offering credit and 

related services that meet the needs 

of YBS farmers

An association’s board oversight and 

reporting are key parts of every YBS 

program. Each institution must report 

annually to FCA on the operations and 

achievements of its YBS program. Each 

association also must establish an internal 

controls program to ensure that it provides 

credit in a safe and sound manner.

In addition, FCA regulations require 

association business plans to include a 

marketing plan and strategies with specific 

outreach toward diversity and inclusion 

within each market segment. Operational 

and strategic business plans must include 

the goals and targets for the association’s 

YBS lending. System institutions must also 

coordinate with other government and 

private sources of credit in implementing 

their YBS programs. FCA’s oversight and 

examination activities monitor each institution’s assessment of its performance and 

market penetration in the YBS area.

In 2020, we continued to make progress 

on the objectives included in the 2019 

advance notice of public rulemaking. 

We continue to work with the System to 

leverage existing data assets to improve 

usability and consistency of YBS lending 

data, while also reducing regulatory burden. Over the past year, we have made 

significant strides in improving the collection of YBS nonlending data. This information will improve our understanding of 

effective YBS programs, and it will help us 

identify best practices that can be shared 

across the System.

In the fall of 2020, USDA and FCA facilitated an event to find ways for agricultural 

lenders to better serve the credit needs 

of beginning producers. The event was 

a success and included staff from FCA 

and USDA’s Farm Service Agency (FSA), 
30 | Farm Credit Administration

members of the agricultural lending community, and beginning farmers. The event 

culminated with three initiatives:

• Establishing a process for agricultural 

lenders and FSA to communicate 

when challenges arise in financing 

beginning farmers and ranchers

• Engaging agricultural lenders and 

FSA staff in loan-making training sessions and farm loan conferences

• Forming workgroups of agricultural 

lenders and FSA representatives to 

identify a consistent process to overcome challenges to financing beginning farmers and ranchers 

We continue to work with FSA and other 

stakeholders to further solidify this first 

step of many to improve financing opportunities for beginning farmers. 

Results

The following information summarizes 

the quantitative information that System 

institutions provided for their YBS programs. (See tables 4A and 4B.)

In 2020, the System made a total of 

370,943 new loans, totaling $119.7 billion. 

The total number of outstanding loans at 

year-end 2020 was 946,119, amounting to 

$311.9 billion.

Table 4A

YBS loans made during 2020

YBS Category Number of Loans Percentage of 

Total Number of 

System Loans

Dollar Volume of 

Loans in Millions

Percentage 

of Total Volume of 

System Loans

Average Loan Size

Young 65,807 17.7% $13,810 11.5% $209,850 

Beginning 94,329 25.4% $22,488 18.8% $238,402 

Small 166,282 44.8% $23,437 19.6% $140,946 

Table 4B

YBS loans outstanding as of Dec. 31, 2020

YBS Category Number of Loans Percentage of 

Total Number of 

System Loans

Dollar Volume of 

Loans in Millions

Percentage 

of Total Volume of 

System Loans

Average Loan Size

Young 181,378 19.2% $33,586 10.8% $185,170 

Beginning 283,936 30.0% $54,779 17.6% $192,927 

Small 470,836 49.8% $58,587 18.8% $124,432 

Sources: Annual Young, Beginning, and Small Farmer Reports submitted by each System lender through the FCS banks.

Note: The YBS totals listed in tables 4A and 4B include loans, advancements, commitments, and participation interests to farmers, ranchers, and aquatic producers. 

The totals exclude rural home loans made under FCA regulation 613.3030, loans to cooperatives, and the activities of the Farm Credit Leasing Services Corporation.
2020 FCA Annual Report | 31

Young: The System reported making 65,807 

new loans to young farmers in 2020, and 

the volume of these loans amounted to 

$13.8 billion. The new loans made to 

young farmers in 2020 represented 17.7% 

of all loans the System made during the 

year and 11.5% of the dollar volume of 

loans made. At the end of 2020, the System 

reported 181,378 loans outstanding to 

young farmers, totaling $33.6 billion.

Beginning: The System reported making 

94,329 new loans to beginning farmers 

in 2020, and the volume of these loans 

amounted to $22.5 billion. The new loans 

made to beginning farmers in 2020 represented 25.4% of all System loans made 

during the year and 18.8% of the dollar 

volume of loans made. At the end of 2020, 

the System reported 283,936 loans outstanding to beginning farmers, totaling 

$54.8 billion.

Small: System institutions reported making 166,282 new loans to small farmers in 

2020, totaling $23.4 billion. The new loans 

made to small farmers in 2020 represented 

44.8% of all System loans made during 

the year and 19.6% of the dollar volume of 

loans made. At the end of 2020, the System 

reported 470,836 loans outstanding to 

small farmers, totaling $58.6 billion.

Please note: Because the YBS mission is 

focused on each borrower group separately, data are reported separately for each of 

the three YBS categories. Since some loans 

fit more than one category, adding the 

loans across categories does not produce 

an accurate measure of the System’s YBS 

lending.

New loans made in 2020 by dollar volume 

and number of loans

From Dec. 31, 2019, to Dec. 31, 2020, the 

System’s total new loan dollar volume increased by 31.6%. New loan dollar volume 

to young farmers increased by 36.9%, to 

beginning farmers by 57.4%, and to small 

farmers by 63.0%. (See table 5A.)

The number of total System loans made 

during the year increased by 37.4%. The 

number of loans to young farmers increased by 34.0%, to beginning farmers by 

40.6%, and to small farmers by 34.9%.

Several factors contributed significantly 

to the large increases in new loan volume 

and the number of new loans:

• The System’s ability to re-price existing loans

• Higher demand for agricultural land 

and equipment

• The Small Business Administration’s 

Payroll Protection Program
32 | Farm Credit Administration

Outstanding loans by dollar volume and 

number of loans

Both the dollar volume of the System’s total 

loans outstanding and the dollar volume of 

YBS loans outstanding increased in 2020. 

Total System loan dollar volume outstanding increased by 11.3%. The loan dollar 

volume outstanding to young farmers increased by 8.0%, to beginning farmers by 

12.5%, and to small farmers by 12.9%. (See 

table 5B.)

The number of total System loans outstanding increased in 2020 by 3.5%. The 

number of loans outstanding to young 

farmers increased by 2.1%, to beginning 

farmers by 4.1%, and to small farmers by 

2.4%. 

Ratio of new and outstanding YBS loans to 

total System loans

The ratio of new YBS loans (by number) 

to total new System loans was 17.7% for 

young farmers, 25.4% for beginning farmers, and 44.8% for small farmers. The ratio 

of outstanding YBS loans (by number) to 

total outstanding System loans was 19.2% 

for young farmers, 30.0% for beginning 

farmers, and 49.8% for small farmers. (See 

figures 10A, 10B, and 10C.) All the ratios 

either increased slightly from 2019 or 

remained flat.

Table 5A

Change in new YBS lending from 2019 to 2020

YBS Category Dollar Volume Loan Numbers

Young 36.9% 34.0%

Beginning 57.4% 40.6%

Small 63.0% 34.9%

Table 5B

Change in outstanding YBS lending from 2019 to 2020

YBS Category Dollar Volume Loan Numbers

Young 8.0% 2.1%

Beginning 12.5% 4.1%

Small 12.9% 2.4%
2020 FCA Annual Report | 33

Figure 10A

Young farmers and ranchers

0

50

100

150

200

Number of young, beginning, 

or small loans made (left

scale)

Number of young, beginning, 

or small loans outstanding 

(left scale)

Number of young, beginning, 

or small loans made 

as a percentage of total 

FCS loans made (right scale)

Number of young, beginning, 

or small loans outstanding as 

a percentage of FCS loans 

2020201920182017201620152014201320122011 outstanding (right scale)

0%

10%

20%

30%

40%

50%

Number of loans in thousands

Percentage of total FCS loans made

Figure 10B

Beginning farmers and ranchers

0

50

100

150

200

250

300

2020201920182017201620152014201320122011

0%

5%

10%

15%

20%

25%

30%

Number of loans in thousands

Percentage of total FCS loans made

Figure 10C

Small farmers and ranchers

0

100

200

300

400

500

600

2020201920182017201620152014201320122011

0%

10%

20%

30%

40%

50%

60%

Number of loans in thousands

Percentage of total FCS loans made
Managing risk is a challenge for 

all kinds of lenders but especially 

for those lending to a single 

sector of the economy —

in this case, agriculture.
2020 FCA Annual Report | 35

Examining and regulating the banks and 

associations

Examination

Managing risk is a challenge for all kinds 

of lenders but especially for those lending 

to a single sector of the economy — in this 

case, agriculture. To manage this risk, 

Farm Credit System institutions must have 

both sufficient capital and effective risk 

management controls. As the independent regulator of the FCS, the Farm Credit 

Administration examines and supervises 

System institutions. Our examiners determine how issues affecting agriculture 

and the economy create risk for System 

institutions.

Our examiners also evaluate whether 

each institution is fulfilling its chartered 

mission to provide credit and financially 

related services to all eligible, creditworthy customers. They do so in a couple 

of ways. They determine whether each institution is complying with mission-related 

laws and regulations. They also evaluate 

System outreach efforts and best practices 

in implementing innovative programs for 

serving the credit needs of eligible agricultural producers and cooperatives, including young, beginning, and small farmers 

and ranchers.

Our examiners review System institutions’ annual reports and business plans 

and encourage institutions to include a 

discussion of how they are meeting their 

mission. Ongoing oversight and examination efforts continue to address diversity 

and inclusion, as well as compliance with 

YBS regulations and YBS data integrity.

As required by the Farm Credit Act, 

FCA examines each institution at least 

once every 18 months. In the interim between these statutory examinations, we 

also monitor and examine institutions as 

circumstances warrant. We customize our 

examination activities to each institution’s 

specific risks. To monitor and address 

FCS risk as effectively and efficiently as 

possible, we assign highest priority to 

institutions, or the parts of an institution’s 

operations, that present the greatest risk.

We require institutions to develop and 

maintain programs, policies, procedures, 

and controls to identify and manage risk. 

For example, our regulations require FCS 

institutions to have effective loan underwriting and loan administration processes. 

We also have regulations requiring FCS institutions to maintain strong asset-liability 

management capabilities.

National oversight program 

In addition to monitoring risks that are 

unique to a single institution, we also 

monitor risks that affect the System as a 

whole. Each year we develop a national 

oversight plan that takes certain systemic 

risks into account. In fiscal year 2021, we 

are focusing on two risk areas:

Credit risk management and loan servicing 

Pressure on commodity prices caused 

by ample supplies, weak trade, and the 

pandemic continues to impact agriculture, the System, and its borrowers. 

Timely and effective risk identification, 
36 | Farm Credit Administration

risk management, and loan servicing are 

increasingly important. Our FY 2021 examination program emphasizes these areas, 

particularly for portfolios with commodity 

concentrations in stressed industries. 

Where appropriate, we focus on ensuring timely and accurate risk identification, 

effective internal credit reviews, robust 

stress testing, and well-supported allowances for loan losses. We also examine the 

effectiveness of loan servicing, including 

servicing related to deferral programs 

and borrower rights. Finally, we evaluate 

the adequacy of institutions’ processes 

to identify, report, and manage affiliated 

exposures related to large borrowers and 

processors. We give special attention to 

the most stressed industries.

Operational risk management and 

response to the pandemic

The pandemic continues to impact institutions’ business operations. Many institutions materially modified operational processes to continue providing products and 

services while adhering to stay-at-home 

and social distancing guidelines. 

Furthermore, the shift to the predominantly virtual work environment and remote access likely increased the potential 

for fraud involving funds transfer activities 

and new lending programs introduced 

during the pandemic. For this reason, our 

FY 2021 examinations focus on adjustments to operations, strategic business 

plans, controls, and internal audit risk 

assessments in response to the pandemic 

and other risks. 

We also began applying our new examination guidance on model risk management. System institutions rely on models 

in many decision-making aspects, and 

this reliance presents risk. The pandemic 

may have increased model risk by introducing more uncertainty to the inputs and 

assumptions used, thus impacting some 

models’ predictability and reliability. We 

are focusing on examining policies, procedures, and processes for model development, implementation, and validation, as 

well as change controls, internal controls, 

and board reporting.

Three tiers of supervision

In examining and overseeing System institutions, we use a three-tiered program: 

normal supervision, special supervision, 

and enforcement actions. Institutions 

under normal supervision are performing 

in a safe and sound manner and are complying with laws and regulations. These 

institutions can correct weaknesses in the 

normal course of business.

For those institutions displaying more 

serious or persistent weaknesses, we shift 

from normal to special supervision, and 

our examination oversight increases accordingly. Under special supervision, we 

give an institution clear and firm guidance 

to address weaknesses, and we give a timeframe for correcting the problems.

If informal supervisory approaches 

have not been or are not likely to be successful, we use our formal enforcement 

authorities to ensure that FCS institutions 

are safe and sound and that they comply 

with laws and regulations. We may take an 

enforcement action for several reasons:

• A situation threatens an institution’s 

financial stability.

• An institution has a safety or soundness problem or has violated a law or 

regulation.

• An institution’s board is unable or unwilling to correct problems we have 

identified. 

Our enforcement authorities include the 

following powers:

• To enter into formal agreements
2020 FCA Annual Report | 37

• To issue cease and desist orders

• To levy civil money penalties

• To suspend or remove officers, directors, and other persons

If we take an enforcement action, the 

FCS institution must operate under the 

conditions of the enforcement document 

and report back to us on its progress in 

addressing the issues identified. The document may require the institution to take 

corrective actions, such as reducing risk 

exposures, increasing capital, enhancing 

earnings, and strengthening risk management. Our examiners oversee the institution’s performance to ensure compliance 

with the enforcement action.

As of Jan. 1, 2021, no FCS institutions 

were under enforcement action.

Borrower rights

We also examine institutions to make sure 

they are complying with the borrower 

rights provisions of the Farm Credit Act. 

These provisions provide certain System 

borrowers and loan applicants with the 

following rights:

• To know the current effective rates 

of interest on their loans by the dates 

the loans close

• To be informed that they are required 

to purchase at-risk stock in their FCS 

institutions

• To receive copies of all the documents 

they have signed by the time their 

loans close

• To be informed promptly as to whether their loan applications have been 

accepted, reduced, or denied

• To be informed of their right to request restructuring for their loans if 

they cannot meet current payments 

and their loans become distressed

• To obtain credit committee reviews of 

denials or reductions of loan requests 

and denials of restructuring requests

• To have first refusal when their FCS 

institutions decide to sell agricultural 

properties their institutions have acquired from them

• To receive cooperation from their FCS 

institutions if they seek mediation

We also receive and review complaints 

from borrowers and loan applicants who 

believe their rights have been denied. If 

we find violations of law or regulations, 

we have several options to bring about 

corrective action. In 2020, we received 32 

borrower complaints, compared with 27 

in 2019. In June 2021, we added an online 

complaint form to our website to provide 

an additional means by which borrowers 

and loan applicants may submit complaints regarding System institutions.

Regulation

As the regulator of the Farm Credit System, we issue regulations, policy statements, and other guidance to ensure that 

the System, including its banks, associations, Farmer Mac, and other related 

entities, complies with the law, operates in 

a safe and sound manner, and efficiently 

carries out its statutory mission. Our regulatory philosophy is to provide an environment that enables the System to safely 

and soundly offer high-quality, reasonably 

priced credit and related services to farmers and ranchers, agricultural cooperatives, rural residents, and other entities on 

which farming depends.

We strive to develop balanced, well-reasoned regulations whose benefits outweigh their costs. With our regulations, we 

seek to meet two general objectives. The 

first is to ensure that the System continues 

to be a dependable source of credit and 
38 | Farm Credit Administration

related services for agriculture and rural 

America while also ensuring that System 

institutions comply with the law and with 

the principles of safety and soundness. 

The second is to promote participation by 

member-borrowers in the management, 

control, and ownership of their System 

institutions.

Regulatory activity in 2020

When the president declared a national 

emergency on March 13, 2020, FCA implemented a regulatory pause, which delayed the publication of three rulemaking 

actions in the Federal Register. This delay 

postponed the dates of some planned 

rulemaking activities listed in the agency’s 

Spring 2020 Regulatory Projects Plan. 

We eventually published two of the three 

delayed rulemaking actions in the Federal 

Register, but one remained unpublished at 

year-end.

FCA also issued guidance to FCS institutions during 2020 and early 2021 on 

managing some of the challenges created 

by the COVID-19 pandemic. Our guidance 

covered working with borrowers, meeting 

capital and liquidity requirements, complying with financial reporting requirements, and handling other managerial 

and operational issues. Our guidance also 

addressed the impact on FCS institutions 

of regulations issued by other federal 

agencies. We provided guidance on the 

Small Business Administration’s Paycheck 

Protection Program and the Consumer 

Financial Protection Bureau’s forbearance 

relief on federally backed mortgage loans.

The following paragraphs describe 

some of FCA’s regulatory efforts in 2020, 

along with several projects that will remain active in 2021. More information on 

these topics is available on our website. 

From the Laws & regulations tab at www.

fca.gov, you can read our board policy 

statements, bookletters, informational 

memorandums, proposed rules, and 

any final rules whose effective dates are 

pending.

Criteria to reinstate nonaccrual loans — The 

FCA board approved a final rule in February 2020 that uses more measurable standards to determine when high-risk loans 

are suitable for reinstatement to accrual 

status. The standards closely resemble the 

standards of the Federal Financial Institutions Examination Council.

District financial reporting — The FCA 

board approved a final rule in September 

2020 that amended regulations governing 

the presentation of financial information 

from an FCS bank’s affiliated associations in 

the bank’s Annual Report to Shareholders.

Investment eligibility — The FCA board 

approved a final rule in August 2020 that 

amended FCA regulations governing eligible investments for System associations.

Amortization limits — The FCA board 

approved a proposed rule in January 2020 

and a final rule in August 2020 that repealed obsolete regulatory provisions that 

imposed amortization limits on production credit association loans and required 

System associations to address amortization through their credit underwriting 

standards and internal controls.

Tier 1/tier 2 capital framework — The FCA 

board approved a proposed rule in February 2020 to amend the tier 1/tier 2 capital 

framework to clarify FCA’s expectations 

on numerous provisions, to correct technical errors, and to codify previous guidance 

and reduce burden.

Flood insurance — The FCA board approved a notice and request for comments 

on 24 proposed interagency questions and 

answers regarding private flood insurance 

in February 2020. 
2020 FCA Annual Report | 39

Interest rate risk management guidance — The FCA board approved a bookletter in January 2020 to provide clarification 

and guidance on interest rate risk management to System institutions.

Guidance for System Institutions Affected 

by the COVID-19 Pandemic — We issued an 

informational memorandum in May 2020 

that provided guidance to help System 

institutions manage challenges associated 

with the COVID-19 pandemic. Also, over 

the course of the pandemic, we issued numerous supplements to provide guidance 

on topics such as troubled debt restructurings, consumer financial protection, and 

flood insurance. 

Guidance on the Paycheck Protection Program (PPP) for Small Businesses Affected 

by the COVID-19 Pandemic — We issued an 

informational memorandum in July 2020 

that provided guidance on the PPP for eligible borrowers; we also issued a supplement on regulatory capital requirements 

for PPP loans.

National Oversight and Examination Program for 2021 — We issued an informational memorandum in October 2020 that 

summarized the National Oversight Plan 

for 2021. The plan detailed strategies for 

addressing critical risks and other areas 

of focus.

Loan syndications and assignment markets study — We continued to study loan 

syndications and assignment markets to 

determine whether our regulations should 

be modified to reflect significant changes 

in the markets.

Corporate activity in 2020

In 2020 and early 2021, we analyzed 

and approved the following corporate 

applications.

• Effective Feb. 1, 2020, we issued a 

charter to a service corporation affiliated with AgriBank. 

• On Jan. 1, 2021, a CoBank-affiliated 

agricultural credit association (ACA) 

and its production credit association 

(PCA) and federal land credit association (FLCA) subsidiaries merged their 

operations with another ACA and its 

PCA and FLCA subsidiaries in the CoBank district.

The total number of associations as of 

Jan. 1, 2021, was 67 (66 ACAs and 1 FLCA). 

We publish information about corporate 

applications on our website at www.fca.

gov under the Bank and association oversight tab.

Funding activity in 2020

As the System’s regulator, we have several 

responsibilities pertaining to System funding activities. The Farm Credit Act requires 

the System to obtain our approval before 

distributing or selling debt. 

Because we make it a high priority to 

respond efficiently to the System’s requests 

for debt issuance approvals, we have a 

program, which we monitor on an ongoing 

basis, that allows the System to issue discount notes at any time up to an outstanding balance of $100 billion. (From 2008 to 

March 2020, the discount ceiling had been 

$60 billion; in March 2020, it increased to 

$100 billion.) 

In addition, we approve most longer-term debt issuances through a monthly “shelf” approval program. For 2020, we 

approved $230.6 billion in longer-term 

debt issuances through this program. For 

more information about the System’s funding and liquidity, see pages 24 through 26.
Farmer Mac is a federally 

chartered instrumentality and 

an institution of the FCS.
2020 FCA Annual Report | 41

Farmer Mac

Created in 1988, the Federal 

Agricultural Mortgage Corporation 

(Farmer Mac) provides a secondary market for agricultural real estate loans, government-guaranteed portions of certain 

loans, rural housing mortgage loans, and 

eligible rural utility cooperative loans. It 

offers greater liquidity and lending capacity to agricultural and rural lenders, including insurance companies, credit unions, 

commercial banks, other FCS institutions, 

and investors.

Farmer Mac is owned by its investors — it is not a member-owned cooperative. Investors in voting stock may include 

commercial banks, insurance companies, 

other financial organizations, and other 

FCS institutions. Any investor may own 

nonvoting stock.

Farmer Mac is a federally chartered 

instrumentality and an institution of the 

FCS. However, it has no liability for the 

debt of any other System institution, and 

the other System institutions have no liability for Farmer Mac debt.

Farmer Mac conducts activities through 

four major lines of business:

• Farm & Ranch, which involves mortgage loans secured by first liens on 

agricultural real estate and rural 

housing.

• USDA Guarantees, which involves 

certain agricultural and rural loans 

guaranteed by the U.S. Department of 

Agriculture, including farm ownership loans, operating loans, and rural 

business and community development loans.

• Rural Utilities Program, which involves loans made by cooperative 

lenders to finance rural electric 

facilities.

• Institutional Credit, which involves 

Farmer Mac’s purchase or guarantee of collateralized bonds known 

as AgVantage securities. AgVantage 

bonds are general obligations of the 

issuer that are secured by pools of 

eligible loans or real estate.

Farmer Mac purchases eligible loans 

directly from lenders, provides advances 

against eligible loans by purchasing obligations secured by those loans or assets 

that qualify as eligible agricultural real 

estate collateral, securitizes assets and 

guarantees the resulting securities, and 

issues long-term standby purchase commitments (standbys) for eligible loans. 

Securities guaranteed by Farmer Mac may 

be held either by the originator of the underlying assets or by Farmer Mac, or they 

may be sold to third-party investors.

Examining and regulating Farmer Mac

FCA regulates Farmer Mac through the 

Office of Secondary Market Oversight 

(OSMO), which was established by the 

Food, Agriculture, Conservation, and 

Trade Act Amendments of 1991. This office 

provides for the examination and general 

supervision of Farmer Mac’s safe and 

sound performance of its powers, functions, and duties.

The statute requires OSMO to be a separate office within our agency and to report 

directly to the FCA board. The law also 
42 | Farm Credit Administration

stipulates that OSMO’s activities must, to 

the extent practicable, be carried out by 

individuals who are not responsible for 

supervising the banks and associations of 

the FCS.

Through OSMO, we examine Farmer 

Mac at least annually for capital adequacy, 

asset quality, management performance, 

earnings, liquidity, and interest rate sensitivity. We oversee and evaluate Farmer 

Mac’s safety and soundness and its mission achievement. We also supervise and 

issue regulations governing Farmer Mac’s 

operations.

In January 2020, the FCA board approved FCA Policy Statement 35 on the 

oversight of Farmer Mac. Later in the year, 

OSMO issued the following guidance documents to Farmer Mac:

• COVID-19 Pandemic and Mission, 

Communication, and Reporting 

(March 2020)

• Guidance on Loan Servicing and Reporting Troubled Debt Restructurings 

for Lines of Business Affected by the 

COVID-19 Outbreak (April 2020)

• Preferred Stock Issuance Response to 

Notice (August 2020)

Financial condition of Farmer Mac

OSMO reviews Farmer Mac’s compliance 

with statutory and regulatory minimum 

capital requirements and supervises its 

operations and condition throughout the 

year. Table 6 summarizes Farmer Mac’s 

condensed balance sheets at the end of 

each calendar year from 2015 to 2020.

Capital

As of Dec. 31, 2020, Farmer Mac’s net 

worth (that is, equity capital determined 

using generally accepted accounting principles [GAAP]) was $992.5 million, compared with $799.3 million a year earlier. Its 

net worth was 4.1% of its on-balance-sheet 

assets as of Dec. 31, 2020, compared with 

3.7% a year earlier. Net worth, in terms 

of dollars, went up primarily because of 

an issuance of preferred stock and an increase in net income.

When Farmer Mac’s off-balance-sheet 

program assets (essentially its guarantee 

obligations) are added to its total on-balance-sheet assets, net worth was 3.6% as 

of Dec. 31, 2020, compared with 3.2% in 

2019. Farmer Mac continued to be in compliance with all statutory and regulatory 

minimum capital requirements.

At year-end 2020, Farmer Mac’s core capital (the sum of the par value of outstanding common stock, the par value of outstanding preferred stock, paid-in capital, 

and retained earnings) remained above the 

statutory minimum requirement. It totaled 

$1,006.4 million, exceeding the statutory 

minimum capital requirements of $680.9 

million by $325.5 million or 47.8%.

Its regulatory capital (core capital plus 

allowance for credit losses) exceeded the 

required amount as determined by the 

Risk-Based Capital Stress Test. Farmer 

Mac’s regulatory capital totaled $1,024.0 

million as of Dec. 31, 2020, exceeding the 

regulatory risk-based capital requirement 

of $197.4 million by $826.6 million.

Risk exposure on USDA guaranteed portions is very low because they are backed 

by the U.S. Department of Agriculture. 

Table 7 offers a historical perspective on 

capital and capital requirements for 2015 

through 2020.

Program activity

Farmer Mac’s total program activity 

increased to $21.9 billion by year-end 

2020, up from $21.1 billion a year earlier. 

(See figure 11.) Farmer Mac experienced 

steady growth in its Farm & Ranch loan 

purchases, as well as its Institutional Credit 

Program, which involves the purchase or 
2020 FCA Annual Report | 43

Table 6

Farmer Mac condensed balance sheets, 2015 – 2020

As of Dec. 31

Dollars in millions

Item 2015 2016 2017 2018 2019 2020 Growth Rate 

2019 – 2020

Total assets $15,540.4 $15,606.0 $17,792.3 $18,694.3 $21,709.4 $24,355.5 12.2%

Total liabilities $14,986.6 $14,962.4 $17,084.1 $17,941.8 $20,910.1 $23,363.0 11.7%

Net worth or 

equity capital

$553.7 $643.6 $708.1 $752.6 $799.3 $992.5 24.2%

Sources: Farmer Mac’s Annual Reports on Securities and Exchange Commission Form 10-K.

Table 7

Farmer Mac capital positions, 2015 – 2020

As of Dec. 31

Dollars in millions

Item 2015 2016 2017 2018 2019 2020

GAAP equity $553.7 $643.6 $708.1 $752.6 $799.3 $992.5

Core capital $564.5 $609.7 $657.1 $727.6 $815.4 $1,006.4

Regulatory capital $571.1 $617.1 $665.9 $736.8 $828.1 $1,024.0

Statutory requirement $462.1 $466.5 $520.3 $545.0 $618.8 $680.9

Regulatory requirement $72.2 $104.8 $235.4 $119.0 $122.1 $197.4

Surplus core capital over 

statutory requirement*

$102.4 $143.2 $136.8 $182.6 $196.7 $325.5

Capital margin excess over 

the minimum

22.2% 30.7% 26.3% 33.5% 31.8% 47.8%

Sources: Farmer Mac’s Annual Reports on Securities and Exchange Commission Form 10-K.

* Farmer Mac is required to hold capital at or above the statutory minimum capital requirement or the amount required by FCA regulations as determined by the 

Risk-Based Capital Stress Test, whichever is higher.
44 | Farm Credit Administration

guarantee of AgVantage securities. These 

bonds are general obligations of the issuing financial institution that are purchased 

or guaranteed by Farmer Mac. Each AgVantage security is secured by eligible loans 

under one of Farmer Mac’s programs in an 

amount at least equal to the outstanding 

principal amount of the security.

Off-balance-sheet program activity 

consists of standbys, certain AgVantage securities, and agricultural mortgage-backed 

securities (AMBS) sold to investors. At the 

end of December 2020, 14.9% of program 

activity consisted of off-balance-sheet 

obligations, as compared with 16.6% a 

year earlier.

Farmer Mac’s Long-Term Standby Purchase Commitment product is similar to 

a guarantee of eligible pools of program 

loans. Under the standbys, a financial 

institution pays a fee in return for Farmer 

Mac’s commitment to stand ready (that is, 

“stand by”) to purchase loans at face value 

even under adverse conditions. As shown 

in figure 12, standbys represented 10.6% of 

Farmer Mac’s total program activity in 2020.

Asset quality

Figure 13 shows Farmer Mac’s allowance 

for credit losses, its levels of substandard 

Farm & Ranch assets, and its 90-day delinquencies relative to outstanding program 

volume, excluding AgVantage loan volume.

As of Dec. 31, 2020, Farmer Mac’s allowance for credit losses totaled $17.6 

million, compared with $12.6 million the 

year before. Of its Farm & Ranch program 

portfolio, $291.5 million was substandard, 

representing 3.40% of the principal balance of Farm & Ranch loans purchased, 

guaranteed, or committed to be purchased. 

This compares with $310.0 million on Dec. 

31, 2019. Assets are considered to be substandard when they have a well-defined 

weakness or weaknesses that, if not corrected, are likely to lead to some losses.

Figure 11

Farmer Mac program activity and nonprogram investment 

trends

As of Dec. 31

Dollars in billions

$0

$5

$10

$15

$20

$25

Off-balance-sheet 

program activity

Nonprogram 

investments

On-balance-sheet 

program assets

Total program activity

2015 2016 2017 2018 2019 2020

Source: Farmer Mac’s Annual Reports on Securities and Exchange Commission Form 10-K.

Figure 12

Farmer Mac total program activity

As of Dec. 31, 2020

AMBS sold — 1.7%

Standbys — 10.6%

AMBS held — 11.3%

Rural utility — 12.8%

Loans held — 28.2%

AgVantage — 35.5%

Source: Farmer Mac’s Annual Report on Securities and Exchange Commission Form 10-K.

AMBS = agricultural mortgage-backed securities
2020 FCA Annual Report | 45

Figure 13

Allowance, nonperforming asset, and delinquency trends, 

2015 – 2020

$0

$50

$100

$150

$200

$250

$300

$350

90-day delinquencies as 

percentage of Farm & Ranch

Substandard assets as 

percentage of Farm & Ranch

90-day delinquencies (left scale)

Substandard assets (left scale)

Allowance for credit losses (left scale)

2015 2016 2017 2018 2019 2020

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

Dollars in millions

Percentage of Farm & Ranch

Source: Farmer Mac’s Annual Reports on Securities and Exchange Commission Form 10-K.

As of Dec. 31, 2020, Farmer Mac’s 90-day 

delinquencies decreased to $46.2 million, 

or 0.54% of Farm & Ranch loans, from 

$61.0 million, or 0.78%, as of Dec. 31, 2019.

Farmer Mac had no real estate owned 

at the end of 2020, compared with 2019, 

when it had $1.77 million in real estate 

owned. Farmer Mac reported no delinquencies in its pools of rural utility cooperative loans.

Earnings

Farmer Mac reported net income available 

to common stockholders of $89.2 million 

(in accordance with GAAP) for the year 

ended Dec. 31, 2020, down from $93.7 

million reported at year-end 2019. Core 

earnings for 2020 were $100.6 million, 

compared with $93.7 million in 2019. Net 

interest income, which excludes guarantee 

fee income, was reported at $182.8 million 

in 2020, up from $169.6 million in 2019. 

Guarantee fee income was $12.5 million, 

compared with $13.7 million in 2019. Table 

8 shows a six-year trend for the basic components of income.

Table 8

Farmer Mac condensed statements of operations, 2015 – 2020

As of Dec. 31

Dollars in millions

Item 2015 2016 2017 2018 2019 2020 Growth Rate 

2019 – 2020

Total revenues $145.9 $160.8 $175.1 $186.1 $194.1 $206.7 7%

Total expenses $98.5 $96.6 $103.8 $91.2 $100.4 $117.5 17%

Net income available to 

common stockholders

$47.4 $64.2 $71.3 $94.9 $93.7 $89.2 −5%

Core earnings $47.0 $53.8 $65.6 $84.0 $93.7 $100.6 7%

Sources: Farmer Mac’s Annual Reports on Securities and Exchange Commission Form 10-K.
46 | Farm Credit Administration

Figure 14

FCA organizational chart as of August 2021

For an accessible version of this chart, go to 

www.fca.gov/about/fca-organizational-chart.

FCA Board

Glen R. Smith, 

Chairman

Jeffery S. Hall, 

Member

—Office of the Board 

Chairman and Chief 

Executive Officer 

Glen R. Smith 

—Office of Inspector 

General 

Wendy R. Laguarda

—Office of the Chief Operating Officer

S. Robert Coleman

—Office of Secondary Market 

Oversight*

Laurie A. Rea

—Office of Congressional and 

Public Affairs 

Michael A. Stokke

—Designated Agency Ethics Official 

Jane Virga

—Equal Employment and Inclusion 

Director 

Thais Burlew

—Secretary to the Board 

Dale L. Aultman

—Office of the Chief 

Financial Officer

Stephen G. Smith

—Office of Agency 

Services

Vonda Bell

—Office of Examination

Roger Paulsen

—Office of Information 

Technology

Jerald Golley

—Office of Regulatory 

Policy

Kevin Kramp

—Office of General 

Counsel†

Clark Ogilvie

—Office of Data Analytics 

and Economics 

Jeremy D’Antoni * Reports to the board for policy and to the CEO for administration.

† Maintains a confidential advisory relationship with each of the board members.
2020 FCA Annual Report | 47

FCA’s organization and leadership

Organization of FCA

FCA’s headquarters is in McLean, Virginia. 

We also have field offices in Bloomington, 

Minnesota; Dallas, Texas; Denver, Colorado; and Sacramento, California. As of 

July 1, 2021, we had 337 employees.

FCA’s leadership

Currently, FCA has only two board members: Chairman Glen R. Smith and Board 

Member Jeffery S. Hall. The board has one 

vacancy because former Chairman Dallas 

Tonsager passed away in May 2019.

Glen R. Smith, FCA Board Chairman 

and CEO 

Glen R. Smith was appointed to the FCA 

board by President 

Donald Trump on 

Dec. 8, 2017. Mr. 

Smith will serve a 

term that expires 

May 21, 2022.

He also serves 

as a member of the 

board of directors 

of the Farm Credit 

System Insurance 

Corporation, an independent U.S. government-controlled corporation that insures 

the timely payment of principal and interest on obligations issued jointly by Farm 

Credit System banks.

Mr. Smith is a native of Atlantic, Iowa, 

where he was raised on a diversified crop 

and livestock farm. His farm experience 

started at a very early age, after his father 

was involved in a disabling farm accident. 

He graduated from Iowa State University 

in 1979 with a Bachelor of Science in agricultural business and accepted a position 

with Doane Agricultural Services as state 

manager of the company’s farm real estate 

division.

In 1982, Mr. Smith and his wife, Fauzan, 

moved back to his hometown and started 

farming and developing his ag service 

business. Today, their family farm, Smith 

Generation Farms Inc., has grown to 

encompass about 2,000 acres devoted to 

corn, soybeans, hay, and a small beef cow 

herd.

Mr. Smith is founder and co-owner of 

Smith Land Service Co., an ag service 

company that specializes in farm management, land appraisal, and farmland 

brokerage, serving about 30 Iowa counties. 

From 2001 to 2016, he was also co-owner 

and manager of S&K Land Co., an entity 

involved in the acquisition, improvement, 

and exchange of Iowa farmland. Mr. Smith 

has served on numerous community, 

church, and professional boards. He was 

elected to the Atlantic Community School 

Board of Education on which he served for 

nine years.

In 1990, he earned the title of Accredited Rural Appraiser from the American 

Society of Farm Managers and Rural Appraisers. In 2000, he served as president of 

the Iowa chapter of that organization. He 

is a lifelong member of the Farm Bureau, 

Iowa Corn Growers Association, Iowa Soybean Association, and Iowa Cattlemen’s 

Association.
48 | Farm Credit Administration

The Smiths have four grown children 

and five grandchildren. Two of their 

children are involved in production agriculture. Their son Peter has assumed managerial responsibilities for both the family 

farm and business.

Jeffery S. Hall, FCA Board Member

Jeffery S. Hall 

was appointed to 

the FCA board by 

President Barack 

Obama on March 

17, 2015. Mr. Hall 

is serving a term 

that expired on 

Oct. 13, 2018. He 

will continue to 

serve until his successor has been named.

Mr. Hall also serves as chairman of 

the board of directors of the Farm Credit 

System Insurance Corporation, an independent U.S. government-controlled corporation that insures the timely payment 

of principal and interest on obligations issued jointly by Farm Credit System banks.

Mr. Hall was president of The Capstone 

Group, an association management and 

consulting firm that he cofounded in 2009. 

He was the state executive director for the 

U.S. Department of Agriculture’s Farm 

Service Agency in Kentucky from 2001 to 

2009. In that role, he had responsibility 

for farm program and farm loan program 

delivery and compliance.

From 1994 to 2001, Mr. Hall served as 

assistant to the dean of the University of 

Kentucky, College of Agriculture, advising 

the dean on state and federal legislative activities and managing a statewide economic development initiative called Ag-Project 

2000.

Mr. Hall also served as a senior staff 

member in the office of U.S. Senator Mitch 

McConnell from 1988 until 1994. During 

that time, he was the legislative assistant 

for agriculture, accountable for internal 

and external issue management.

Before joining Senator McConnell’s 

staff, Mr. Hall served on the staff of the 

Kentucky Farm Bureau Federation. Over 

his 30-year career in agriculture, he has 

held leadership positions in the following 

nonprofits: the Kentucky Agricultural 

Council, the Agribusiness Industry Network, the Louisville Agricultural Club, 

the Kentucky Agricultural Water Quality 

Authority, and the Governor’s Commission 

on Family Farms.

Mr. Hall was raised on a family farm in 

southern Indiana, which has been in his 

family for over 200 years. He is currently 

a partner in the farm with his mother 

and sister. Mr. Hall received a Bachelor of 

Science from Purdue University.
2020 FCA Annual Report | 49

Appendix

Glossary

Agricultural credit association—An ACA 

results from the merger of a federal land 

bank association (or a federal land credit association) and a production credit 

association (PCA) and has the combined 

authority of the two institutions. An ACA 

borrows funds from a farm credit bank 

or an agricultural credit bank to provide 

short-, intermediate-, and long-term credit 

to farmers, ranchers, and producers and 

harvesters of aquatic products. It also 

makes loans to these borrowers for certain 

processing and marketing activities, to 

rural residents for housing, and to certain 

farm-related businesses.

Agricultural credit bank—An ACB results 

from the merger of a farm credit bank and 

a bank for cooperatives and has the combined authorities of those two institutions. 

An ACB is also authorized to finance U.S. 

agricultural exports and provide international banking services for farmer-owned 

cooperatives. CoBank is the only ACB in 

the FCS.

Bank for cooperatives—A BC provided 

lending and other financial services to 

farmer-owned cooperatives, rural utilities 

(electric and telephone), and rural sewer 

and water systems. It was also authorized 

to finance U.S. agricultural exports and 

provide international banking services 

for farmer-owned cooperatives. The last 

remaining BC in the FCS, the St. Paul Bank 

for Cooperatives, merged with CoBank on 

July 1, 1999.

Farm Credit Act—The Farm Credit Act 

of 1971, as amended, (12 U.S.C. §§ 2001 – 

2279cc) is the statute under which the FCS 

operates.

Farm credit bank—FCBs provide services 

and funds to local associations that, in 

turn, lend those funds to farmers, ranchers, producers and harvesters of aquatic 

products, rural residents for housing, and 

some agriculture-related businesses. On 

July 6, 1988, the federal land bank and the 

federal intermediate credit bank in 11 of 

the 12 then-existing Farm Credit System 

districts merged to become FCBs. The 

mergers were required by the Agricultural 

Credit Act of 1987.

Farm Credit Leasing Services Corporation—The Leasing Corporation is a service 

entity owned by CoBank, ACB. It provides 

equipment leasing and related services 

to eligible borrowers, including agricultural producers, cooperatives, and rural 

utilities.

Farm Credit System Insurance Corporation—FCSIC was established by the 

Agricultural Credit Act of 1987 as an independent U.S. government-controlled 

corporation. Its purpose is to ensure the 

timely payment of principal and interest 

on insured notes, bonds, and other obligations issued on behalf of FCS banks and 

to act as conservator or receiver of FCS 

institutions. The FCA board serves ex officio as the board of directors for FCSIC. The 

chairman of the FCSIC board of directors 

must be an FCA board member other than 

the current chairman of the FCA board.
50 | Farm Credit Administration

Federal Agricultural Mortgage Corporation—Farmer Mac was created with the 

enactment of the Agricultural Credit Act 

of 1987 to provide a secondary market for 

agricultural real estate and rural housing 

mortgage loans.

Federal Farm Credit Banks Funding Corporation—The Funding Corporation, based 

in Jersey City, New Jersey, manages the 

sale of Systemwide debt securities to finance the loans made by FCS institutions. 

It uses a network of bond dealers to market its securities.

Federal intermediate credit bank—The Agricultural Credits Act of 1923 provided for 

the creation of 12 FICBs to discount farmers’ short- and intermediate-term notes 

made by commercial banks, livestock 

loan companies, and thrift institutions. 

The Farm Credit Act of 1933 authorized 

farmers to organize PCAs, which could discount notes with FICBs. As a result, PCAs 

became the primary entities for delivery 

of short- and intermediate-term credit 

to farmers and ranchers. The FICBs and 

the federal land banks merged to become 

FCBs or part of the ACB. Thus, no FICBs 

remain within the FCS.

Federal land bank—The Federal Farm 

Loan Act of 1916 provided for the establishment of 12 federal land banks to provide long-term mortgage credit to farmers 

and ranchers, and later to rural home buyers. All federal land banks and FICBs have 

merged to become FCBs or part of the 

ACB. Thus, no federal land banks remain.

Federal land bank association—These 

associations were lending agents for 

FCBs before they received their affiliated 

banks’ direct-lending authority to make 

long-term mortgage loans to farmers, 

ranchers, and rural residents for housing. 

As lending agents, the associations did not 

own loan assets but made loans only on 

behalf of the FCBs with which they were 

affiliated. As of Oct. 1, 2000, all active federal land bank associations had received 

direct-lending authority and did not serve 

as lending agents for FCBs.

Federal land credit association—An FLCA 

is the regulatory term FCA uses for a federal land bank association that owns its 

loan assets. An FLCA borrows funds from 

an FCB to make and service long-term 

loans to farmers, ranchers, and producers 

and harvesters of aquatic products. It also 

makes and services housing loans for rural 

residents.

Financial Institution Rating System—The 

FIRS is similar to the Uniform Financial 

Institutions Rating System used by other 

federal banking regulators. However, 

unlike the Uniform Financial Institutions 

Rating System, the FIRS was designed to 

reflect the nondepository nature of FCS 

institutions. The FIRS provides a general 

framework for assimilating and evaluating 

all significant financial, asset quality, and 

management factors to assign a composite 

rating to each System institution. The ratings are described below.

Rating 1—Institutions in this group 

are basically sound in every respect; 

any negative findings or comments are 

of a minor nature and are anticipated 

to be resolved in the normal course 

of business. Such institutions are well 

managed, resistant to external economic and financial disturbances, and more 

capable of withstanding the uncertainties of business conditions than those 

with lower ratings. Each institution in 

this category exhibits the best performance and risk management practices 

for its size, complexity, and risk profile. 

These institutions give no cause for regulatory concern.
2020 FCA Annual Report | 51

Rating 2—Institutions in this group are 

fundamentally sound but may reflect 

modest weaknesses correctable in the 

normal course of business. Since the 

nature and severity of deficiencies are 

not material, such institutions are stable 

and able to withstand business fluctuations. Overall risk management practices are satisfactory for the size, complexity, and risk profile of each institution 

in this group. While areas of weakness 

could develop into conditions of greater 

concern, regulatory response is limited 

to the extent that minor adjustments 

are resolved in the normal course of 

business and operations continue in a 

satisfactory manner.

Rating 3—Institutions in this category 

exhibit a combination of financial, management, operational, or compliance 

weaknesses ranging from moderately 

severe to unsatisfactory. When weaknesses relate to asset quality or financial 

condition, such institutions may be vulnerable to the onset of adverse business 

conditions and could easily deteriorate 

if concerted action is not effective in 

correcting the areas of weakness. Institutions that are in significant noncompliance with laws and regulations may 

also be accorded this rating. Risk management practices are less than satisfactory for the size, complexity, and risk 

profile of each institution in this group. 

Institutions in this category generally 

give cause for regulatory concern and 

require more than normal supervision 

to address deficiencies. Overall strength 

and financial capacity, however, still 

make failure only a remote possibility if 

corrective actions are implemented.

Rating 4—Institutions in this group 

have an immoderate number of 

serious financial or operating weaknesses. Serious problems or unsafe 

and unsound conditions exist that are 

not being satisfactorily addressed or 

resolved. Unless effective actions are 

taken to correct these conditions, they 

are likely to develop into a situation that 

will impair future viability or constitute 

a threat to the interests of investors, 

borrowers, and stockholders. Risk 

management practices are generally unacceptable for the size, complexity, and 

risk profile of each institution in this 

group. A potential for failure is present 

but is not yet imminent or pronounced. 

Institutions in this category require 

close regulatory attention, financial 

surveillance, and a definitive plan for 

corrective action.

Rating 5—This category is reserved for 

institutions with an extremely high, 

immediate or near-term probability 

of failure. The number and severity 

of weaknesses or unsafe and unsound 

conditions are so critical as to require 

urgent external financial assistance. 

Risk management practices are inadequate for the size, complexity, and risk 

profile of each institution in this group. 

In the absence of decisive corrective 

measures, these institutions will likely require liquidation or some form 

of emergency assistance, merger, or 

acquisition.

Government-sponsored enterprise—A GSE 

is typically a federally chartered corporation that is privately owned, designed to 

provide a source of credit nationwide, and 

limited to servicing one economic sector. 

Each GSE has a public or social purpose. 

GSEs are usually created because the 

private markets did not satisfy a purpose 

that Congress deems worthy—either to 

fill a credit gap or to enhance competitive behavior in the loan market. Each is 

given certain features or benefits (called 

GSE attributes) to allow it to overcome 
52 | Farm Credit Administration

the barriers that prevented purely private 

markets from developing. The FCS is the 

oldest financial GSE.

Participation—A loan participation is 

usually a large loan in which two or more 

lenders share in providing loan funds 

to a borrower to manage credit risk or 

overcome a legal lending limit for a single 

credit. One of the participating lenders 

originates, services, and documents the 

loan. Generally, the borrower deals with 

the institution originating the loan and 

is not aware of the other participating 

institutions.

Production credit association—PCAs are 

FCS entities that deliver only short- and 

intermediate-term loans to farmers and 

ranchers. A PCA borrows money from its 

FCB to lend to farmers. PCAs also own 

their loan assets. As of Jan. 1, 2003, all 

PCAs were eliminated as independent, 

stand-alone, direct-lender associations. All 

PCAs are now subsidiaries of ACAs.

Service corporation—Sections 4.25 and 

4.28 of the Farm Credit Act authorize FCS 

banks and associations to organize service 

corporations for performing functions 

and services that banks and associations 

are authorized to perform under the Farm 

Credit Act, except that the corporations 

may not provide credit or insurance services to borrowers.

Syndication—A loan syndication (or “syndicated bank facility”) is a large loan in 

which a group of banks work together to 

provide funds for a borrower. Usually one 

bank takes the lead, acting as an agent for 

all syndicate members and serving as the 

focal point between them and the borrower. All syndicate members are known at 

the outset to the borrower and they each 

have a contractual interest in the loan.

Abbreviations 

ACA—agricultural credit association

ACB—agricultural credit bank

CAMELS—capital, assets, management, earnings, liquidity, 

and sensitivity

CEO—chief executive officer

Farm Credit Act—Farm Credit Act of 1971, as amended

Farmer Mac—Federal Agricultural Mortgage Corporation

FCA—Farm Credit Administration

FCB—farm credit bank

FCS—Farm Credit System

FCSIC—Farm Credit System Insurance Corporation

FIRS—Financial Institution Rating System

FLCA—federal land credit association

GAAP—generally accepted accounting principles

OFIs—other financing institutions

PCA—production credit association

USDA—U.S. Department of Agriculture

YBS—young, beginning, and small (farmers and ranchers)
2020 FCA Annual Report | 53

Additional information

The 2020 Annual Report of the Farm Credit Administration is available on FCA’s website at www.fca.gov. 

For questions about this publication, contact FCA:

Office of Congressional and Public Affairs

Farm Credit Administration

1501 Farm Credit Drive

McLean, VA 22102-5090

Telephone: 703-883-4056

Fax: 703-790-3260

Email: info-line@fca.gov

With support from the Farm Credit System banks, 

the Federal Farm Credit Banks Funding Corporation 

prepares the financial press releases, the System’s 

Annual and Quarterly Information Statements, and 

the System’s combined financial statements. These 

documents are available on the Funding Corporation’s 

website at www.farmcreditfunding.com. For copies of 

these documents, contact the Funding Corporation:

Federal Farm Credit Banks Funding Corporation

101 Hudson Street, Suite 3505

Jersey City, NJ 07302

Telephone: 201-200-8131

The Farm Credit System Insurance Corporation’s annual report is available on its website at www.fcsic.gov. 

To receive copies of this report, contact FCSIC:

Farm Credit System Insurance Corporation

1501 Farm Credit Drive

McLean, VA 22102

Telephone: 703-883-4380
Copies available from

Office of Congressional and Public Affairs 

Farm Credit Administration

1501 Farm Credit Drive

McLean, VA 22102

703-883-4056

www.fca.gov

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