ICBA - Publications - FCA Performance Report Shows FCS Gaining Market Share & Size

FCA Performance Report Shows FCS Gaining Market Share & Size

MARCH 7, 2003


The Farm Credit Administration (FCA), which regulates the Farm Credit System (FCS), recently released its annual Performance and Accountability Report for Fiscal Year 2002. The report contains a number of noteworthy statistics on how well the FCS has been faring in recent years, maintaining annual net profits of well over $1 billion, high capital levels, and gaining market share against commercial banks.

FCS's performance statistics reveal the following: FCS loan volume increased sharply for the second year in a row in 2002. Total gross loan dollars outstanding grew by $7.8 billion or nearly 10 % during the year ended Sept. 30, 2002, and by $24.9 billion or nearly 40 % over the past five years. Total members served increased about 3% during the past year. About 70 FCS associations had double-digit loan volume growth for the year ended Sept. 30, 2002.

FCS's December 31, 2001 share of total farm debt jumped from 26.4% at year-end 2000 to 28.3%. Total farm debt held by commercial banks declined to 40.5%. The report states, "Slow growth in ag lending by commercial banks suggests they have either decided to reduce their exposure to the risk of agricultural lending or have found more attractive financing opportunities in other types of commercial lending." (ICBA Note: The authors apparently forgot to consider FCS cherry-picking of commercial bank loans as a leading cause of slow growth in ag lending by banks.)

The System's increased loan volume over the past 12 months was mainly from long-term real estate loans (up $5.7 billion or 12.7%) and short- and intermediate-term loans (up $1.9 billion or 9%) with the fastest component being "other" farm-related business, marketing and processing loans. As of year-end 2001, the System held 34.2% of the market in real estate secured farm debt, up 1.7 %. In the non real-estate market, the System held 21.5%, up 2.1 %. Commercial banks' total loans to farmers were up 1% for the year ended June 30, 2002.

Permanent capital ratios (PCRs) at FCS associations ranged from a low of 10.5% to a high of 28.1%, with 90% of associations having at least 12.8%. Net interest margins were 2.76%.

FCS Institutions' Asset Growth: As of January 1, 2003, the number of FCS institutions had declined to five Farm Credit Banks (FCBs) that provide loan funds to 81 Agricultural Credit Association (ACAs), and 13 Federal Land Credit Associations (FLCAs). With the decline in institution numbers, the average asset size of System institutions has increased sharply. The System's district funding banks rose from $9.3 billion in average assets as of Sept. 30, 1998 to $13.6 billion as of Sept. 30, 2002, a 46% increase.

During the same period, the size of the smallest district bank grew 164% to $5.9 billion while the size of the largest bank grew by one-third to nearly $26 billion. Growth in the System's associations assets during 1998-2002 was even more dramatic. Average size of direct-lender associations increased 132% between 1998-2002 to $652 million.

The largest FCS institution increased 44% to $7 billion and the smallest institution increased 74%. As of Sept. 30, 1998 only 6 associations or 4% of the total had assets in excess of $1 billion. On Sept. 30, 2002, the number of such associations had increased to 16 or about 15% of the total. As of Sept. 30, 1998, 35% of total association assets were held by institutions with assets of more than $1 billion, but by Sept. 30, 2002, the number had increased to 56%!