Farm Credit Administration
1501 Farm Credit Drive
McLean, Virginia 22102-5090
For Immediate Release
Contact: Martha Schober or Christine Quinn, 703-883-4056
Web site: www.fca.gov
Farm Credit Administration Board Revises Bookletter Regarding Appointment of Directors to Farm Credit System Institutions McLEAN, Va., December 14, 2006 — The Farm Credit Administration (FCA) Board today voted to revise a bookletter related to the appointment of directors to the boards of Farm Credit System (FCS or System) institutions. Bookletters are documents that communicate Agency policy, legal interpretations, and positions on issues.
According to FCA regulations, the stockholders of an FCS institution must elect at least 60 percent of the Board from among the institution’s stockholders, and institution boards must appoint outside directors (i.e., directors who are not stockholders).
While regulations do not preclude the appointment of directors who are stockholders, until now the Agency has not provided guidance on their appointment. We are issuing guidance on all board appointments to help ensure that requirements are met and that cooperative principles are maintained.
Among other things, the guidance provided in the revised bookletter
affirms that all directors have the same fiduciary responsibilities and voting rights,
clarifies that all directors are subject to the same disclosures and conflicts of interest rules and requirements, and
encourages institutions to apply the same term of office and the same removal provisions to all appointed directors.
Reports to the Board
In other business, the Board heard several reports, including an economic report and an update on the System’s funding approval.
The economic report addressed general economic issues, especially those issues affecting agriculture, such as farmland values, farm income, the ethanol industry, and farm policy. The report notes that the System’s loan growth rate continues at a strong pace, with an annual growth of 12.3 percent as of September 30, 2006. Other lenders have also seen strong growth in their agricultural loan volume.
According to the funding approval update, the weighted average maturity on the System’s outstanding debt has increased significantly over the past five years because of favorable interest rates and the Common Minimum Liquidity Standard the System imposed on itself in 2003. The number of days of liquidity the System would have to meet its maturing debt obligations in the unlikely event of a disruption to the capital markets is well above the 90-day standard. In addition, the amount of the System’s excess collateral has increased over the past five years although its collateral-to-debt ratio has trended somewhat lower over the most recent two years because of asset and debt growth.
In a closed session, the Office of Secondary Market Oversight provided its regular quarterly report on operations of the Federal Agricultural Mortgage Corporation (Farmer Mac).
FCA Issues 2006 Performance and Accountability Report
In other news, FCA has issued its 2006 Performance and Accountability Report, the highlight of which is that for the 13th consecutive year, the FCA has received an unqualified audit opinion. The report also states that the FCA has achieved all three goals and has achieved or exceeded all of the 18 performance measures in its 2004–2009 strategic plan. These measures determine whether the FCA is effectively carrying out its mission of ensuring that the FCS, which includes Farmer Mac, operates in a safe and sound manner and provides reliable, accessible credit to farmers and farmer cooperatives. The full report is available at www.fca.gov.
The FCA Board has approved five notational votes in recent weeks. Notational votes are actions taken by the FCA Board between Board meetings.
The Board authorized the 29 district associations affiliated with the U.S. AgBank, FCB, to invest in agriculture and rural community bonds under appropriate conditions.
The Board approved the FCS Building Association’s (FCSBA’s) fiscal year 2007 budget, its annual operating plan, and the assessments it will charge FCS banks.
The Board authorized CoBank, ACB, and its affiliated associations to invest in agricultural and rural community securities under appropriate conditions.
The Board authorized the FCSBA to execute a Participating Employer Agreement making the FCSBA a party to the AgFirst Administrative Agreement Regarding Employee Benefit Plans.
The Board authorized the FCB of Texas to invest in certain investment-grade agribusiness securities under appropriate conditions.
The Farm Credit Administration is the safety and soundness regulator of the cooperative Farm Credit System. FCA charters, regulates, and examines the 108 banks, associations, and service corporations of the System. System institutions make loans to agricultural producers and their cooperatives nationwide. Members of the FCA Board are Nancy C. Pellett, Chairman and CEO; Douglas L. “Doug” Flory; and Dallas P. Tonsager.
Note: FCA news releases are available on the Internet. Access the FCA Web site at www.fca.gov.