2014 Accomplishments!!!! • Obligations of direct and guaranteed OL and FO funds were the third highest in Agency

history (exceeded only in FY’s 1985 and 2010). • The highest level of direct FO obligations (nearly $1 billion) in Agency history. • The highest level of guaranteed FO obligations (over $2 billion) in Agency history. • No backlogs of approved, unfunded applications were carried forward into FY 2015.

• The highest level of direct and guaranteed loan assistance provided to SDA’s in Agency history.

• The highest level of direct and guaranteed loan assistance provided to BF’s in Agency history.

2014 Accomplishments continued

• The Direct Dollar Delinquency rate is 5.26% and

the lowest since at least 1992.• The Direct Borrower Delinquency rate is 10.69%• The Guaranteed Dollar Delinquency rate is

0.98% and the lowest since at least 1991.• The Guaranteed Loan Delinquency rate is 1.83%

Roadmap for Future of FLP

• To understand the future we need to understand where we have been and what has shaped our workforce and our programs to date

0.0

50.0

100.0

150.0

200.0

250.0

300.0

85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

Nu

mb

er o

f B

orr

ow

ers

(in

th

ou

san

ds)

Fiscal Year

FARM LOAN PROGRAMS Direct Borrower Caseload

Churn Data/Graduation

• Portfolio is turning over at a rapid rate• Of all borrowers in the portfolio in 2000 only

20% remain today• Important talking points • There are still some in Congress and others

that think our customers get in our portfolio and stay forever

$0.0

$5.0

$10.0

$15.0

$20.0

$25.0

$30.0

85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

Un

pai

d P

rin

cip

al (

in b

illio

ns)

Fiscal Year

FARM LOAN PROGRAMSDirect Unpaid Principal Balances

FY 2015 Budget

• $5.3 billion to $6.4 billion• Appropriation language allows for plus 25% in zero

subsidy programs • Direct FO and Guaranteed FO are zero subsidy

programs • Potential for $7.5 billion for FY 2015 –a 40% increase • Total loans made per year from 34,000 to 43,000• Plus up in staffing –292 –most planned for CO

deployment

24.4

5.3

1.520.98

0

5

10

15

20

25

30

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Del

inq

uen

cy R

ate

Fiscal Year

FARM LOAN PROGRAMS DOLLAR DELINQUENCY RATE20-Year Trend

Direct Delinquency Rate

Guaranteed Delinquency Rate

Servicing Needs Attention in FY 2015

• Defaults increasing • Commodity prices down• Cash flows difficult to develop• Need to use all available servicing tools • Plans have to be customer driven with

technical assistance from FSA

9.3

0.7

1.00.2

0.0

2.0

4.0

6.0

8.0

10.0

12.0

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Lo

ss R

ate

(per

cen

t o

f u

np

aid

pri

nci

pal

)

Fiscal Year

FARM LOAN PROGRAMS LOSS RATES20-Year Trend

Direct Loss Rate

Guaranteed Loss Rate

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

Nu

mb

er o

f P

rop

erti

es

Fiscal Year

FARM LOAN PROGRAMS INVENTORY PROPERTY

Steller Portfolio Performance

• Despite increased loan volume• Despite reduced staffing levels• Despite outside distractions • Public and Political view of FLP has never been

better—need to capitalize on the momentum

02468

101214161820

Year

Dir

ect F

LP M

arke

t Sha

re o

f tot

al fa

rm

debt

(per

cent

)FSA Direct Loan Programs Have Been Used to Assist Farmers During

Periods of Farm Financial Stress

Rise in Emergency Lending

Farm Debt Crisis

Uptick from 2008 Financial Crisis

Civil rights cases

Farm Credit System37%

FSA - Di-rect6%

FSA - Guaranteed4%

Farmer Mac3%

Commercial Banks39%

Life In-surance

Companies5%

Individuals and Others6%

Share of Farm Business Debt Heldby Institutional Type

As of December 31, 2011. Sources: ERS Farm Income, Federal Reserve, FSA FLP and Farmer Mac Annual Reports

Market Penetration

• Chart shows FSA market share at 10% of all farmers regardless of financial condition

• If the information is filtered for producers having at least $500 of interest expense the FSA market share increases to 35% and even higher with underserved groups

Underserved

• Use SDA for forms and legal documents (internal )

• Use Underserved for general fact sheets and press releases for FSA outreach and marketing activities (external)

• Use Targeted Underserved (list the particular groups ) for external communication where we are specifically talking about targeted funding or reduced /waived fees for FP

FSA Portfolio Trends

26%

74%

Direct Portfolio 2007Direct Beginning Farmer Direct Non-beginners

56%

44%

Direct Portfolio 2014Direct Beginning Farmer Direct Non-beginners

What does this tell you

• What we do is important and our efforts can move the needle

• Most beginning farmer loans ever in 2014• Most loans to unserved groups in 2014• Through a joint and continued effort we have changed

the focus of the FSA loan programs to truly the Lender of First Opportunity

• FSA is the premier lender of choice for Beginning and underserved producers

Gulf of Mexico

AtlanticOcean

PacificOcean

Canada

Mexico

-70°

-80°

-80°

-90°

-90°

-100°

-100°

-110°

-110°

-120°

-120°-130°

40

°

40

°

30

°

30

°

Counties by Number of Bank & FCS Associations Providing Agricultural Loans

# of Branch Offices in County s of Ag Lenders Providing Loans to Farmers

None

1 or 2

3 or more

_̂

_̂_̂

_̂

_̂

_̂

_̂

_̂ _̂_̂

_̂

-150°

-150°-160°-170°-180°

-140° -130°

70°

60°

50°

-160°

20°

Ag Credit Deserts

• No physical presence of a major agricultural lender in the county

• Even counties with physical presence have credit deserts in urban areas

• Partnering with CDFIs • Partnering with local farm advocacy groups

– Rural Coalition– Federation of Southern Cooperatives– Center for Rural Affairs

Continued

• In budget constrained times we must leverage the non-USDA work force

• There are many organizations out there doing the same thing we are doing and share the same customer base

• How do we turn their work force into an extension of ours

• Teach , Train, and Trust

Brand

Behaviors

Standards

Functionswhat the organization does, its products and services

how the organization delivers its products and services

how the organization relates to its customers, communities and stakeholders

Sustaining a long-term advantage in competencies and/or standards is difficult…

…so most successful brands emphasize relationships with customers

Our brand relationship with the market place has threemain components.

Functions –what the organization does

• Loans• Technical Assistance• Facilitators of resources• Financial counseling • BTO

Standards-How We Deliver Our Products

• One on one• Locally• With highly qualified financial experts• With integrity • With genuine concern for our customer

Behaviors –How We Relate to Our Customers

• Behavior is the strongest foundation on which we can build strong and enduring relationships with our customers– Way we treat people– Understand each customer and their situation – The lengths we go to help – The example we set in the community – we are FSA and if people like and respect us then

they like and respect FSA

Building Coalitions

• Beginning Farmer Advisory Council• Native American Advisory Council• Veterans –Farmer Veteran Coalition (FVC)• You are FSA

Continued

• Customers demand more products and services• Customers demand more flexibility• Customers demand fairness but not to be

treated equally• Customers are different • We need to use the appropriate tools and

programs for the appropriate customers and situations

Continued

• Panel of Veteran, beginning, organic, and underserved

• Each told a different story of their trials and tribulations in obtaining credit

• If not for their fortitude we would have missed out on having them in agriculture

FSA Toolkit

• Micro loans • Streamlined loans • PLP lenders • New servicing flexibilities • For best results use as directed and when

appropriate

Building Relationships with our Partners

• Farm Credit • ABA• IBA• Non-traditional lenders--CDFIs• SBA• RD

What About Internally

• Have we given our internal customers the same attention we give our external customer

• Smile in every aisle • More training • More emotional and financial support • Administrators awards

– Vote early and often – With our fantastic portfolio performance there has

to be hundreds of worthy people out there

What About Internally

• Administration is making a significant commitment to our employees

• Cash award money• IT refresh—each employee will get new

hardware• Management training• More staff• Listening to your ideas—resolutions

And the Results Are In

• Overall: OVERALL RATING OF NATIONAL OFFICE• Service Quality Overall• Excellent 4 8 25.0% 32• Good 3 21 65.6% 63• Fair 2 3 9.4% 6• Poor 1 0 0.0% 0

• Encourage you to do the same type of survey in your respective states

2016 Budget• Should expect the same level funding and staffing • 16% of our nations population lives in rural America• Who should be most concerned about this

– Churches– Schools– Local business owners – Military– Locally retired farmers and ranchers

• This group of people need to be engaged in our efforts to reach our customer base

• Continue to offer additional services to our customer base– Financial literacy– Access to land– Serve as facilitators for community resources

Research and Development

• Continue to focus on – Beginners– Underserved– Veterans

R & D Cont

• Direct FO micro loan program • Pre-screening / qualification for eligibility

– Borrower training and cash flow development• use of cooperative agreements to leverage

shills and abilities of extended work force• Teach—Train—and Trust

R & D Cont

• Develop a Guaranteed micro lender program– Non-traditional and smaller lenders

• Organic and locally grown pricing options • On line applications • Paper less office • Digital signatures

R & D Cont

• ADR for civil right cases • Live chat• Compliance review makeover• Develop library of non-traditional tips and

tricks

Reports

• FSA has access to endless reports—in some cases too many

• We get lost in the repots and the averages when we need to be analyzing what they are telling us and look behind the numbers for anomalies (not averages)

Development of Human Resources

• Farm Loan Chief Development – Mentoring program– Leadership training scheduled

• FLOT training – Flexibility in length—adopt same philosophy as

with loan making—different people and different situations need different responses • Former PT—first year could be accelerated• Former loan officer –second year could be accelerated

Development of Human Resources

• FLOTs need to be trained in a training office• All those attempting to get loan approval

authority need to be tracked and held accountable

• Determining the skill set needed and revising the PDs accordingly

FLOT Assessment Tool

• Working Group Members:– Ranay Brady, HRD Kansas City– Craig Schaunaman, SED South Dakota– Maureen Mausbach, FLM Nebraska– Dan Gieseke, FLC, Missouri

FLOT Assessment Tool

• Last Updated 2010• Contained 15 questions• Seemed to emphasize FSA or bank experience• Wanted to be able to reach recent college

grads as well as those with experience• Emphasize agriculture and finance

background

FLOT Assessment Tool

• Revised old questions• Developed some new ones• Assigned point values to the answers with

higher weighting on agriculture and finance answers

• “Soft skill” questions

FLOT Assessment Tool

• New Assessment Tool– Implemented October 20– Contains 13 questions– Removed questions regarding “loan closing” and

“ability to train”

In Conclusion

• We are excellent in what we do • As good as we are we intend to get better!!