2022 Annual Report
The Farm Credit System Insurance Corporation, a government-controlled, independent entity,

shall

• protect investors in insured Farm Credit System obligations and taxpayers through

sound administration of the Farm Credit Insurance Fund,

• exercise its authorities to minimize Insurance Fund loss, and

• help ensure the future of a permanent system for delivery of credit to agricultural

borrowers.
June 21, 2023

Dear Mr. President and Mr. Speaker:

The Farm Credit System Insurance Corporation is pleased to submit its annual report for

calendar year 2022. This report highlights our role as the independent federal governmentcontrolled corporation established to insure the timely payment of principal and interest to

investors in insured Farm Credit System debt securities.

The balance in the Farm Credit Insurance Fund as of December 31, 2022, was $6.7 billion. In

2022, we earned $644.6 million in insurance premiums from Farm Credit System banks and

$72.1 million in investment income. In 2023, we expect to incur $5.0 million in operating costs.

FCSIC is proud of the role we play in supporting the safety and soundness of the Farm Credit

System, and we are committed to faithfully fulfilling our mission.

Sincerely,

Jeffery S. Hall

Chairman

The President of the United States Senate

The Speaker of the United States House of Representatives

Protecting Investors in Agriculture and Rural America 1
CONTENTS

Message from the Chairman.................................................................................................. 3

Board of Directors.................................................................................................................. 4

Jeffery S. Hall.................................................................................................................... 5

Glen R. Smith.................................................................................................................... 6

						 Vincent G. Logan.............................................................................................................. 7

2022 — Year in Review .......................................................................................................... 8

The Farm Credit System......................................................................................................... 11

Insurance Fund Management................................................................................................ 18

Investments............................................................................................................................ 24

Risk Management .................................................................................................................. 26

Financial Assistance and Resolutions..................................................................................... 32

Independent Auditor's Report............................................................................................... F1

Financial Statements.............................................................................................................. F4

Notes to the Financial Statements......................................................................................... F7

Management Assurances....................................................................................................... 34

Compliance with the Federal Civil Penalties Inflation Adjustment Act Improvements Act

of 2015 ................................................................................................................................... 36

Performance Management Program..................................................................................... 37

Glossary.................................................................................................................................. 40

Acronyms and Abbreviations................................................................................................. 42

Corporate Staff....................................................................................................................... 43

Contact Information............................................................................................................... 43

Banks Insured by FCSIC .......................................................................................................... 44

Additional Information........................................................................................................... 45

2 Farm Credit System Insurance Corporation
MESSAGE FROM THE CHAIRMAN

I am pleased to present the 2022 Annual Report of the Farm Credit System Insurance

Corporation. It is gratifying to note that, for the 33rd consecutive year since we began issuing

financial statements, our independent public auditor has issued unmodified or unqualified

opinions on those statements.

The enclosed opinion letter indicates that the financial statements of the Farm Credit Insurance

Fund, of which we are stewards, are fairly and accurately presented. The letter also indicates

that we maintained effective internal control over financial reporting in 2022.

FCSIC’s net income for 2022 was $712.3 million, compared with $505.5 million for the previous

year. The Insurance Fund balance as of December 31, 2022, was $6.7 billion, compared with

$6.0 billion at year-end 2021 (see Table 1).

Revenue from insurance premiums paid by Farm Credit System banks was $644.6 million for

2022, compared with $460.8 million for 2021. Interest income for 2022 totaled $72.1 million,

compared with $48.9 million in 2021.

As required by the Federal Managers’ Financial Integrity Act of 1982, our management assesses

FCSIC’s internal controls annually. The 2022 assessment found that, in the reviewed areas, our

internal controls comply with the standards prescribed by the U.S. Government Accountability

Office. The assessment also		provided reasonable assurance that our program objectives are

being met.

We will continue to carry out our mission in 2023 by working hard to achieve our strategic goals

and objectives. We are mindful of our public trust and will ensure that investors, Congress, the

Farm Credit System, and other regulatory agencies receive timely and accurate information on

issues concerning the Insurance Fund.

Sincerely,

Jeffery S. Hall

Protecting Investors in Agriculture and Rural America 3
BOARD OF DIRECTORS

The Farm Credit System Insurance Corporation is managed by a three-member board of

directors comprising the same three individuals who make up the Farm Credit Administration

(FCA) board. However, the same member may not serve as chairman of both entities. FCA is the

independent federal agency responsible for the regulation and examination of the Farm Credit

System (System), a nationwide network of financial cooperatives that lend to agriculture and

rural America.

Currently, the three members of the FCSIC board of directors are Chairman Jeffery S. Hall, Glen

R. Smith, and Vincent G. Logan. Mr. Hall is serving a term that expired on October 13, 2018, and

Mr. Smith is serving a term that expired on May 21, 2022. Mr. Logan's term expires on May 21,

2026.		

4 Farm Credit System Insurance Corporation
JEFFERY S. HALL

Jeffery S. Hall is chairman of the board of directors of FCSIC. He

was elected to this position on November 29, 2016. Mr. Hall has

served on the FCSIC board and on the FCA board since his

appointment by President Barack Obama on March 17, 2015. He

is serving a term that expired on October 13, 2018.

Before coming to FCSIC and FCA, Mr. Hall was president of The

Capstone Group, an association management and consulting

firm that he cofounded in 2009. From 2001 to 2009, he was the

state executive director for the U.S. Department of Agriculture’s

(USDA’s) Farm Service Agency in Kentucky. In that role, he was

responsible 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 to 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 more than 200 years. He is currently a

partner in the farm with his mother and sister. Mr. Hall received

a Bachelor of Science degree from Purdue University.

Protecting Investors in Agriculture and Rural America 5
GLEN R. SMITH

Glen R. Smith was designated FCA board chairman and CEO of

the Farm Credit Administration by President Donald Trump on

July 17, 2019. He served in this position until Oct. 21, 2022. Mr.

Smith has been a member of the FCSIC board since December

2017. Although his board term expired on May 21, 2022, he will

continue to serve on the board until his successor has been

named.

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.

The Smiths have four grown children and six grandchildren.

Three of their children are involved in production agriculture.

Their son Peter has assumed managerial responsibilities for

both the family farm and business.

6 Farm Credit System Insurance Corporation
VINCENT G. LOGAN

Vincent G. Logan was appointed to the FCSIC board of directors

and the FCA board by President Joseph Biden on October 3,

2022. He was designated FCA board chairman and CEO on

October 21. The agencies’ first openly LGBT person and Native

American board member, he is serving a term that expires on

May 21, 2026.

Before joining the FCSIC and FCA boards, Mr. Logan was chief

financial officer and chief investment officer for the Native

American Agriculture Fund, which is the largest philanthropic

organization dedicated solely to serving the Native American

farming and ranching community.

Nominated by President Barack Obama and confirmed by the

U.S. Senate in 2014, Mr. Logan served as the Special Trustee for

American Indians at the U.S. Department of the Interior. During

his tenure, he was appointed to the Department of the

Treasury’s Financial Literacy Education Commission, which seeks

to develop a national strategy on financial education.

Mr. Logan has worked in New York both as a lawyer, practicing

in aircraft, shipping, and equipment finance, and as an

investment advisor, focusing on institutional asset management

and permanent fund development.

Mr. Logan previously served as a director to the Federal Reserve

Bank of St. Louis, Little Rock Branch, and as an Oklahoma State

University Foundation governor. He was educated at Oklahoma

State University; the University of Oklahoma College of Law;

Queen’s College, Oxford University; and the School of

International and Public Affairs at Columbia University.

Protecting Investors in Agriculture and Rural America 7
2022 — YEAR IN REVIEW

FCSIC Operations

Because of the COVID-19 pandemic, FCSIC operated in maximum telework status throughout

2021. During 2022, we transitioned to a hybrid office/telework status tailored to our business

needs and appropriate for FCSIC's very small and experienced staff. We continued to fulfill our

mission and complete all necessary tasks, maintaining our business model of operating

efficiently and outsourcing support services from government and private-sector contractors. In

2022, our accomplishments included the following:

• Kept our operating costs below budget, which totaled $4.4 million in 2022, up slightly

from $4.1 million in 2021.

• Earned enough in interest income on our investments during the first four weeks of

2022 to cover all of our annual operating expenses.

• Insured repayment of $392 billion of debt securities at the end of 2022, up 11% from

$353 billion in 2021 (and up from $53 billion in January 1993, when we became

operational).

• Managed an insurance fund of approximately $6.7 billion at the end of 2022, up from

$6.0 billion in 2021 (and up from $488 million in January 1993).

• Kept FCSIC’s staff small, with only 10 employees at the end of 2022 (compared with 9

employees in 1993) despite the significant growth in insured debt and the Insurance

Fund.

• Kept our operating costs very low as a percentage of average assets, at about 7 basis

points in 2022, unchanged from 2021.

• Fully implemented a new governance, risk, and compliance software tool to further

automate processes and enhance internal controls.

• Maintained readiness to provide liquidity assistance to, and act as receiver or

conservator for, a System institution.

• Received an unqualified or unmodified opinion on our financial statements for the 33rd

consecutive year. Our external auditor also issued an opinion stating that FCSIC

maintained effective internal control over financial reporting.

• Adopted updated policy statements governing insurance premiums; internal controls,

audit coverage, and the FCSIC Audit Committee charter; management and sale of owned

assets; and strategic planning.

8 Farm Credit System Insurance Corporation
• Managed insurance premium rates in response to System debt growth to effectively

target the Insurance Fund's statutory secure base amount.

• Increased yields on our Insurance Fund investments as a result of our strategy to make

short-term investments during the historically low interest rate environment of 2020—

2021. This strategy allowed us to take advantage of increasing rates during 2022. We

earned a weighted average yield of 2.85% on our investments versus 0.28% in 2021

(with an increase from 0.91% to 1.22% in the overall portfolio yield). These increased

yields on our investment portfolio during 2022 allowed us to reduce the 2023 premium

accrual rate charged to System banks, which resulted in multimillion dollar savings for

the Farm Credit System.

• Began implementing a five-year-bond ladder investment strategy to provide additional

structure to our investment decisions while allowing flexibility to respond to changing

conditions. Under this plan, which we expect to fully implement in the first quarter of

2024, we will construct a laddered portfolio in which approximately 20% of the

investment fund matures each year.

Collaboration with Other Federal Agencies

In addition to leveraging public and private sector resources to support our operations, we

maintain productive dialogue with several other federal agencies to support our mission. During

2022, we worked closely with the Farm Credit Administration on joint issues of concern,

including climate risk, System mergers and structure, cyber risk, liquidity, and capital.

We continued our key relationship with the Federal Deposit Insurance Corporation (FDIC) to

provide support and training for FCSIC receivership and conservatorship readiness. We also

maintained contact with the National Credit Union Administration (NCUA) on resolution issues

and with both the FDIC and NCUA on best practices for administration of our Insurance Fund.

We also interacted with representatives from the Federal Housing Finance Agency, the Federal

Reserve, and the Office of the Comptroller of the Currency to discuss risk issues of joint

concern. We value and appreciate the support we receive from our federal counterparts.

Protecting Investors in Agriculture and Rural America 9
Table 1

Selected Financial Statistics for the Farm Credit System Insurance Corporation

(Dollars in Millions)

BALANCE SHEET 2022 2021 2020

Total assets $ 6,673.2 $ 5,960.5 $ 5,454.9

Total liabilities 1.2 0.7 0.6

Insurance Fund

Allocated insurance reserves accounts 0.0 0.0 0.0

Unallocated Insurance Fund 6,672.0 5,959.8 5,454.3

OPERATIONS

Revenues 716.7 509.7 320.0

Operating expenses 4.4 4.1 4.0

Net income $ 712.3 $ 505.5 $ 316.0

10 Farm Credit System Insurance Corporation
THE FARM CREDIT SYSTEM

Structure and Funding

The Farm Credit System is a network of federally chartered, cooperative lending institutions

owned by the agricultural and rural customers it serves, including farmers, ranchers, producers

and harvesters of aquatic products, agricultural cooperatives, and farm-related businesses. As

of December 31, 2022, the System had 4 banks and 63 associations. Each association has its

own chartered territory and is affiliated with one of the four banks. See Table 2 for the

combined financial statistics for the banks and associations.

Table 2

Combined Farm Credit System Statistics

(Dollars in Billions)

2022 2021 2020

Insured debt outstanding1 $ 392.3 $ 353.4 $ 323.0

Real estate mortgage loans 172.8 164.5 147.6

Production and intermediate-term loans 66.4 62.6 58.0

Agribusiness loans:

Processing and marketing 42.0 34.3 31.9

Loans to cooperatives 19.5 21.3 20.0

Farm-related business 6.0 5.1 4.5

Rural infrastructure loans:

Power 27.9 23.6 22.1

Communication 12.5 10.3 9.7

Water/Waste water 3.9 3.1 2.7

Rural residential real estate loans 7.0 6.9 6.9

Agricultural export finance loans 10.1 7.1 6.9

Lease receivables 4.1 4.2 4.3

Loans to other financing institutions 1.1 1.0 0.9

Cash and investments 89.9 80.8 74.2

Net income 7.3 6.8 6.0

Nonperforming loans as a percentage of total

loans

0.5 % 0.5 % 0.6 %

Source: Federal Farm Credit Banks Funding Corporation

1. Insured debt outstanding is based on System institution call report information and reflects the book value of

insured debt outstanding plus accrued interest as of December 31, 2022, 2021, and 2020. (Book value excludes

fair-value adjustments.)

Protecting Investors in Agriculture and Rural America 11
Associations receive funding from their affiliated bank and lend directly to their ownerborrowers, providing a consistent and reliable source of agricultural and rural credit throughout

the United States, including the Commonwealth of Puerto Rico. One of the System banks

(CoBank) also has nationwide authority to make retail loans to cooperatives and other eligible

entities.

The banks obtain funds for their operations primarily through the sale of consolidated

Systemwide debt securities. The banks own and use the Federal Farm Credit Banks Funding

Corporation (Funding Corporation) to issue Systemwide debt securities in the capital markets.

As the fiscal agent for the banks, the Funding Corporation partners with a select group of

dealers to market and distribute the securities to investors throughout the world.

Systemwide debt securities are the general unsecured joint and several obligations of the

banks. Systemwide debt securities are not obligations of, and are not guaranteed by, the U.S.

government. In addition, Systemwide debt securities are not the direct obligations of the

System associations and, as a result, the capital of the associations may not be available to

support principal and interest payments on Systemwide debt securities.

Investor Protection

Investors provide the funds that the System lends to agriculture and rural America. FCSIC’s

primary purpose, as defined by the Farm Credit Act, is to insure the timely payment of principal

and interest on Systemwide debt securities purchased by these investors.

Regulatory Oversight

The Farm Credit Administration is responsible for the examination, supervision, and regulation

of each System institution. FCA is an independent agency in the executive branch of the U.S.

government and derives its authorities from the Farm Credit Act. These authorities include

examination and enforcement authorities similar to those of commercial bank regulators. The

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

Representatives Committee on Agriculture oversee FCSIC, FCA, and the System.

Insured Obligations

FCSIC insures Systemwide and consolidated bonds, notes, and other obligations issued by

System banks through the Funding Corporation under section 4.2(c) or (d) of the Farm Credit

Act. Figure 1 shows that insured debt outstanding increased by 11.0% in 2022 to $392.3 billion,

compared with an increase of 9.4% in 2021.

12 Farm Credit System Insurance Corporation
Figure	1

Insured	Debt	Outstanding:

Growth	Averaged	8.1%	Over	the	Past	Five	Years

(Dollars	in	Billions)

Note:	Insured	debt	outstanding,	which	is	based	on	the	call	report	information	provided	by	System	institutions,

reflects	the	book	value	of	insured	debt	outstanding,	plus	accrued	interest.	(Book	value	excludes	fair-value

adjustments.)

Farm	Credit	System	Capital

The	primary	source	of	funds	to	repay	insured	Systemwide	debt	securities	is	the	System’s	

borrowers.	Each	borrower	must	demonstrate	repayment	capacity	and,	in	most	cases,	collateral	

posted	to	secure	the	loan.	The	borrower	makes	payments	on	the	loan	to	the	lending	association	

(or	to	the	bank	if	the	borrower	received	the	loan	directly	from	the	bank),	and	the	association	in	

turn	makes	payments	on	its	loan	to	its	affiliated	bank.	The	banks	ultimately	repay	Systemwide	

debt	securities.

All	the	banks	and	associations	currently	exceed	their	minimum	regulatory	capital	requirements	

as	protection	and	support	for	the	repayment	of	the	outstanding	insured	debt.	If	a	bank	were	

unable	to	repay	its	portion	of	an	insured	Systemwide	debt	obligation,	FCSIC	would	use	the	

Insurance	Fund	to	make	the	payment	on	its	behalf.	If	the	assets	in	the	Insurance	Fund	were	

exhausted,	the	Farm	Credit	Act’s	provisions	for	joint	and	several	liability	would	be	triggered,	

requiring	the	other	System	banks	to	repay	the	defaulting	bank’s	portion	of	the	debt.

As	Figure	2	shows,	the	amount	of	System	bank	capital	plus	the	balance	in	the	Insurance	Fund	

increased	10.9%,	from	$24.2	billion	at	year-end	2018	to	$26.8	billion	at	year-end	2022.	Bank	

capital	plus	the	amount	in	the	Insurance	Fund	as	a	percentage	of	insured	debt	outstanding	was	

6.8%	as	of	year-end	2022,	down	from	8.3%	as	of	year-end	2021	(see	Figure	3).	The	decline	was	

due	to	a	decline	in	bank	capital,	primarily	the	result	of	an	increase	in	accumulated	other	

Protecting	Investors	in	Agriculture	and	Rural	America 13
comprehensive	loss	caused	by	rising	interest	rates.	Without	the	Insurance	Fund,	bank	capital	as	

a	percentage	of	insured	debt	was	5.1%	at	year-end	2022	and	6.6%	at	year-end	2021.

Figure	2

Bank	Capital	Plus	Insurance	Fund

(Dollars	in	Billions)

$19.2 $20.7 $22.7 $23.2 $20.2

$5.0 $5.2

$5.5 $6.0

$6.7

Bank	Capital Insurance	Fund

2018 2019 2020 2021 2022

$0

$5

$10

$15

$20

$25

$30

Source:	Federal	Farm	Credit	Banks	Funding	Corporation

Figure	3

Bank	Capital	Plus	Insurance	Fund	as	Percentage	of	Insured	Debt

8.5%

8.8% 8.7%

8.3%

6.8%

2018 2019 2020 2021 2022

6.0%

7.0%

8.0%

9.0%

10.0%

Source:	Federal	Farm	Credit	Banks	Funding	Corporation

14 Farm	Credit	System	Insurance	Corporation
Overall,	the	financial	performance	and	condition	of	the	System	on	a	consolidated	basis	remains	

strong,	although	some	institutions	continue	to	experience	stress	from	credit	deterioration	in	

certain	agricultural	sectors.	(See	trends	in	the	Financial	Institution	Rating	System	(FIRS)	in	the	

“Risk	Management”	section.)

A	bank’s	credit	exposure	to	borrowing	associations	is	partially	mitigated	by	the	associations’	

capital	levels.	Increases	in	System	associations’	capital	levels,	the	result	of	higher	retention	

levels	of	association	net	incomes,	further	reduce	credit	risk.

As	Figure	4	shows,	from	2018	to	2022,	combined	association	capital	increased	$10.1	billion	—	

an	annual	average	increase	of	approximately	6.0%.	The	associations	continue	to	collectively	

achieve	solid	earnings	and	preserve	capital.	Since	2018,	association	capital	as	a	percentage	of	

total	association	assets	has	declined	because	association	asset	growth	has	outpaced	association	

capital	growth.	However,	all	associations	were	well	capitalized	at	the	end	of	2022,	with	

association	capital	as	a	percentage	of	total	association	assets	equaling	17.5%	(see	Figure	5).

Figure	4

Combined	Association	Capital

(Dollars	in	Billions)

$40.5 $42.7 $45.0

$48.2 $50.6

2018 2019 2020 2021 2022

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

$50

$55

$60

Source:	Federal	Farm	Credit	Banks	Funding	Corporation

Protecting	Investors	in	Agriculture	and	Rural	America 15
Figure	5

Combined	Association	Capital	as	Percentage	of	Total	Association	Assets

19.5%

19.3%

18.6%

18.1%

17.5%

2018 2019 2020 2021 2022

17.0%

18.0%

19.0%

20.0%

Source:	Federal	Farm	Credit	Banks	Funding	Corporation

16 Farm	Credit	System	Insurance	Corporation
Farm Credit System Risk Management Tools

Farm Credit System banks use risk management tools to protect investors. One tool is the

Contractual Interbank Performance Agreement (CIPA). All System banks have entered into this

agreement, which measures the financial condition and performance of each bank by using

ratios that consider bank capital, asset quality, earnings, interest rate risk, and liquidity. The

CIPA contains triggers that financially penalize banks that do not meet performance standards.

The System banks and the Funding Corporation have also entered into the Market Access

Agreement. The Market Access Agreement establishes conditions for each bank’s continued

participation in the debt market. If a bank fails to meet agreed-upon performance measures, it

may be restricted from issuing debt. The performance criteria used under the Market Access

Agreement are the CIPA scores and the bank’s tier 1 leverage and total capital ratios.

The Farm Credit Administration’s liquidity regulation requires the banks to effectively manage

liquidity risk and maintain a three-tiered liquidity reserve to better withstand a liquidity crisis.

Each System bank is authorized to hold eligible investments in an amount not to exceed 35% of

its total outstanding loans for the purposes of maintaining a liquidity reserve, managing shortterm surplus funds, and managing interest rate risk.

The liquidity reserve must always consist of readily marketable instruments that are sufficient

to fund at least 90 days of the principal portion of on-balance-sheet maturing obligations. The

liquidity reserve must consist of

• level 1 instruments to cover the principal portion of each bank’s on-balance-sheet

maturing obligations for the first 15 days,

• level 1 and 2 instruments sufficient to cover days 16 to 30, and

• level 1, 2, and 3 instruments to cover days 31 to 90.

Level 1 instruments include cash, overnight money market investments, obligations of U.S.

government agencies with a final remaining maturity of 3 years or less, non-System

government-sponsored enterprise (GSE) senior debt securities that mature within 60 days, and

diversified investment funds composed exclusively of level 1 instruments.

Level 2 instruments include obligations of U.S. government agencies with a final remaining

maturity of more than 3 years, mortgage-backed securities that are fully guaranteed by a U.S.

government agency as to the timely repayment of principal and interest, and diversified

investment funds composed exclusively of level 1 and 2 instruments.

Level 3 instruments include non-System GSE senior debt securities with maturities exceeding 60

days, mortgage-backed securities that are fully guaranteed by a GSE as to the timely repayment

of principal and interest, money market instruments maturing within 90 days, and diversified

investment funds composed exclusively of level 1, 2, and 3 instruments.

All four System banks exceeded these requirements in 2022.

Protecting Investors in Agriculture and Rural America 17
INSURANCE FUND MANAGEMENT

The Insurance Fund and the Secure Base Amount

The Farm Credit Insurance Fund is FCSIC’s equity; it is the difference between total assets and

total liabilities, including insurance obligations. The Insurance Fund is composed of an

unallocated insurance fund (the portion of the Insurance Fund for which no specific use has

been designated) and an allocated insurance fund (the portion of the Insurance Fund that has

been transferred to the allocated insurance reserves accounts (AIRAs)).

The Farm Credit Act established the secure base amount as 2% of the aggregate outstanding

insured obligations (adjusted to exclude 90% of federal government-guaranteed loans and

investments and 80% of state government-guaranteed loans and investments). Table 3 shows

how the secure base amount is calculated. The Farm Credit Act also gives FCSIC sole discretion

to choose another percentage that we determine to be actuarially sound to maintain the

Insurance Fund, considering the risk of insuring outstanding debt obligations.

FCSIC’s premiums are set with the goal of reaching and maintaining the 2% secure base

amount. However, if growth of insured debt is greater than forecast when premium accrual

rates are established (or the Fund is used for some authorized purpose), the Insurance Fund will

end the year below the secure base amount, and FCSIC will need to collect additional premiums

in the following year to make up the shortfall. If growth of insured debt is less than forecasted

when premium accrual rates are set, then the Insurance Fund may end the year above the

secure base amount.

If the Insurance Fund exceeds the secure base amount at the end of any calendar year, FCSIC

allocates the excess amounts, minus budgeted annual operating expenses and insurance

obligations, to the AIRAs established by Congress for the benefit of the System banks.

Once FCSIC determines that the allocation is appropriate and that the funds in the AIRAs are

not otherwise needed, FCSIC may pay the amounts in the AIRAs to the accountholders (the

System banks) in accordance with the formula specified in the Farm Credit Act.

18 Farm Credit System Insurance Corporation
Table 3

Calculation of Secure Base Amount

(Dollars in Millions)

12/31/2022 12/31/2021

Total principal and interest of debt outstanding $ 392,277 $ 353,382

Less:

90% federal government–guaranteed loans (8,590) (7,789)

80% state government–guaranteed loans (19) (17)

90% federal government–guaranteed investments (45,705) (44,918)

80% state government–guaranteed investments 0 0

Total deduction (54,314) (52,724)

Adjusted insured debt 337,963 300,658

Secure base amount (2%) 6,759 6,013

Unallocated and allocated Insurance Fund balance 6,672 5,960

Unallocated and allocated Insurance Fund as a

percentage of adjusted insured debt 1.97% 1.98%

Both total Insurance Fund and total assets increased by 11.9% to $6.67 billion in 2022 (see

Figure 6). Insured debt outstanding grew $38.9 billion in 2022 (11.0%). Because of the

significant growth in insured debt, the Insurance Fund finished 2022 at 1.97%, which was $87

million below the secure base amount (see Figure 7). Consequently, no funds were transferred

to the AIRAs. The Insurance Fund finished 2021 at 1.98%, $53 million below the secure base

amount.

Protecting Investors in Agriculture and Rural America 19
Figure	6

Insurance	Fund	Balances

(Dollars	in	Billions)

$4.95 $5.20 $5.45

$5.96

$6.67

2018 2019 2020 2021 2022

$0

$1

$2

$3

$4

$5

$6

$7

Figure	7

Insurance	Fund	Relative	to	2%	Secure	Base	Amount

20 Farm	Credit	System	Insurance	Corporation
Premiums

In setting premiums, the FCSIC board’s objective is to achieve and maintain the statutory secure

base amount of 2% in the Insurance Fund. The board reviews premium assessment rates as

often as necessary but at least semiannually. The review focuses on the current level of the

Insurance Fund and the amount of money and time needed to reach the secure base amount

based on expected growth in Systemwide insured obligations.

The review also examines the risk that the Insurance Fund will need to be used in the next 12

months. It includes an analysis of the condition of the System, the health of the agricultural

economy, and risks in the financial environment.

The Farm Credit Act requires premium assessments to be 20 basis points on adjusted insured

debt outstanding unless they are reduced by the FCSIC board of directors. There is a risk

surcharge of up to 10 basis points on nonaccrual loans and on other-than-temporarily impaired

investments. In addition, the Farm Credit Act reduces the total insured debt on which premiums

are assessed and requires premiums to be based on outstanding insured debt obligations

adjusted downward by 90% of federal government-guaranteed loans and investments and by

80% of state government-guaranteed loans and investments.

The unallocated Insurance Fund began 2022 at 1.98% of the secure base amount. The board of

directors set premium accrual rates at its January 27, 2022, meeting at 16 basis points on

average adjusted insured debt. The board also continued the assessment of the surcharge of 10

basis points on the average principal balance outstanding for nonaccrual loans and other-thantemporarily impaired investments.

At its June 8, 2022 meeting, the board of directors reviewed premiums and voted to increase

the premium accrual rate on average adjusted insured debt to 20 basis points and to apply the

rate retroactively for the entire 2022 premium billing cycle. The board also continued the

assessment of the surcharge of 10 basis points on the average principal balance outstanding for

nonaccrual loans and other-than-temporarily impaired investments for the second half of 2022.

The most important determinants in setting premium accrual rates are the Insurance Fund

balance and prospects for Systemwide debt growth during the year.

During 2022, insured debt outstanding increased by 11.0%. The Insurance Fund finished 2022

below the 2% secure base level, at 1.97% of adjusted insured obligations or $87 million below

the target level.

Protecting Investors in Agriculture and Rural America 21
Revenues	and	Expenses

FCSIC	operates	with	no	annually	appropriated	funds.	We	collect	insurance	premiums	from	each	

Farm	Credit	System	bank.	These	premiums	and	the	income	from	our	investment	portfolio	

provide	the	funds	necessary	to	fulfill	our	mission.

Our	revenues	increased	by	40.6%	to	$716.7	million	in	2022	from	$509.7	million	in	2021	(see	

Figure	8).	Interest	income	increased	47.4%	in	2022	to	$72.1	million	from	$48.9	million	in	2021.

Figure	8

FCSIC	Revenues

(Dollars	in	Millions)

To	avoid	duplication	of	effort	and	to	minimize	costs,	we	operate	with	a	small	core	staff	and	use	

private-	and	public-sector	contractors	to	leverage	our	efforts.	The	board	of	directors	and	

management	adopted	this	model	as	a	cost-effective	and	efficient	way	to	use	available	

expertise,	services,	and	resources	to	accomplish	our	mission.

Our	operating	costs	as	a	percentage	of	total	assets	represented	7	basis	points	for	2022,	

unchanged	from	2021.	Costs	for	staff	salaries,	rent,	and	miscellaneous	expenses	were	$3.5	

million	of	the	$4.4	million	total	for	the	year	(see	Figure	9).	The	remaining	expenses	of	$0.9	

million	were	for	contracted	services.

22 Farm	Credit	System	Insurance	Corporation
Figure	9

FCSIC	Operating	Expenses

(Dollars	in	Millions)

Protecting	Investors	in	Agriculture	and	Rural	America 23
INVESTMENTS

FCSIC’s investments increased from $5.5 billion as of year-end 2021 to $6.0 billion as of yearend 2022 (see Figure 10). The increase occurred primarily because of the investment of $460.5

million in premiums, which were collected in January 2022. At December 31, 2022, we held $0.4

million in the overnight investment account, compared with $1.9 million at December 31, 2021.

The funds in the overnight investment account are classified as “cash and cash equivalents.”

Our primary investment objective is to ensure adequate liquidity of the Insurance Fund to meet

our mission. Our secondary objective is to optimize the rate of return on our investment

portfolio. Funds are invested in U.S. Treasury securities in accordance with the Farm Credit Act

and our investment policy.

We use several benchmarks to enhance our ability to assess portfolio performance. The FCSIC

Policy Statement Concerning Investments prohibits trading for capital gains purposes. In 2022,

the average FCSIC investment portfolio yield was 1.22%, up from 0.91% in 2021. The average

yield for our primary benchmarks ranged from 1.04% to 2.72%.

In 2020, the board of directors revised FCSIC’s policy statement to implement a short-duration

investment strategy to minimize loss exposure in the event FCSIC needs to make disbursements

to meet its statutory obligations. Under the revised policy, at least 40% of the portfolio must

consist of Treasury securities with remaining maturities of 2 years or less; Treasury securities

with maturities of between 5 and 10 years must not exceed 20% of the portfolio. FCSIC does

not purchase Treasury securities with maturities that exceed 10 years.

In 2022, FCSIC implemented a 5-year- bond ladder strategy, which has increased the weightedaverage maturity of the portfolio. Once this strategy is fully implemented, approximately 20%

of the portfolio will mature each year. As of December 31, 2022, the weighted-average maturity

of the portfolio was 2.06 years, up from 1.35 years at the end of 2021. The composition of the

investment portfolio as of December 31, 2022, is shown in Figure 11.

24 Farm Credit System Insurance Corporation
Figure	10

FCSIC	Investments

(Dollars	in	Billions)

Note:	Total	investments	reflected	on	this	chart	do	not	include	overnight	investments	classified	as	“cash	and	cash	

equivalents”	on	the	balance	sheet.

Figure	11

Investment	Portfolio	by	Maturity	as	of	December	31,	2022

(Dollars	in	Millions)

<1	year

$2,037

34%

1-2	years

$1,366

23%

2-3	years

$894

15%

3-4	years

$888

15%

4-5	years

$810

13%

Note:	Total	investments	reflected	in	this	chart	include	overnight	investments	classified	as	“cash	and	cash	

equivalents”	on	the	balance	sheet.

At	least	40%	of	the	portfolio	must	consist	of	Treasury	securities	with	remaining	maturities	of	2	years	or	less;

Treasury	securities	with	maturities	of	between	5	and	10	years	must	not	exceed	20%	of	the	portfolio.

Protecting	Investors	in	Agriculture	and	Rural	America 25
RISK MANAGEMENT

FCSIC’s Risk Profile

FCSIC’s primary purpose is to insure the timely payment of principal and interest on

Systemwide debt securities. The System banks, through the jointly owned Federal Farm Credit

Banks Funding Corporation, issue Systemwide debt securities, insured by FCSIC, to fulfill their

mission. Anything impairing the System banks’ ability to repay their insured debt constitutes an

insurance risk. To carry out our mission, FCSIC monitors conditions in the farm, rural, domestic,

and global economies that affect the System’s ability to repay insured debt obligations.

FCSIC’s Insurance Fund is exposed to a variety of risks, some inherent in insuring financial

institutions and others specific to the System. Examples of specific events that could increase

risk to the Insurance Fund include the following:

• Material reduction in System bank capital

• Material adverse change in the System banks’ ability to access debt markets

• Catastrophic operational failure at a System institution related to a control deficiency or

cybersecurity breach

• Inadequate governance at a System institution, such as a failed business strategy or

mismanagement of the organization

• Significant, rapid, or unexpected credit deterioration resulting from adversity in the

agricultural sector

Major categories of risk monitored by FCSIC include the following:

Credit risk — the risk of default on a debt that may arise from a borrower failing to make

required payments. Credit risk includes consideration of loan concentrations and other broad

elements of System institution portfolios. FCSIC primarily focuses on credit risk issues affecting

the underlying agricultural borrowers’ ability to repay their debts to individual System

institutions. These risks include the following:

• Changes in farmland values

• Price volatility for agricultural commodities

• Changes in government support programs for agricultural producers

• Changes in supply and demand for U.S. agricultural products

• Changes in international trade and the value of the U.S. dollar

• Changes in production costs

• Changes in the domestic economy that affect incomes from off-farm jobs

• Climate, weather, and other environmental conditions

• Availability of agricultural workers

Liquidity risk — the risk that an institution may be unable to meet short-term financial

demands without unacceptable losses. The System relies on its ability to regularly issue new

debt obligations in part to pay maturing obligations. The System banks also hold liquidity

26 Farm Credit System Insurance Corporation
investments that are available if needed. A significant disruption in the System banks’ ability to

issue new debt obligations or sell liquidity investments would impair their ability to repay

insured obligations. As further discussed on page 32, FCSIC has procedures in place to provide

liquidity assistance to System banks if external market circumstances make it likely that the

banks will be unable to pay maturing insured obligations.

Interest rate risk — the risk that changes in interest rates may reduce the value of assets with a

consequent negative impact on operating results and financial condition.

Operational risk — the prospect of losses resulting from inadequate or failed procedures,

controls, systems, or policies, including employee errors, systems failures, or fraud or other

unauthorized activity. Operational risk also includes inadequate defenses against cyber-threats.

Strategic risk — the risk that a failed business strategy, decision, or series of decisions leads to

losses.

Structural risk — the risk related to the design of the Farm Credit System. For example, as a

lender to a single industry (agriculture), the System has a built-in concentration risk. Also, any

changes to the System’s fundamental organization, such as an alteration in the supervisory

relationship between System banks and associations, or diminution of the two layers of loss

absorbing capital, may create risk to the Insurance Fund.

Reputational risk — the risk resulting from events that affect the reputation of the System or

the agriculture industry. Such events may affect the System’s funding costs depending on

market reaction.

Political risk — the risk of loss of support from federal and state governments. This includes any

change in government support for government-sponsored enterprises.

The Risk Environment in 2022

The global economy lost momentum in 2022 amid high inflation, rising interest rates, the war in

Ukraine, and a resurgence of COVID-19 in China. Global growth stagnated after Russia invaded

Ukraine, with a sharp decline in output in both countries and a contraction of output in the

United States and China. Global growth picked up in the last half of the year, helped by a

rebound in the two largest economies, but it remained moderate, with weak growth in real

income holding back consumer spending. Higher energy prices also contributed to the sharp

slowdown in many economies, particularly in Europe.

U.S. real gross domestic product increased 2.1% in 2022, down from 5.9% growth in 2021.

Personal consumption expenditures increased by 2.7%, with most of the increase coming from

services consumption. Gross private domestic investment increased by 4.0% as businesses

continued to spend heavily on equipment and intellectual property products to further

automate production. However, residential real estate investment declined by 10.6% driven in

part by rising interest rates. The trade deficit continued to widen as the demand for imports

exceeded exports.

Protecting Investors in Agriculture and Rural America 27
Inflation pressures remained elevated throughout 2022, prompting the Federal Reserve to

increase the federal funds rate at the fastest pace in decades. The year-over-year increase in

the consumer price index reached a high of 9.1% in June 2022 and ended the year at 6.5%. The

Federal Reserve raised rates seven times to combat inflation, from the zero-bound at the

beginning of the year to a target range of 4.25—4.50% by December. The Treasury yield curve

inverted during the year, indicating an increased risk of recession.

Despite the sharp rise in interest rates and the prospects of a recession, the U.S. labor market

remained surprisingly strong throughout the year. The unemployment rate dropped from 3.9%

at the end of 2021 to 3.5% at the end of 2022. The annual increase in average hourly wages

declined throughout the year but remained well above historical trends.

The U.S. agricultural sector continued to perform well in 2022. In its February 2023 report, the

U.S. Department of Agriculture (USDA) estimated that 2022 net farm income increased for the

fourth consecutive year despite a substantial decline in direct government payments and higher

input costs compared with the previous year. The USDA estimated that cash receipts from crop

and livestock sales increased by nearly 25% in 2022, offsetting an increase of 19% in production

expenses.

Higher cash receipts were primarily driven by high global commodity prices and record levels of

U.S. exports. Higher expenses were the result of high input and equipment costs as well as

higher farm loan interest expense. Farm financial stress in 2022 was low compared with

historical levels, though some individual operations experienced stress, especially in areas

experiencing extreme and exceptional drought. Farmland values remained robust in 2022. The

System reported net income of $7.3 billion for 2022, up 7.0% from $6.8 billion in 2021. The net

interest margin was 2.39% for 2022, a decrease of 7 basis points from 2021. The net interest

rate spread was 2.16% for 2022, compared with 2.33% in 2021. This decrease in the net interest

rate spread is primarily attributable to an increase in debt costs.

The System’s loan volume increased $29.3 billion, or 8.5%, to $373.3 billion at year-end 2022,

compared with $343.9 billion at year-end 2021. The growth was primarily due to increased real

estate mortgages, rural infrastructure, and agribusiness loans.

System credit quality remained generally stable in 2022. Nonaccrual loans increased $90

million, or 7.7%, to $1.3 billion at December 31, 2022. The increase was primarily due to credit

quality deterioration, which affected a limited number of borrowers. The ratio of nonaccrual

loans to total loans outstanding was 0.34% at December 31, 2022, the same as it was at

December 31, 2021 (see Figure 12).

28 Farm Credit System Insurance Corporation
Figure	12

Nonaccrual	Loans	as	a	Percentage	of	Total	Loans	Outstanding

0.86%

0.63%

0.56%

0.64% 0.64%

0.69% 0.67%

0.48%

0.34% 0.34%

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

Source:	Federal	Farm	Credit	Banks	Funding	Corporation

The	allowance	for	loan	losses	was	$1.6	billion	at	December	31,	2022,	a	decrease	of	$56	million,	

or	3.4%	versus	December	31,	2021.	The	allowance	for	loan	losses	represents	the	aggregate	of	

each	System	entity’s	individual	evaluation	of	its	allowance	for	loan	losses	requirements.	

Evaluations	consider	factors	including	loan	loss	experience,	portfolio	quality	and	composition,	

collateral	value,	current	agricultural	production,	and	economic	conditions.	Although	aggregated	

for	the	System’s	combined	financial	statements,	the	allowance	of	each	entity	is	specific	to	that	

institution	and	is	not	available	to	absorb	losses	at	other	System	entities.

The	System	continued	to	have	reliable	access	to	the	debt	markets	to	support	its	mission.	

Investor	demand	for	Systemwide	insured	debt	securities	remained	favorable	across	all	products	

throughout	2022.	The	System	is	a	government-sponsored	enterprise	that	continues	to	benefit	

from	broad	access	to	domestic	and	global	capital	markets,	providing	a	dependable	source	of	

competitively	priced	debt.

FCA’s	capital	rule	for	banks	and	associations	is	comparable	to	the	Basel	III	standardized	

approach	adopted	by	the	federal	banking	regulatory	agencies.	FCA’s	regulatory	minimums	

include	a	4.5%	common	equity	tier	1	risk-based	capital	ratio,	a	6.0%	tier	1	risk-based	capital	

ratio,	an	8.0%	total	risk-based	capital	ratio,	and	a	4.0%	tier	1	leverage	ratio,	of	which	at	least	

1.5%	must	be	composed	of	unallocated	retained	earnings	(URE)	and	URE	equivalents.	The	riskbased	capital	ratios	also	include	a	2.5%	common	equity	tier	1	capital	conservation	buffer.	The	

Protecting	Investors	in	Agriculture	and	Rural	America 29
tier 1 leverage ratio includes a 1.0% leverage buffer. As of December 31, 2022, all System

institutions exceeded the regulatory minimum and buffer requirements.

FCA authorizes each System bank to hold eligible investments in an amount not to exceed 35%

of its total outstanding loans for the purposes of maintaining a liquidity reserve, managing

short-term funds, and managing interest rate risk. The liquidity reserve must consist of

marketable investments that are sufficient to fund 90 days of on-balance-sheet maturing

obligations. The System banks reported a combined $89.4 billion in cash and available-for-sale

investments with a liquidity position of 180 days at year-end 2022, the same as at year-end

2021.

The System banks are further required to maintain a three-tiered liquidity reserve, consisting of

level 1 instruments to cover each bank’s maturing obligations for the first 15 days; level 1 and 2

instruments sufficient to cover days 16 to 30; and level 1, 2, and 3 instruments to cover days 31

to 90. All four System banks exceeded these requirements in 2022.

The System banks have established contingency funding plans to provide for events that could

impede access to the debt markets. The System banks also regularly perform credit and

liquidity stress testing to determine their ability to withstand severe market events while

continuing to fulfill their mission.

Figure 13 shows a summary of composite year-end FIRS ratings for System banks and

associations. Institutions with performance-related issues continued to receive greater

examination scrutiny and supervisory attention from FCA.

30 Farm Credit System Insurance Corporation
Figure	13

FIRS	Composite	Year-End	Ratings	for	Banks	and	Associations	of	the	Farm	Credit	

SystemNumber	of	Institutions

34 30 32 33 35

32 35 35 32 26

6 7 4 4

3

1

Rating	1 Rating	2 Rating	3 Rating	4

2018 2019 2020 2021 2022

0

10

20

30

40

50

60

70

80

90

Source:	Farm	Credit	Administration

Note:	2022	FIRS	ratings	shown	for	64	System	institutions	is	pro	forma	for	association	mergers	that	

closed	on	January	1,	2023.	 	 	 	 	 	 	 	 	 	 	

Protecting	Investors	in	Agriculture	and	Rural	America 31
FINANCIAL ASSISTANCE AND RESOLUTIONS

FCSIC has statutory authority to provide “stand-alone assistance” to a System bank or

association for any of the following reasons:

• To prevent the placing of the institution in receivership

• To restore the institution to “normal operations”

• To reduce the risk to FCSIC posed by the institution when “severe financial conditions”

threaten the stability of the banks

FCSIC may also provide assistance to facilitate mergers or consolidations.

At present, no assistance agreements are outstanding. If a System institution needs financial

assistance, FCSIC must ensure that the proposed assistance is the least costly means for

resolving the institution’s problems; by law, FCSIC cannot provide financial assistance if the cost

of liquidation is lower than the cost of providing assistance.

FCSIC has a $10 billion line of credit with the Federal Financing Bank that can be accessed when

exigent market circumstances make it extremely doubtful that the System banks will be able to

pay maturing debt obligations that we insure. This liquidity backstop allows us to provide more

assistance to System banks than we otherwise could provide from the Insurance Fund alone.

FCSIC has procedures in place in the event System banks require liquidity assistance because

severe financial conditions threaten the banks’ ability to repay maturing insured debt. The

procedures implement FCSIC’s Policy Statement Concerning Assistance. Along with the

procedures, we developed a model assistance agreement, drafted necessary forms related to

valuation of collateral and liquidity reserves, and entered into a collateral pledge agreement

with each bank and a collateral custodian. We review the procedures annually to evaluate

whether changes are needed and to engage with System stakeholders through a biennial

preparedness exercise.

When appointed by FCA, FCSIC has the statutory responsibility to serve as receiver or

conservator for System banks and associations. As conservator, we will operate the institution

as a going concern. Upon appointment as receiver, we will take possession of a System

institution to settle its business operations, collect the debts owed to it, liquidate its property

and assets, pay its creditors, and distribute any remaining proceeds to stockholders. Our

statutory receivership and conservatorship powers are based on, and intended by Congress to

be functionally equivalent to, the parallel authorities of the Federal Deposit Insurance

Corporation.

Currently there are no active receiverships or conservatorships in the System.

32 Farm Credit System Insurance Corporation
Our staff maintains contact with the resolution staff of the Federal Deposit Insurance

Corporation and the National Credit Union Administration to stay informed about best practices

and exchange information concerning receivership management.

We have board-approved policies that provide guidance related to resolution activities,

including the management and disposition of owned assets and FCSIC's examination authority

for troubled institutions. These policies are supported by detailed procedures. The FCSIC board

must review and approve all policy statements every five years.

Protecting Investors in Agriculture and Rural America 33
The report accompanying these financial statements was issued by 

BDO USA, LLP, a Delaware limited liability partnership and the U.S. member 

of BDO International Limited, a UK company limited by guarantee. 

Farm Credit System Insurance 

Corporation 

Audited Financial Statements 

For the Years Ended December 31, 2022 and 2021 
Farm Credit System Insurance Corporation 

Contents 

Independent Auditor’s Report F1 – F3 

Financial Statements 

Statements of Financial Condition F4 

Statements of Income and Expenses and Changes in Insurance Fund F5 

Statements of Cash Flows F6 

Notes to the Financial Statements F7 - F14 

Management’s Report on Internal Control Over Financial Reporting F15 
BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the 

international BDO network of independent member firms. 

BDO is the brand name for the BDO network and for each of the BDO Member Firms. 

F1 

Independent Auditor’s Report 

Board of Directors 

Farm Credit System Insurance Corporation 

McLean, VA 22102 

Report on the Audit of the Financial Statements and Internal Control Over Financials 

Reporting 

Opinions on the Financial Statements and Internal Control Over Financial Reporting 

We have audited the financial statements of the Farm Credit System Insurance Corporation 

(FCSIC), which comprise the statements of financial condition as of December 31, 2022 and 2021, 

and the related statements of income and expenses and changes in insurance fund and cash flows 

for the years then ended, and the related notes to the financial statements. 

In our opinion, the accompanying financial statements present fairly, in all material respects, the 

financial position of FCSIC as of December 31, 2022 and 2021, and the results of its operations 

and its cash flows of the years then ended in accordance with accounting principles generally 

accepted in the United States of America. 

We have also audited FCSIC’s internal control over financial reporting as of December 31, 2022, 

based on criteria established in Internal Control – Integrated Framework (2013), issued by the 

Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, 

FCSIC maintained, in all material respects, effective internal control over financial reporting as 

of December 31, 2022, based on the COSO criteria. 

Basis for Opinions 

We conducted our audits in accordance with auditing standards generally accepted in the United 

States of America (GAAS) and the standards applicable to financial audits contained in 

Government Auditing Standards issued by the Comptroller General of the United States. Our 

responsibilities under those standards are further described in the Auditor’s Responsibilities for 

the Audits of the Financial Statements and Auditor’s Responsibilities for the Audit of Internal 

Control Over Financial Reporting sections of our report. We are required to be independent of 

FCSIC and to meet our other ethical responsibilities, in accordance with the relevant ethical 

requirements relating to our audits. We believe that the audit evidence we have obtained is 

sufficient and appropriate to provide a basis for our audit opinions. 

Responsibilities of Management for the Financial Statements and Internal Control Over 

Financial Reporting 

Management is responsible for the preparation and fair presentation of the financial statements 

in accordance with accounting principles generally accepted in the United States of America, and 

for the design, implementation, and maintenance of internal control relevant to the preparation 

and fair presentation of financial statements that are free from material misstatement, whether 

due to fraud or error. Management is also responsible for designing, implementing, and 

8401 Greensboro Drive

Suite 800 

McLean, VA 22102 

Tel: 703-893-0600

Fax: 703-893-2766 

www.bdo.com 
F2 

maintaining effective internal control over financial reporting and for its assessment about the 

effectiveness of internal control over financial reporting, included in the accompanying 

Management’s Report on Internal Control Over Financial Reporting. 

In preparing the financial statements, management is required to evaluate whether there are 

conditions or events, considered in the aggregate, that raise substantial doubt about FCSIC’s 

ability to continue as a going concern within one year after the date that the financial statements 

are issued or available to be issued. 

Auditor’s Responsibilities for the Audit of the Financial Statements 

Our objectives are to obtain reasonable assurance about whether the financial statements as a 

whole are free from material misstatement, whether due to fraud or error and to issue an 

auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but 

is not absolute assurance, and therefore is not a guarantee that an audit conducted in accordance 

with GAAS and Government Auditing Standards will always detect a material misstatement when 

it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for 

one resulting from error, as fraud may involve collusion, forgery, intentional omissions, 

misrepresentations, or the override of internal control. Misstatements are considered material if 

there is a substantial likelihood that, individually or in the aggregate, they would influence the 

judgment made by a reasonable user based on the financial statements. 

In performing an audit in accordance with GAAS and Government Auditing Standards we: 

• Exercise professional judgment and maintain professional skepticism throughout the 

audit. 

• Identify and assess the risks of material misstatement of the financial statements, 

whether due to fraud or error, and design and perform audit procedures responsive to 

those risks. Such procedures include examining, on a test basis, evidence regarding the 

amounts and disclosures in the financial statements. 

• Obtain an understanding of internal control relevant to the financial statement audit in 

order to design audit procedures that are appropriate in the circumstances. 

• Evaluate the appropriateness of accounting policies used and the reasonableness of 

significant accounting estimates made by management, as well as evaluate the overall 

presentation of the financial statements. 

• Conclude whether, in our judgment, there are conditions or events, considered in the 

aggregate, that raise substantial doubt about FCSIC’s ability to continue as a going concern 

for a reasonable period of time. 

We are required to communicate with those charged with governance regarding, among other 

matters, the planned scope and timing of the audit, significant audit findings, and certain internal 

control-related matters that we identified during the financial statement audit. 

Auditor’s Responsibilities for Audit of Internal Control Over Financial Reporting 

Our objectives are to obtain reasonable assurance about whether effective internal control over 

financial reporting was maintained in all material respects and to issue an auditor’s report that 

includes our opinion on internal control over financial reporting. Reasonable assurance is a high 
F3 

level of assurance but is not absolute assurance and therefore is not a guarantee that an audit of 

internal control over financial reporting conducted in accordance with GAAS will always detect a 

material weakness when it exists. 

In performing an audit of internal control over financial reporting in accordance with GAAS, we: 

• Exercise professional judgment and maintain professional skepticism throughout the 

audit. 

• Obtain an understanding of internal control over financial reporting relevant to the audit 

of internal control over financial reporting, assess the risks that a material weakness 

exists, and test and evaluate the design and operating effectiveness of internal control 

over financial reporting based on the assessed risk. 

Definition and Limitations of Internal Control over Financial Reporting 

An entity’s internal control over financial reporting is a process effected by those charged with 

governance, management, and other personnel, designed to provide reasonable assurance 

regarding the preparation of reliable financial statements in accordance with accounting 

principles generally accepted in the United States of America. An entity’s internal control over 

financial reporting includes those policies and procedures that (1) pertain to the maintenance of 

records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions 

of the assets of the entity; (2) provide reasonable assurance that transactions are recorded as 

necessary to permit preparation of financial statements in accordance with accounting principles 

generally accepted in the United States of America, and that receipts and expenditures of the 

entity are being made only in accordance with authorizations of management and those charged 

with governance; and (3) provide reasonable assurance regarding prevention, or timely detection 

and correction of unauthorized acquisition, use, or disposition of the entity’s assets that could 

have a material effect on the financial statements. 

Because of its inherent limitations, internal control over financial reporting may not prevent, or 

detect and correct, misstatements. Also, projections of any assessment of effectiveness to future 

periods are subject to the risk that controls may become inadequate because of changes in 

conditions, or that the degree of compliance with the policies or procedures may deteriorate. 

Report on Compliance and Other Matters Based on an Audit of Financial Statements 

As part of obtaining reasonable assurance about whether FCSIC’s financial statements are free 

from material misstatement, we performed tests of its compliance with certain provisions of laws, 

regulations, contracts, and agreements, noncompliance with which could have a direct and 

material effect on the financial statements. However, providing an opinion on compliance with 

those provisions was not an objective of our audit, and accordingly, we do not express such an 

opinion. The results of our tests disclosed no instances of noncompliance or other matters that 

are required to be reported under Government Auditing Standards. 

McLean, Virginia 

February 23, 2023 
December 31, 2022 2021 

Assets 

Cash and cash equivalents $ 648 $ 4,940 

Investments in U.S. Treasury obligations 5,993,783 5,471,826 

Premiums receivable 644,543 460,503 

Accrued interest receivable 33,776 23,187 

Operating lease right-of-use assets 452 - 

General property, plant, equipment,and software, net 1 6 

Total Assets $ 6,673,203 $ 5,960,462 

Liabilities and Insurance Fund 

Liabilities 

Operating lease liabilities $ 457 $ -

Accounts payable and accrued expenses 703 694 

Total Liabilities 1,160 694 

Insurance Fund 

Unallocated Insurance Fund 6,672,043 5,959,768 

Total Insurance Fund 6,672,043 5,959,768 

Total Liabilities and Insurance Fund $ 6,673,203 $ 5,960,462 

See accompanying notes to the financial statements. 

Farm Credit System Insurance Corporation 

Statements of Financial Condition 

(Dollars in thousands) 

F4 
Year-ended December 31, 2022 2021 

Income 

Premiums $ 644,597 $ 460,770 

Interest income 72,057 48,894 

Total Income 716,654 509,664 

Expenses 

Administrative operating expenses 4,379 4,150 

Total expenses 4,379 4,150 

Net income 712,275 505,514 

Insurance Fund - beginning of year 5,959,768 5,454,254 

Insurance Fund - end of year $ 6,672,043 $ 5,959,768 

See accompanying notes tothe financial statements. 

Farm Credit System Insurance Corporation 

Statements of Income and Expenses and Changes in Insurance Fund 

(Dollars in thousands) 

F5 
Year-ended December 31, 2022 2021 

Cash flows from operating activities 

Net income $ 712,275 $ 505,514 

Adjustments to reconcile net income to net cash 

provided by operating activities: 

Depreciation 5 19 

Noncash lease expense 150 - 

Net amortization and accretion of investments 48,230 54,040 

Principal reduction in operating lease liabilities (145) - 

Increase in premiums receivable (184,040) (205,138) 

Increase in accrued interest receivable (10,589) (892) 

Increase in accounts payable and accrued 

expenses 9 45 

Net cash provided by operating activities 565,895 353,588 

Cash flows from investing activities 

Payments for purchase of U.S. Treasury obligations (2,674,371) (3,740,265) 

Proceeds from maturity of U.S. Treasury obligations 2,104,184 2,727,017 

Net cash used in investing activities (570,187) (1,013,248) 

Net change in cash and cash equivalents (4,292) (659,660) 

Cash and cash equivalents, beginning of year 4,940 664,600 

Cash and cash equivalents, end of year $ 648 $ 4,940 

Supplemental disclosure of cash flow information: 

Operating lease assets obtained in exchange for new 

operating lease liabilities - Upon adoption (See Note 5) $ 602 $ - See accompanying notes to the financial statements. 

Farm Credit System Insurance Corporation 

 Statements of Cash Flows 

(Dollars in thousands) 

F6 
Farm Credit System Insurance Corporation 

Notes to the Financial Statements 

F7 

Note 1: Organization and Summary of Significant Accounting Policies 

Farm Credit Insurance Fund (Insurance Fund) 

Statutory Framework: 

The Agricultural Credit Act of 1987 established the Farm Credit System Insurance Corporation (the 

Corporation or FCSIC) for the purpose of insuring the timely payment of principal and interest on 

notes, bonds, debentures, and other obligations issued under subsection (c) or (d) of section 4.2 of 

the Farm Credit Act of 1971, as amended (the Farm Credit Act). Each bank in the Farm Credit System 

(System) participating in insured obligations is an insured System bank. At December 31, 2022 there 

were four insured System banks and 63 direct lender associations, down from four insured System 

banks and 67 direct lender associations at December 31, 2021. 

The Corporation is managed by a board of directors consisting of the same individuals as the Farm 

Credit Administration (FCA) board except that the chairman of the FCA board may not serve as the 

chairman of the Corporation's board of directors. 

The Corporation must spend amounts in the Insurance Fund necessary to insure the timely payment 

of interest and principal on insured obligations. The Corporation, in its sole discretion, is authorized 

to expend amounts to provide financial assistance to System banks and direct lender associations. 

The Corporation may also act as receiver or conservator of a System bank or association. In addition, 

FCSIC has the authority to create, and the Farm Credit Administration to charter, a System bridge 

bank, to assist with resolving a failed bank. 

As of December 31, 2022, the System banks reported amounts totaling $392 billion of insured 

obligations compared to $353 billion as of December 31, 2021. 

If the Corporation does not have sufficient funds to pay all insured obligations, System banks will 

be required to make payments under joint and several liability, as required by section 4.4 (a)(2) of 

the Farm Credit Act. The insurance provided by the Insurance Fund is limited to the resources in 

the Insurance Fund. System obligations are not guaranteed by the U.S. government. 

Under section 5.63 of the Farm Credit Act, the Corporation is exempt from all Federal, state, and 

local taxes with the exception of real property taxes. 

Accounting Framework: 

The Corporation applies accounting and reporting standards issued by the Financial Accounting 

Standards Board (FASB). 

Note 2: Basis of Accounting 

The accounting and reporting policies of the Corporation conform to accounting principles generally 

accepted in the United States of America (GAAP) and, as such, the financial statements have been 

prepared using the accrual basis of accounting. 
Farm Credit System Insurance Corporation 

Notes to the Financial Statements 

F8 

Cash and Cash Equivalents 

Cash and cash equivalents include investments in U.S. Treasury obligations with original maturities 

of 90 days or less. At December 31, 2022, the Corporation held $405.1 thousand in overnight 

Treasury certificates maturing on January 3, 2023, with an interest rate of 3.95 percent, and 

approximately $242.4 thousand in cash. At December 31, 2021, the Corporation held $1.9 million in 

overnight Treasury certificates maturing on January 3, 2022, with an interest rate of 0.06 percent, 

and $3.0 million in cash. 

Investments in U.S. Treasury Obligations 

Section 5.62 of the Farm Credit Act requires that funds of the Corporation, not otherwise employed, 

shall be invested in obligations of the United States or in obligations guaranteed as to principal and 

interest by the United States. The Corporation has classified its investments as held-to-maturity in 

accordance with FASB Accounting Standards Codification (ASC) 320, Investments - Debt and Equity 

Securities and carries them at amortized cost. Amortization of premium and accretion of discount 

on investments has been computed under the interest method since 2002. 

Premium Receivable – Concentration of Credit Risk 

The Farm Credit Act requires that the System banks pay premiums to FCSIC. The premium receivable 

balance consists of amounts due from the four System banks and as such is exposed to risks due to 

concentration. Historically, FCSIC has not experienced any losses related to the premium receivable 

balance. FCSIC performs a quarterly analysis related to estimating an allowance for premium 

receivable which continues to indicate that no allowance is warranted. 

Leases 

Leases arise from contractual obligations that convey the right to control the use of identified 

property, plant or equipment for a period of time in exchange for consideration. At the inception 

of the contract, FCSIC determines if an arrangement contains a lease based on whether there is an 

identified asset and whether FCSIC controls the use of the identified asset. FCSIC also determines 

whether the lease classification is an operating or financing lease at the commencement date. 

A right-of-use asset represents FCSIC’s right to use an underlying asset and a lease liability 

represents FCSIC’s obligation to make payments during the lease term. Right-of-use assets are 

recorded and recognized at commencement for the lease liability amount, adjusted for initial direct 

costs incurred and lease incentives received. Lease liabilities are recorded at the present value of 

the future lease payments over the lease term at commencement. 

FCSIC uses a risk-free discount rate at the lease commencement date for all new leases and at 

January 1, 2022 (the “Adoption date”) (See “Accounting pronouncement adopted” paragraph below) 

to determine the present value of lease payments. 

FCSIC’s operating lease typically includes non-lease components such as common-area maintenance 

costs, utilities, and other maintenance costs. FCSIC has elected to include non-lease components 

with lease payments for the purpose of calculating lease right-of-use assets and liabilities. 

FCSIC’s lease terms may include options to extend or terminate the lease. FCSIC uses the base, noncancelable, lease term when recognizing the lease assets and liabilities, unless it is reasonably 
Farm Credit System Insurance Corporation 

Notes to the Financial Statements 

F9 

certain that FCSIC will exercise those options. FCSIC’s lease agreements do not contain any material 

residual value guarantees or material restrictive covenants. 

FCSIC does not have any short-term lease agreements. 

Liability for Estimated Insurance Obligations 

The liability for estimated insurance obligations is the present value of estimated probable insurance 

payments to be made in the future based on the Corporation's analysis of economic conditions of 

insured System banks. 

The insured System banks' primary lending markets are borrowers engaged in farming, ranching, and 

producing or harvesting of aquatic products, and their cooperatives. Financial weaknesses in these 

market segments and the effect of general market conditions on the System's borrowers could 

adversely affect the banks' financial condition and profitability. Insured System banks also face risks 

from changing interest rate environments and the need to maintain ongoing access to financial 

markets. Adverse changes in the financial condition and profitability of insured System banks 

resulting from increased levels of credit, financial, or other risks could occur in the future which 

would require a liability for estimated insurance obligations to be recorded. 

The Corporation actively monitors the creditworthiness and financial condition of the insured 

System banks. Management is not aware of any events or circumstances at this time which would 

require a liability for estimated insurance obligations to be recorded at December 31, 2022. 

Premiums 

Annual premiums are recorded as revenue during the 12-month calendar year period on which the 

premiums are based. All premiums are required to be paid to FCSIC on or before January 31st of the 

year subsequent to the year in which they are earned. 

Use of Estimates 

The preparation of financial statements, in conformity with GAAP, requires management to make 

estimates and assumptions that affect the reported amount of assets and liabilities and disclosure 

of contingent assets and liabilities at the date of the financial statements and the reported amount 

of revenues and expenses during the reporting period. Actual results could differ from those 

estimates. 

Accounting Pronouncement Adopted 

In 2022, management adopted FASB Accounting Standards Updates (“ASU”) No. 2016-02, Leases 

(Topic 842) (“ASU 2016-02”), and the additional ASUs issued to clarify and update the guidance in 

ASU 2016-02 (collectively, “ASC Topic 842”). ASC Topic 842 modifies lease accounting for lessees to 

increase transparency and comparability by recording lease assets and liabilities for operating leases 

and disclosing key information about leasing arrangements. 

As of January 1, 2022, the adoption date for ASC Topic 842, FCSIC elected the package of practical 

expedients offered by the new standard including to (1) not reassess whether any expired or existing 

contracts are considered or contain leases; (2) not reassess the lease classification for any expired 

or existing leases; and (3) not reassess the initial direct costs for any existing leases. FCSIC does not 
Farm Credit System Insurance Corporation 

Notes to the Financial Statements 

F10 

have leases that contain land easements; therefore, this optional practical expedient was not 

elected. The adoption of ASC Topic 842 resulted in the recognition of total right-of-use assets and 

total lease liabilities of approximately $602 thousand as of January 1, 2022, related to FCSIC’s 

existing office space lease. 

Note 3: Investments in U.S. Treasury Obligations 

In addition to the amounts referenced in Note 2, Cash and Cash Equivalents, at December 31, 2022 

and 2021, investments in U.S. Treasury obligations, which are carried at amortized cost, consisted 

of the following: 

Amortized 

Gross 

Unrealized 

Gross 

Unrealized Estimated 

(Dollars in thousands) Cost Gains Losses Fair Value 

December 31, 2022 

U.S. Treasury obligations $ 5,993,783 $ 1,722 $ (209,240) $ 5,786,265 

December 31, 2021 

U.S. Treasury obligations $ 5,471,826 $ 27,397 $ (14,336) $ 5,484,887 

The fair value of FCSIC’s investments in U.S. Treasury obligations have been included below for 

disclosure purposes only and are estimated based on quoted market prices for those instruments. 

The estimated fair value of U.S. Treasury obligations is measured using the Level 1 hierarchy, which 

is defined in the accounting standards as unadjusted quoted prices in active markets for identical 

assets that are available at the measurement date. 

The amortized cost and estimated fair value of U.S. Treasury obligations at December 31, 2022, by 

contractual maturity, are shown below: 

(Dollars in thousands) 

Amortized 

Cost 

Estimated 

Fair Value 

Due in one year or less $ 2,036,165 $ 1,995,403 

Due after one year through five years 3,957,618 3,790,862 

$ 5,993,783 $ 5,786,265 

The Corporation follows GAAP for measuring, reporting, and disclosing fair value. These standards 

apply to all assets and liabilities that are measured, reported, and/or disclosed on a fair value basis. 

Note 4: Premiums, the Secure Base Amount and Excess Insurance Fund Balances 

Each System bank which issues insured obligations under subsection (c) or (d) of section 4.2 of the 

Farm Credit Act is an insured System bank and is required to pay premiums to the Corporation. 

The Farm Credit Act sets a secure base amount (SBA) for the Insurance Fund to achieve. The 

statutory SBA is equivalent to 2 percent of the aggregate outstanding insured obligations of all 

insured System banks (adjusted downward by a percentage of the guaranteed portions of principal 
Farm Credit System Insurance Corporation 

Notes to the Financial Statements 

F11 

outstanding on certain government-guaranteed loans and investments) or such other percentage as 

determined by the Corporation in its sole discretion to be actuarially sound to maintain in the 

Insurance Fund taking into account the risk of insuring outstanding insured obligations. 

The Farm Credit Act requires FCSIC to assess premiums based on each bank's pro rata share of 

insured debt (rather than on individual loans). FCSIC may collect from 0 to 20 basis points annually 

on adjusted insured debt outstanding. The Farm Credit Act also authorizes a risk surcharge of up to 

10 basis points on nonaccrual loans and on other-than-temporarily impaired investments. The Farm 

Credit Act reduces the total insured debt on which premiums are assessed by 90 percent of Federal 

government-guaranteed loans and investments and 80 percent of state government-guaranteed 

loans and investments and deducts similar percentages of such guaranteed loans and investments 

when calculating the secure base amount (SBA). 

Insurance premium rates are reviewed at least semiannually. For 2022, the board of directors set 

premium accrual rates at its January 27, 2022 meeting at 16 basis points on average adjusted insured 

debt and continued the assessment of the 10 basis point surcharge on the average principal balance 

outstanding for nonaccrual loans and other-than-temporarily impaired investments. The board of 

directors again reviewed premiums at its June 8, 2022 meeting and voted to exercise its discretion 

to increase the premium rate on adjusted insured debt obligations to 20 basis points for 2022 and 

apply the rate retroactively for the entire 2022 premium billing cycle and continued the assessment 

of the 10 basis point surcharge on the average principal balance outstanding for nonaccrual loans 

and other-than-temporarily impaired investments for the remainder of 2022. In 2022, outstanding 

insured obligations increased by $38.9 billion (11.0 percent). At December 31, 2022, the total 

Insurance Fund was 1.97 percent of adjusted insured obligations. 

For 2021, the board of directors set premium accrual rates at its January 28, 2021 meeting at 16 

basis points on average adjusted insured debt and continued the assessment of the 10 basis point 

surcharge on the average principal balance outstanding for nonaccrual loans and other-thantemporarily impaired investments. The board of directors again reviewed premiums at its June 17, 

2021 meeting and voted to maintain the premium accrual rate on average adjusted insured debt at 

16 basis points and continued the assessment of the 10 basis point surcharge on the average principal 

balance outstanding for nonaccrual loans and other-than-temporarily impaired investments for the 

remainder of 2021. In 2021, outstanding insured obligations increased by $30.4 billion (9.4 percent). 

At December 31, 2021, the total Insurance Fund was 1.98 percent of adjusted insured obligations. 

The Farm Credit Act requires if, at the end of any calendar year, the aggregate of the amounts in 

the Insurance Fund exceed the SBA, the Corporation is required to allocate to the Allocated 

Insurance Reserves Accounts (AIRAs) any excess balances less the amount that the Corporation, in 

its sole discretion, determines to be the sum of the estimated operating expenses and estimated 

insurance obligations of the Corporation for the immediately succeeding calendar year. 

The total Insurance Fund did not exceed the 2 percent SBA at December 31, 2022 or 2021, and there 

were no allocations to the AIRAs for the Farm Credit System banks. 

The AIRAs' balances are recorded as part of the Insurance Fund until approved for payment by the 

Corporation's board of directors. AIRAs’ balances may be used to absorb any insurance losses and 

claims. Furthermore, the board of directors has discretion to limit or restrict the AIRAs’ payments. 
Farm Credit System Insurance Corporation 

Notes to the Financial Statements 

F12 

Note 5: Operating Lease 

The Corporation is committed under a ten-year lease with the FCS Building Association for office 

space expiring on November 30, 2025. The Corporation recognizes the right-of-use asset, and 

liability, initially measured at the present value of the lease payments. Additionally, the Corporation 

recognizes a single lease expense, which is allocated over the lease term, generally on a straightline basis. 

As permitted under ASC Topic 842, the Corporation has elected not to recast/restate comparative 

periods and to set the initial adoption application date to January 1, 2022, the beginning of the 

period of adoption; additionally, the Corporation has not separated lease and non-lease components 

under its office space lease. 

Office space payments are due on the first day of every month and the Corporation paid lease 

payments of approximately $155 thousand for the year ended December 31, 2022. 

During 2022, the Corporation recorded lease expense of approximately $159 thousand reported in 

the accompanying Statements of Income and Expenses and Changes in Insurance Fund. The lease 

contains fixed payments which increase by 2% annually and does not include a current option to 

extend or renew beyond the current terms. 

As of December 31, 2022, remaining maturities of lease liabilities approximated were as follows: 

Years ending December 31, 

(Dollars in thousands) 

2023 $ 158 

2024 161 

2025 150 

Total operating lease payments 469 

Less: imputed interest (12) 

Total operating lease liabilities $ 457 

Since the Corporation has only one lease as of December 31, 2022, the weighted-average lease term 

remaining is approximately 3 years. Because the Corporation does not have access to the rate 

implicit in the lease, the Corporation utilized the risk-free rate of 1.8% (the borrowing rate as of 

adoption date) as the discount rate. Likewise, the weighted average discount rate as of December 

31, 2022 was 1.8%. 

As of December 31, 2022, the Corporation recorded a right-of-use asset of approximately $452 

thousand and related lease liability of approximately $457 thousand in the accompanying 

Statements of Financial Condition. 
Farm Credit System Insurance Corporation 

Notes to the Financial Statements 

F13 

Previous lease standard (FASB ASC 840) – Fiscal year 2021 

The Corporation is committed under a ten-year lease with the FCS Building Association for office 

space expiring on November 30, 2025. The Corporation recorded lease expense (including operating 

cost assessments) of $154 thousand for 2021. The following is a schedule by year of the future 

minimum lease payments required under this lease as of December 31, 2021: 

Years ending December 31, 

(Dollars in thousands) 

2022 $ 155 

2023 158 

2024 161 

2025 150 

$ 624 

Note 6: Line of Credit 

On September 24, 2013, the Corporation entered into an agreement with the Federal Financing Bank 

(the FFB), a United States government corporation subject to the supervision and direction of the 

U.S. Treasury. Pursuant to this agreement, the FFB would advance funds to the Corporation under 

certain limited circumstances. The Corporation would use these funds to increase its capacity to 

provide assistance to the System banks in exigent market circumstances that threaten the banks' 

ability to pay maturing debt obligations. The agreement provides for a short-term revolving credit 

facility of up to $10 billion, renewable annually and terminating on September 30, 2023, unless 

otherwise further extended. 

Under the agreement, each provision of funds by the FFB is subject to certain terms and conditions. 

The interest rate for each advance will be established by the FFB at the time the respective advance 

is made. Each advance cannot have a maturity date longer than twelve months and the maturity 

date cannot be later than the final termination date of the agreement. 

The Corporation paid no commitment fee to secure this line of credit. There were no amounts drawn 

on this line of credit during 2022 and 2021 and no outstanding balance due as of December 31, 2022 

and 2021. 

Note 7: Retirement Plan 

All permanent Corporation employees are covered by the Federal Employees Retirement System 

(FERS). The Corporation's contribution was 18.4 percent of base pay for 2022. The Corporation's 

contribution was 17.3 percent of base pay for the first nine months of 2021 and 18.4 percent for the 

last three months of 2021. In addition, the Corporation automatically contributes 1 percent of base 

pay to the employee's Thrift Savings Plan account, matches the first 3 percent contributed by the 

employee, and matches one-half of the next 2 percent contributed by the employee. In 2015, the 

Corporation began a 401K plan for employees. The Corporation automatically contributes 1 percent 

of base pay to the employee's 401K account and matches the first 2 percent contributed by the 

employee. Retirement plan expenses amounted to $585 thousand in 2022 and $507 thousand in 

2021. 
Farm Credit System Insurance Corporation 

Notes to the Financial Statements 

F14 

Note 8: Related Parties 

The Corporation purchases services from FCA under an Interagency Agreement, including 

examination and administrative support services. The intention of the parties as stated in the 

agreement is that specified rates and fees will reimburse the party providing services for all 

reasonable costs associated with provision of the services. The Corporation purchased services for 

2022 which totaled $340 thousand, compared with $358 thousand for 2021. At December 31, 2022 

and 2021, included in the accompanying Statements of Financial Condition are the amounts of $29 

thousand and $19 thousand respectively which were due to FCA from the Corporation. 

The Corporation may also provide services to FCA under an Interagency Agreement; however, the 

Corporation provided no services and recognized no revenue for 2022 and 2021. At December 31, 

2022 and 2021, the Corporation did not have any receivables from FCA. 

Note 9: Subsequent Events 

FCSIC evaluated subsequent events from the date of the statement of financial condition through 

February 23, 2023, the date at which FCSIC’s financial statements were issued. No material 

subsequent events were identified for either recognition or disclosure. 
F15 

Management's Report on Internal Control Over Financial Reporting 

The Farm Credit System Insurance Corporation's (FCSIC) internal control over financial reporting is 

a process effected by those charged with governance, management, and other personnel, designed 

to provide reasonable assurance regarding the preparation of reliable financial statements in 

accordance with generally accepted accounting principles in the United States of America. Our 

internal control over financial reporting includes those policies and procedures that (1) pertain to 

the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions 

and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as 

necessary to permit preparation of financial statements in accordance with generally accepted 

accounting principles in the United States of America and that receipts and expenditures of FCSIC 

are being made only in accordance with authorizations of FCSIC management and those charged 

with governance; and (3) provide reasonable assurance regarding prevention, or timely detection 

and correction, of unauthorized acquisition, use, or disposition of FCSIC's assets that could have a 

material effect on our financial statements. 

Management of FCSIC is responsible for designing, implementing, and maintaining effective internal 

control over financial reporting. Management assessed the effectiveness of FCSIC's internal control 

over financial reporting as of December 31, 2022, using the criteria established in the Internal 

Control - Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the 

Treadway Commission (COSO). Based on that assessment, management concluded that, as of 

December 31, 2022, FCSIC's internal control over financial reporting is effective, based on the COSO 

criteria. 

Internal control over financial reporting has inherent limitations. Internal control over financial 

reporting is a process that involves human diligence and compliance and is subject to lapses in 

judgment and breakdowns resulting from human failures. Internal control over financial reporting 

also can be circumvented by collusion or improper management override. Because of its inherent 

limitations, internal control over financial reporting may not prevent, or detect and correct, 

misstatements. Also, projections of any assessment of effectiveness to future periods are subject 

to the risk that controls may become inadequate because of changes in conditions, or that the 

degree of compliance with the policies or procedures may deteriorate. 

_____________________________________ 

Andrew J. Grimaldi 

Chief Financial Officer 

_____________________________________ 

John F. Simonson 

Chief Risk Officer 

_____________________________________ 

Howard I. Rubin 

Chief Operating Officer 

_____________________________________ 

Lynn M. Powalski 

General Counsel 

February 2, 2023 

HOWARD 

RUBIN 

Digitally signed by 

HOWARD RUBIN 

Date: 2023.02.23 

16:12:52 -05'00' 

ANDREW 

GRIMALDI 

Digitally signed by 

ANDREW GRIMALDI 

Date: 2023.02.23 

12:10:59 -05'00' 

LYNN 

POWALSKI 

Digitally signed by LYNN 

POWALSKI 

Date: 2023.02.23 

13:06:41 -05'00' 

SIMONSONJ 

Digitally signed by 

SIMONSONJ 

Date: 2023.02.23 

12:22:44 -05'00' 
MANAGEMENT ASSURANCES

February 23, 2023

The management of the Farm Credit System Insurance Corporation is responsible for managing

risk and maintaining effective internal control to meet the objectives of sections two and four

of the Federal Managers’ Financial Integrity Act.

FCSIC is an independent U.S. government-controlled corporation. Our primary purpose is to

insure the timely payment of principal and interest on insured debt obligations issued on behalf

of System banks.

The System is a nationwide government-sponsored enterprise of cooperative lending

institutions owned by the agricultural and rural customers it serves. By protecting investors, we

help maintain a dependable source of funds for the farmers, ranchers, and other borrowers of

the System.

FCSIC actively monitors and manages insurance risk to minimize the Farm Credit Insurance

Fund’s exposure to potential losses. When appointed by the Farm Credit Administration, we

also serve as receiver or conservator of any System bank or association.

Our management has completed an assessment of the effectiveness of FCSIC’s enterprise risk

management and internal control systems in effect during 2022 in accordance with guidelines

provided by the Office of Management and Budget (OMB) in consultation with the comptroller

general (OMB Circular A-123, Management’s Responsibility for Enterprise Risk Management

and Internal Control). The objective of these controls and systems is to provide reasonable

assurance that

• obligations and costs comply with applicable laws;

• assets are safeguarded against waste, fraud, unauthorized use, and mismanagement;

• revenues and expenditures applicable to our operations are recorded and accounted for

properly; and

• financial and statistical reports are reliable, complete, and timely.

On the basis of established guidelines and the assessment performed, we can provide

reasonable assurance that internal control over operations, reporting, and compliance was

operating effectively as of December 31, 2022.

34 Farm Credit System Insurance Corporation
In addition, as stated in the accompanying report, FCSIC’s independent auditor, BDO USA, LLP,

indicated that the financial statements of the Farm Credit Insurance Fund as of December 31,

2022, are fairly presented in all material respects. BDO also conducted testing on the

effectiveness of FCSIC’s internal control over financial reporting and issued an opinion that it

was effective in all material aspects.

Jeffery S. Hall

Chairman

Howard I. Rubin

Chief Operating Officer

Andrew J. Grimaldi

Chief Financial Officer

Lynn M. Powalski

General Counsel

John F. Simonson

Chief Risk Officer

Protecting Investors in Agriculture and Rural America 35
COMPLIANCE WITH THE FEDERAL CIVIL

PENALTIES INFLATION ADJUSTMENT ACT

IMPROVEMENTS ACT OF 2015

FCSIC has authority under section 5.65(c) of the Farm Credit Act (12 U.S.C. 2277a-14) to impose

civil money penalties against a Farm Credit System bank that willfully fails or refuses to file any

certified statement or pay any required premium.

In addition, section 5.65(d) of the Farm Credit Act prohibits any person convicted of any

criminal offense involving dishonesty or a breach of trust to serve as a director, officer, or

employee of any System institution, except with the prior written consent of FCA. This section

also authorizes FCSIC to recover penalties for a willful violation of this prohibition. Sections

5.65(c) and (d) provide for a penalty of not more than $100 for each day during which the

violation continues.

The Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (the 2015 Act)

amended the Federal Civil Penalties Inflation Adjustment Act of 1990 (28 U.S.C. 2461 note) to

provide for regular evaluation of civil penalties. It also required every applicable federal agency

to adopt, through an interim final rule, a one-time catch-up adjustment to be effective no later

than August 1, 2016, with annual adjustments thereafter.

On January 13, 2022, FCSIC published a final rule making the annual adjustment required by the

2015 Act. The 2022 adjustment increased our civil money penalties to not more than $231 for

each day during which a violation continues (87 Fed. Reg. 2031). On January 18, 2023, we

published a final rule making the required annual adjustment for 2023. This adjustment

increased our civil money penalties to not more than $249 for each day during which a violation

continues (88 Fed. Reg. 2812).

36 Farm Credit System Insurance Corporation
PERFORMANCE MANAGEMENT PROGRAM

FCSIC’s mandate is to insure the timely payment of principal and interest on insured Farm

Credit System debt securities and to serve as receiver or conservator when appointed by the

Farm Credit Administration board. To fulfill our mandate, we have three fundamental program

goals:

• Manage the Insurance Fund to protect investors

• Monitor, evaluate, and report insurance risk

• Maintain the capability to manage assistance requests, receiverships, and

conservatorships

We have implemented performance measures to help us evaluate the effectiveness of these

goals. It is important to note that some of these measures use management estimates that may

be affected by the performance and condition of System institutions. Also, unforeseen events

may have a material effect on performance measures over time.

Performance Measures

1. Manage the Farm Credit Insurance Fund to maintain the secure base amount to

provide protection for investors and taxpayers against identified risks

We adjust insurance premium assessments when appropriate and manage assets to optimize

investment returns to build and maintain the Insurance Fund at the statutory 2% secure base

amount. At the same time, we must maintain appropriate liquidity to carry out our mission.

We assess the effectiveness of our performance in achieving this goal through the following:

• Reviewing semiannually the need for adjustments to insurance premium assessments

• Measuring investment performance by comparing the portfolio’s average yield with

peer investment funds that have similar investment parameters for quality and maturity

• Comparing the level of the Insurance Fund every month with the secure base amount

and reporting the results to the board of directors

Our ability to maintain the Insurance Fund at the secure base amount may be affected by

events beyond our control, such as insurance losses.

2. Monitor, evaluate, and report risks that could generate losses to the Insurance Fund

We measure progress toward this program goal by how promptly we detect emerging problems

and how effectively we minimize insurance losses. We use financial indicators to monitor

conditions and trends, and we analyze and report data before losses become likely. In periods

when there are insurance claims or the probability of claims, the ratio of estimated losses to

actual losses helps measure our ability to assess prospective loss exposure.

Protecting Investors in Agriculture and Rural America 37
As guidance, our management uses criteria specified in our policy statement on allowance for

Insurance Fund loss and in the Financial Accounting Standards Board’s Accounting Standards

Topic 450, Contingencies. Timely evaluation of the Insurance Fund’s risk exposure is critical to

preserving the Insurance Fund’s solvency. We use FCA reports of examination to evaluate risks

to the Insurance Fund. When necessary, we independently examine and require information

from System institutions.

3. Maintain the capability to manage assistance requests, receiverships, and

conservatorships

FCSIC has statutory authority to provide financial assistance to System institutions, including

loans. Any assistance agreement is subject to the board’s approval. We have a policy statement

on assistance, and we have adopted procedures for providing assistance in a liquidity crisis. We

measure effectiveness by periodically testing our procedures and updating our policy statement

so that we remain ready to provide financial assistance in a timely and cost-effective manner.

We are required to serve as receiver or conservator of System banks and associations when

appointed by FCA. This program goal requires us to maintain readiness through periodic staff

training and evaluation of support capabilities. We must ensure that we have the resources we

need to manage receiverships or conservatorships in case the need arises.

We use the following measures to determine the effectiveness of our receivership operations:

• Timeliness of initial processing of all claims (Processing should occur within a period of

time warranted by the size and complexity of each case.)

• The ratio of operating costs to total assets

• The ratio of actual asset recovery returns to net realizable asset values

We did not have any assistance requests and were not appointed as a receiver or conservator in

2022.

Strategic Goals and Objectives

The Government Performance and Results Act of 1993, as amended, requires all federal

government organizations to report on the results of program performance. Performance

results are included in regular reports to the board of directors and in our annual report.

Information for each of the three major program areas is presented in Table 4.

38 Farm Credit System Insurance Corporation
Table 4

Strategic Goals and Objectives by Program Area

FCSIC’s

Mission

Program Areas Strategic Goals Strategic Objectives For More

Information

Protect

investors in

insured Farm

Credit System

obligations and

taxpayers

through sound

administration

of the Insurance

Fund.

Exercise its

authorities to

minimize

Insurance Fund

loss.

Help ensure the

future of a

permanent

system for

delivery of

credit to

agricultural

borrowers.

Insurance Fund

management

Manage the

Insurance Fund to

maintain the

secure base

amount to

provide

protection for

investors and

taxpayers against

identified risks.

1.Manage the Insurance Fund to ensure

adequate liquidity while optimizing

investment returns and ensuring

premium collections and refunds reflect

anticipated changes in adjusted insured

debt levels and potential insurance

claims.

2.Use actuarial tools to evaluate the

adequacy of investor protections and

risk exposures to the Insurance Fund.

3. Ensure that System banks have

adequate temporary liquidity in

situations where external market factors

make normal debt market access

extremely doubtful.

4. Communicate accurate and easily

understood information about the

insurance program to the public, insured

investors, and System institutions.

See pages 18

—23 for 2022

results.

Risk

management

Monitor,

evaluate, and

report risks that

could generate

losses to the

Insurance Fund.

1.Use analytical models and other risk

management tools and processes to

identify and respond to potential risks to

the Insurance Fund. Conduct trend

analysis on the System’s growth, funding

needs, condition, and performance.

Regularly report to the board of

directors on identified risk exposures.

2.Monitor conditions in the agricultural

and financial sectors that may affect

insurance risk and integrate the results

into the process for setting annual

insurance premium rates.

See pages 26

—31 for 2022

results.

Receivership /

conservatorship

Effectively

manage

assistance

requests,

receiverships,

and

conservatorships.

1. Subject to the provisions of the Farm

Credit Act, including the least-cost test,

provide assistance when appropriate to

a troubled System bank or association.

2. Ensure receiverships and

conservatorships are managed to fulfill

the purposes of the Farm Credit Act and

protect creditors and are terminated in

an orderly and timely manner.

See pages 32

—33 for 2022

results.

Protecting Investors in Agriculture and Rural America 39
GLOSSARY

Farm Credit Act — The Farm Credit Act of 1971, as amended, (12 U.S.C. 2001 et seq.) is the

statute under which the Farm Credit System, FCSIC, and the Farm Credit Administration

operate.

Farm Credit Administration (FCA) — FCA was established in 1933 to regulate the System. It is

governed by a three-member presidentially appointed board. To ensure the safety and

soundness of the System, FCA examines and supervises System institutions and develops

regulations to govern them.

Federal Farm Credit Banks Funding Corporation — Based in Jersey City, New Jersey, the

Funding Corporation manages the sale of Systemwide debt securities to finance the loans made

by System institutions. It uses a network of bond dealers to market the System’s securities.

Financial Institution Rating System (FIRS) — The FIRS is similar to the Uniform Financial

Institutions Rating System used by other federal banking regulators except that the FIRS reflects

the nondepository nature of System 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 institutions 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.

Rating 2 — Institutions in this group are fundamentally sound but may reflect modest

weaknesses correctable in the normal course of business. Because 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, these

institutions may be vulnerable to the onset of adverse business conditions and could

easily deteriorate if weaknesses are not corrected. Institutions that are in significant

noncompliance with laws and regulations may also be given this rating. Risk

management practices are less than satisfactory for the size, complexity, and risk profile

40 Farm Credit System Insurance Corporation
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 taken.

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 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 (GSE) — A GSE is typically a federally chartered corporation

created by Congress 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 the barriers

that prevented purely private markets from developing. The System is the oldest financial GSE.

Protecting Investors in Agriculture and Rural America 41
ACRONYMS AND ABBREVIATIONS

AIRAs allocated insurance reserves accounts

CIPA Contractual Interbank Performance Agreement

Farm Credit Act Farm Credit Act of 1971, as amended

FCA Farm Credit Administration

FCSIC Farm Credit System Insurance Corporation

FDIC Federal Deposit Insurance Corporation

FIRS Financial Institution Rating System

Funding Corporation Federal Farm Credit Banks Funding Corporation

NCUA National Credit Union Administration

OMB Office of Management and Budget

System Farm Credit System

URE unallocated retained earnings

USDA United States Department of Agriculture

42 Farm Credit System Insurance Corporation
CORPORATE STAFF

Howard I. Rubin Chief Operating Officer

Andrew J. Grimaldi Chief Financial Officer

Lynn M. Powalski General Counsel

John F. Simonson Chief Risk Officer

Wade Wynn Chief Investment Officer and Senior Risk Analyst

Gregory Smith Asset Assurance Manager

Tanya Renica Senior Accountant

Mark Bowen Accountant

Matthew Morgan Financial Analyst

Monica Daly Program Specialist

CONTACT INFORMATION

Farm Credit System Insurance Corporation

1501 Farm Credit Drive

McLean, VA 22102

Voice: (703) 883-4380

Fax: (703) 790-9088

www.fcsic.gov

Protecting Investors in Agriculture and Rural America 43
BANKS INSURED BY FCSIC

AgFirst Farm Credit Bank

P.O. Box 1499

Columbia, SC 29202-1499

(800) 845-1745

www.agfirst.com

AgriBank

30 E. 7th Street, Suite 1600

St. Paul, MN 55101-4914

(651) 282-8800

www.agribank.com

CoBank

P.O. Box 5110

Denver, CO 80217-5110

(800) 542-8072

www.cobank.com

Farm Credit Bank of Texas

P.O. Box 202590

Austin, TX 78720-2590

(512) 465-0400

www.farmcreditbank.com

44 Farm Credit System Insurance Corporation
ADDITIONAL INFORMATION

Federal Farm Credit Banks Funding Corporation

101 Hudson Street, Suite 3505

Jersey City, NJ 07302

(201) 200-8064

www.farmcreditfunding.com

Office of Congressional and Public Affairs

Farm Credit Administration

1501 Farm Credit Drive

McLean, VA 22102

(703) 883-4056

www.fca.gov

Protecting Investors in Agriculture and Rural America 45
Farm Credit System Insurance Corporation

1501 Farm Credit Drive

McLean, VA 22102

Voice: 703-883-4380

Fax: 703-790-9088

www.fcsic.gov