2008 annual report - AgCountry Farm Credit Services

Transcription

2008 ANNUAL REPORT
TABLE OF CONTENTS
Consolidated Five-Year Summary of Selected Financial Data
Management’s Discussion and Analysis
Report of Management
Report on Internal Control Over Financial Reporting
Report of Audit Committee
Report of Independent Auditors
Consolidated Financial Statements
Notes to Consolidated Financial Statements
Disclosure Information Required by Regulations
Future Payment Funds Policy
Our Commitment to Serving Young, Beginning and Small Farmers
1
2
8
9
10
11
12
16
26
29
30
AgriBank, FCB’s financial condition and results of operations materially affect members’ investment in
AgCountry Farm Credit Services, ACA. To request a free copy of the combined AgriBank, FCB and Affiliated
Associations’ financial reports contact AgCountry Farm Credit Services, ACA at Post Office Box 6020,
Fargo, North Dakota 58108-6020, (701) 282-9494 or via electronic mail to [email protected] or
through our website at www.agcountry.com. You may also contact AgriBank, FCB at 375 Jackson Street, St.
Paul, MN 55101-1810, (651) 282-8800, or via electronic mail to [email protected]. The reports
are also available through AgriBank, FCB’s website at www.agribank.com.
To request a free copy of our annual or quarterly reports contact us as stated above. The annual report is
available on our website 75 days after the end of the calendar year and members are provided a copy of
such report 90 days after the end of the year. The quarterly reports are available 40 days after the end of
each calendar quarter.
CONSOLIDATED FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA
AgCountry Farm Credit Services, ACA
(Dollars in thousands)
2008
Statement of Condition Data
Loans
Allowance for loan losses
Net loans
Investment in AgriBank, FCB
Investment securities
Other property owned
Other assets
Total assets
Obligations with maturities of one year or less
Obligations with maturities greater than one year
Total liabilities
2006*
2005*
2004*
$3,049,792
9,260
3,040,532
67,363
29,366
250
174,223
$2,472,698
4,874
2,467,824
54,685
1,325
700
141,935
$2,098,040
6,135
2,091,905
48,773
--125,153
$1,834,804
6,780
1,828,024
47,410
-177
107,541
$1,684,118
6,305
1,677,813
47,410
-1,164
89,760
$3,311,734
$2,666,469
$2,265,831
$1,983,152
$1,816,147
$46,681
2,713,027
$2,180,071
--
$1,827,568
--
$1,581,277
--
$1,451,373
--
2,759,708
2,180,071
1,827,568
1,581,277
1,451,373
7,475
544,551
6,922
479,476
7,000
431,263
7,046
394,829
7,099
357,675
552,026
486,398
438,263
401,875
364,774
$3,311,734
$2,666,469
$2,265,831
$1,983,152
$1,816,147
Capital stock and participation certificates
Unallocated surplus
Total members' equity
Total liabilities and members' equity
2007*
Statement of Income Data
Net interest income
Provision for (reversal of) loan losses
Patronage and dividend income
Other expense, net
Provision for (reversal of) income taxes
Net income
Key Financial Ratios
Return on average assets
Return on average members' equity
Net interest income as a percentage of average
earning assets
Members' equity as a percentage of assets
Net chargeoffs (recoveries) as a percentage of average loans
Allowance for loan losses as a percentage of loans
Permanent capital ratio
Total surplus ratio
Core surplus ratio
$78,192
4,604
7,182
15,053
642
$65,070
(552)
7,085
23,835
659
$58,220
1,402
5,907
25,232
1,059
$51,428
(1,482)
5,214
21,362
(392)
$48,685
(30,291)
4,458
18,470
8,954
$65,075
$48,213
$36,434
$37,154
$56,010
2.1%
12.4%
2.0%
10.5%
1.7%
8.7%
2.0%
9.8%
3.2%
17.2%
2.7%
16.7%
--
2.9%
18.2%
-0.2%
15.8%
15.5%
15.4%
3.0%
19.3%
0.1%
0.3%
16.3%
16.0%
15.8%
3.0%
20.3%
(0.1%)
0.4%
17.3%
17.0%
16.4%
3.0%
20.1%
-0.4%
16.0%
15.7%
14.9%
0.3%
14.1%
13.9%
13.9%
No income was distributed to members in the form of cash, dividends, stock or allocated surplus during the five years presented.
*Combined for the January 1, 2008 consolidation of AgCountry Farm Credit Services, ACA and Farm Credit Services of Grand Forks, ACA.
1
MANAGEMENT’S DISCUSSION AND ANALYSIS
activity in the real estate markets. Agribusiness loan volume increased as a
result of new customers and increased loan volume with elevators and
ethanol plants due to higher grain prices. In addition, increased loan
volume was seen in our FCS Commercial Finance Group (CFG) and
ProPartners Financial (ProPartners) alliance relationships. The CFG
experienced strong growth in loan volume as new opportunities were
presented in the capital markets with the tightened availability of credit from
many lending institutions and investors. The ProPartners alliance saw
increased volume from input supply financing programs with both new and
existing customers.
The following commentary reviews the consolidated financial position and
consolidated results of operations of AgCountry Farm Credit Services, ACA
and its subsidiaries and provides additional specific information. The
accompanying consolidated financial statements and notes also contain
important information about our financial position and results of operations.
Consolidation/Merger Activity
On January 1, 2008, AgCountry Farm Credit Services, ACA and Farm
Credit Services of Grand Forks, ACA consolidated to form a new
association known as AgCountry Farm Credit Services, ACA.
Simultaneously, the subsidiaries of Farm Credit Services of Grand Forks,
ACA merged into the subsidiaries of AgCountry Farm Credit Services, ACA.
The associations had been operating under a joint management agreement
since April 1, 2007. Additional information regarding this consolidation is
included in Note 1.
Portfolio Distribution
We are chartered to operate in certain counties in North Dakota and
Minnesota. Approximately 30.6% of our total loan portfolio was in the Red
River Valley in North Dakota and Minnesota. No other counties in our
portfolio had more than 5% concentration in loans to borrowers. Based
upon volume, approximately 53.5% and 34.8% of our loans are to
borrowers in the states of Minnesota and North Dakota, respectively at
December 31, 2008.
Forward-Looking Information
Certain sections of this Annual Report contain forward-looking statements.
These statements are not guarantees of future performance and involve
certain risks, uncertainties, and assumptions that are difficult to predict.
Words such as "anticipates", “believes", "could", "estimates", "may",
"should", "will", or other variations on these terms are intended to identify
such forward-looking statements. These statements are based on
assumptions and analyses made in light of experience, historical trends,
current conditions, and expected future developments. However, actual
results and developments may differ materially from our expectations and
predictions due to a number of risks and uncertainties; many of which are
beyond our control. These risks and uncertainties include, but are not
limited to:
•
•
•
•
•
At December 31, 2008, our loan portfolio was distributed between loans to
agricultural producers, loans to agribusiness operations, and loans to other
types of operations representing 67.8%, 27.6% and 4.6% of the loan
portfolio, respectively.
In addition, we provide a leasing program for customers with 22.5% of total
leases in Minnesota, 52.3% of total leases in North Dakota, and 25.2% of
total leases in other states.
Approximately one-third of the operations in our portfolio are involved in the
production of cash grains, primarily corn, soybeans and wheat.
Accordingly, the commercial loan portfolio exhibits some seasonality. These
loans are normally at their lowest levels during the winter months because
of operating repayments following harvest. They then increase throughout
the year as farmers borrow for operating and capital needs.
political, legal, regulatory, and economic conditions and
developments in the United States and abroad,
fluctuations in the agricultural and general economies,
periodically occurring weather-related conditions and plant and
animal disease that impact agricultural productivity and income
and consumer demand,
changes in United States government support of the agricultural
industry, and
bio-terrorism and other terrorism.
Agricultural and Economic Conditions
The Food, Conservation, and Energy Act of 2008 (FCEA/farm bill) was
enacted into law in June 2008. FCEA includes significant federal financial
support for wheat, feed grains, cotton, rice, oilseeds, and dairy, largely
continuing the same total level of financial support to agriculture, while
changing the distribution and methods of allocating such support. FCEA
also contains new, expanded assistance to certain specialty crops, and
added price support and trade protection for domestically produced sugar.
FCEA continues the direct payment, loan rate, and countercyclical
payments (CCP) programs from previous farm support legislation, but the
levels of support provided by each program have changed. Also, FCEA
provides a new income support program called Average Crop Revenue
Election (ACRE).
Loan Portfolio
Loan volume totaled $3.0 billion at December 31, 2008. The changes in
loan volume for the last two years were as follows (in thousands):
Change in loan volume
2008 vs. 2007
2007 vs. 2006
Accrual
Mortgage
$366,562
23.3%
$316,769
25.2%
176,679
19.8%
63,853
7.7%
Nonaccrual
33,853
469.4%
(5,964)
Total loans
$577,094
23.3%
Commercial
$374,658
Strong agricultural economic conditions in 2008 were the result of record
high prices for agricultural commodities and the continued positive impact of
government programs. The USDA reported $86.8 billion in net farm income
in 2007 representing a significant increase over the reported $59.0 billion in
net farm income in 2006, and 42% higher than the 10-year average net
income of $61.1 billion. Increases in income were due to higher agricultural
commodity prices, partially offset by increases in agricultural production
costs, including fuel, land, fertilizer and pesticides. Net farm income is
forecast to be $86.9 billion (down from $96.6 billion previously forecasted)
in 2008 but virtually unchanged from 2007. Net cash income, a more critical
statistic for lenders, is forecast to be $90.7 billion in 2008, a $3.3 billion
(4%) increase over 2007 net cash income. Sales of 2007 crops in 2008
(45.3%)
17.9%
The increased loan volume came from a variety of sources in our different
marketing channels. Increased producer volume was from a combination
of new customers, increased operating costs, increased machinery
financing both through branches and dealer programs and increased
2
account for the larger increase in net cash income compared to the
increase in net farm income.
Fourth-quarter 2008 prices for live equivalent 51-52% lean hogs are
expected to average $41-$43 per cwt, or about 6 percent above last year.
The 2008 production year saw its share of challenges. Planting timeliness
was challenged due to wet planting conditions; crop maturity (primarily corn,
sunflowers, and edible beans) was pushed due to a cooler than average
growing season; and harvest was delayed due to excessive wet conditions
and late maturity. In spite of this, overall production was quite good. Wheat
production was excellent, soybeans average, and corn was average to
above average. Min-Dak producers were unable to lift ~ 20,000 acres of
sugar beets due to excessive moisture. Multi-peril crop insurance played a
big role in crop income for 2008. Crop revenue coverage and revenue
assurance prices were set at historic levels in February 2008. Fall 2008
prices dropped off significantly creating large trigger factors. This was very
favorable for producers. The levels of multi-peril crop insurance coverage
are projected to be lower than 2008 levels as a result of lower crop prices.
Multi-peril crop insurance provides a very valuable risk management tool for
producers. Many producers have taken advantage of recent profitability
and have built sufficient financial strength into their farm units to withstand a
time of reduced margins.
The Farm Credit System (the System) continues to fulfill its mission and be
a reliable source of debt capital for the farmers, ranchers and other rural
businesses that we serve. However, during the second half of 2008, the
culmination of negative economic developments in the global financial
markets created a high level of volatility and uncertainty among global
financial institutions in general. This volatility has constrained the System’s
ability to issue debt in the preferred maturities and structures that have
traditionally been used to fund our loan portfolios. However, the System has
been able to issue debt with a broad enough range of maturities and
structures to allow the AgriBank District to continue to offer our complete
array of loan products. Responses by the Federal Government, including
explicit actions to protect the housing Government Sponsored Entities
(GSEs) and to capitalize and guarantee the liabilities of many commercial
banks, have had an unintended consequence of increasing our spread over
Treasury rates relative to these institutions and reducing our ability to issue
debt at preferred maturities and structures. During December 2008 and into
January 2009, the spreads to Treasuries have narrowed significantly from
levels seen in the fourth quarter of 2008, but still remain “wide” of housing
GSE and government guaranteed bank debt. Because of the System’s
sound financial condition, we expect to continue to issue debt securities as
necessary to meet our funding needs. However, spreads relative to
Treasuries and swap rates are expected to remain at higher levels than our
historical experience.
The sugar industry continues to deal with change and uncertainty. This
sector has been profitable. These producers are highly susceptible to
weather and legislative forces, including the Farm Bill. Sugar beet grower
profitability, sugar beet stock and specialized sugar beet equipment values
could retract without continued legislative protection. As of January 1,
2008, there was no longer a Mexican Tier II tariff as outlined in the NAFTA
(North American Free Trade Agreement) and this could have serious
implications to producers from both countries. The Doha Round of the
WTO (World Trade Organization) continues to push for the liberalization of
agriculture trade, which could potentially increase market access and over
supply the U.S. sugar market.
Agricultural economic conditions are somewhat unsteady. We have seen
significant price drops, with some recovery, in most major agricultural
commodities. Real estate markets have remained solid throughout the
association. However, there is talk that sales and cash rents may level off
or soften some in light of a tightening outlook for production agriculture.
The U.S. ethanol industry continues to be viable, but expansion has slowed
due to losses experienced in 2008. Current economics support operations,
but rising raw product costs (corn), higher plant construction costs,
blending/infrastructure constraints and lower ethanol prices have tempered
growth. The rapid expansion was caused by the government phase out of
methyl tertiary-butyl ether and the government's desire for renewable fuels
and a comprehensive energy bill. State and Federal subsidies continue to
support this industry. Government support remains positive as evidenced
by passage of the energy bill. Increased crude oil prices and associated
increased gasoline and diesel fuel prices had been key elements in
supporting ethanol's price. Industry specialization, improved technology
with efficient production, continued government support and industry
blending capacity/infrastructure are key components to this industry’s
health.
The farm sector in 2008 saw a large increase in the value of crop
production as well as rising costs of production. The value of crop
production, at $181 billion, is forecast to exceed its previous record (set in
2007) by $30 billion, a 20-percent increase. Prices of major crops (corn,
soybeans, wheat) were trending upward in late 2007 and continued doing
so in the first part of 2008 while the marketing of the remainder of the 2007
harvest was being completed. These prices have declined in recent months
as the 2008 harvests progressed however are still high by historical
standards. Consequently, with large harvests to sell at historically high
prices, 2008 has proven to be another good year for the U.S. farm economy
as a whole, driven by strong demand for feed crops, oilseeds, and food
grains. The values of both crop and livestock production have trended
steadily upward since 1970. However, the year-to-year movements in the
two measures have not always been synchronized—in 2008, the rise in the
value of crop production is expected to be nearly six times that of livestock.
This disparity will cause income circumstances to vary across farms
depending on their mix of commodities and inputs.
Analysis of Risk
The following table summarizes risk assets (accruing volume includes
accrued interest receivable) and delinquency information (in thousands):
Despite steep declines in feed grain prices, adverse effects from the current
worldwide economic downturn are being felt throughout the cattle and beef
sectors. In addition to declining grain prices, oil price declines are benefiting
the sector. The appreciation of the dollar against most foreign currencies is
making U.S. beef more expensive internationally, dampening foreign
demand. However, prices for corn, feeder cattle, fed cattle, and live cattle
futures are at levels commensurate to positive cattle feeding margins for
cattle placed on feed now for marketing in the spring of 2009. Falling feed
costs, which are likely to continue into 2009, will provide little relief for dairy
producers. Milk prices are also declining and are expected to continue to do
so into next year. The stronger dollar has also disadvantaged U.S.
producers. The outlook is for continued weakening exports into 2009,
especially for dry products. The all milk price is expected to fall to between
$14.95 to $15.75 per cwt next year, a drop from 2008’s expected average
of $18.30 to $18.40 per cwt. USDA lowered its fourth-quarter estimate of
commercial pork production by 80 million pounds due to lower-thanexpected hog slaughter in October 2008. Production is expected to be
nearly 6.21 billion pounds, less than 1 percent above fourth quarter 2007.
As of December 31
2008
2007
2006
Loans:
Accruing restructured
$999
$1,080
Past due 90 days or more still accruing
2,268
510
--
Nonaccrual
41,065
7,212
13,176
Total risk loans
44,332
8,802
14,520
250
700
--
$44,582
$9,502
$14,520
Total risk assets
3
$1,344
Risk loans as a percentage of total loans
1.4%
0.3%
0.7%
Total delinquencies
as a percentage of total loans
0.7%
0.2%
0.7%
At December 31, 2008, all of the loans past due 90 days or more and still
accruing interest were allocated to us through our participation with
ProPartners. See Note 3 for additional information. Based on analysis,
these loans were adequately secured and in the process of collection.
investment notes in a trust of equipment loans. These were purchased
through our participation in CFG. For further information, see Note 3.
Results of Operations
The volume of nonaccrual loans increased from 2007, but remained at an
acceptable level at December 31, 2008, and represented 1.3% of our
total portfolio. The material increase in nonaccrual loans from 2007 to
2008 primarily reflects the transfer of nine agribusiness accounts to
nonaccrual status in 2008. The agribusiness loans transferred to
nonaccrual status were in the ethanol and poultry industry. At December
31, 2008, 83.2% of our nonaccrual loans were current.
The following table illustrates profitability information (in thousands):
For the year ended December 31
Net income
Return on average assets
Return on average members' equity
The credit quality of our portfolio declined slightly during 2008. Adversely
classified assets increased from 1.6% of the portfolio at December 31,
2007, to 2.5% of the portfolio at December 31, 2008. Adversely classified
assets are assets we have identified as showing some credit weakness
outside our credit standards. We have considered portfolio credit quality
in assessing the reasonableness of our allowance for loan losses.
•
•
•
The allowance for loan losses is an estimate of losses on loans in our
portfolio as of the financial statement date. We determine the appropriate
level of allowance for loan losses based on the periodic evaluation of
factors such as:
Net interest income
Provision for loan losses
Patronage income
Allowance as a percentage of:
Loans
Nonaccrual loans
Total risk loans
Net chargeoffs (recoveries) as a
percentage of average loans
Adverse assets to risk funds
$48,213
2.0%
$36,434
1.7%
12.4%
10.5%
8.7%
2008 vs.
2007 vs.
2007
2006
$13,122
$6,850
(5,156)
97
1,954
1,178
19,235
(10,773)
6,405
(3,923)
Financially related services and
miscellaneous income, net
Operating expense
Consolidation expense
Provision for income taxes
Comparative allowance coverage of various loan categories follows:
2007
$65,075
2.1%
changes in income as discussed below,
changes in assets discussed in the Loan Portfolio Section, and
changes in members’ equity discussed in the Capital Adequacy
Section.
Increase (decrease) in net income
loan loss history,
portfolio quality, and
current economic and environmental conditions.
2008
2006
The following table summarizes the changes in components of net income
(in thousands):
Analysis of the Allowance for Loan Losses
As of December 31
2007
Changes in these ratios relate directly to:
In certain circumstances, we use various government guarantee
programs to reduce the risk of loss. At December 31, 2008, $222 million
of our loans were, to some level, guaranteed under these government
programs.
•
•
•
2008
320
17
(1,085)
400
2006
Total change in net income
0.3%
22.5%
20.9%
0.2%
67.6%
55.4%
0.3%
46.6%
42.3%
-16.4%
-9.7%
0.1%
8.9%
$16,862
$11,779
Net Interest Income
Net interest income was $78.2 million for the year ended December 31,
2008. The following table quantifies changes in net interest income (in
thousands):
Changes in net interest income due to:
In our opinion, the allowance for loan losses was reasonable in relation to
the probable losses in the loan portfolio at December 31, 2008. The
changes in the ratios reflect the increase in risk assets, primarily from the
transfer of nine agribusiness accounts to nonaccrual status in 2008. The
agribusiness loans transferred to nonaccrual status were in the ethanol and
poultry industry.
Changes in volume
Changes in rates
Changes in nonaccrual income and other
Net change
Additional Loan Information
Additional loan information is included in Notes 3, 12 and 13.
2008 vs.
2007 vs.
2007
2006
$15,244
(2,104)
$7,388
(854)
316
(18)
$13,122
$6,850
Net interest income included income on nonaccrual loans that totaled $798
thousand in 2008, $596 thousand in 2007, and $234 thousand in 2006.
Nonaccrual income is recognized when:
Investment Securities
•
•
•
In addition to loans, we hold investment securities. Investments totaled
$29.4 million at December 31, 2008 and $1.3 million at December 31, 2007.
We had no investments at December 31, 2006. Of the total investments,
$1.3 million is part of the 3-year Agricultural and Rural Community (ARC)
bond pilot program. The remaining $28.1 million represents our share of
received in cash,
collection of the recorded investment is fully expected, and
prior chargeoffs have been recovered.
Net interest margin (net interest income divided by average earning assets)
was 2.7% in 2008, 2.9% in 2007, and 3.0% in 2006.
4
Provision for Loan Losses
Operating Expenses
The variance in the provision for loan losses is primarily related to the
transfer of nine agribusiness accounts to nonaccrual status in 2008. The
agribusiness loans transferred to nonaccrual status were in the ethanol and
poultry industry.
The following presents a comparison of operating expenses by major
category and the operating rate (operating expenses as a percentage of
average earning assets) for the past three years (in thousands):
2008
2007
2006
Patronage Income
Salaries and benefits
Purchased and vendor services
Communications
Occupancy and equipment
Advertising and promotion
Examination
Farm Credit System insurance
Other
We receive two different types of discretionary patronage from AgriBank.
AgriBank’s Board of Directors sets the level of patronage for each of the
following:
•
•
patronage on our note payable with AgriBank,
equalization income based on our preferred stock investment in
AgriBank.
We received patronage income based on the average balance of our note
payable to AgriBank. AgriBank’s Board of Directors sets the patronage rate.
We recorded patronage income of $6.9 million in 2008, $6.6 million in 2007,
and $5.3 million in 2006. Changes in our note payable to AgriBank and, to a
lesser extent, patronage rate changes caused the variances in the
patronage income amounts. The patronage rates paid by AgriBank were 27
basis points in 2008, 34 basis points in 2007, and 32 basis points in 2006.
Total operating expense
Less: Related services
and other income
Net operating expense
Net operating rate
Prior to 2008, we received another component of patronage, referred to as
equalization income, from AgriBank. The quarterly average balance of any
excess stock investment in AgriBank is used to determine this amount. The
targeted rate equals the average cost of funds for all affiliated associations
as a group. As of December 31, 2008, we no longer had any preferred
stock investment in AgriBank. Equalization income totaled $24 thousand for
2008, $193 thousand for 2007, and $410 thousand for 2006.
$31,162
5,977
736
4,205
1,116
838
4,380
8,862
$24,560
4,113
614
4,170
1,303
817
3,301
7,625
$23,307
3,628
660
3,464
964
800
2,852
6,905
57,276
46,503
42,580
39,803
21,351
14,980
$17,473
$25,152
$27,600
0.6%
1.1%
1.4%
The operating expense increases were primarily related to increased
salaries and benefits costs, purchased services costs primarily related to
the conversion to Farm Credit Financial Partners, Inc. technology systems
and Farm Credit System insurance expense.
Consolidation Expenses
We began receiving patronage from CoBank, ACB in 2006. This patronage
income totaled $272 thousand in 2008, $299 thousand in 2007, and $160
thousand in 2006.
Consolidation expenses related to our January 1, 2008 consolidation were
primarily related to employee retention and severance costs. Expenses
also included attorney fees, printing and postage costs, and consulting
charges.
Financially Related Services and Miscellaneous Income, Net
Provision for Income Taxes
Financially related services and miscellaneous income, net is primarily
comprised of insurance related income. The increase in financially related
services and miscellaneous income, net is primarily due to a record year in
multi-peril crop insurance income. Annual multi-peril crop insurance
premiums are based on the base price for crops which is established in
February of each year. The base price for crops in 2008 was approximately
70% higher than the base price for 2007 crops. As a result, the producer
premiums were higher in 2008 versus 2007 resulting in higher commission
income for AgCountry in 2008.
We recorded tax expense of $642 thousand for the year ended December
31, 2008, compared to $659 thousand for 2007, and $1.1 million for 2006.
The changes in provision for income taxes are related to lower taxable
incomes in 2008 and 2007. See Note 9 for additional discussion.
Funding and Liquidity
We borrow from AgriBank under a note payable, in the form of a line of
credit, as described in Note 7. During 2008, our average balance was $2.5
billion with an average interest rate of 3.6%. Our average balance during
2007 was $1.9 billion with an average interest rate of 5.2% and during 2006
our average balance was $1.7 billion with an average interest rate of 4.9%.
Our other source of lendable funds is from unallocated surplus.
Our approach to sustaining sufficient liquidity to fund operations and meet
current obligations is to maintain an adequate line of credit with AgriBank.
At December 31, 2008, we had $1.2 billion available under our line of credit.
We generally apply excess cash to this line of credit.
5
capacity and preferences. We had $541.2 million of CFG volume at
December 31, 2008, $354.6 million at December 31, 2007, and $251.4
million at December 31, 2006. We also had $298.2 million of available
commitment on CFG loans at December 31, 2008.
We offer variable, fixed, capped, indexed, and adjustable interest rate loan
programs to our borrowers. Variable and fixed rate lease programs are
also offered. We determine interest margins charged on each lending
program based on:
•
•
•
ProPartners Financial
cost of funds,
market conditions, and
the need to generate sufficient earnings.
We participate in ProPartners Financial (ProPartners) with other
associations in North Dakota, Minnesota, Illinois, Wisconsin, and Michigan.
ProPartners provides financing programs for clients of agribusiness
companies. ProPartners is directed by representatives from the
participating associations. The income, expense and loss sharing
arrangements are based on each association’s participation interest of
ProPartners volume. Each association’s allocation is established according
to a prescribed formula based on risk funds of the associations. We had
$96.4 million of ProPartners volume at December 31, 2008, $80.0 million at
December 31, 2007, and $57.4 million at December 31, 2006.
The repricing attributes of our line of credit generally correspond to the
repricing attributes of our loan portfolio which significantly reduces our
market interest rate risk.
Capital Adequacy
Total members’ equity increased $65.6 million during 2008 due to net
income for the period and an increase in capital stock and participation
certificates outstanding.
Trade Credit
Members’ equity position information is as follows (in thousands):
As of December 31
Members' equity
2008
$552,026
2007
$486,398
We have entered into agreements with certain dealer networks to provide
alternative service delivery channels to borrowers. These trade credit
opportunities create more flexible and accessible financing options to
borrowers through programs such as dealer point-of-purchase financing.
2009
$438,263
Surplus as a percentage
of members' equity
98.6%
98.6%
98.4%
Permanent capital ratio
14.1%
15.8%
16.3%
Total surplus ratio
13.9%
15.5%
16.0%
Core surplus ratio
13.9%
15.4%
15.8%
AgriSolutions
We have an alliance with AgriSolutions, a farm software and consulting
company, to provide farm records software.
Farm Cash Management
Our capital plan is designed to maintain an adequate amount of surplus and
allowance for loan losses which represents our reserve for adversity prior to
impairment of stock. We manage our capital to allow us to meet member
needs and protect member interests, both now and in the future.
We offer Farm Cash Management to our members. Farm Cash
Management links members’ revolving lines of credit with an AgriBank
Investment Bond to optimize members’ use of funds.
Mission Related Investments
At December 31, 2008, our permanent capital, total surplus, and core
surplus ratios significantly exceeded the regulatory minimum requirements.
See Note 8 for further discussions of these regulatory ratios.
We participate in an Investment for Rural America pilot program authorized
during 2006 by the Farm Credit Administration in order to meet the
changing needs of agriculture and rural America by making investments
that support farmers, ranchers, agribusinesses, and their rural communities
and businesses. These investments will help to increase their well-being
and prosperity by providing an adequate flow of capital into rural areas. We
had $1.3 million of volume under this pilot program outstanding at
December 31, 2008 and at December 31, 2007. We made no investments
prior to 2007.
In addition to these regulatory requirements, we establish an optimum
permanent capital target. This target allows us to maintain a capital base
adequate for future growth, investment in new products and services, and
for earnings and credit quality volatility. The target is subject to revision as
circumstances change. As of December 31, 2008, we have established a
long-term capital objective of not less than 12% of the total and core surplus
ratios as defined by the Farm Credit Administration.
The changes in our capital ratios reflect changes in capital and assets.
Refer to the Loan Portfolio Section for further discussion of the changes in
assets. Additional members’ equity information is included in Note 8.
Relationship with AgriBank
Borrowings
Initiatives
We borrow from AgriBank to fund our lending operations in accordance with
the Farm Credit Act of 1971, as amended. Approval from AgriBank is
required for us to borrow elsewhere. A General Financing Agreement, as
discussed in Note 7, governs this lending relationship. Cost of funds under
the General Financing Agreement includes:
We are involved in a number of initiatives designed to improve our credit
delivery, related services, and marketplace presence.
FCS Commercial Finance Group
•
•
•
•
We participate in the FCS Commercial Finance Group (CFG) alliance with
other associations in Minnesota and North Dakota to meet the financial
needs of agricultural producers and agribusiness operations. The CFG is
governed by representatives from each participating association. The
income, expense and loss sharing arrangements are based on each
association’s participation interest of the CFG volume. Each association
determines its commitment for new volume opportunities based on its
a marginal cost of debt component,
a cost of servicing component,
a bank spread component, and
a risk premium component, if applicable.
In the periods presented, we were not subject to the risk premium
component. The marginal cost of debt approach simulates match funding
the cost of underlying debt with substantially the same terms as the
6
anticipated terms of our loans to borrowers. This methodology substantially
protects us from interest rate risk.
Affect on Members’ Investment
We are required to invest in AgriBank capital stock as a condition of
borrowing. This investment may be in the form of purchased stock or stock
representing previously distributed AgriBank surplus. As of December 31,
2008, we were required to maintain a common stock investment equal to
2.5% of the average quarterly balance of our note payable to AgriBank.
AgriBank’s current bylaws allow AgriBank to increase the required
investment to 4.0%. Effective in 2009, our required investment will include
an additional 1% on growth that exceeds a targeted rate.
Due to the nature of our financial relationship with AgriBank, the financial
condition and results of operations of AgriBank materially affect our
members’ investment. To request a free copy of the combined AgriBank,
FCB and Affiliated Associations’ financial reports contact AgCountry Farm
Credit Services, ACA at Post Office Box 6020, Fargo, North Dakota
58108-6020, (701) 282-9494 or via electronic mail to
[email protected] or through our website at
www.agcountry.com or contact AgriBank at 375 Jackson Street, St. Paul,
MN 55101-1810, (651) 282-8800, or via electronic mail to
[email protected]. The reports are also available through
AgriBank’s website at www.agribank.com.
At December 31, 2008, $47.4 million of our investment in AgriBank
consisted of stock representing distributed AgriBank surplus and $20.0
million consisted of purchased investment. For the periods presented in this
report, we have received no dividend income on this stock investment and
we do not anticipate any in future years.
To request a free copy of our annual or quarterly reports contact us as
stated above. The annual report is available on our website 75 days after
the end of the calendar year and members are provided a copy of such
report 90 days after the end of the year. The quarterly reports are available
40 days after the end of each calendar quarter.
Investment
Patronage
Relationship with Other Farm Credit Institutions
We receive patronage income based on the annual average daily balance
of our note payable to AgriBank and equalization income based on the
quarterly average daily balance of our excess stock investment in AgriBank.
AgriBank’s Board of Directors sets the patronage rates.
Effective July 1, 2004, we executed an "Agreement for the Transition of
Services" with Farm Credit Financial Partners, Inc. (FPI), a Farm Credit
System service corporation. This agreement was revised to extend beyond
our January 1, 2008 consolidation date with Farm Credit Services of Grand
Forks, ACA. During that time period, we transitioned the purchase of some
of the services previously provided by AgriBank to FPI. Effective July 28,
2008, we completed the transition of our loan accounting, loan origination
and general ledger systems from AgriBank to FPI. As part of this
relationship, as of December 31, 2008, we had a $934 thousand equity
investment in FPI. The total cost of services we purchased from FPI was
$3.8 million in 2008, $1.4 million in 2007, and $842 thousand in 2006.
Purchased Services
We purchase various services from AgriBank including:
•
•
•
•
certain information systems,
certain financial services,
certain accounting and reporting services, and
selected retail product processing and support.
We have a relationship with CoBank, ACB which involves purchasing or
selling participation interests in loans. As part of this relationship, as of
December 31, 2008, we had a $363 thousand equity investment in
CoBank, ACB. CoBank, ACB provides direct loan funds to associations in
its chartered territory and also makes loans to cooperatives and other
eligible borrowers.
The total cost of services we purchased from AgriBank was $880 thousand
in 2008, $1.8 million in 2007, and $2.0 million in 2006. As discussed in the
Relationship with Other Farm Credit Institutions Section, during 2008, we
transitioned some of the services previously provided by AgriBank to Farm
Credit Financial Partners, Inc.
7
REPORT OF MANAGEMENT
We prepare the consolidated financial statements of AgCountry Farm Credit Services, ACA and are responsible for their integrity and objectivity,
including amounts that must necessarily be based on judgments and estimates. The consolidated financial statements have been prepared in
conformity with accounting principles generally accepted in the United States of America. The consolidated financial statements, in our opinion,
fairly present the financial condition of AgCountry Farm Credit Services, ACA. Other financial information included in the annual report is
consistent with that in the consolidated financial statements.
To meet our responsibility for reliable financial information, we depend on accounting and internal control systems designed to provide reasonable
but not absolute assurance that assets are safeguarded and transactions are properly authorized and recorded. Costs must be reasonable in
relation to the benefits derived when designing accounting and internal control systems. Financial operations audits are performed to monitor
compliance. PricewaterhouseCoopers LLP, our independent auditors, audit the consolidated financial statements. They also conduct a review of
internal controls to the extent necessary to comply with generally accepted auditing standards in the United States of America. The Farm Credit
Administration also performs examinations for safety and soundness as well as compliance with applicable laws and regulations.
The Board of Directors has overall responsibility for our system of internal control and financial reporting. The Board of Directors and its Audit
Committee consults regularly with us and meets periodically with the independent auditors and other auditors to review the scope and results of
their work. The independent auditors have direct access to the Board of Directors, which is composed solely of directors who are not officers or
employees of AgCountry Farm Credit Services, ACA.
The undersigned certify we have reviewed AgCountry Farm Credit Services, ACA’s annual report and it has been prepared in accordance with all
applicable statutory or regulatory requirements and the information contained herein is true, accurate, and complete to the best of our knowledge
and belief.
Mark Ellison
Chairperson of the Board
Robert C. Bahl
President and Chief Executive Officer
Jeremy W. Oliver
Senior Vice President - Corporate Finance and Information Services
February 27, 2009
8
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
AgCountry Farm Credit Services, ACA’s principal executives and principal financial officers, or persons performing similar functions, are responsible for
establishing and maintaining adequate internal control over financial reporting for the Association’s consolidated financial statements. For purposes of
this report, “internal control over financial reporting” is defined as a process designed by, or under the supervision of the Association’s principal
executives and principal financial officers, or persons performing similar functions, and effected by its boards of directors, management and other
personnel, to provide reasonable assurance regarding the reliability of financial reporting information and the preparation of the consolidated financial
statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those
policies and procedures that: (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and
dispositions of the assets of the Association, (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial information in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures are
being made only in accordance with authorizations of management and directors of the Association, and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use or disposition of the Association’s assets that could have a material effect on its
consolidated financial statements.
The Association’s management has completed an assessment of the effectiveness of internal control over financial reporting as of December 31, 2008.
In making the assessment, management used the framework in Internal Control — Integrated Framework, promulgated by the Committee of Sponsoring
Organizations of the Treadway Commission, commonly referred to as the “COSO” criteria.
Based on the assessment performed, the Association concluded that as of December 31, 2008, the internal control over financial reporting was effective
based upon the COSO criteria. Additionally, based on this assessment, the Association determined that there were no material weaknesses in the
internal control over financial reporting as of December 31, 2008.
Robert C. Bahl
President and Chief Executive Officer
Jeremy W. Oliver
Senior Vice President - Corporate Finance and Information Services
February 27, 2009
9
REPORT OF AUDIT COMMITTEE
The consolidated financial statements were prepared under the oversight of the Audit Committee. The Audit Committee is composed of a subset of the
Board of Directors of AgCountry Farm Credit Services, ACA. The Audit Committee oversees the scope of the Association’s internal audit program, the
approval and independence of PricewaterhouseCoopers LLP (PwC) as our independent auditors, the adequacy of the Association’s system of internal
controls and procedures, and the adequacy of management’s action with respect to recommendations arising from those auditing activities. The Audit
Committee’s responsibilities are described more fully in the Internal Control Policy and the Audit Committee Charter.
Management is responsible for internal controls and the preparation of the consolidated financial statements in accordance with accounting principles
generally accepted in the United States of America. PwC is responsible for performing an independent audit of the consolidated financial statements in
accordance with generally accepted auditing standards in the United States of America and to issue their report based on their audit. The Audit
Committee’s responsibilities include monitoring and overseeing these processes.
In this context, the Audit Committee reviewed and discussed the audited consolidated financial statements for the year ended December 31, 2008, with
management. The Audit Committee also reviewed with PwC the matters required to be discussed by Statement on Auditing Standards No. 114, The
Auditor’s Communication with Those Charged with Governance, and both PwC and the internal auditors directly provided reports on significant matters
to the Audit Committee.
The Audit Committee had discussions with and received written disclosures from PwC confirming its independence. The Audit Committee also reviewed
the non-audit services provided by PwC, if any, and concluded these services were not incompatible with maintaining PwC’s independence. The Audit
Committee discussed with management and PwC such other matters and received such assurances from them as the Audit Committee deemed
appropriate.
Based on the foregoing review and discussions, and relying thereon, the Audit Committee recommended that the Board of Directors include the audited
consolidated financial statements in the Annual Report for the year ended December 31, 2008.
Jack Hansen
Chairperson of the Audit Committee
Roger Weinlaeder
Roger Bernstrom
Alton Hermunslie
Michael A. Long
Greg Nelson
Mike Vig
February 27, 2009
10
David Johnsrud
PricewaterhouseCoopers LLP
225 South Sixth Street
Suite 1400
Minneapolis MN 55402
Telephone (612) 596 6000
www.pwc.com
Report of Independent Auditors
To the Board of Directors and Members of
In our opinion, the accompanying consolidated statement of condition and the related consolidated statements of income, of changes in members’ equity and
of cash flows present fairly, in all material respects, the financial position of AgCountry Farm Credit Services, ACA (the Association) and its subsidiaries at
December 31, 2008, 2007 and 2006, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America. These financial statements are the responsibility of the Association’s management. Our responsibility is
to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing
standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
As described in Note 1, the consolidated financial statements give effect to the consolidation of AgCountry Farm Credit Services, ACA and Farm Credit
Services of Grand Forks, ACA on January 1, 2008 in a transaction accounted for on a historical cost basis similar to that of a pooling of interests.
February 27, 2009
11
CONSOLIDATED STATEMENT OF CONDITION
As of December 31
2008
2007*
2006*
ASSETS
Loans
$3,049,792
$2,472,698
$2,098,040
9,260
4,874
6,135
3,040,532
2,467,824
2,091,905
Investment in AgriBank, FCB
67,363
54,685
48,773
29,366
1,325
--
Accrued interest receivable
49,316
50,688
48,019
Premises and equipment, net
28,420
22,438
21,014
250
700
--
Assets held for lease, net
69,589
56,295
42,828
Other assets
26,898
12,514
13,292
$3,311,734
$2,666,469
$2,265,831
Net loans
Total assets
LIABILITIES
Note payable to AgriBank, FCB
$2,713,027
$2,132,532
$1,782,929
Accrued interest payable
22,317
26,633
23,432
Net deferred income tax liability
11,909
4,775
5,472
Other liabilities
12,455
16,131
15,735
2,759,708
2,180,071
1,827,568
Total liabilities
MEMBERS' EQUITY
Capital stock and participation certificates
7,475
6,922
7,000
544,551
479,476
431,263
552,026
486,398
438,263
$3,311,734
$2,666,469
$2,265,831
Unallocated surplus
Total members' equity
Total liabilities and members' equity
The accompanying notes are an integral part of these consolidated financial statements.
12
CONSOLIDATED STATEMENT OF INCOME
Year ended December 31
2008
Interest income
Interest expense
Net interest income
2006*
$170,491
$165,614
$140,718
92,299
100,544
82,498
78,192
65,070
58,220
4,604
Net interest income after provision for loan losses
2007*
73,588
(552)
65,622
1,402
56,818
Other income
Patronage income
7,182
7,085
5,907
42,999
23,764
17,359
50,181
30,849
23,266
Salaries and employee benefits
31,162
24,560
23,307
Other operating expense
26,114
21,943
19,273
776
1,096
11
58,052
47,599
42,591
Income before income taxes
65,717
48,872
37,493
Provision for income taxes
642
659
1,059
$65,075
$48,213
$36,434
Financially related services and miscellaneous income, net
Total other income
Operating and other expense
Consolidation expense
Total operating and other expense
Net income
13
CONSOLIDATED STATEMENT OF CHANGES IN MEMBERS' EQUITY
Capital
Stock and
Total
Participation
Unallocated
Members'
Certificates
Surplus
Equity
$7,046
$394,829
$401,875
--
36,434
36,434
Capital stock/participation certificates issued
428
--
428
Capital stock/participation certificates retired
(474)
--
(474)
Balance at December 31, 2005*
Net income
7,000
431,263
438,263
--
48,213
48,213
385
--
385
(463)
--
(463)
Net income
6,922
479,476
486,398
--
65,075
65,075
7,570
--
7,570
(7,017)
--
(7,017)
Balance at December 31, 2008
$7,475
Net income
$544,551
$552,026
14
CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended December 31
2008
Cash flows from operating activities
Net income
Adjustments to reconcile net income to cash flows from operating activities:
Depreciation on premises and equipment
Depreciation on assets held for lease
Increase in accrued interest receivable
(Increase) decrease in other assets
(Decrease) increase in accrued interest payable
Increase (decrease) increase in other liabilities
Loss (gain) on sale of other property owned
Write down of other property owned
Gain on sale of premises and equipment
Gain on disposal of assets held for lease
$65,075
2007*
$48,213
2006*
$36,434
1,782
10,973
4,604
(867)
(14,384)
(4,316)
3,458
-450
(316)
(260)
1,742
9,463
(552)
(5,738)
778
3,201
(301)
--(11)
(50)
1,722
7,710
1,402
(14,081)
1,992
7,269
894
(28)
-(134)
(154)
1,124
8,532
6,592
Net cash provided by operating activities
66,199
56,745
43,026
Cash flows from investing activities
Increase in loans, net
Purchases of investment in AgriBank, FCB
Purchases of investment securities
Purchases of assets held for lease, net
Sales of other property owned, net
Purchases of premises and equipment, net
(575,106)
(12,678)
(28,041)
(24,007)
-(7,448)
(372,859)
(5,912)
(1,325)
(22,880)
-(3,155)
(263,192)
(1,363)
-(14,290)
391
(2,515)
(647,280)
(406,131)
(280,969)
580,495
586
349,603
(217)
238,128
(185)
581,081
349,386
237,943
---
---
---
$ --
$ --
$ --
$2,239
$46
$79
---
$3,069
$343
$204
-$700
$2,138
$368
$229
-$186
$96,615
$2,312
$97,343
$2,819
$75,229
$2,531
Total adjustments
Net cash used in investing activities
Cash flows from financing activities
Increase in note payable to AgriBank, FCB
Capital stock and participation certificates issued (retired), net
Net cash provided by financing activities
Net change in cash
Cash at beginning of year
Cash at end of year
Supplemental schedule of non-cash activities
Interest transferred to loans
Stock financed by loan activities
Stock applied against loan principal
Stock applied against interest
Loans transferred to other property owned
Supplemental information
Interest paid
Taxes paid
15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
surcharge and guaranteed loans which are deductions to the premium
base. The premium rate on this base, originally 15 basis points, increased
to 18 basis points effective October 1, 2008. AgriBank, in turn, assesses the
associations premiums each year based on these same factors. Previously,
AgriBank assessed the associations annual premiums based on the
average principal outstanding of accrual and nonaccrual loans of the
associations.
NOTE 1: ORGANIZATION AND OPERATIONS
Farm Credit System and District
Farm Credit System Lending Institutions: The Farm Credit System is a
nationwide system of cooperatively owned banks and associations
established by Congress to meet the credit needs of American agriculture.
At December 31, 2008, the Farm Credit System consisted of four Farm
Credit Banks, one Agricultural Credit Bank, and ninety associations.
AgriBank and its affiliated associations are collectively referred to as the
District. At December 31, 2008, the District consisted of seventeen
Agricultural Credit Associations that each have wholly-owned Federal Land
Credit Association and Production Credit Association subsidiaries. Federal
Land Credit Associations are authorized to originate long-term real estate
mortgage loans. Production Credit Associations are authorized to originate
short-term and intermediate-term loans. Agricultural Credit Associations are
authorized to originate long-term real estate mortgage loans and short-term
and intermediate-term loans either directly or through their subsidiaries.
Associations are also authorized to provide lease financing options for
agricultural purposes. AgriBank provides funding to all associations
chartered within the District.
Association
AgCountry Farm Credit Services, ACA and its subsidiaries, AgCountry
Farm Credit Services, FLCA and AgCountry Farm Credit Services, PCA are
lending institutions of the Farm Credit System. We are a member-owned
cooperative providing credit and credit-related services to, or for the benefit
of, eligible members for qualified agricultural purposes in the counties of
Barnes, Cass, Cavalier, Dickey, Grand Forks, Griggs, LaMoure, Nelson,
Pembina, Ramsey, Ransom, Richland, Sargent, Steele, Stutsman, Towner,
Traill, and Walsh in the state of North Dakota and Becker, Beltrami, Big
Stone, Clay, Clearwater, Douglas, Grant, Hubbard, Kittson, Koochiching,
Lake of the Woods, Mahnomen, Marshall, Norman, Ottertail, Pennington,
Polk, Pope, Red Lake, Roseau, Stevens, Todd, Traverse, Wadena, and
Wilkin in the state of Minnesota.
Associations are authorized to provide, either directly, or in participation
with other lenders, credit and related services to eligible borrowers. Eligible
borrowers may include farmers, ranchers, producers or harvesters of
aquatic products, rural residents and farm-related service businesses. In
addition, associations can participate with other lenders in loans to similar
entities. Similar entities are parties that are not eligible for a loan from a
Farm Credit System lending institution, but have operations that are
functionally similar to the activities of eligible borrowers. Associations are
also authorized to purchase and hold certain types of investments.
We borrow from AgriBank and provide financing and related services to our
members. Our ACA holds all the stock of the FLCA and PCA subsidiaries
and provides lease financing options for agricultural production or operating
purposes. The FLCA makes secured long-term agricultural real estate and
rural home mortgage loans and provides lease financing options. The PCA
makes short-term and intermediate-term loans and provides lease financing
options for agricultural production or operating purposes.
We, along with other System Associations, own Financial Partners, Inc.
(FPI) which provides technology and other operational services to its
owners.
Farm Credit System Regulator: The Farm Credit Administration is
authorized by Congress to regulate the Farm Credit System banks and
associations. We are examined by the Farm Credit Administration and
certain association actions are subject to the prior approval of the Farm
Credit Administration and/or AgriBank.
We offer various risk management services, including credit life, term life,
credit disability, crop hail, multi-peril crop and livestock insurance for
borrowers and those eligible to borrow. We also offer farm records, fee
appraisals, income tax planning and preparation services, retirement and
succession planning, and producer education services to our members.
Farm Credit Insurance Fund: The Farm Credit Act of 1971, as amended,
established the Farm Credit System Insurance Corporation to administer
the Farm Credit Insurance Fund. The Farm Credit Insurance Fund is used:
•
•
•
Consolidation/Merger Activity
to insure the timely payment of principal and interest on Farm
Credit Systemwide debt obligations,
to insure the retirement of protected borrower capital at par or
stated value, and
for other specified purposes.
On January 1, 2008, AgCountry Farm Credit Services, ACA and Farm
Credit Services of Grand Forks, ACA consolidated to form a new
association known as AgCountry Farm Credit Services, ACA.
Simultaneously, the subsidiaries of Farm Credit Services of Grand Forks,
ACA merged into the subsidiaries of AgCountry Farm Credit Services, ACA.
The associations had been operating under a joint management agreement
since April 1, 2007. The consolidation was accounted for on a historical cost
basis similar to that of a pooling of interests with the associations combined
at their respective book values. Accordingly, the accompanying
consolidated financial statements for all years presented include the
accounts and results of operations of AgCountry Farm Credit Services,
ACA and Farm Credit Services of Grand Forks, ACA as if the merger had
been in effect for all periods presented.
At the discretion of the Farm Credit System Insurance Corporation, the
Farm Credit Insurance Fund is also available to provide assistance to
certain troubled Farm Credit System institutions and for the operating
expenses of the Farm Credit System Insurance Corporation. Each Farm
Credit System bank has been required to pay premiums into the Farm
Credit Insurance Fund until the assets in the Farm Credit Insurance Fund
equal 2% of Systemwide debt obligations. This percentage of aggregate
obligations can be changed as the Farm Credit System Insurance
Corporation, in its sole discretion, determines to be actuarially sound. Prior
to July 1, 2008, the premiums were based on each bank’s annual average
loan principal outstanding. Insurance rates were 15 basis points on accrual
loans and 25 basis points on nonaccrual loans through June 30, 2008.
Effective July 1, the basis for assessing premiums was changed from loans
to debt outstanding. Adjustments to debt outstanding are made for
nonaccrual loans and impaired investments which are assessed a
16
year is capitalized to the recorded investment of the loan. Any cash
received on nonaccrual loans is applied to reduce the recorded investment
in the loan, except in those cases where the collection of the recorded
investment is fully expected and the loan does not have any unrecovered
prior chargeoffs. Nonaccrual loans may be returned to accrual status
when:
Separate net interest income and net income of AgCountry Farm Credit
Services, ACA and Farm Credit Services of Grand Forks, ACA prior to the
consolidation were as follows:
2007
For the Year Ended December 31
2006
Net Interest Income
Farm Credit Services of Grand Forks, ACA
$44,368
20,702
$39,770
18,450
Consolidated AgCountry
Farm Credit Services, ACA
$65,070
$58,220
Net Income
Farm Credit Services of Grand Forks, ACA
$34,989
13,224
$26,933
9,501
Consolidated AgCountry
Farm Credit Services, ACA
$48,213
$36,434
•
•
•
•
Investment Securities: We are authorized to purchase and hold certain
types of investments. As we have the positive intent and ability to hold
these investments to maturity, they have been classified as held-to-maturity
and are carried at cost.
Allowance for Loan Losses: The allowance for loan losses is an estimate
of losses on loans in our portfolio as of the financial statement date. We
determine the appropriate level of allowance for loan losses based on
periodic evaluation of factors such as:
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
•
•
•
Our accounting and reporting policies conform to accounting principles
generally accepted in the United States of America and the prevailing
practices within the financial services industry. Preparing financial
statements in conformity with accounting principles generally accepted in
the United States of America requires us to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
•
•
•
nonaccrual loans,
formally restructured loans, and
loans that are 90 days or more past due and still accruing.
We record a specific allowance to reduce the carrying amount of the risk
loan to the lower of book value or the net realizable value of collateral.
When collection is unlikely, we charge the loan principal and prior year(s)
accrued interest against the allowance for loan losses. Subsequent
recoveries, if any, are added to the allowance for loan losses.
The following are our significant accounting policies:
Loans: Mortgage loan terms range from 5 to 40 years at origination. Almost
all commercial loans are made for agricultural production or operating
purposes with original loan terms of 10 years or less.
We apply Statement of Financial Accounting Standard No. 5, Accounting
for Contingencies, to loans that are not individually assessed as impaired.
An allowance is recorded for probable and estimable credit losses as of the
financial statement date.
Loans are carried at their principal amount outstanding. Loan interest is
accrued and credited to interest income based upon the daily principal
amount outstanding. We currently account for loan origination fees in
accordance with Statement of Financial Accounting Standards No. 91,
Accounting for Nonrefundable Fees and Costs Associated with Originating
or Acquiring Loans and Initial Direct Costs of Leases, which establishes the
accounting for nonrefundable fees and costs associated with lending,
commitment to lend, or purchasing a loan or group of loans. Material fees,
net of related costs, are deferred and recognized over the life of the loan as
an adjustment to the yield. Other loan fees are recorded as an offset to the
related origination costs. The net amount of these fees and expenses is
not material to the consolidated financial statements taken as a whole.
Changes in the allowance for loan losses consist of provision activity,
recorded as “Provision for (reversal of) loan losses” on the Consolidated
Statement of Income, and chargeoffs and recoveries.
Investment in AgriBank: Accounting for our investment in AgriBank is on
a cost plus allocated equities basis. The investment in AgriBank is in the
form of Class P common stock.
Premises and Equipment: The carrying amount of premises and
equipment is at cost, less accumulated depreciation. Calculation of
depreciation is generally on the straight-line method over the estimated
useful lives of the assets. Gains or losses on disposition are included in
current operating results. Maintenance and repairs are included in operating
expense and improvements are capitalized.
We place loans in nonaccrual status when:
•
loan loss history,
portfolio quality, and
current economic and environmental conditions.
Loans in our portfolio that are considered impaired are analyzed individually
under Statement of Financial Accounting Standard No. 114, Accounting by
Creditors for Impairment of a Loan, to establish a specific allowance for
impaired loans. A loan is impaired when it is probable that all amounts due
under the contractual terms of the loan agreement will not be collected. We
measure impairment based on the net realizable value of the collateral. All
risk loans are considered to be impaired loans. Risk loans include:
The consolidated financial statements present the consolidated financial
results of AgCountry Farm Credit Services, ACA (the parent) and
AgCountry Farm Credit Services, FLCA and AgCountry Farm Credit
Services, PCA (the subsidiaries). All material intercompany transactions
and balances have been eliminated in consolidation.
•
principal and interest are current,
prior chargeoffs have been recovered,
the ability of the borrower to fulfill the contractual repayment
terms is fully expected, and
the loan is not classified as doubtful or loss.
principal or interest is delinquent for 90 days or more (unless
the loan is well secured and in the process of collection) or
circumstances indicate that full collection is not expected.
Other Property Owned: We record other property owned, which consists
of real and personal property acquired through foreclosure or deed in lieu of
foreclosure, at the lower of the carrying amount or the fair value less
estimated selling costs. Income and expense from operations and carrying
When a loan is placed in nonaccrual status, we reverse accrued interest to
the extent principal plus accrued interest before the transfer exceeds the
net realizable value of the collateral. Any unpaid interest accrued in a prior
17
Where quoted prices are available in an active market, investment
securities would be classified as Level 1. If quoted prices are not available
in an active market, the fair value of securities is estimated using pricing
models that utilize observable inputs, quoted prices for similar securities
received from pricing services or discounted cash flows. Generally, these
securities would be classified as Level 2. Where there is limited activity or
less transparency around inputs to the valuation, the securities are
classified as Level 3. The fair value disclosures have been expanded in
accordance with SFAS No. 157, as disclosed in Note 13.
value adjustments are included in “Financially related services and
miscellaneous income, net” on the Consolidated Statement of Income.
Leases: We have finance and operating leases. Under finance leases,
unearned income from lease contracts represents the excess of gross
lease receivables plus residual receivables over the cost of leased
equipment. We amortize net unearned finance income to earnings on the
interest method. The carrying amount of finance leases is included in
“Loans” on the Consolidated Statement of Condition and represents
lease rent receivables net of the unearned income plus the residual
receivable. We recognize operating lease revenue evenly over the term
of the lease. We charge depreciation and other expenses against
revenue as incurred. The carrying amount of operating leases is included
in “Assets held for lease, net” on the Consolidated Statement of Condition
and represents the asset cost net of accumulated depreciation.
NOTE 3: LOANS AND INVESTMENT SECURITIES
Loans consisted of the following (in thousands):
As of December 31, 2008
Employee Benefit Plans: Our employees may be eligible to participate in
the defined benefit retirement plan of the Seventh Farm Credit District. The
plan is comprised of two benefit formulas. Effective October 1, 2001, all
new benefits-eligible employees participate in the cash balance formula.
Employees hired prior to October 1, 2001, were on the final average pay
formula. These employees were given a one-time option to convert to the
cash balance formula or to remain on a final average pay formula. The
District plan utilizes the "Projected Unit Credit" actuarial method for financial
reporting purposes and the "Entry Age Normal Cost" method for funding
purposes. Effective January 1, 2007, the defined benefit retirement plan
was closed to new employees. Employees hired after December 31, 2006,
only participate in the defined contribution plan.
$935,103
417,197
476,696
974,090
51,467
904,943
26,162
24.7%
11.0%
12.6%
25.7%
1.4%
23.9%
0.7%
Subtotal
3,785,658
100.0%
Total loans
We also provide certain health and life insurance benefits to eligible retired
employees according to the terms of those benefit plans. The anticipated
cost of these benefits is accrued during the employees’ active service
period.
3,094,517
100.0%
(621,819)
$2,472,698
Amount
Percentage
Long-term agricultural mortgage
Production
Intermediate term
Processing and marketing
Finance leases
Participations purchased
Other
$727,811
366,351
396,525
390,267
28,354
473,457
1,400
30.5%
15.4%
16.6%
16.4%
1.2%
19.9%
--
Subtotal
2,384,165
100.0%
Total loans
18
Percentage
Subtotal
Participations sold
Fair Value Measurement: Effective January 1, 2008, we adopted SFAS
No. 157, “Fair Value Measurements.” This Statement defines fair value,
establishes a framework for measuring fair value and expands disclosures
about fair value measurements. It also clarifies that the term fair value is
intended to mean a market-based measure, not an entity-specific measure.
It describes three levels of inputs that may be used to measure fair value.
Amount
25.3%
12.6%
13.9%
25.9%
1.3%
21.0%
--
Statement of Cash Flows: For purposes of reporting cash flow, cash
includes cash on hand.
$3,049,792
$781,636
390,693
429,648
802,930
38,810
649,436
1,364
Total loans
The FLCA is exempt from federal and other taxes to the extent provided in
the Farm Credit Act of 1971, as amended.
(735,866)
Production
Intermediate term
Finance leases
Other
Participations sold
Income Taxes: The ACA and PCA accrue federal and state income taxes.
Deferred tax assets and liabilities are recognized for future tax
consequences of temporary differences between the carrying amounts and
tax basis of assets and liabilities. Deferred tax assets are recorded if the
deferred tax asset is more likely than not to be realized. If the realization
test cannot be met, the deferred tax asset is reduced by a valuation
allowance. We have adopted Financial Accounting Standards Board
Interpretation No. 48 – Accounting for Uncertainty in Income Taxes. Under
the interpretation, the expected future tax consequences of uncertain
income tax positions are accrued.
Percentage
Production
Intermediate term
Finance leases
Other
Participations sold
The defined contribution plan allows eligible employees to save for their
retirement either pre-tax/post-tax or both with an employer match on a
percentage of the employee’s contributions. For employees hired after
December 31, 2006, the defined contribution plan is the only retirement
plan available, and we provide benefits under this plan in the form of a fixed
percentage of salary contribution in addition to the employer match.
Employer contributions are expensed when incurred.
Amount
(286,125)
$2,098,040
Participations
Risk Loans
We may purchase or sell participation interests with other parties in order to
diversify risk, manage loan volume, and comply with Farm Credit
Administration Regulations or General Financing Agreement limitations.
A loan is considered a risk loan if it is probable that we will be unable to
collect all principal and interest according to the loan agreement. The
following table presents risk loan (accruing volume includes accrued
interest receivable) information (in thousands):
The following table presents information regarding participations purchased
and/or sold (in thousands):
As of December 31
Participations
Purchased
Participations purchased from/sold to:
Other Farm Credit System institutions
AgriBank, FCB
Non-Farm Credit System institutions
$734,775
-170,168
$537,314
21,918
176,634
Total participations purchased/sold
$904,943
$735,866
Nonaccrual loans:
Current as to principal and interest
Past due
Total nonaccrual loans
Accruing restructured loans
Loans past due 90 days or
more still accruing
Sold
The participation volume is largely due to participations on loans to
agribusinesses.
At December 31, 2008, volume plus commitments to our ten largest
borrowers totaled an amount equal to 61.5% of members’ equity.
Approximately 30% of this volume is in the Standby Commitment to
Purchase Agreement with the Federal Agricultural Mortgage Corporation
which mitigates our risk in these loans.
Other
14.8%
Forestry
5.2%
Dairy
3.5%
Poultry &
eggs
3.3%
Livestock
3.9%
Ethanol
12.5%
$5,386
7,790
13,176
1,344
2,268
510
--
$44,332
$8,802
$14,520
$6,297
2,505
$3,663
10,857
Total risk loans
$44,332
$8,802
$14,520
$5,487
$1,606
$3,277
2008
2007
2006
Income on accrual risk loans
Income on nonaccrual loans
$124
798
$138
596
$260
234
Total income on risk loans
$922
$734
$494
$17,632
$12,936
$13,195
The material increase in nonaccrual loans from 2007 to 2008 primarily
reflects the transfer of nine agribusiness accounts to nonaccrual status in
2008. The agribusiness loans transferred to nonaccrual status were in
the ethanol and poultry industry.
At December 31, 2008, all of the loans past due 90 days or more and still
accruing interest was allocated to us through our participation with
ProPartners Financial. All were classified as Other High Risk, and six of
these loans were 92 days past due at December 31, 2008. Based on
analysis, these loans were adequately secured and in the process of
collection.
Sugar Beets
9.3%
Rural electric
3.9%
$4,949
2,263
7,212
1,080
We did not have any material commitments to lend additional money to
borrowers whose loans were at risk at December 31, 2008
Concentration of Agricultural
Commodities
Meat
products
6.2%
$34,164
6,901
41,065
999
$26,998
17,334
Average recorded investment
Our agricultural commodity concentrations at December 31, 2008, were as
follows:
Telecom
3.2%
2006
Total risk loans
We have concentrations with individual borrowers, within various
agricultural commodities and within our chartered territory.
2007
Volume with specific reserves
Volume without specific reserves
Total specific reserves
Portfolio Concentrations
2008
Cash Grains
(primarily
corn,
soybeans
and wheat)
34.2%
To manage portfolio concentration limitations and to enhance revenue, we
have entered into a Standby Commitment to Purchase Agreement with the
Federal Agricultural Mortgage Corporation (Farmer Mac). This has allowed
us to hold a larger portion of the ethanol loans in our loan portfolio. In the
event of default, subject to certain conditions, we have the right to sell the
loans identified in the agreement to Farmer Mac. Credit guarantees remain
in place until receipt of full payment. The balance of loans under this
agreement was $167.6 million at December 31, 2008, $158.0 million at
December 31, 2007, and $98.5 million at December 31 2006. Fees paid to
Farmer Mac for these commitments totaled $1.8 million in 2008, $1.1
million in 2007, and $783 thousand in 2006. These amounts are included in
“Operating expense” on the Consolidated Statement of Income. As of
December 31, 2008, no sales of loans to Farmer Mac have been made
under this agreement.
The commodity concentrations have not changed materially from prior
years.
We are chartered to operate in certain counties in North Dakota and
Minnesota. Approximately 30.6% of our total loan portfolio was in the twelve
counties of the Red River Valley at December 31, 2008.
While these concentrations represent our maximum potential credit risk as it
relates to recorded loan principal, a substantial portion of our lending
activities is collateralized. This reduces our exposure to credit loss
associated with our lending activities. We consider credit risk exposure in
establishing the allowance for loan losses.
19
Investment Securities
NOTE 6: PREMISES, EQUIPMENT AND ASSETS HELD FOR LEASE
Investments totaled $29.4 million at December 31, 2008. We purchased
investment bonds as a part of the Agricultural and Rural Community (ARC)
bond pilot program which total $1.3 million at December 31, 2008. The
remaining $28.1 million represents our share of investment notes in a trust
of equipment loans. These were purchased through our participation in the
FCS Commercial Finance Group (CFG).
Premises and equipment consisted of the following (in thousands):
As of December 31
Land, buildings and improvements
The following table presents the book value, unrealized gain/loss and fair
value of the investment securities (in thousands).
As of December 31
2008
2007
2006
Book value
Gross unrealized gains
Gross unrealized losses
$29,366
$296
($3,888)
$1,325
18
(6)
$ ----
Estimated fair value
$25,774
$1,337
$ --
4.6%
7.0%
Weighted Average Yield
--
2008
Balance at end of year
$9,260
4,604
85
(303)
2007
2006
$6,135
$6,780
(552)
100
(809)
1,402
218
(2,265)
$4,874
At December 31, 2008, we were required by AgriBank to maintain an
investment equal to 2.5% of the quarter-end balance of our note payable to
AgriBank. Effective in 2009, our required investment will include an
additional 1% on growth that exceeds a targeted rate.
The following summarizes investment balances (in thousands):
Common stock
Preferred stock
Total investment
$67,363
-$67,363
2007
$52,543
2,142
$54,685
$22,438
8,243
30,609
(9,595)
$21,014
In addition, we have a note agreement with CoBank, ACB to obtain funding,
in the amount not to exceed $20 million, in connection with specific
CoBank, ACB related transactions. The interest rate and repayment terms
on such indebtedness will be established at the time of the related
transactions and the note to CoBank, ACB is subject to annual review. To
date, we have not drawn on this line of credit.
NOTE 5: INVESTMENT IN AGRIBANK
2008
$28,420
$22,366
The General Financing Agreement provides for limitations on our ability to
borrow funds based on specified factors or formulas relating primarily to
credit quality and financial condition. We cannot exceed these limitations
without approval from AgriBank. At December 31, 2008, and throughout the
year, we were within the specified limitations and in compliance with all debt
covenants.
$6,135
Our allowance for loan losses increased to $9.3 million at December 31,
2008. The increase is largely the result of $4.6 million provision expense
we recorded in 2008 reflecting the transfer of nine agribusiness accounts to
nonaccrual status in 2008. The agribusiness loans transferred to
nonaccrual status were in the ethanol and poultry industry.
As of December 31
Total
7,407
31,720
(9,282)
Our note payable to AgriBank represents borrowings, in the form of a line of
credit, to fund our loan portfolio. The line of credit is governed by a General
Financing Agreement and our assets serve as collateral. The total line of
credit was $3.9 billion and the outstanding principal under the line of credit
was $2.7 billion as of December 31, 2008. The interest rate is adjusted
monthly and was 2.8% at December 31, 2008. During 2008, our average
balance was $2.5 billion with an average interest rate of 3.6%. Our average
balance during 2007 was $1.9 billion with an average interest rate of 5.2%
and during 2006 our average balance was $1.7 billion with an average
interest rate of 4.9%. Our note was renewed December 23, 2008 with a
February 28, 2010 maturity date at which time the note will be renegotiated.
A summary of the changes in the allowance for loan losses follows (in
thousands):
$4,874
$29,703
9,261
38,964
(10,544)
$24,313
Furniture and equipment
Subtotal
Less: accumulated depreciation
2006
NOTE 7: NOTE PAYABLE TO AGRIBANK
NOTE 4: ALLOWANCE FOR LOAN LOSSES
Balance at beginning of year
Provision for (reversal
of) loan losses
Loan recoveries
Loan chargeoffs
2007
We also hold property for the purpose of agricultural leasing, primarily farm
equipment and livestock facilities. Net operating lease income totaled $3.4
million in 2008, $2.7 million in 2007, and $2.4 million in 2006. Net operating
lease assets totaled $69.6 million at December 31, 2008, $56.3 million at
December 31, 2007, and $42.8 million at December 31, 2006.
Income is recorded in interest income and totaled $972 thousand in 2008
and $92 thousand in 2007. We had no investment income in 2006.
2008
2006
$44,998
3,775
$48,773
20
We have an agreement with AgriBank which defines how our investment in
AgriBank is allocated in calculating regulatory capital ratios. According to
the agreement, we include in our ratios all preferred stock which is the
amount of our investment in AgriBank that is in excess of the required
amount. At December 31, 2008, we no longer had any preferred stock. At
December 31, 2007, we included 3.9% and at December 31, 2006, we
included 7.7% of our investment in AgriBank as capital. These changes did
not have a material impact on our regulatory capital ratios.
NOTE 8: MEMBERS’ EQUITY
Capitalization Requirements
In accordance with the Farm Credit Act of 1971, as amended, each
borrower is required to invest in us as a condition of obtaining a loan. As
authorized by the Agricultural Credit Act of 1987 and our capital bylaws, the
Board of Directors has adopted a capital plan that establishes a stock
purchase requirement for obtaining a loan of 2% of the customer’s
aggregate outstanding loan(s) or one thousand dollars, whichever is less, or
such greater amount of such borrower’s aggregate outstanding loan
balance as may be determined by the Board from time to time. Based on
these authorities, stock/participation certificate purchase is not required for
facility leases; however, non-borrowers with equipment leases are required
to have a single $5 participation certificate in the ACA. The ACA and its
subsidiary PCA and FLCA are also authorized by FCA to offer approved
financial services to persons eligible to borrow from the Farm Credit
System. The investment requirement for each purchaser of crop insurance
that is not a stock or participation certificate holder is a single $5
participation certificate in the ACA. The Board of Directors may increase
the amount of required investment to the extent authorized in the capital
bylaws. The borrower acquires ownership of the capital stock at the time
the loan/lease is made, but usually does not make a cash investment. We
retain a first lien on the stock or participation certificates owned by
customers.
Description of Equities
The following table presents information regarding classes and number of
shares of stock and participation certificates outstanding as of December
31, 2008. All shares and participation certificates were $5.00 par value.
Class B common stock (at-risk)
Class E participation certificates (at-risk)
Only holders of Class B stock have voting rights. Our bylaws do not prohibit
us from paying dividends on any classes of stock. However, no dividends
have been declared during the last three years.
Our bylaws generally permit stock and participation certificates to be retired
at the discretion of the Board of Directors and in accordance with our
capitalization plans, provided prescribed capital standards have been met.
At December 31, 2008, we exceeded the prescribed standards. We do not
anticipate any significant changes in capital that would affect the normal
retirement of stock.
Regulatory Capitalization Requirements
Under capital adequacy regulations, we are required to maintain a
permanent capital ratio of at least 7%, a total surplus ratio of at least 7%,
and a core surplus ratio of at least 3.5%. The calculation of these ratios in
accordance with Farm Credit Administration Regulations is discussed
below:
In accordance with our bylaws, in the event of our liquidation or dissolution,
any assets remaining after payment or retirement of all liabilities shall be
distributed pro rata to all holders of stock.
The permanent capital ratio is average at-risk capital divided by
average risk-adjusted assets. At December 31, 2008, our ratio was
14.1%.
•
The total surplus ratio is average unallocated surplus less any
deductions made in the computation of permanent capital divided by
average risk-adjusted assets. At December 31, 2008, our ratio was
13.9%.
•
The core surplus ratio is average unallocated surplus less any
deductions made in the computation of total surplus and less any
preferred stock investment in AgriBank divided by average riskadjusted assets. At December 31, 2008, our ratio was 13.9%.
1,491,201
3,855
Under our bylaws, we are also authorized to issue Class C and Class D
common stock. This stock is at-risk and nonvoting with a $5.00 par value
per share. Currently, no stock of these classes has been issued.
During the first quarter of 2008, we transitioned to a new stock program.
Under the terms of the new program, we issued one thousand dollars of
stock to all loan customers and established an offsetting stock receivable
account. We also issued one participation certificate to those customers
required to own one participation certificate and established an offsetting
participation certificate receivable account.
•
Shares
Outstanding
In the event of impairment, losses will be absorbed by concurrent
impairment of all classes of stock.
All classes of stock are transferable to other customers who are eligible to
hold such class as long as AgCountry Farm Credit Services, ACA meets
the regulatory minimum capital requirements.
Patronage Distributions
The Farm Credit Administration Regulations prohibits patronage
distributions to the extent they would reduce our permanent capital ratio
below the minimum permanent capital adequacy standards. We do not
foresee any events that would result in this prohibition in 2009. We do not
have a patronage program to make such distributions.
21
NOTE 9: INCOME TAXES
Deferred Income Taxes
Provision for Income Taxes
Deferred tax assets and liabilities are composed of the following (in
thousands):
As of December 31
Our provision for income taxes follows (in thousands):
Current:
Federal
State
Total current
Deferred:
Federal
State
Total deferred
2008
($6,049)
(443)
(6,492)
2007
$1,243
113
1,356
Postretirement benefits accrual
Leasing related
Accrued patronage income
2006
$1,930
171
2,101
not received
AgriBank, FCB 2002 allocated stock
Accrued pension asset
2008
2007
2006
$710
569
(9,230)
$400
550
(1,893)
$1,081
535
(3,470)
(278)
(445)
(402)
(1,256)
(2,020)
(1,255)
(1,867)
(1,255)
(2,088)
(220)
6,703
431
7,134
(642)
(55)
(697)
(986)
(56)
(1,042)
Depreciation
(450)
(199)
Other assets
296
184
597
(250)
(250)
(250)
Provision for
income taxes
$642
$659
$1,059
Net deferred tax liabilities
($11,909)
($4,775)
($5,472)
Effective tax rate
1.0%
1.3%
2.8%
Gross deferred tax assets
$1,576
$1,134
$2,213
($13,485)
($5,909)
($7,685)
Other liabilities
The following table quantifies the differences between the provision for
income taxes and income taxes at the statutory rates (in thousands):
Gross deferred tax liabilities
A valuation reserve for the deferred tax assets was not necessary at
December 31, 2008, December 31, 2007, or December 31, 2006.
Federal tax at statutory rate
Effect of non-taxable entity
State tax, net
Loss contingency reversal
Other
Provision for
income taxes
2008
2007
2006
$22,343
(21,620)
34
-(115)
$16,616
(16,009)
29
-23
$12,748
(11,645)
54
(186)
88
$642
$659
We have not provided deferred income taxes on approximately $39.9
million of patronage allocations received from AgriBank prior to 1993. Such
allocations, distributed in the form of stock, are subject to tax only upon
conversion to cash. Our intent is to permanently maintain this investment in
AgriBank. Additionally, we have not provided deferred income taxes on
accumulated FLCA earnings of $371.5 million as it is our intent to
permanently maintain this equity in the FLCA or to distribute the earnings
to members in a manner that results in no additional tax liability to us.
$1,059
We adopted the provisions of the Financial Accounting Standards Board
Interpretation No. 48 – Accounting for Uncertainty in Income Taxes, on
January 1, 2008. At the time of adoption, as well as at December 31, 2008,
we had no uncertain income tax positions to recognize.
Tax Related Matters
In 2002, we established loss contingencies in the form of tax reserves
related to certain income accrued by AgCountry Farm Credit Services,
FLCA in connection with settlements with the IRS and the State of North
Dakota. Due to the passing of statutes of limitations on assessing taxes,
those contingencies have now expired and have been reversed. The
reversals, in the amount of $186 thousand in September 2006, are included
in the provision for income taxes in the Consolidated Statement of Income.
NOTE 10: EMPLOYEE BENEFIT PLANS
Our employees may be eligible to participate in a District-wide multiemployer defined benefit retirement plan (the Plan). The Plan is
noncontributory and covers eligible District employees. Benefits are
based on salary and years of service. The assets, liabilities and costs of
the plan are not segregated by participating entities. Costs are
determined for each individual employer based on costs directly related
to their current employees as well as an allocation of the remaining costs
based proportionately on the estimated projected liability of the employer
under the plan. We recognize our proportional share of expense and
contribute a proportional share of funding. As a participant in the Plan, we
contributed $2.5 million for 2008 and $1.1 million for 2007. We did not
contribute in 2006. Plan expenses included in salaries and employee
benefits expense in the Consolidated Statement of Income were $1.6
million for 2008, $2.1 million for 2007 and $2.2 million for 2006. Additional
financial information for the Plan may be found in the AgriBank, FCB and
Affiliated Associations 2008 Annual Report.
22
opinion, none of these loans outstanding at December 31, 2008, involved
more than a normal risk of collectibility.
The funded status of the plans will be recorded at the District level only.
Please refer to the AgriBank, FCB and Affiliated Associations 2008
Annual Report for detailed disclosures under Statement of Financial
Accounting Standard No. 158 – Employers’ Accounting for Defined
Benefit Pension and Other Postretirement Plans.
The following table represents information on loans and leases to related
parties as determined at each year end (in thousands):
2008
In December 2007, the District adopted SFAS No. 158, which required
the recognition of the overfunded or underfunded status of pension and
other postretirement benefit plans on the balance sheet. SFAS No. 158
also requires that employers measure the benefit obligation and plan
assets as of fiscal year end in 2008. The Standard allows for the use of
the measurements determined for the prior year-end.
As of December 31:
Total related party loans and leases
For the year ended December 31:
Advances to related parties
Repayments by related parties
Under this approach, pension and postretirement benefit income
measured for the three-month period October 1, 2007 to December 31,
2007 (determined using the September 30, 2007 measurement date) was
credited to beginning 2008 unallocated surplus. As a result, the District
decreased unallocated surplus by $5.0 million and increased the pension
and other postretirement benefits liabilities by $5.0 million.
2007
2006
$8,295
$16,974
$16,246
$13,225
13,440
$16,349
18,491
$16,252
17,058
The composition of related parties can be different each year end due
primarily to changes in the makeup of the Board of Directors. Advances and
repayments to related parties at the end of each year are included in the
preceding chart.
Life Insurance and Retiree Medical Plans
We purchase various services from AgriBank including certain information
systems, certain financial services, certain accounting and reporting
services, and selected retail product processing and support services. The
total cost of services we purchased from AgriBank was $880 thousand in
2008, $1.8 million in 2007, and $2.0 million in 2006. During 2008, we
transitioned some of the services previously provided by AgriBank to FPI
which accounts for the decrease from 2007.
District employers also provide certain health and life insurance benefits
to eligible retired employees according to the terms of those benefit
plans. The anticipated costs of these benefits are accrued during the
period of the employee’s active status. Postretirement benefits (primarily
health care benefits and life insurance) included in salaries and employee
benefits expense were $146 thousand for 2008, $167 thousand for 2007
and $41 thousand for 2006. Additional financial information for this plan
may be found in the AgriBank, FCB and Affiliated Associations 2008
Annual Report.
Effective July 28, 2008, we completed the transition of our loan accounting,
loan origination and general ledger systems from AgriBank to FPI. As part
of this relationship, as of December 31, 2008, we had a $934 thousand
equity investment in FPI. The total cost of services we purchased from FPI
was $3.8 million in 2008, $1.4 million in 2007, and $842 thousand in 2006.
Retirement Savings Plan
We also participate in a retirement savings plan. For employees hired
before January 1, 2007, employee contributions are matched dollar for
dollar up to 2% and 50 cents on the dollar on the next 4% on both pre-tax
and post-tax contributions. The maximum employer match is 4%. For
employees hired after December 31, 2006, we contribute 3% of the
employee’s compensation and will match employee contributions dollar
for dollar up to a maximum of 6% on both pre-tax and post-tax
contributions. The maximum employer contribution is 9%. Employer
contributions and recorded expense to this plan were $1.1 million in
2008, $806 thousand in 2007, and $678 thousand in 2006.
NOTE 12: CONTINGENCIES AND COMMITMENTS
In the normal course of business, we have various contingent liabilities and
commitments outstanding which may not be reflected in the accompanying
consolidated financial statements. We do not anticipate any material losses
because of these contingencies or commitments.
From time to time, we may be named as a defendant in certain lawsuits or
legal actions in the normal course of business. At the date of these
consolidated financial statements, we were not aware of any such actions
that would have a material impact on our financial condition. However, such
actions could arise in the future.
Nonqualified Retirement Plan
We participate in a District-wide non-qualified defined benefit Pension
Restoration Plan. This plan provides retirement benefits above the
Internal Revenue Code compensation limit to certain highly compensated
eligible employees. Benefits payable under this plan are offset by the
benefits payable from the Pension Plan. In 2008, we contributed $1
million to a Rabbi Trust to fund our future liability under this plan. A
Rabbi Trust is a trust created for the purpose of supporting the nonqualified benefit obligations of employers to their employees. Pension
Restoration plan expenses included in salaries and benefits were $20
thousand for 2008. We did not participate prior to 2008.
We have commitments to extend credit and letters of credit to satisfy the
financing needs of our borrowers. These financial instruments involve, to
varying degrees, elements of credit risk not recognized in the financial
statements. Commitments to extend credit are agreements to lend to a
borrower as long as there is not a violation of any condition established in
the loan contract. Standby letters of credit are agreements to pay a
beneficiary if there is a default on a contractual arrangement. At December
31, 2008, we had commitments to extend credit and unexercised
commitments related to standby letters of credit of $1.4 billion. Additionally,
we had $47.3 million of issued standby letters of credit as of December 31,
2008.
NOTE 11: RELATED PARTY TRANSACTIONS
Commitments to extend credit and letters of credit generally have fixed
expiration dates or other termination clauses and we may require payment
of a fee. If commitments and letters of credit remain unfulfilled or have not
expired, they may have credit risk not recognized in the financial
statements. Many of the commitments to extend credit and letters of credit
will expire without being fully drawn upon. Therefore, the total commitments
do not necessarily represent future cash requirements. Certain letters of
credit may have recourse provisions that would enable us to recover from
third parties amounts paid under guarantees, thereby limiting our maximum
In the ordinary course of business, we may enter into loan transactions with
our officers, directors, their immediate family members, and other
organizations with which such persons may be associated. Such
transactions are subject to special approval requirements contained in
Farm Credit Administration Regulations and are made on the same terms,
including interest rates, amortization schedules, and collateral, as those
prevailing at the time for comparable transactions with other persons. In our
23
underlying real estate collateral. The fair value measurement process uses
independent appraisals and other market-based information. As a result,
these fair value measurements fall within Level 2 of the hierarchy.
However, in many cases it also requires significant input based on
management’s knowledge of and judgment about current market
conditions, specific issues relating to the collateral and other matters. As a
result, these fair value measurements fall within Level 3 of the hierarchy.
When the value of the real estate, less estimated costs to sell, is less than
the principal balance of the loan, a specific reserve is established.
potential exposure. The credit risk involved in issuing these financial
instruments is essentially the same as that involved in extending loans to
borrowers and we apply the same credit policies.
NOTE 13: FAIR VALUE OF FINANCIAL INSTRUMENTS
Quoted market prices are generally not available for our financial
instruments. Accordingly, we base fair values on:
•
•
•
•
•
judgments regarding future expected losses,
current economic conditions,
risk characteristics of various financial instruments,
credit risk, and
other factors.
Investment Securities: If an active market exists, the fair value is based
on currently quoted market prices. For those securities for which an active
market does not exist, we estimate the fair value of these investments by
discounting the expected future cash flows using current interest rates.
Note Payable to AgriBank: Estimating the fair value of the note payable to
AgriBank is determined by segregating the note into pricing pools according
to the types and terms of the underlying loans funded. We discount the
estimated cash flows from these pools using the current rate charged by
AgriBank for additional borrowings with similar characteristics.
These estimates involve uncertainties and matters of judgment and cannot
be determined with precision. Changes in assumptions could significantly
affect the estimates.
Estimating the fair value of our investment in AgriBank is not practical
because the stock is not traded. As discussed in Note 2 and Note 5, the
investment is a requirement of borrowing from AgriBank.
Commitments to extend credit and letters of credit: Estimating the fair
value of commitments and letters of credit is determined by the inherent
credit loss in such instruments.
A description of the methods and assumptions used to estimate the fair
value of each class of our financial instruments, for which it is practical to
estimate that value, follows:
The estimated fair value of our financial instruments is as follows (in
thousands):
Loans: The estimate of the fair value of loan assets is determined by
discounting the expected future cash flows using current interest rates.
Current interest rates are estimated based on similar loans made or loans
repriced to borrowers with similar credit risk. This methodology is used
because no active market exists for the vast majority of these loans. Since
the discount rates are based upon internal pricing mechanisms and other
estimates, we cannot determine whether the fair values presented would
equal the exit price negotiated in an actual sale. Furthermore, certain
statutory or regulatory factors not considered in the valuation, such as the
unique statutory rights of Farm Credit System borrowers, could render our
portfolio unmarketable outside the Farm Credit System.
Carrying
Estimated
Amount
Fair Value
Financial assets:
Loans, net
$3,040,532
$3,079,097
29,366
25,774
$2,713,027
$2,749,204
Financial liabilities:
Unrecognized financial instruments:
Commitments to extend credit
We segregate the loan portfolio into pools of loans with homogenous
characteristics for purposes of determining fair value of accruing loans.
Expected future cash flows and interest rates reflecting appropriate credit
risk are separately determined for each individual pool.
and letters of credit
Fair value of nonaccrual loans, current as to principal and interest, are
discounted with appropriately higher rates, reflecting the uncertainty of
continued cash flows. We assume for noncurrent nonaccrual loans,
collection will result only from the sale of the underlying collateral. Fair value
is estimated to equal the total net realizable value of the underlying
collateral, discounted at an interest rate that appropriately reflects the
uncertainty of the expected future cash flows over the average disposal
period. We use the legal obligation if the net realizable value of the
collateral exceeds the legal obligation for a particular loan.
($1,765)
Carrying
Estimated
Amount
Fair Value
Financial assets:
Loans, net
$2,467,824
$2,488,877
1,325
1,337
$2,132,532
$2,148,972
SFAS No. 157 defines fair value as the exchange price that would be
received for an asset or paid to transfer a liability in the principal or most
advantageous market for the asset or liability. See Note 2 for additional
information.
($1,240)
Carrying
Estimated
Amount
Fair Value
Financial assets:
Assets measured at fair value on a non-recurring basis at December 31,
2008 for each of the fair value hierarchy levels are summarized below:
Loans, net
Fair Value Measurement Using
Level 1
Loans*
$0
Level 2
$1,280
Level 3
$20,231
Total Fair Value
$21,511
$2,091,905
$2,091,398
$1,782,929
$1,780,637
Total Gains
(Losses)
($5,487)
*Represents the fair value of certain loans that were evaluated for
impairment under SFAS No. 114. The fair value was based upon the
24
($903)
NOTE 14: QUARTERLY FINANCIAL INFORMATION (Unaudited)
Quarterly consolidated results of operations for the years ended December
31, 2008, December 31, 2007 and December 31, 2006, follow (in
thousands):
2008
Net interest income
First
$18,841
Second
$19,891
Third
$19,865
Fourth
Total
$19,595
$78,192
5,282
4,604
of) loan losses
442
Patronage income
1,803
1,705
1,844
1,830
7,182
Other expense, net
10,124
(1,995)
(2,027)
8,951
15,053
(1,254)
$8,446
642
$65,075
(191)
(929)
of) income taxes
Net income
2007
Net interest income
805
$9,273
First
$15,833
578
$23,204
Second
$16,116
513
$24,152
Third
$16,569
Fourth
$16,552
Total
$65,070
of) loan losses
574
7
124
Patronage income
1,536
1,324
1,408
(1,257)
2,817
7,085
(552)
Other expense, net
8,845
6,477
5,026
3,487
23,835
438
$7,512
134
$10,822
101
$17,038
659
$48,213
of) income taxes
Net income
2006
Net interest income
First
$13,966
Second
$14,083
(14)
$12,841
Third
$15,067
Fourth
Total
$15,104
$58,220
1,555
1,402
(Reversal of) provision
for loan losses
(44)
268
(377)
Patronage income
1,064
1,294
1,203
2,346
5,907
Other expense, net
7,731
6,068
5,140
6,293
25,232
541
$6,802
217
$8,824
101
$11,406
200
$9,402
1,059
$36,434
Provision for
income taxes
Net income
25
DISCLOSURE INFORMATION REQUIRED BY REGULATIONS
(Unaudited)
DESCRIPTION OF BUSINESS
MANAGEMENT'S DISCUSSION AND ANALYSIS
General information regarding the business is discussed in Note 1 of this
annual report.
Information regarding any material aspects of our financial condition,
changes in financial condition, and results of operations are discussed in
the "Management's Discussion and Analysis” portion of this annual report.
The description of significant business developments, if any, is discussed in
the “Management's Discussion and Analysis" portion of this annual report.
BOARD OF DIRECTORS
DESCRIPTION OF PROPERTY
Information regarding directors who served as of December 31, 2008,
including business experience in the last five years and any other business
interest where a director serves on the board of directors or as a senior
officer follows:
The following table sets forth certain information regarding our properties:
Location
Description
Usage
Fargo, ND
Ada, MN
Alexandria, MN
Crookston, MN
Detroit Lakes, MN
Elbow Lake, MN
Fergus Falls, MN
Fosston, MN
Graceville, MN
Hallock, MN
Morris, MN
Red Lake Falls, MN
Roseau, MN
Thief River Falls, MN
Warren, MN
Cavalier, ND
Cooperstown, ND
Devils Lake, ND
Grafton, ND
Grand Forks, ND
Hillsboro, ND
Jamestown, ND
LaMoure, ND
Langdon, ND
Lisbon, ND
Valley City, ND
Wahpeton, ND
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Leased
Owned
Leased
Owned
Owned
Leased
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Headquarters/Branch
Branch
Branch
Branch
Branch
Branch
Branch
Branch
Branch
Branch
Branch
Branch
Branch
Branch
Branch
Branch
Branch
Branch
Branch
Branch
Branch
Branch
Branch
Branch
Branch
Branch
Branch
Mark Ellison, Chairperson of the Board, is a self-employed grain farmer.
He also serves as a Director for Otter Tail Ag Enterprises, LLC which is
an ethanol plant near Fergus Falls, MN and is the President of Ellison
Farm, Inc. His term on the board expires in 2012.
Roger Bernstrom is a self-employed grain and beet farmer. His term on
the board expires 2012.
Keith Bjerke, Appointed Director, Chairperson of Compensation
Committee, is the Vice President of University Relations at North Dakota
State University. His term on the board expires in April 2010.
Glen Brandt is a self-employed grain and livestock farmer. His term on
the board expires in 2010.
Michael Elliott is a self-employed grain and livestock farmer. His term on
Jack Hansen, Appointed Director, Chairperson of Audit Committee,
Board and Audit Committee financial expert, was the President of
Norwest Bank in Hillsboro, ND, prior to his retirement in August 1998. His
term on the board expires in December 2012.
Alton Hermunslie is a self-employed grain farmer and is employed at
Tecton Products in Fargo, ND. He was previously employed at Imation
Corp of Wahpeton, ND. His term on the board expires in 2009.
David Johnsrud is a self-employed grain farmer. His term on the board
expires in 2009.
LEGAL PROCEEDINGS
Michael Long is a self-employed grain and livestock farmer. His term on
Information regarding legal proceedings is discussed in Note 9 and Note 12
of this annual report. We were not subject to any enforcement actions at
December 31, 2008.
William Muhs is a self-employed grain farmer. His term on the board
expires in 2011.
DESCRIPTION OF CAPITAL STRUCTURE
Greg Nelson is a self-employed grain farmer. His term on the board
expires in 2010.
Information regarding our capital structure is discussed in Note 8 of this
annual report.
Wally Sparby, Appointed Director, was a grain and livestock farmer and
currently does legislative work in Minnesota. His term on the board
expires in 2011.
DESCRIPTION OF LIABILITIES
Information regarding liabilities is discussed in Note 7 and Note 12 of this
annual report.
Mike Vig is a self-employed grain farmer. His term on the board expires
in 2011.
SELECTED FINANCIAL DATA
Roger Weinlaeder is a self employed grain farmer and is the President of
Weinlaeder Seed Co. He also services as a board member for Northstar
The "Consolidated Five-Year Summary of Selected Financial Data” is
presented at the beginning of this annual report.
26
Genetics which is involved in wholesale seed distribution. His term on the
board expires in 2012.
All of the senior officers have been with the Farm Credit System for the past
five years except for Mr. Carlson and Ms. Strand. Prior to beginning his
employment with AgCountry in 2007, Mr. Carlson’s business experience
was with a law firm. Ms. Strand’s prior business experience before joining
AgCountry in 2007 was with a manufacturer of farm equipment.
Dale Zahradka, Vice Chairperson of the Board, is a self-employed grain
farmer. He also serves as the Chairman of the Board of Directors for
Walsh County Pigs, a pig farrowing operation. His term on the board
expires in 2010.
A summary of compensation earned by senior officers during 2008 follows
(in thousands):
Pursuant to our bylaws, directors are paid a reasonable amount for
attendance at board meetings, committee meetings or other special
assignments. Directors are also reimbursed for reasonable expenses
incurred in connection with such meetings or assignments. The Board of
Directors has adopted a rate of $400 per day and a per diem rate of $150
per conference call. Each director receives an annual retainer of $12,000.
In addition, the Board Chairperson receives an additional $4,000, the Vice
Chairperson receives an additional $3,000, the Audit Chairperson receives
an additional $2,000 and the Compensation Chairperson receives an
additional $1,000. All retainer fees are paid in equal quarterly payments.
Board
Meetings
service on
a board
committee
Name of
Committee
20.0
20.0
37.5
24.0
38.0
23.0
25.0
1,150
700
Audit
Audit
$23,800
24,550
24,100
25,500
34,600
27,050
26,200
David Johnsrud (1)
19.0
35.0
700
Audit
30,200
Kevin Kutzer (3)
Robert Landman (3)
Dennis Laumb (3)
Michael Long (1)
Charles Marvin (3)
William Muhs (2)
Greg Nelson (1)
Jonathan Piekarski (3)
Hans Ronnevik (3)
Wally Sparby (2)
Brent Strickler (3)
Ron Tholkes (3)
4.5
5.5
4.5
18.5
6.0
20.5
14.0
4.5
4.5
21.5
4.0
4.5
9.0
9.0
13.0
24.0
7.0
30.5
11.0
9.0
11.0
22.0
6.5
12.0
Mike Vig (1)
Roger Weinlaeder (1)
Dale Zahradka (2)
17.0
16.0
21.5
17.0
23.5
23.0
Total
319.5
450.0
400
700
Compensation
Audit
1,900
850
Audit
Audit
$7,800
$312
$205
$1
2008
150
--
--
Total
$
--
$518
567
717
2008
$913
$377
$3
$
--
$1,293
** Retired effective 3/31/08. Compensation shown is through 3/31/08.
18.0
19.0
19.5
19.0
19.5
19.5
19.0
Audit
2008
Eugene Smestad **
Other
* Became CEO effective 4/1/08. Compensation shown is for the entire year of 2008.
Roger Bernstrom (1)
Keith Bjerke (2)
Glen Brandt (2)
Michael Elliott (2)
Mark Ellison (2)
Jack Hansen (1)
Alton Hermunslie (1)
550
Robert C. Bahl *
Seven
Total
Compensation
Paid in 2008
$700
Audit
150 Compensation
Perquisites
Aggregate Number of Senior Officers: (does not include CEO compensation):
Compensation
paid for
Other
Official
Activities
Deferred/
Pay
Salary
CEO
Information regarding compensation for each director who served during
2008 follows:
Number of
Days Served
Variable
Year
6,550
6,950
8,150
26,050
6,350
29,950
17,450
6,550
7,350
26,000
5,350
8,150
22,200
24,700
28,350
$446,100
Members may request information on the compensation paid during 2008
to the individuals listed in the preceding table. The amount included in
‘Other’ in the preceding table represents severance payments to a former
senior officer.
AgCountry Farm Credit Services, ACA is a new association formed on
January 1, 2008 from the consolidation of AgCountry Farm Credit Services,
ACA and Farm Credit Services of Grand Forks, ACA. Therefore, no prior
year CEO or senior officer compensation is presented. Information prior to
2008 is contained in the previous annual reports of the former associations
and is available to members upon request.
The Board of Directors Compensation Committee annually reviews and
approves the overall compensation program for senior officers. CEO
variable pay is paid annually based on performance criteria established by
the Board of Directors. Other senior officer variable pay is paid annually
based on performance criteria established by the CEO. The criteria
included return on assets, loan volume, credit quality, personal objectives
and performance ratings. We calculate the variable pay after the end of the
plan year (the plan year is the calendar year). The variable pay is paid out
within 90 days of year end.
TRANSACTIONS WITH SENIOR OFFICERS AND DIRECTORS
Information regarding related party transactions is discussed in Note 11 of
this annual report.
TRAVEL, SUBSISTENCE AND OTHER RELATED EXPENSES
(1) Member of Audit Committee as of December 31, 2008
Directors and senior officers are reimbursed for reasonable travel,
subsistence and other related expenses associated with business
functions. A copy of our policy for reimbursing these costs is available by
contacting AgCountry Farm Credit Services, ACA at Post Office Box 6020,
Fargo, North Dakota 58108-6020, (701) 282-9494 or via electronic mail to
[email protected] or through our website at
www.agcountry.com.
(2) Member of Compensation Committee as of December 31, 2008
(3) Resigned or were not re-elected at the first annual meeting (March 2008) after
consolidation of AgCountry Farm Credit Services, ACA and Farm Credit Services of
Grand Forks, ACA.
SENIOR OFFICERS
The senior officers as of December 31, 2008 included:
The total directors’ travel, subsistence and other related expenses were
$256 thousand in 2008, $235 thousand in 2007, and $188 thousand in
2006.
Robert Bahl, President and Chief Executive Officer
Dave DeVos, Senior Vice President - Agribusiness Finance
Wayne Carlson, Vice President and General Counsel
Kenneth Knudsen, Senior Vice President - Credit
Marvin Langerud, Senior Vice President - Producer Marketing
Jeremy Oliver, Senior Vice President - Corporate
Finance and Information Services
Howard Olson, Senior Vice President - Financial Services
Jeni Strand, Vice President - Human Resources
27
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
FINANCIAL STATEMENTS
No events occurred during the past five years that are material to evaluating
the ability or integrity of any person who served as a director or senior
officer on January 1, 2009 or at any time during 2008.
The "Report of Management”, “Report on Internal Control Over Financial
Reporting”, “Report of Audit Committee”, “Report of Independent Auditors,"
"Consolidated Financial Statements“, and “Notes to Consolidated Financial
Statements" are presented prior to this portion of the annual report.
MEMBER PRIVACY
CREDIT AND SERVICES TO YOUNG, BEGINNING, AND SMALL
FARMERS AND RANCHERS
Farm Credit Administration Regulations protect members’ nonpublic
personal financial information. Our directors and employees are restricted
from disclosing information about our association or our members not
normally contained in published reports or press releases.
Information regarding credit and services to young, beginning, and small
farmers and ranchers and producers or harvesters of aquatic products is
discussed in an addendum to this annual report.
RELATIONSHIP WITH QUALIFIED PUBLIC ACCOUNTANT
EQUAL EMPLOYMENT OPPORTUNITY
There were no changes in independent auditors since the last annual report
to members and we are in agreement with the opinion expressed by the
independent auditors. The total fees paid during 2008 to our independent
auditors were $90 thousand for audit services. We also had $8 thousand of
fees to another qualified public accountant for tax services.
We are an equal opportunity employer. It is our policy to provide equal
employment opportunity to all persons regardless of race, national origin,
religion, age, sex, disability, marital status, veteran status, public assistance
status, or any other condition or status covered by law. We comply with all
state and local equal employment opportunity regulations. We conduct all
personnel decisions and processes relating to our employees and job
applicants in an environment free of discrimination and harassment.
28
Future Payment Funds Policy
The Association offers a Future Payment Funds Program (FPF) that
provides for customers to make advance payments on designated real
estate and commercial loans. The following terms and conditions apply
to all FPF accounts unless the loan agreement, or related documents,
between the Association and customer provide for other limitations.
Withdrawals
Payment Application
In the event of default on any loan, or if FPF exceeds the maximum
limit as established above, or if the Association discontinues its FPF
program, the Association may apply funds in the account to the unpaid
loan balance and other amounts due, and shall return any excess
funds to the customer.
No withdrawals allowed.
Association Options
Loan payments received by the Association before the loan has been
billed can be placed into FPF and applied against the next installment
due. Loan payments received after the loan has been billed will be
directly applied to the installment due on the loan and related charges,
if any. Funds received in excess of the billed amount will be applied as
a special principal payment unless the customer has specified the
funds to be applied to FPF.
Uninsured Account
FPF is not a depository account and is not insured. In the event of
Association liquidation, customers having balances in FPF shall be
notified according to Farm Credit Administration Regulations.
When a loan installment becomes due, moneys in FPF for the loan will
be automatically applied toward the installment on the due date. Any
accrued interest on FPF will be applied first. If the balance in FPF does
not fully satisfy the entire installment, the customer must pay the
difference by the installment due date.
Questions:
Please direct any questions regarding FPF to your local FCS
representative.
Account Maximum
The amount in FPF may not exceed the unpaid principal balance of the
loan.
Interest Rate
Interest will accrue on FPF at a simple rate of interest that may be
changed by the Association from time to time. The interest rate may
never exceed the interest rate charged on the related loan. The
interest rate is established by the Association Asset/Liability
Committee (ALCO). Interest rates are currently reported on each
customer’s periodic Statements of Account.
29
Our Commitment to Serving
Young, Beginning and Small Farmers
Serving our young, beginning and small
farmer customers is a priority at AgCountry.
Our Progress in
Achieving These Objectives
Young, Beginning and Small
Farmers Defined
AgCountry maintains and markets to lists of
young and beginning farmer prospects. We
monitor the farm business transition plans
of customers and prospects including
offering Succession and Retirement
Planning consulting. Customer information
for underwriting is streamlined and often
relies on simple credit scoring tools. Our
young and beginning credit underwriting
allows exceptions to established underwriting standards, provides for defined interest
rate pricing exceptions and subsidies on
eligible financial services. Scholarships and
numerous educational opportunities are
also provided.
Young Farmer: A farmer or rancher who is
age 35 or younger.
Beginning Farmer: A farmer or rancher
who has 10 years or less of farming or
ranching experience as of the loan
transaction date.
Small Farmer: A farmer or rancher who
normally generates less than $250,000 in
annual gross sales of agricultural products.
Our Mission for Serving Young,
Beginning and Small Farmers
To help agricultural producers, rural customers, agribusinesses and their communities
achieve goals, leverage opportunities, and
mitigate risk. We do this by providing
competitive access to capital and integrated
financial management tools, mission-related
investments and specialized staff through
convenient distribution channels.
For young, beginning farmers, this
means…We support the successful entry
of young and beginning farmers into
production agriculture through specialized
credit underwriting, educational/informational programs and other activities.
For small farmers, this means…We
provide convenient, easy and cost-effective
access to our products and services at
competitive prices.
Our Objectives for Serving Young,
Beginning Farmers
1. To aggressively identify those individuals
with the personal management skills and
drive to build a full-scale, full-time operation.
2. To bring a more aggressive application of
credit standards to the young, beginning
farmer market segment, invest the specialized
skills of our staff in serving this segment and
provide limited subsidies for interest rates
and financial services.
3. To closely monitor the business transaction
plans of our upper GFI segment ($250,000
and over gross farm income) and ensure that
from a customer value, service and monitoring standpoint, we are positioned with the
next generation of owner/operators.
Our Objectives for
Serving Small Farmers
1. To establish small farmer delivery and
processing systems that are streamlined and
efficient using technology and branch offices
as our main vehicle to achieve cost-effective
access and competitive prices.
2. To pursue decision-making methodology
that streamlines the credit process, along
with the vehicles that maximize disbursement
and payment alternatives (such as revolving
loans, scorecards, online loan applications,
purchase or debit cards and online banking).
3. To identify customers within the small
farmer segment that have the capacity and
the goal to become a larger farm operation
and provide them with more loan officer and
financial services interaction that brings us
closer to the people-intensive portion of our
value proposition provided for larger, fullscale farm operations.
Our Progress in
Achieving these Objectives
AgCountry had 27 office locations in 2008
to serve this segment as well as access
through dealer retail financing. Customer
information for underwriting is streamlined
and often relies on simple credit scoring
tools. All financial services are made
available and we provide additional support
to those units with a business expansion
strategy.
30
Quantitative Goals and Status Annual, Three-Year, and Actual
Goal: 25% of producer loan customers will
be coded young or beginning.
Status: Annual: 25%
Three-Year: 25%
Actual: 27.6%
Goal: 25% of all producer relationships will
be young or beginning.
Status: Annual: 25%
Three-Year: 25%
Actual: 32.5%
Goal: YBSF volume will remain above 45%
of ongoing producer credit branch operations volume.
Status: Annual: 45%
Three-Year: 50%
Actual: 38.2%
Goal: Educational/informational opportunities will touch 200 YBFs annually.
Status: Annual: 350
Three-Year: 300
Actual: 613
Goal: The YBF portfolio will be maintained
at or above 85% acceptable. The small
farmer portfolio will be maintained at or
above 94% acceptable.
Status: Annual: 85% & 94%
Three-Year: 85%
Actual: Young and beginning - 99%
Small - 99.2%
Goal: 25% of our new loan volume will go
to YBFs annually.
Status: Annual: 25%
Three-Year: 25%
Actual: 27.6%
Goal: We maintain no more than 50% risk
rated 8 or higher new loan volume to YBFs.
Status: Annual: 50%
Three-Year: 50%
Actual: 35.7%
Goal: An ongoing producer market
customer mix of 24% young farmers and
25% beginning farmers will be maintained.
Status: Annual: 24% & 25%
Three-Year: 25% & 25%
Actual: Young - 26.4% Beginning - 25%
Qualitative Goals and Status
Goal: The capacity to use FSA and state
programs should they be a necessary tool for
a YBF operator will be maintained.
Status: Farm Services Agency assisted in
providing 20 new loans. Bank of North Dakota
assisted in providing four new loans. Minnesota RFA assisted in providing one loan.
Goal: Succession and retirement/transition
planning consultative services will be
provided to young and beginning farmers.
Status: These services were provided to
146 young and beginning farmers.
Goal: AgCountry’s full spectrum of
financial services will be made available to
young and beginning farmers.
Status:
Services
# Served
Tax
582
Records
244
S&R
146
Crop Insurance
(MPCI/CRC & Crop Hail) 487
Goal: Educational and informational
opportunities will be provided to young and
beginning farmers.
Status: The following educational and
informational opportunities were provided
to young, beginning farmers:
• Seminars on “Trends: Market Outlook in
this New Arena”, “It’s a Whole New World”
and “Hedging vs. Speculation: Tax Hazards
for the Unwary” at the Big Iron farm show
in September, along with a section of our
display booth dedicated to YBF information
and materials. 36 YBFs visited our booth.
• A marketing education workshop, “Weathering the Opportunities of Agriculture” was held
in January (37 YBFs attended).
• Seminar on “Personal Financial Planning:
Pay Yourself First - Your Future’s Worth It”
for small farmers. Designed to help
understand the importance of a personal
financial plan involving a savings plan and
having it as a “necessity” in their budget.
Different types of savings plans (retirement, educational and investment) were
reviewed and components of a financial
plan (budget, estate planning, tax planning
and emergencies) were discussed.
• Presentation on “The Golden Rules of
Management” led by Dr. David Kohl at a
gathering of 102 YBFs prior to the start of the
International Crops Expo in February.
• Marketing education meetings
• Crop revenue profiler meetings
• Multi peril and crop insurance consultations
• Succession & retirement planning meetings
• Record-keeping update meetings
• Pre-harvest meetings
• FSA Guarantee loan counseling sessions
• Marketing club presentations
Goal: Focus group meetings will be held
periodically with select samples of Young
and Beginning or small farmers.
Status: Four meetings were held with five
YBFs in attendance. One meeting was held
expressly for small farmers with eight in
attendance.
Goal: Financial and in-kind support will be
provided to programs that foster the development of young farmers, such as 4H and FFA.
Young, Beginning and Small Farmer
Demographics in Our Service Area
Status:
• $40,000 was donated to such programs,
including 4H, FFA, Farm Management/
Leadership Programs, Farm Safety camps
and educational seminars offered through
county Extension Service offices.
• $3000 in scholarships was awarded to YBF
customers to attend The Executive Program
for Agricultural Producers (TEPAP) at Texas
A&M University.
• $2,500 scholarship donation to the William J.
Collins Scholarship Fund administered by
Agriculture Future of America.
• One YBF received a $1,750 scholarship to
attend the Midwest Food and Agri-Business
Executive Seminar at Purdue University in
October.
• One YBF couple received a $150 scholarship
for the Agassiz Emerging Leadership Program.
• $24,000 in scholarships was awarded to high
school seniors pursuing careers in agriculture.
Goal: Information about special exceptions
to credit standards, special pricing options
and other services available to young and
beginning farmers will be distributed through
branch offices, trade shows and focus group
meetings and our web site.
Status: This continues to be accomplished.
Census 2002
AgCountry
Producer Portfolio
Age 18 to 35 and/or less than
10 years of experience farming
34.1%
25.1%
Farms less than $250,000 Value Farm Sales
87%
56% (estimate)
Data Differences:
• The age and farmer experience is as of the date of the ag census, while AgCountry
compiled as of the date the loan was made.
• Small farmers is by each farm entity from the ag census data, while AgCountry data is
compiled as of the date of the loan and the total value of sales of closely related entities
rather than individual entities.
• Census data reflects all farms whether they use debt or not. The Census reflects only
49% of farms have debt.
• Of the farms reporting to the Census report, 48% of the farms had sales less than $10,000.
Safety and Soundness of the Program:
The association’s young, beginning and small farmer program has established specific
lending standards for loans made under the program. Goals are also established for loan
quality and portfolio risk of these respective segments. The association is well above
these standards and goals at this time.
31
AgCountry Farm Credit Services Staff
Ada
901 West 1st Avenue South
PO Box 271
Ada, MN 56510
218-784-7263 / 800-450-3063
Fax-218-784-3644
Crookston
530 Fisher Avenue
P.O. Box 378
Crookston, MN 56716
218-281-1416 / 800-689-9373
Fax-218-281-5211
Fargo
1900 44th Street South
PO Box 6020
Fargo, ND 58108
701-235-9858 / 800-450-9858
Fax-701-235-5659
Dick Arnston, Sr Loan Officer/Br Mgr
Renee Fink, Associate Tax Specialist
Stacey Hagan-Kuball, Records Specialist
Kelly Hanson, Records Specialist
Ginger Harris, Sr Insurance Specialist
Brenda Neisen, Seasonal Receptionist
Andrew Ness, Associate Loan Officer
Mike Ness, Sr Tax Specialist
Anita Olson, Credit Technician
Ross Opsahl, Loan Officer/Branch Manager
Connie Purrington, Sr Loan Service Spec
Kathy Ruebke, Sr Loan Service Specialist
Patricia Sakrismo, Customer Service Rep
Debbie Todd, Loan Service Specialist
Dave Vilmo, Sr Loan Officer
Carol Coauette, Loan Service Specialist
Dan Erdman, Sr Loan Officer
Mark Gullickson, Sr Loan Officer/Br Mgr
Kelly Isakson, Credit Technician
Kristie Ricard, Insurance Specialist
Amber Skaug, Customer Service Rep
Tammy Easton, Customer Service Rep
John Holland, Regional VP Central Region
Gwen Johnson, Loan Service Specialist
Robyn Johnston, Financial Serv Supp Tech
Cheryl Landsem, Sr Records Spec/Team Leader
Scot Manthe, Sr Loan Officer/Br Mgr
Penny Martin, Sr Loan Service Specialist
Ross Menholt, Credit Technician
Barb Parmer, Sr Records Spec/Prod Leader
Jordan Pederson, Loan Officer
Pam Peterson, Financial Services Sup Tech
Brad Schwab, Sr Insurance Specialist
Patti Sell, VP Records
Linda Strommen, Sr Credit Technician
Doug Tehven, Sr Loan Officer
Eileen Tortorice, Sr Loan Service Specialist
Ralph Ubben, Sr Loan Officer
Tim Wangler, Sr Loan Officer
Linda Widner, Sr Insurance Specialist
Ronda Zupi, Sr Tax Specialist
Alexandria
1022 Broadway Street
Alexandria, MN 56308
320-763-3184 / 800-450-3184
Fax-320-763-4533
Mike Maudal, Sr Loan Officer/Br Mgr
Michelle Niska, Loan Service Specialist
Erling Olson, Sr Certified Appraiser
Shari Smith, Loan Service Specialist
Cavalier
300 Main Street West
P.O. Box 639
Cavalier, ND 58220
701-265-8423 / 866-898-6221
Fax-701-265-8244
Chris Burgess, Sr Loan Officer, Commercial
Producers
Garnet Furstenau, Sr Loan Officer/Br Mgr
Dorothy Hall, Loan Service Specialist
Carol Shephard, Loan Service Specialist
Travis Stegman, Associate Loan Officer
Bethany Thomson, Records Specialist
Cooperstown
4th & Rollin Avenue SW
P.O. Box 648
Cooperstown, ND 58425
701-797-2332
Fax-701-797-2335
Corlis Juliuson, Loan Service Specialist
Detroit Lakes
Hwy 10 East
PO Box 1228
Detroit Lakes, MN 56501
218-847-1645 / 800-224-1647
Fax-218-847-2835
Brad Erickson, Loan Officer
Chris Guck, RVP Eastern Region
Jameson Hallof, Loan Officer
Colleen Johnson, Sr Loan Service Spec
Kathryn Kallis, Receptionist
Brenda Lund, Loan Service Specialist
Thomas Schaaf, Loan Officer
Kerri Steinert, Credit Technician
Devils Lake
707 Highway 2 East
Devils Lake, ND 58301
701-662-5356 / 800-422-3670
Fax-701-662-5357
Barry Ash, Tax Specialist
Jodi Faaborg, Tax Preparer
Neomi Hammond, Insurance Specialist
Patti Hoffart, Financial Services Supp Tech
Evan Markestad, Loan Officer
Shirley Owens, Sr Loan Service Specialist
Lora Petersson, Tax Preparer
Leo Sayler, Sr Loan Officer/Br Mgr
DeAnn Schmidt, Loan Service Specialist
Sheena Weed, Records Specialist
Elbow Lake
17 First Street NE
PO Box 313
Elbow Lake, MN 56531
218-685-5311/ 800-450-5311
Fax-218-685-4872
Dave Franklin, Sr Loan Officer/Br Mgr
Laurie Kaye, Sr Loan Service Specialist
Fergus Falls
311 North Tower Road
Fergus Falls, MN 56537
218-739-5221 / 800-757-5221
Fax-218-739-4604
Lisa Anderson, Records Specialist
Myron Brusven, RVP Southern Region
Scott Dethlefsen, Loan Officer
Robert Fronning, Insurance Specialist
Jenni Jensen, Customer Service Rep
Mike Johnson, Sr Tax Specialist
Patricia Johnson, Financial Services Support Tech
Leon Keller, Sr Loan Officer/Br Mgr
Candy Neppl, Sr Loan Service Specialist
Cindy Schmidt, Sr Credit Technician
Anthony Stensgard, Associate Tax Spec
Mary Strande, Customer Service Rep
Roger Twedt, Sr Loan Officer
Fosston
907 Prairie Pines Dr
P.O. Box 150
Fosston, MN 56542
218-435-1686 / 877-635-2311
Fax-218-435-1260
Grand Forks
2424 32nd Avenue South
P.O. Box 13570
Grand Forks, ND 58208-3570
701-775-3193 / 800-288-3982
Fax-701-787-6659
Hillsboro
802 West Caledonia Avenue
PO Box 817
Hillsboro, ND 58045
701-636-4842 / 800-450-4842
Fax-701-636-5245
Jolene Anderson, Loan Service Specialist
Kevin Geerdes, Sr Loan Officer/Br Mgr
David Landsverk, Insurance Specialist
Karen Matson, Loan Service Specialist
Mary Pulford, Sr Insurance Specialist
Harmon Badger, AVP Audits
Derek Beaudry, Loan Officer
Jenny Boe, Agribusiness Service Specialist
Kristi Erickson, Receptionist
Chris Feller, Sr Tax Spec/Records Team Leader
Diane Hoffman, Dir of Customer Solutions
Charlotte Holcomb, Lending Op Spec
Candee Jenson, Loan Service Specialist
Jeremy Johnson, Insurance Specialist
Jean Johnson, Marketing Comm Consultant
Cathy Johnson, Loan Service Specialist
Beth Just, Office Assistant
Lynette Kennedy, Reporting Specialist
Rick Kovar, VP Agribusiness Finance
Gerri Kraft, Customer Service Rep
Dean Kuznia, RVP North Central Region
Lori Labahn, Info Sys Analyst-Network Operations
Melissa Leidal, Records Specialist
Barb Ljunggren, Credit Coordinator
Rick Mapel, Dir Business Solutions Ed/Sr Tax Spec
Mary Mondry, Credit Technician
Larry Nelson, VP Credit
Allan Nelson, Marketing Specialist
Brian Nelson, Tax Preparer
Steve Onstad, Business Analyst
Lee Reddig, Sr Loan Officer
Sherrie Schaefer, Customer Service Rep
Stacey Sem, Sr Loan Officer/Br Mgr
Janelle Skibicki, Asst VP HR
Randy Skjerven, Sr Loan Officer
Dana Skorheim, Business Analyst
Michele Sorenson, Sr Business Analyst
Carol Thompson, Sr Lending Op Spec
Seth Twedt, Associate Loan Officer
Abby Volbrecht, Financial Serv Supp Tech
Elizabeth Weber, Sr Loan Service Spec Coordinator
Chad Wigestrand, Certified Appraiser
Beth Wilhelmi, Tax Intern
Allen Wood, Chief Appraiser
Andrew Zenk, Agribusiness Consultant
Dan Christianson, Sr Loan Officer/B Mgr
Kari Cotton, Records Specialist
Justin Grinde, Loan Officer
Jennifer Horne, Sr Loan Service Spec
Leslie Hurt, Loan Officer
Dane Larsen, Sr Tax Specialist
Char Ludwig, Loan Service Spec
Trish Mueller, Receptionist
Graceville
112 East St. Paul Avenue
PO Box 428
Graceville, MN 56240
320-748-7294 / 800-450-7294
Fax-320-748-7329
Kathy Behrens, Sr Insurance Specialist
Amanda Groebner, Records Specialist
Tim Hanson, Sr Loan Officer/Br Mgr
Kathy Haukos, Loan Service Specialist
Lori Kuschel, Sr Loan Service Specialist
Warren Schoenherr, Sr Loan Officer
Grafton
1005 Hill Avenue
Grafton, ND 58237
701-352-1651 / 800-819-1651
Fax-701-352-1921
Mary Dusek, Credit Technician
Patty Eidenschink, Loan Service Specialist
Renae Fayette, VP Insurance
Yvonne Feltman, Sr Tax Specialist
Karah Hanson, Records Specialist
Wendy Machart, Financial Serv Supp Tech
Marlene Niemann, Loan Officer/Br Mgr
Nicholas Osowski, Loan Officer
Julie Rachac, Loan Service Specialist
Michelle Shereck, Loan Service Specialist
Jody Tibert, Tax Specialist
Paul Vorachek, Sr Certified Appraiser
Hallock
224 North Atlantic Avenue
P.O. Box 878
Hallock, MN 56728
218-843-3627 / 877-284-2835
Fax-218-843-3629
Benjamin Diamond, Sr Insurance Spec
Wayne Gjervold, Sr Loan Officer/Br Mgr
Kayla Holt, Customer Service Rep
Jodi Johnson, Loan Service Specialist
Jon Swenson, Loan Officer/Br Mgr
Jamestown
604 18th Street SW
PO Box 1389
Jamestown, ND 58402
701-252-5242 / 800-450-5242
Fax-701-252-5333
Michelle Ackerman, Sr Insurance Spec
Donny Allmaras, Sr Loan Officer
Amber Backen, Records Specialist
Joe Burgard, Marketing Specialist
Brian Chandler, Sr Tax Specialist
Angela Donegan, Customer Service Rep
Sharon Fors, Financial Services Supp Tech
Brad Kallenbach, Sr Loan Officer
Dawn Kjelland, Sr Loan Service Specialist
Scott Moser, Sr Loan Officer/Br Mgr
Jason Rohr, Associate Insurance Spec
Chad Rudolph, Loan Officer
Amanda Schlepuetz, Records Specialist
Connie Sova, Loan Service Specialist
Dawn Suhr, Loan Service Specialist
Chad Warner, Associate Tax Specialist
LaMoure
200 1st Street SW
PO Box 237
LaMoure, ND 58458
701-883-5291 / 800-520-5291
Fax-701-883-5294
Russ Grueneich, Sr Loan Officer/Br Mgr
Pam Haberman, Sr Loan Service Spec
Wayne Hoff, Sr Insurance Specialist
Jill Lacina, Loan Service Specialist
Jodi Laney, Insurance Specialist
Bonnie Loeks, Sr Tax Specialist
Sue Quinlan, Sr Loan Service Spec
ReNae Roney, Sr Records Spec/Team Ldr
Meagan Stearns, Financial Serv Supp Tech
Karen Thielges, Records Specialist
Matthew Van Bruggen, Loan Officer
Lance Vilhauer, Loan Officer
Langdon
323 Ninth Avenue
P.O. Box 270
Langdon, ND 58249
701-256-2553 / 877-623-9582
Fax-701-256-2554
Dean Aanderud, Sr Loan Officer/Br Mgr
Randy Hill, Business Analyst
Connie Howatt, Loan Service Spec
Diane Wenzel, Customer Service Rep
Mike Zeis, Sr Insurance Specialist
Lisbon
604 Main Street
PO Box 33
Lisbon, ND 58054
701-683-4172 / 800-450-4172
Fax-701-683-5728
Genene Aabrekke, Loan Service Spec
Crystal Bjone, Sr Credit Technician
Darla Coleman, Loan Service Spec
Teena Elijah, Loan Service Spec
Carol Haarsager, Financial Serv Supp Tech
Eric Klubben, Sr Loan Officer
Amanda Lyons, Records Specialist
Bradley Nims, Loan Officer
Brian Orn, Sr Insurance Specialist
Sheri Rostock, Insurance Specialist
Michael Rufsvold, Associate Tax Spec
Michael Schaefer, Sr Loan Officer/Br Mgr
Stacey Spadgenske, Customer Serv Rep
Morris
102 Atlantic Avenue South
Morris, MN 56267
320-589-3881 / 800-450-3881
Fax-320-589-3951
Troy Andreasen, Sr Loan Officer
Mona Dickey, Sr Loan Service Spec
Kate Fernholz, Associate Tax Spec
Dawn Gades, Customer Service Rep
Sandra Helseth, Sr Tax Specialist
Suzanne Johnson, Sr Loan Service Spec
Stephanie Kleindl, Fin Serv Supp Tech
Paul Mahoney, Loan Officer
Dean Meichsner, Sr Loan Officer,
Commercial Producers
Carter Moser, Sr Tax Specialist
Jim Palmer, Insurance Specialist
Carla Peterson, Sr Loan Service Spec
Jeffrey Schaefer, Loan Officer
Dennis Sleiter, Sr Loan Officer/Br Mgr
Heidi Solemsaas, Records Specialist
Sue Swenson, Credit Technician
Lynn Watzke, Credit Technician
Red Lake Falls
2611 Wheat Drive
Red Lake Falls, MN 56750
218-253-2040
Fax-218-253-2317
Heather Dufault, Sr Insurance Spec
Dawn Glass, Insurance Support Tech
Roseau
208 Third Avenue NW
Roseau, MN 56751
218-463-2766 / 888-290-2766
Fax-218-463-2777
Megan Betcher, Loan Service Spec
William Hunt, Sr Business Analyst
Keith Rourke, Sr Loan Officer/Br Mgr
Robert Severson, Sr Insurance Spec
Thief River Falls
2044 State Highway 1 NE
P.O. Box 673
Thief River Falls, MN 56701
218-681-2304
Fax-218-681-8473
Brian Frisk, Sr Loan Officer/Br Mgr
Cindi Kilen, Loan Service Specialist
Jim Reinbold, Sr Insurance Specialist
Andrew Solem, Associate Loan Officer
Jerilyn Wilson, Loan Service Specialist
Valley City
350 2nd Street NW
PO Box 1025
Valley City, ND 58072
701-845-1751 / 800-900-1751
Fax-701-845-5690
Kathy Anderson, Customer Service Rep
Linda Anderson, Loan Service Specialist
Shareen Berntson, Fin Serv Supp Tech
Valerie Holm, Sr Regional Processing Spec
Kirsten Huschka, Sr Insurance Specialist
Rhonda Marshall, Sr Loan Service Spec
Sherry Peterson, Loan Service Specialist
Mark Rehovsky, RVP Western Region
Heather Schmidt, Associate Tax Specialist
Deborah Svenningsen, Fin Serv Supp Tech
Dustin Theurer, Loan Officer
Curt Van Dyke, Sr Loan Officer/Br Mgr
Reuben Viland, Sr Loan Officer
Charles Wendel, Sr Tax Specialist
Wahpeton
1982 Two Ten Drive
PO Box 1028
Wahpeton, ND 58075
701-642-8557 / 800-450-8557
Fax-701-642-6000
Bob Asche, Sr Loan Officer
Vickie Berndt, Sr Loan Service Spec
Kathy Czichotzki, Credit Technician
Kirsten Erbes, Financial Serv Supp Tech
Todd Good, Sr Loan Officer
Shelly Grueneich, Customer Service Rep
Ron Haugen, Sr Loan Officer
Donovan Johnson, Sr Loan Officer/Br Mgr
Tanya Kath, Sr Records Spec/Team Leader
Arlene Lovgren, Sr Loan Service Specialist
Jodi Meyer, Sr Loan Service Specialist
Cheryl Muehlberg, Sr Credit Technician
Rod Myhra, Sr Insurance Specialist
Melissa Quam, Tax Preparer
Rick Quam, Sr Loan Officer
Linda Rezac, Sr Insurance Specialist
Mickie Rogal, Records Specialist
Nadine Steiner, Records Specialist
Karla Stone, Sr Tax Specialist
Lori Vogeler, Customer Service Rep
Korrine Weisbrod, Sr Tax Specialist
Warren
406 North McKinley Street
Warren, MN 56762
218-745-8500 / 800-642-6346
Fax-218-745-6014
Jeff Beaudry, Insurance Specialist
David Durand, Sr Loan Officer/Br Mgr
Robert Ellerbusch, RVP Northern Region
Peggy Feuillerat, Customer Service Rep
Casey Francis, Loan Officer
Cedric Gustafson, Sr Insurance Spec
Jerrilyn Potucek, Title/Legal Doc Spec
Lisa Sedlacek, Loan Service Specialist
Rob Svendsen, Sr LO/Business Analyst
Fargo Corporate
1900 44th Street South
PO Box 6020
Fargo, ND 58108
701-282-9494 / 800-450-8933
Fax-701-282-9618
Randy Aberle, VP Lg Agribusiness Markets
Mary Altepeter, HR Asst-Training & Events
Jill Anderson, Database Reporting Spec
Stacy Anderson, Sr Retail Finance Marketing
Specialist
Dave Anderson, VP Controller
Valerie Anderson, Sr Agribusiness Service
Specialist
Micki Antoine, Director of Loan Accounting
Paul Backlund, Info Sys Analyst-Application
Development
Bob Bahl, President/CEO
Diane Balster, Credit Support Technician
Jim Baltezore, VP Agribusiness Finance
Neal Beitelspacher, VP Agribusiness Finance
Dennis Benna, VP Credit
Ron Beyer, VP Credit
Jim Bonnichsen, Sr Retail Finance Account
Manager
Karen Bosh, Legal/Administrative Assistant
Kriste Briest, Sr Retail Finance Mktg Spec
Janel Brooks, Sr Records CP Technician
Jody Bucholz, Agribusiness Service Spec
Wayne Carlson, VP General Counsel
Shawn Christmann, Business Analyst
Dick Costain, VP Credit
Amber Dahl, Centralized Processing Tech
Rebecca Darling, Sr Insurance CP Tech
Heidi Deeton, Sr Business Analyst
Dave DeVos, Sr VP Agribusiness Finance
Sue DeVos, Title/Legal Document Specialist
Roger Durensky, Asst. Chief Appraiser
Ken Ebensteiner, VP Tax
Allison Eggl, Sr Records CP Technician
Kaye Enderud, Corporate Accounting Spec
Nicole Erickson, Associate Tax Specialist
June Esser, Credit Assistant
Karen Field, VP Agribusiness & Retail Fin
Bradley Fjestad, Business Analyst
Dave Freeh, VP Retail Finance & Leasing
Richard Freeman, Facilities Assistant
Nancy Frid, Reporting Specialist
Ken Friskop, Sr Loan Acctg Spec-Comm
Kelly Garnaas, Lending Operations Spec
Jill Gerszewski, Lending Operations Spec
Tina Gjestvang, Corporate Accounting Spec
Denise Goehring, Loan Acctg Spec-Prod
Rhonda Greicar, Loan Accounting Specialist
Alesha Greseth, Centralized Proc Tech
Lynn Hager, Lending Operations Specialist
Marissa Hapka, Retail Finance Mktg Spec
Matt Hasbargen, Sr Insurance Specialist
Amy Hegseth, Agribusiness Service Spec
Derrick Heick, Business Analyst
Elaine Heinrich, Support Services Assistant
Jeff Heley, Senior Auditor
Diana Huseby, Dir of Marketing Comm
Terri Jackson, Loan Accounting Specialist
Pat Janzen, VP Strategic Op Systems
Lori Jegtvig, Loan Accounting Specialist
Brian Jenson, Asst VP Credit
Maryanne Jerstad, Dir of Education & Development
Ginger Johnson, VP Operations
Curtis Johnson, Sr Loan Officer
Jerry Johnson, Facilities & Equipment Mgr
Todd Kaiser, Business Analyst
Janee Kale, Dir Corporate Finance GL
Becky Kallenbach, Sr Agribusiness Service Specialist
Kathy Karlsson, Art Consultant/Graphic Design
Paula Keelin, Operations Specialist
Kristy Kellerman, Corp Accounting Spec
Ken Knudsen, Sr VP Chief Credit Officer
Gary Landsem, Info Sys Specialist-Hardware Support
Marv Langerud, Sr VP Producer Marketing
Heather Leith, HR Generalist
Teri Lingen, Retail Finance Mktg Specialist
Randa Lisburg, Info Sys Specialist-Security
Administrator
Linda Magnuson, Executive Assistant
Karen McCann, Appraisal Asst/Qualified Evaluator
Brian McDonald, Dir of Info Systems
Brian McKay, VP Agribusiness Finance & Analysis
Bruce Middaugh, VP Agribusiness Consultant
Dawn Mogck, Director of Applied Tech
Carolyn Monson, Corp Accounting Spec
Natalie Murch, Centralized Processing Tech
Donna Nelson, Sr Retail Finance Mktg Spec
Jeremy Oliver, Sr VP Chief Financial Officer
Howard Olson, Sr VP Financial Services
Kari Olson, Director of Lending Operations
Gary Ouradnik, Dir of Budget & GL
Stuart Peterson, Contract Analyst
Peggy Pitsenbarger, Sr Agribusiness
Service Specialist
Nicolette Rindahl, Sr Insurance CP Tech
Julie Rosenfeldt, CP Team Lead
Mary Jane Rudolf, Mktg Comm Coordinator
Dave Rupp, VP Agribusiness Finance
Todd Sather, Retail Finance Account Mgr
Julie Sauvageau, Financial Services Asst
Jaramie Schoepp, Business Analyst
Nicole Schwartz, Sr Business Analyst
Kari Seidel, Title/Legal Document Spec
Dan Senn, Business Analyst
Tracy Sinclair, Asst VP HR
Carol Sletmoen, Corporate Receptionist
Tiffany Stiles, Agribusiness Service Spec
Gwen Stoltman, Credit Education Specialist
Jeni Strand, VP Human Resources
Neal Sundet, VP Credit
Tracy Tate, Loan Acctg Specialist-Comm
Tim Terras, Sr Business Analyst
Betty Thomas, Credit Coordinator
Paul Thorp, Sr Certified Appraiser
Russell Tweiten, Agribusiness Consultant
John Ust, Asst VP Credit
Tamara VanWechel, Business Analyst
Eric Vinje, Mktg Technology Consultant
Michaella Vliem, Lending Operations Spec
Sylvia Volker, Credit Support Technician
Cindy Waasdorp, Dir of Compliance & Documentation
Lavonne Walker, Dir Agribusiness Finance
Administration
Kelly Wetzstein, Loan Acctg Spec-Producer
Kim Wheeler, Financial Services Assistant
Jess Wiemann, Associate Business Analyst
Keith Wilson, VP Insurance
Tracy Winterquist, Business Analyst
Kent Zeltinger, VP Audits
Kim Zeltinger, VP Credit

2008 annual report - AgCountry Farm Credit Services

Transcription

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