|News Release||Farm Credit Administration|
1501 Farm Credit Drive
McLean, Virginia 22102-5090
For Immediate Release
NR 08-17 (10-09-08)
Contact: Martha Schober or Christine Quinn, 703-883-4056
Web site: www.fca.gov
FCA Board Adopts Proposed Rule on Disclosure and
McLEAN, Va., October 9, 2008 — The Farm Credit Administration (FCA or Agency) Board today adopted a proposed rule that revises and clarifies FCA regulations related to disclosure and accounting requirements for Farm Credit System (FCS or System) institutions.
The revisions are needed because both the structure of the System and the finance industry’s accounting and reporting standards have changed since these regulations were adopted in 1986.
The proposed rule will be published in the Federal Register for a 60-day comment period. Comments for the proposed rule may be submitted by electronic mail to email@example.com, through the Pending Regulations section of FCA’s Web site at www.fca.gov, or through the federal government Web portal at www.regulations.gov. Comments also may be sent by mail to Gary K. Van Meter, Deputy Director, Office of Regulatory Policy, Farm Credit Administration, 1501 Farm Credit Drive, McLean, VA 22102-5090, or by fax to 703-734-5784. The public may read submitted comments at the FCA office in McLean, Virginia, or on FCA’s Web site at www.fca.gov.
Report on Financial Condition and Performance of the Farm Credit System
In other business, the Board received a report on the financial condition and performance of the FCS by staff from the Office of Examination and the Office of Regulatory Policy.
According to the report, the FCS remains financially strong and continued to meet very significant credit demands during the first six months of this year. The strongest demand came from cooperatives and farmer customers located in the grain belt.
“Despite unprecedented market volatility, the System has continued to have access to the credit markets and to raise funds at competitive rates,” reported Andrew Jacob, Director of the Office of Regulatory Policy.
Asset quality remains high although examiners expect to see a slight deterioration in the coming months. According to Chief Examiner Tom McKenzie, adjustments are being made in both FCS and FCA programs in response to the volatile environment.
System capital ratios have continued a downward trend due to rapid asset growth. However, capital levels remain strong overall and generally well above regulatory minimums. Earnings and liquidity levels remain excellent.
Overall, the CAMELS (capital, asset, management, earnings, liquidity, and sensitivity) ratings of System institutions remain very good, with 80 of 99 institutions rated 1 on a scale of 1 to 5. A rating of 1 is the highest, indicating that the institution is sound in every respect. Five institutions received a rating of 3, which is up by one institution from the previous quarter. Institutions receiving a rating of 3 exhibit higher than normal risk and receive increased supervision. No institution received a rating lower than 3.
Because of the volatility in the agricultural and credit markets, stress from the deteriorating general economy, and stress on certain portions of the agricultural sector, especially livestock, examiners are closely monitoring the portfolios and management actions of System lenders.
“The Farm Credit System banks and associations remain safe and sound amid the current financial market turmoil,” concluded McKenzie.
Chairman Leland Strom said, “Confidence in the System remains at a high level, reflecting its focus on building capital and strengthening lending and business operations during the past two decades. Now, during this period of unprecedented volatility and an environment of increasing risk, even more caution and vigilance will be needed to ensure institutions’ lending programs and internal controls are sound.”
Since the FCA Board meeting on September 11, eight notational votes have occurred. Notational votes are actions taken by the FCA Board between Board meetings.
On September 15, the FCA Board authorized Puerto Rico Farm Credit, ACA, to purchase and hold a limited amount of subordinated debt issued by ArborOne, ACA, and Chattanooga Agricultural Credit Association. On the same day, the Board authorized ArborOne and Chattanooga Agricultural Credit Association to conditionally include subordinated debt in regulatory permanent capital and total surplus.
On September 16, the FCA Board approved the FCA Office of Examination’s fiscal year 2009 Oversight and Examination Plan. The Board also voted to approve the reprogramming of fiscal year 2008 budget funds within the Office of Examination. Also on September 16, the Board voted to conditionally authorize Badgerland Farm Credit Services to acquire and hold ownership interests in the Peak Ridge Private Equity Group’s AgTech Fund.
On September 19, the FCA Board granted preliminary approval for the proposed merger of Federal Land Bank Association of Ponca City, FLCA, with and into Farm Credit Services of Central Kansas, ACA. If approved by the voting stockholders of Ponca City, FLCA, and Central Kansas, ACA, the proposed merger would become effective on December 31, 2008. The continuing association (Farm Credit Services of Central Kansas) will change its name to Farm Credit of the Heartland, ACA.
On September 30, the FCA Board conditionally authorized System banks to acquire and hold as eligible investments Federal Agricultural Mortgage Corporation (Farmer Mac) preferred stock or other capital instruments issued by Farmer Mac.
The Farm Credit Administration is the safety and soundness regulator of the cooperative Farm Credit System (System) and the Federal Agricultural Mortgage Corporation (Farmer Mac). FCA charters, regulates, and examines the 104 banks, associations, and service corporations of the System and Farmer Mac. System institutions make loans to agricultural producers and their cooperatives nationwide. Farmer Mac provides a secondary market for agricultural real estate and rural housing mortgage loans. Members of the FCA Board are Leland A. Strom, Chairman and CEO; Nancy C. Pellett; and Dallas P. Tonsager.
Note: FCA news releases are available on the Web at www.fca.gov.