ICBA - Publications - Farm Credit System Advantages Fueling Increased Profits

Farm Credit System Advantages Fueling Increased Profits

MARCH 1, 2002


Omaha-based Farm Credit Services of America reports that increased loan demand and lower funding costs raised its net income by $105 million in 2001, a 21.4% increase from the previous year. The FCS farm lender for Iowa, South Dakota, Wyoming and Nebraska said its loans increased 11% to $6 billion, and net interest income totaled $154 million, up 18% from 2000. Real estate loans were up 8%, and commercial loans were up 19%. Its customer base grew 9% to 49,800 and crop insurance premiums were up 35%.

A USDA report issued by the Economic Research Service (ERS) said the financial condition of FCS remains solid with loan volume and at-risk capital growing. "Income is fueled by strong portfolio quality, loan growth, and the reduced taxation of income from interest on real estate loans originated by Agricultural Credit Associations through Federal Land Credit Association subsidiaries," stated USDA (emphasis added). Loan growth is fairly even between short and long term loans and FCS has increased the purchase of participations originated by other lenders, including commercial banks.

Farm loan volume held by commercial banks and the FCS increased 3% and 12%, respectively. Together, commercial banks and the FCS held 69% of all farm debt at the end of 2001. Commercial banks gained market share for 17 of the past 20 years and now hold 41% of outstanding farm business debt. FCS market share has increased in six of the last seven years to 28%. Net interest margins have benefited from the overall fall in interest rates, allowing FCS to generate retained earnings to maintain capital positions.