News Briefs, Summer 2008

Brief news items from Summer 2008 about the Farm Credit community.

FARM CREDIT

Landscapes Summer 2008

Tenth District Lenders Return 55 Percent of Earnings to Customers

The 20 lending cooperatives in the Tenth Farm Credit District declared a total of $133.7 million — more than half of their 2007 earnings — in patronage to their customers earlier this year.

That compares to 2006 and 2005, when they declared $124.8 million and $56.4 million, respectively, in patronage distributions.

"We hope that these patronage payments will help defray rising operating expenses for our agricultural producers," said Farm Credit Bank of Texas (FCBT) Board Chairman Ralph W. Cortese of Fort Sumner, N.M.

The record patronage distribution highlighted the strong 2007 year-end financial results for the Tenth District, which is composed of the 20 rural lenders and the Farm Credit Bank of Texas.

District net income totaled $242.5 million in 2007, compared with $240.1 million in 2006. Net interest income increased to $432.4 million in 2007 from $386.2 million the previous year, due largely to an increase in average interest-earning assets and, to a lesser extent, the higher interest-rate environment in 2007.

Gross loans totaled $15.11 billion at Dec. 31, 2007, a 17 percent increase from the $12.91 billion loan volume reported at year-end 2006. At the same time, the credit quality of the district’s portfolio remained strong, with 98.8 percent of the loan volume considered acceptable at year end.

The Farm Credit Bank of Texas also reported strong year-end results. FCBT net income of $74 million for 2007 was up 13.9 percent from the $65 million reported for 2006. The bank’s loan portfolio at Dec. 31, 2007, totaled $10.87 billion, reflecting an 8.1 percent increase from the $10.06 billion balance a year earlier.

"While we enjoyed tremendous growth and solid earnings last year, we are particularly proud that our lending associations once again provided excellent value to their stockholders in the form of patronage," said Larry Doyle, FCBT chief executive officer. "Patronage reduces our customers’ cost of borrowing. It is the cornerstone of the cooperative business model, and it’s what distinguishes Farm Credit from other lenders."

Nationally, the Farm Credit System reported combined net income of $2.7 billion at Dec. 31, 2007, an increase of approximately 12.5 percent from the $2.4 billion in net income the previous year.

President Appoints New FCA Chairman

Leland A. Strom, a corn and soybean farmer from Illinois, was designated chairman and chief executive officer of the Farm Credit Administration (FCA) by President George W. Bush, effective May 22. He succeeds Nancy C. Pellett, who had served as FCA chairman and CEO since May 2004.

The Farm Credit Administration is the federal regulator of the Farm Credit System. The FCA charters, regulates and examines the System’s 106 banks, lending associations and service corporations.

Strom has served as a member of the FCA board and concurrently as chairman of the Farm Credit System Insurance Corporation Board of Directors since his board appointment by President Bush in December 2006. His term on the FCA board will expire in October 2012.

Strom has been active in the agriculture industry for more than 30 years, serving on the boards of AgriBank, the national Farm Credit Council, 1st Farm Credit Services of Illinois, Country Mutual Funds Trust and Northern F.S., Inc., a farm-supply cooperative. Also, he was a member of the Federal Reserve Bank of Chicago Advisory Council on Agriculture, Labor and Small Business for six years.

2008 Marks 75 Years of Production Lending

This year marks important anniversaries in the history of the Farm Credit System.

In 1933, Congress passed the Farm Credit Act, which, among other things, established a new production credit system for farmers and ranchers through local customer-owned Production Credit Associations (PCAs). In the Tenth Farm Credit District, the first PCA was formed when 53 farmers gathered at the Tyler, Texas, courthouse on Dec. 9 and organized the Tyler PCA. Soon afterward, the association made its first loan for $80.

All PCAs in the Tenth District merged with Federal Land Bank Associations in recent years to create full-service Agricultural Credit Associations.

Also in 1933, President Franklin Roosevelt issued an executive order consolidating the supervision of all federally regulated agricultural credit agencies under the new Farm Credit Administration (FCA). These various cooperatively owned financial entities, with the FCA as their regulator, formed the basis of the Farm Credit System as it exists today.

The Farm Credit Act of 1933 also created 13 Banks for Cooperatives across the country.

Looking Out for You

Farm Credit directors go to school on issues that could affect your Farm Credit co-op.

Being a Farm Credit board member is like being an athlete: You have to work out to stay in shape. And it helps to have a good trainer.

For many Farm Credit board members, that "workout" comes during the Director Development Program, a three-day training session geared toward keeping local Farm Credit co-op directors at the top of their game.

"It’s never been more complicated to be a director serving on the board of a financial institution," says Dr. Willie Staats, a member of the Farm Credit Bank of Texas board and the chair of the bank’s audit committee.

"The board of directors bears the ultimate responsibility for the organization’s success or failure. The duties really haven’t changed much in decades, but the environment has changed, so more is expected of directors today than ever before," Staats says.

This year, 310 directors from the Tenth Farm Credit District and the AgFirst District attended the Director Development Program, which was held in three locations: Memphis, Tenn., Orlando, Fla., and San Antonio, Texas.

Developing a Banker’s Mind-Set

Many Farm Credit directors have expertise in running a farm, ranch or other business, but few have specific banking or lending experience. The Director Development Program helps to fill that gap.

"Co-ops, especially directors, need some type of continuing education, and this training is very helpful and current," says Lonnie Hammonds, a director on the Lone Star Ag Credit Board of Directors, who also has 20 years of commercial banking experience.
"Each year it generates new ideas that we can talk about and take back to our management," Hammonds says.

Keith Morton joined the board of the FLBA of North Mississippi last year and attended the Director Development Program for the first time this year.

"As far as banking is concerned, I’ve only been on the borrower side of the desk," Morton says. "This meeting allowed me to go to the banking side of the desk. It gave me a different perspective. I understood for the first time why I’ve been asked some of the questions I’ve been asked in the past when I’ve borrowed money."

Keeping Up With Banking Issues

Burt Richards has been a director since 1988 and now serves as vice chairman of the Texas Land Bank board. He agrees that the training helps keep directors informed about issues related to banking, governance, new regulations and other financial trends.

"The speakers explain the issues in a way that we can understand, because we’re not all bankers ourselves," Richards says. "The training has been very helpful in my role as a director. At practically every board meeting, some topic of discussion will come up that applies to what we learned at the Director Development Program."

In fact, Richards and his fellow board members found the meeting so informative that they asked their chief executive officer to attend a future session. "There was a lot of information there that was helpful, and we wanted him to hear it, too," Richards says.
Don Crawford, a CPA who serves on the Lone Star Ag Credit board with Hammonds, says that their entire board attends the same meeting together.

"That helps us because over meals and after the sessions we can discuss the topics and draw the line about how it applies to us," Crawford says. "I’ve been to five or six of them now, and I’ve taken something away from every single one. I can’t stand to be in class not learning something — that crawls all over me — but I’ve never felt that way at this training."

Knowing Their Responsibility

The role of a Farm Credit board member has become increasingly complex in today’s lending environment. It is a responsibility that the directors take seriously.

"When you’re talking about financial organizations of this size — ours is now over $1 billion — it is helpful to have a financial background as a director to be able to ask the right questions of management," Hammonds says.

Directors also must make decisions that are in the best interest of the stockholder-members who elected them. Like many Farm Credit directors, Morton serves on other boards, but he feels more responsibility as a Farm Credit director because he is making decisions that can affect other people’s money.

"Borrowers are counting on others to manage the association in a manner that is secure and also will represent our values," Morton says. "I want to do that for my own purposes, as I am a borrower too, and I also want to represent other borrowers’ interests. It is a huge honor that I’ve been elected, and I do not take it lightly."

– Article by Penny Currie

Related Tags

Farm Credit

What Can Farm Credit Do for Me?

Farm Credit offers loans, leases and other financial services to those involved in agriculture and rural communities. Whether you're a farmer, rancher or rural business owner - we can help.

Learn More