2015 ANNUAL REPORT - Farm Credit Services of America · In 2015, we leveraged the ... Matt, Aaron & John Anderson, Anderson Farms LOCATION: Elgin, Nebraska ... / 2015 Annual Report

2 0 1 5 A N N U A L R E P O R T

/ 2015 Annual Report

Loans (in billions)

$2

2.1

$2

0.2

'15 '14 '13

$4

.0

$3

.6

Members’ Equity (in billions)

'15 '14 '13$

53

6.5

$5

14

.6

Net Income (in millions)

'15 '14 '13

$1

60

$1

45

Cash-BackDividendsDeclared (in millions)

'15 '14 '13

Financial Highlights

$5

14

.0

$4

.3$2

3.6

$1

60

no. 3

the most remarkable idea for financing agriculture is 100 years new.

Rapidly changing farmland values, the

introduction of new technologies, the

desire to expand, higher production costs,

a struggle to keep the next generation

from leaving.. .

As chronicled in the news of the day, the challenges faced by America’s farmers and ranchers 100 years ago still sound familiar. But in the early 20th century, they included an additional barrier to success: the lack of consistent credit at reasonable rates.

The Federal Farm Loan Act was signed into law in 1916 to establish a cooperative system to deliver reliable financing to qualified farmers and ranchers through every cycle of agriculture. The resulting Farm Credit System remains one of the most remarkable — and successful — ideas in agricultural finance.

Today, Farm Credit Services of America supports rural communities and agriculture with financing for producers, crop insurance to help manage risks, and tools to help grow success.

The next 100 years will undoubtedly bring new innovations and challenges to agriculture. More than simply changing with the times, Farm Credit Services of America will help lead the way by enabling our customer-owners to thrive and succeed into the next century.

no other lender works for agriculture like farm credit services of America.


"No other lender gives back to its customers — or the

communities they are part of — like FCSAmerica."

no. 5

In an era of volatility and uncertainty, you can count on your financial services cooperative to be consistent, dependable and strong. With loan growth to $23.6 billion, net income of $514.0 million and members’ equity increasing to $4.3 billion, Farm Credit Services of America (FCSAmerica) is well-positioned to meet the challenges of an unpredictable agricultural economy.

In 2015, we leveraged the strengths of the Association to implement a strategic alliance with Frontier Farm Credit, an Association serving 41 counties in eastern Kansas. We are working with the Frontier Farm Credit Board of Directors to deliver additional FCSAmerica products, services and lending capacity to farmers and ranchers there. The alliance uniquely positions our two Associations to continue investing in new services and technologies that enhance our customers’ experiences.

The value proposition of our cooperative continues to be bolstered through a very strong patronage program as well as through educational opportunities for producers. It is always heartening to hear from customer-owners who say our education programs, such as GrowingOn® (a risk management offering) and Side by Side (a special program for young and beginning producers), help them with their business decisions. It also is rewarding to watch a new generation of farmers and ranchers enhance their opportunities for success with the support of programs like our Development Fund.

Your Board of Directors’ declaration of a $160 million cash-back dividend for 2015 marked a milestone for our patronage program. The amount of earnings returned to rural communities and agriculture through cash-back dividends to our eligible customer-owners now exceeds $1 billion. Yes, that is billion with a “b.” No other lender has matched this achievement.

Another milestone this year is the 100th anniversary of the Farm Credit System. We are proud of the legacy of the Farm Credit System — and even prouder that we are so well-positioned to serve rural communities and agriculture today and in the years to come.

Certainly among the hottest topics of 2015 were interest rates and land values. In December 2015, for the first time in nearly 10 years, the Federal Reserve raised the federal funds rate. Even so, as we look back, interest rates remain at reasonable levels, and opportunities still exist to help manage interest rate risk through attractive fixed rates.

Farmland values softened in our four states in 2015, with the level varying by state. Still, values remained firmer than expected, helped in the last half of 2015 by higher-than-expected yields. However, we expect that lower commodity prices and tighter margins will continue to put downward pressure on farmland values as we look forward.

Nothing that stands still survives forever. As the Farm Credit System begins a new century of service to agriculture, we will continue to look for opportunities to strengthen your Association. On behalf of FCSAmerica, I would like to thank you for being part of our history and invite you to celebrate and shape the next 100 years.

Douglas R. StarkPresident and CEO


working to grow the next generation of farmers and ranchers.

One of the most innovative programs of its kind for helping young, beginning and small producers, our Development Fund was launched this past year.

The Development Fund works with and enhances FCSAmerica’s Young & Beginning specialized loan program and conventional lending products to address the short-term risk-bearing ability of producers at that critical stage of transitioning into, or starting or expanding an operation.

FCSAmerica has committed $40 million to the Fund, which provides low-interest, long-term working capital loans of up to $150,000. Successful applicants must have a viable business plan and are guided by the financial expertise and support of an FCSAmerica business development officer.

One young South Dakota ranching couple described the business planning process as a great way to understand more about the industry, research best practices, learn cutting-edge ideas and identify historical trends. “As uncomfortable as it was, the process forced us to contemplate future markets,” they said. “Ultimately, we are more informed and better prepared to make adjustments and take an alternate path if needed.”

Just as we continue to serve our more established customers through the ups and downs of agriculture, our support of young, beginning and small producers is critical to the future. It is important to our vision of becoming the next generation’s most valued financial partner.

Young, beginning or small producers accounted for 52% of all new customers

added in 2015.

52%

We assisted more than 2,100 customers in 2015 alone

through our Young & Beginning specialized loan program — a 50% increase

over the last five years.

50%

no. 7

NAME:

Matt & Andy Hurd, M & A Farms

LOCATION: Nemaha, Iowa

OPERATION: Grain & Beef Producers

CUSTOMERS SINCE: 2002

Why we chose agriculture

Matt: My dad had an opportunity to

expand his farming operation, which

made room for me to come back after

working off the farm for a few years.

I like the work, the lifestyle and being

my own boss.

Andy: I decided at an early age that

I wanted to return to the farm if the

opportunity presented itself. I like how the

business is run and being my own boss.

Our vision for the operationAndy: The goal for our farming operation

is to pass it on to the next generation.

We want to keep it sustainable, make

a comfortable living, and pass the farm

on to our kids if they want to take the

opportunity.

Why we work with FCSAmericaMatt: Our financial officer was our dad’s

financial officer. He helped us transition

the operation and then took us on as

customers in 2002. FCSAmerica is a

family type of place. I know everyone in

the office. They’ll come out to the farm

and talk to us anytime.

Andy: FCSAmerica helped us get on our

feet. They are a business partner we

chose to be on our team. Anybody we

choose to be on our team we feel is the

best. They are great people and very

friendly to work with.

"The goal for our farming operation is to pass it on to the next generation." – ANDY HURD

PICTURED LEFT TO RIGHT:

Matt & Andy Hurd

Hear more from the Hurds at fcsamerica.com/matthurdfcsamerica.com/andyhurd

https://www.fcsamerica.com/careers/customer-profiles/matt-wendy-hurd

https://www.fcsamerica.com/careers/customer-profiles/andy-lisa-hurd

/ 2015 Annual Report / 2015 Annual Report

Hear more from the Andersons at fcsamerica.com/mattandersonfcsamerica.com/aaronandersonfcsamerica.com/johnanderson

"The digital tools help us hone our positives, find our weaknesses and become more efficient." – JOHN ANDERSON

NAME:

Matt, Aaron & John Anderson, Anderson Farms

LOCATION: Elgin, Nebraska

OPERATION: Grain Producers



Aaron: We work well together. There are

a lot of challenges, but it’s always been

a dream to farm together. Opportunities

arise from good and bad times. It’s

exciting. No matter the situation, there’s

always an exciting moment.

Using FCSAmerica’s digital toolsJohn: I like that FCSAmerica has digital

tools that can analyze our financial

information to generate charts, pie graphs

and balance sheets. We learn something

about our balance sheet every time we

look at it. The digital tools help us hone

our positives, find our weaknesses and

become more efficient.

Our business approach

John: We’ve been trying to expand for

years and have been doing so little by

little. We’ve been running a lot of older

equipment. We didn’t ever want to tie up a

lot of money or capital in equipment. We’re

very confident in expanding this way.

The future of our operationMatt: The biggest thing is the transition

of the farm. It’s something we’re all going

to work through together. We know it can

be a challenge to bring new people into

the family and operation successfully, but

we’re committed to doing it.

PICTURED LEFT TO RIGHT:

Matt, Aaron & John Anderson

https://www.fcsamerica.com/careers/customer-profiles/matt-anderson

https://www.fcsamerica.com/careers/customer-profiles/aaron-anderson

https://www.fcsamerica.com/careers/customer-profiles/john-anderson

technology advances growth and sustainability.

FCSAmerica’s investment in technology spans every facet of our business, from digital tools for our customers to internal systems that make our operations more efficient and productive.

FCSAmerica is a leader in the development of automated loan-decisioning systems, resulting in significant cost efficiencies that support our business growth. Other systems equip our Association with sophisticated risk management tools. In addition, online tools available through FCSAmerica® Mobile and AgriPoint® at fcsamerica.com provide account access, Remote Deposit, and robust data and financial management support to help customers better understand their financial health and make smart business decisions.

FCSAmerica will continue to invest in technologies, systems and programs that make it easier and more convenient to do business with us — to save time, save money and help grow your operation.

no. 9


providing educational opportunities to help customers grow.

As farm, ranch and agribusiness operations grow, so too does the need for sophisticated business and financial acumen. Our financial and crop insurance officers are on farms and ranches every day, working one-on-one with producers to provide financial expertise and support. To further elevate the business of financial management, FCSAmerica hosts and sponsors a variety of educational programs.

Our sponsorship of Annie’s Project in our four states has allowed more than 1,000 women in agriculture to sharpen their financial and farm management skills. In July, we hosted our annual Side by Side Conference in Omaha for young and beginning farmers and ranchers. Approximately 1,000 farm families have now benefited from our workshops in farm finances, transition planning and more. In early 2015, our GrowingOn events drew record attendance in Iowa, Nebraska and South Dakota with a comprehensive and timely review of the Farm Bill and its impact on operations.

Whether it’s an educational program offered at a retail office, a learning resource provided online, or guidance shared through a one-on-one discussion, we are committed to equipping you with the financial know-how to succeed.

We continue to expand our learning tools and topics to help you anticipate and prepare for agriculture’s changing cycles, manage your finances and better understand the trends and forces shaping agriculture.

98% of 2015 GrowingOn attendees said the

experience was extremely valuable or valuable.

98%

99% of 2015 Side by Side Conference attendees said

the experience was extremely valuable or valuable.

99%

no. 11

NAME:

Bryce & Leann Vigil

LOCATION: Manderson, Wyoming

OPERATION: Grain Producers



Bryce: Growing up, I worked on our

family farm. I’ve always had fun doing it

and I like being outside as much as I can.

Attending Side by SideBryce: To get young people where

everybody’s at the same point in life

and striving for the same things, made

it an event we were really excited to

attend. It was fun to be in a group

where everybody’s thinking about the

same issues.

Our farm’s transitionBryce: My dad is trying to slow down and

let me take on more responsibility. We’re

going through a similar change with our

FCSAmerica financial officer right now

too. We’ve got a financial officer retiring

and one who’s very young. It’s awesome

for me, because Dad and I are at a similar

point. He’s got ideas like I do and is very

good with technology. We work together

well.

Our approach to our farm’s future Bryce: We want to expand the acres we

farm. That’s just the nature of agriculture.

But, when we sit down and think about it,

sometimes we could work a little less, do

a better job and make a little more money

at the end of the day. We set our goals,

have faith and believe in ourselves.

"Attending Side by Side, where everybody's at the same point in life and striving for the same things, made it an event we were really excited to attend." – BRYCE VIGIL

Hear more from the Vigils at fcsamerica.com/brycevigil

https://www.fcsamerica.com/careers/customer-profiles/bryce-vigil


Each year, we make contributions and volunteer to assist programs and organizations that impact people and communities across our four-state area. Our community involvement efforts are focused on ag education, hunger and nutrition, and young and beginning producer initiatives.

Annie’s Project

Farm Risk Management Tool

Farm Safety For Just Kids

Grants

Scholarships

Invest An Acre

The Big GardenEmployee Volunteer Locations

Underwriting Support

FFA Support

Hunger Relief

Disaster Relief

4-H Stall Cards

Of�ce Activities

Grain Bin Rescue Donations

4-H Stall Cards More than 21,600 stall cards provided to livestock exhibitors in 89 counties.

Annie’s Project Funded 39 courses on farm business management, livestock management and succession planning.

Disaster Relief 439 employee volunteer hours and contributions dedicated to cleanup efforts.

Employee Volunteer Locations FCSAmerica employees volunteered 7,141 hours in 335 communities.

Farm Risk Management Tool Web-based farm management curriculum used by 304 high school FFA chapters.

Farm Safety For Just Kids Funding support provided to educate 11,060 children in 127 communities about farm safety.

FFA Support 7,482 FFA handbooks, seven national convention sponsorships and state convention support.

Hunger Relief Funding and employee volunteering increased mobile pantries, food rescue and food distribution to underserved counties with high percentages of food insecurity.

Grain Bin Rescue Donated grain bin rescue equipment and training for 84 fire departments.

Grants Provided 257 Working Here Fund grants totaling $440,530 for hunger and nutrition, ag education, and young and beginning producer initiatives.

Scholarships Awarded 24 $2,500 land grant and 44 $1,000 community college scholarships to students in agriculture.

The Big Garden 20 new community gardens for hunger, harvesting 88.4 tons of produce overall and teaching 4,800 children to grow food.

Underwriting Support Funding for commodity groups, Raising Nebraska, Feeding South Dakota, Wyoming Women in Ag, Iowa Food Bank Association, Lincoln Public Schools Ag Career Pathways and four land grant university endowment funds. Local Contributions Each of our 42 offices impact communities with funding support for local programs and initiatives.

Invest An Acre Matched crop donations at $500 each; contributions went to the producer’s local food bank.

Ongoing Community Efforts

land grant universities each receive $100,000 in honor of farm credit system centennial.

To celebrate our centennial in a way that can provide a lasting impact on agriculture, FCSAmerica contributed $100,000 to each of the land grant universities in our four-state area. The funds will be used to help advance industry education initiatives and opportunities in agriculture, life sciences and leadership.

At the University of Nebraska-Lincoln, FCSAmerica centennial funding supports the Institute of Agriculture and Natural

Resources Science Literacy Initiative designed to integrate agricultural literacy and STEM education in Nebraska schools. Partners in this effort include state commodity organizations, Ag in the Classroom, educators and staff leaders from UNL Extension, UNL College of Agricultural Sciences and Natural Resources and UNL College of Education and Human Sciences.

Agricultural leadership is the focus of FCSAmerica’s contribution at the University of Wyoming. The funding is being used to

create an Agricultural Leadership Program within the university’s College of Agriculture and Natural Resources. The program will develop new leadership programming, provide funding for student-led research on institutional leadership models, develop a campus-wide leadership-focused speaker series, and support programs that will create a permanent university leadership curriculum.

South Dakota State University is using the FCSAmerica McCrory Gardens Education and Visitors Center Endowment

for an outdoor teaching laboratory for agronomy, botany, horticulture and plant science students. With FCSAmerica’s contribution, SDSU College of Agriculture and Biological Sciences leaders will develop new classroom facilities to expand student educational opportunities. This includes providing new equipment, supplies and other upgrades to expand the university’s research.

Iowa State University’s College of Agriculture and Life Sciences features the highest-ranked Ag Business Club in the nation.

The Ron Deiter ISU Ag Business Club Endowment, supported by FCSAmerica, is being established to expand the Ag Business Club’s leadership mentoring capacities for students. This will include new leadership development activities, ag industry tours, and professional meetings and engagements with industry leaders.

no. 13

Annie’s Project

Farm Risk Management Tool

Farm Safety For Just Kids

Grants

Scholarships

Invest An Acre

The Big GardenEmployee Volunteer Locations

Underwriting Support

FFA Support

Hunger Relief

Disaster Relief

4-H Stall Cards

Of�ce Activities

Grain Bin Rescue Donations

For more information about

our community involvement,

visit fcsamerica.com/community.

volunteer hours contributed

https://www.fcsamerica.com/who-we-are/community-involvement/community-involvement


"I feel confident that FCSAmerica has the tools, expertise and capital to see us through these

challenging times."

no. 15

Those of us who work in production agriculture understand the risks inherent in our chosen careers. Last year was a reminder that long-term success depends as much on managing through the tough cycles as it does on maximizing profits during the good ones.

As chairman of your cooperative’s Board of Directors, I feel confident that FCSAmerica has the tools, expertise and capital to see us through these challenging times. Many producers have and will continue to benefit from FCSAmerica’s work to restructure debt to preserve critical working capital. Few lenders offer the kind of long-term fixed rates that FCSAmerica provides. This, combined with financing strategies tailored to each of our operations, offers opportunities to succeed even in tough times.

Your Board recognizes that today’s agricultural market is especially difficult for young and beginning producers. Agriculture remains a capital-intensive business. Low commodity prices and a relatively strong land market compound the challenges of starting and sustaining an operation. In 2015, more than half of all new FCSAmerica customers fell into the young, beginning or small categories. While many of these producers met the criteria for traditional financing, others benefited from our specialized programs that offer modified credit standards and financial guidance.

I am proud to report that in 2015, FCSAmerica’s new Development Fund for young, beginning and small producers provided working capital loans to dozens of young farmers and ranchers with solid business plans to start or expand operations. In addition, our Young & Beginning specialized loan program, which began with 132 customers in 2002, now serves more than 2,100 producers. In total, FCSAmerica loaned nearly $5.5 billion to young, beginning or small producers in 2015.

Your Board also is committed to advocating on behalf of agriculture. FCSAmerica, along with others in the Farm Credit System, regularly reaches out to lawmakers to defend and protect the interests of agriculture. I would like to thank all of those who joined FCSAmerica during Congress’ 2015 appropriations process to educate lawmakers about the importance of crop insurance.

Bringing the weight of our stockholders to bear for the good of agriculture is one of the strengths of our cooperative business model. So too is FCSAmerica’s patronage program, which returns a share of earnings to eligible customer-owners each year. With more than $1 billion returned to farmers and ranchers in the past 12 years, the Board considers cash-back dividends to be an added value to doing business with the cooperative, one that benefits our farms and ranches as well as our rural communities throughout our four-state area.

Thank you for choosing FCSAmerica. We wish you continued success.

Jeremy Heitmann2015 Board Chairperson


Jim Ehlers / Newell, IowaEhlers has a farming operation raising corn and soybeans. He was elected to the Board effective January 1, 2009, and his current term ends March 31, 2017.

Jeremy Heitmann / Byron, NebraskaHeitmann farms with his family. They raise corn, soybeans, wheat and alfalfa, and run abackground feeder cattle operation. He was appointed to the Board effective January 1, 2008. He was elected to the Board effective January 1, 2011, and his current term ends March 31, 2018.

Steve Henry / Nevada, IowaHenry has a family commercial and seed-crop production operation. He was elected to the Board effective January 1, 2011, and his current term ends March 31, 2019.

Nicholas Hunt / Atlantic, IowaHunt owns and operates a farm growing corn, soybeans and alfalfa, and has a cattle-feeding operation. He was elected to the Board effective January 1, 2007, and his current term ends March 31, 2017.

Jim Kortan / Brookings, South DakotaAn Appointed Director, Kortan is a retired partner with Deloitte and brings a background in information technology, strategic planning, risk management, internal control, regulatory compliance and business process improvement. He was appointed to the Board effective April 1, 2015, and his current term ends March 31, 2019.

fcsamerica, aca directors

Robert Bruxvoort / New Sharon, IowaBruxvoort operates a family farm producing corn and soybeans. He is also a partner in a contract hog-finishing operation. He was elected to the Board effective January 1, 2008, and his current term ends March 31, 2018.

Cris Miller / Spearfish, South DakotaMiller has a family ranching business with a commercial cow-calf operation, a backgrounding operation and feed crops. He was elected to the Board effective January 1, 2012, and his current term ends March 31, 2016.

Rick Maxfield / Lyman, WyomingMaxfield and his family have a ranch and farm. The multigenerational operation includes cow-calf and background calves. The family also grows hay. He was elected to the Board effective April 1, 2015, and his current term ends March 31, 2019.

no. 17

Timothy Rowe / Elwood, NebraskaRowe and his wife raise corn, white corn, soybeans and alfalfa. He also raises livestock that consists of a cow-calf herd, plus a custom backgrounding, feedlot and finishing operation. He was appointed to the Board effective June 1, 2014, to serve the balance of a vacated four-year term that ends March 31, 2017.

Jon Van Beek / Primghar, Iowa Van Beek has a family farm operation raising corn and soybean seed, and contract finish pigs. He was elected to the Board effective January 1, 2009, and his current term ends March 31, 2016.

John Reisch / Howard, South Dakota Reisch is a farmer and cattle feeder. As president of Reisch Farms, Inc., he raises corn,wheat, soybeans and alfalfa, and has cattle-feeding and cow-calf enterprises. He was elected to the Board effective January 1, 2008, and his current term ends March 31, 2018.

Jennifer Zessin / Madison, Nebraska Zessin has a grain farm operation raising corn and soybeans. She has past businessexperience in banking, personnel and internal auditing. She was elected to the Board effective January 1, 2009, and her current term ends March 31, 2016.

Kim Vanneman / Ideal, South DakotaVanneman and her husband own and operate a diversified farming operation including rowcrops, small grains, finishing feeder pigs and a commercial beef-cow herd. She serves on the Farm Credit Foundations board of directors and plan sponsor committee, the Farm Credit Council board of directors and FCC Services board of directors. She was elected to the FCSAmerica Board effective January 1, 2007, and her current term ends March 31, 2017.

Susan Voss / North English, Iowa Voss and her husband grow corn and soybeans, and have run cow-calf and background feeder operations. She also is a certified public accountant and principal at TD&T CPAs and Advisors. She was elected to the Board effective April 1, 2014, and her current term ends March 31, 2018.

Mark Weiss / Omaha, NebraskaAn Appointed Director, Weiss is the chief information officer with Solutionary Inc. He has senior leadership experience with organizations engaged in the business of healthcare, gas and water utilities, telecom, financial services and software development. He was appointed to the Board effective April 1, 2014, and his current term ends March 31, 2018.

Randy Peters / McCook, NebraskaPeters has a family farm and ranch operation raising wheat, corn, soybeans and sunflowers. Peters also raises and sells certified seed wheat, and has a Black Angus and Red Angus cow-calf herd. He was elected to the Board effective January 1, 2003, and his current term ends March 31, 2019.


Financial Information

19 Consolidated Five-Year Summary of Selected Financial Data

20 Management’s Discussion and Analysis of

Financial Condition and Results of Operations

30 Report of Management

31 Report on Internal Control Over Financial Reporting

32 Report of Audit Committee

33 Independent Auditor’s Report

34 Consolidated Financial Statements

38 Notes to Consolidated Financial Statements

61 Disclosure Information Required by

Farm Credit Administration Regulations (Unaudited)

no. 19

Farm Credit Services of America, ACA

Consolidated Five-Year Summary of Selected Financial Data (Dollars in thousands)

2015 2014 2013 2012 2011

Balance Sheet Data

Loans $23,638,506 $22,098,426 $20,211,770 $18,489,616 $15,890,986

Less allowance for loan losses 65,000 58,000 52,000 60,000 58,000

Net loans 23,573,506 22,040,426 20,159,770 18,429,616 15,832,986

Investment in AgriBank, FCB 487,333 465,880 486,438 455,203 426,735

AgDirect, LLP investment in AgriBank, FCB 73,783 82,975 86,972 82,388 65,412

Cash 60,832 48,246 86,363 216,109 157,260

Other property owned – 4,279 3,642 4,800 4,330

Other assets 577,212 486,147 451,086 422,048 418,984

Total assets $24,772,666 $23,127,953 $21,274,271 $19,610,164 $16,905,707

Obligations with maturities of one year or less $20,077,076 $18,790,035 $17,333,892 $16,060,763 $13,720,771

Other liabilities 370,834 368,566 347,905 325,747 310,720

Total liabilities 20,447,910 19,158,601 17,681,797 16,386,510 14,031,491

Protected members’ equity – – – – 1,734

At-risk capital stock 47,780 46,480 46,118 46,978 47,116

Accumulated other comprehensive loss – – – – (188)

Retained earnings 4,276,976 3,922,872 3,546,356 3,176,676 2,825,554

Total members’ equity 4,324,756 3,969,352 3,592,474 3,223,654 2,874,216

Total liabilities and members’ equity $24,772,666 $23,127,953 $21,274,271 $19,610,164 $16,905,707

Statement of Income Data

Net interest income $628,454 $597,965 $554,935 $509,687 $482,620

Provision for (reversal of) credit losses 12,194 3,015 (18,747) 15,051 (9,775)

Noninterest income 189,569 210,643 188,004 201,624 166,269

Noninterest expense 286,818 260,244 233,748 210,354 192,853

Provision for income taxes 4,964 8,868 13,296 4,820 9,407

Net income $514,047 $536,481 $514,642 $481,086 $456,404

Key Financial Ratios

For the year

Return on average assets 2.20% 2.48% 2.60% 2.75% 2.84%

Return on average total members’ equity 12.28% 14.07% 15.00% 15.60% 16.63%

Net interest income as a percentage of average earning assets 2.81% 2.89% 2.95% 3.07% 3.17%

Net charge-offs (recoveries) as a percentage of average loans 0.02% (0.01)% (0.04)% 0.06% 0.04%

At year-end

Members’ equity as a percentage of total assets 17.46% 17.16% 16.89% 16.44% 17.00%

Allowance for loan losses as a percentage of total loans 0.28% 0.26% 0.26% 0.32% 0.37%

Permanent capital ratio 15.38% 15.20% 14.81% 14.86% 15.06%

Total surplus ratio 15.19% 14.99% 14.58% 14.60% 14.77%

Core surplus ratio 15.19% 14.99% 14.58% 14.60% 14.77%

Other

Cash patronage distribution payable to members $160,000 $160,000 $145,000 $130,000 $130,000



Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following commentary reviews the consolidated financial condition and consolidated results of operations of Farm Credit Services of America, ACA (FCSAmerica) and its subsidiaries, Farm Credit Services of America, FLCA and Farm Credit Services of America, PCA (the subsidiaries) and provides additional specific information. The accompanying consolidated financial statements and notes to the consolidated financial statements also contain important information about our financial condition and results of operations. 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. As of January 1, 2016, the Farm Credit System consisted of three Farm Credit Banks, one Agricultural Credit Bank and 74 customer-owned cooperative lending institutions. The Farm Credit System serves all 50 states, Washington, D.C., and Puerto Rico. This network of financial cooperatives is owned and governed by the rural customers the Farm Credit System serves. AgriBank, FCB, a System bank, and its affiliated associations are collectively referred to as the AgriBank Farm Credit District. Farm Credit Services of America, ACA is one of the affiliated associations in the AgriBank Farm Credit District. The Farm Credit Administration is authorized by Congress to regulate the Farm Credit System. The Farm Credit System Insurance Corporation ensures the timely payment of principal and interest on Systemwide debt obligations and the retirement of protected borrower capital at par or stated value. To request a free copy of our annual or quarterly reports, contact us at PO Box 2409, Omaha, NE 68103-2409, (800) 531-3905, via email to [email protected] or view them on our website, fcsamerica.com. The annual report is available on our website 75 days after the end of the calendar year, and members are provided a copy of the report 90 days after the end of the year. The quarterly reports are available on our website 40 days after the end of each calendar quarter.

Notice of Significant or Material Event

On May 20, 2014, the Boards of Directors of Farm Credit Services of America and Frontier Farm Credit signed a letter of intent to form a strategic alliance. The alliance is designed to benefit the farmers and ranchers who own and support the two financial services cooperatives by ensuring that both associations have the strength and capacity to serve agricultural customers’ needs for years to come.

As part of the new alliance, Farm Credit Services of America and Frontier Farm Credit continue to exist as separate associations while integrating their day-to-day business operations, technology systems and leadership teams. Each Association continues to have its own Board, with representatives participating in a coordinating committee to facilitate Board governance between the two organizations. By aligning with Farm Credit Services of America, Frontier Farm Credit gains access to state-of-the-art technology and business processes to serve its customers, lowers its cost of operations and strengthens its risk management capabilities. Farm Credit Services of America benefits from economies of scale with access to larger capital pools and the ability to spread technology investments across a larger customer base. In October 2014, Frontier Farm Credit stockholders voted to approve the alliance. Farm Credit Services of America provided information concerning the alliance to its stockholders. The alliance was implemented January 1, 2015. Under the alliance agreement, Farm Credit Services of America and Frontier Farm Credit have agreed to share current-year income and expenses based on the average total assets of each entity for the prior calendar year. Due to the transition period required to fully implement the alliance, the agreement specifies generally that pre-tax net income will be shared on fixed percentages of 94 percent for Farm Credit Services of America and 6 percent for Frontier Farm Credit for 2015, and 93 percent for Farm Credit Services of America and 7 percent for Frontier Farm Credit for 2016. For the year ending December 31, 2015, Farm Credit Services of America recorded $10.4 million of operating expense credits under the income and expense sharing provisions of the alliance agreement primarily due to the recovery of salary and related expenses incurred by Farm Credit Services of America for former Frontier Farm Credit employees added to the Farm Credit Services of America payroll. Frontier Farm Credit has $1.9 billion in assets and serves multiple counties in eastern Kansas. Farm Credit Services of America has $24.8 billion in assets and serves the states of Iowa, Nebraska, South Dakota and Wyoming.

Forward-Looking Information

This annual report includes 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 “anticipate,” “believe,” “estimate,” “may,” “expect,” “intend,” “outlook” and similar expressions are used to identify such forward-looking statements. These statements reflect our current views with respect to future events. However, actual results may differ materially from our expectations due to a number of risks and uncertainties which may be beyond our control.

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These risks and uncertainties include, but are not limited to:

• political, legal, regulatory, financial markets, international and economic conditions and developments in the United States and abroad;

• economic fluctuations in the agricultural and farm-related business sectors;

• unfavorable weather, disease and other adverse climatic or biological conditions that periodically occur and impact agricultural productivity and income;

• changes in United States government support of the agricultural industry and the Farm Credit System as a government-sponsored enterprise, as well as investor and rating agency actions relating to events involving the United States government, other government-sponsored enterprises and other financial institutions;

• actions taken by the Federal Reserve System in implementing monetary policy;

• credit, interest rate and liquidity risks inherent in our lending activities; and

• changes in our assumptions for determining the allowance for loan losses.

2015 Highlights

The year ended December 31, 2015, was another year of continuing to build Farm Credit Services of America’s financial strength. A solid balance sheet and favorable earnings provide a solid foundation for 2016. Highlights include:

• In December, the Board declared a $160 million cash-back dividend distribution under the 2015 patronage program.

• Loan volume increased 7 percent to $23.6 billion.• Total members’ equity increased 9 percent to $4.325 billion

after recording a liability for the $160 million cash-back dividend payment.

• Net income for the year was $514 million compared to $536 million for 2014, a decrease of 4 percent.

Commodity Review and Outlook

The United States Department of Agriculture forecasts 2015 farm net income at $55.9 billion, down 38 percent from 2014 and the largest single-year decline since 1983. Crop receipts are expected to drop by 8.7 percent while livestock receipts are forecasted to drop by 12 percent, largely driven by lower commodity prices. The major agricultural production industries financed by Farm Credit Services of America were not immune from price declines, leading to reduced profits for most of the industries. The exception was egg producers who experienced higher prices, but several producers were adversely impacted by disease outbreaks.

The average prices received by farmers and ranchers in December compared to prior years are reflected in the following chart based on United States Department of Agriculture data:

Averages for the Month of December:

Commodity 2015 2014 2013 2012 2011

Corn $3.65 $3.79 $4.41 $6.87 $5.86

Soybeans $8.76 $10.30 $13.00 $14.30 $11.50

Wheat $4.71 $6.14 $6.73 $8.30 $7.20

Beef cattle $122.00 $164.00 $130.00 $124.00 $120.00

Hogs $42.80 $64.30 $61.50 $62.40 $63.50

Milk $17.20 $20.40 $22.00 $20.80 $19.10

Eggs $1.24 $1.77 $1.36 $1.13 $1.22

We monitor, compile and report real estate sales information for Farm Credit Services of America’s four-state territory of Iowa, Nebraska, South Dakota and Wyoming. We also monitor 64 benchmark farms in the four states, which are updated each January and July. The following chart compiled by our Appraisal team reflects average value changes for each state over the past six-month, one-year, five-year and ten-year periods as of January 1, 2016. The current number of benchmark farms is shown in parentheses after each state.

State Six-Month One-Year Five-Year Ten-Year

Iowa (21) (1.6)% (6.3)% 45.1% 156.9%

Nebraska (18) 0.2% (2.4)% 95.0% 243.2%

South Dakota (23) 0.2% 1.0% 101.2% 239.8%

Wyoming (2) 2.5% 9.5% 25.1% 62.7%

Farmland prices have remained fairly steady over the past year, while the number of sales and demand for farmland has declined across our territory. Public land auction activity for the four-state territory was 26 percent lower than a year ago with overall sales activity down in all four states. A reduction in farm income compared to previous years has led many operators to focus on the profitability of an acre of land. Sales of higher-quality ground are driving the market and keeping overall market prices relatively steady. Fewer sales of lower-quality and average-quality land are entering the market. Loan repayment capacity is largely dependent on income from corn, soybeans, hogs and cattle. Of somewhat less significance are wheat, dairy and poultry. Many of our customers are also dependent on off-farm income, although the level of off-farm income varies widely. Government program payments related to corn, soybeans, wheat, the Conservation Reserve Program and, to a lesser extent, dairy are also a source of income for many of our customers.




Corn and soybean production is predominant in Iowa, with hogs and cattle also a significant source of income. Corn, soybeans and cattle are important income sources in Nebraska and South Dakota. Western areas of our territory are dependent on income from wheat, cow-calf and feeder-cattle operations. We have no single customer or group of related customers who comprise more than 10 percent of our volume or who would have a material effect if they no longer did business with us. The following reflects economic conditions for various commodities prepared by our industry specialists based on United States Department of Agriculture and commodity industry reports: Grain: Crop producers were again challenged by lower grain prices while input costs declined marginally, resulting in break-even to negative margins for most producers. Strong yields across our four-state territory helped offset lower prices with gross revenues similar to 2014. Production expenses were down for the first time since 2009; however, the estimated 2 percent expense decline follows a four-year period of rapid increases averaging 9 percent per year. Cash rents remain at high levels but have modestly declined based on Iowa State University studies showing rental rates down about 10 percent over the past two years. This compares to a 26 percent increase over the previous two-year period. United States corn production in 2015 was 13.6 billion bushels, down 4 percent from the record crop raised in 2014. United States yields at 168.4 bushels per acre were down 2.6 bushels per acre compared to a year earlier. Iowa production was up 5.8 percent and Nebraska production was up 5.7 percent, as yields increased from 178 to 192 bushels per acre in Iowa and from 179 to 185 bushels per acre in Nebraska. South Dakota production was up 1.6 percent due to an 11-bushel per-acre yield increase to 159 bushels per acre. United States ending stocks were up slightly as a result of the strong yields with production outpacing usage. Corn prices in 2015 were in a relatively narrow trading range during the year as corn was priced between $3.50 and $3.75 per bushel during the majority of the year. Omaha cash corn prices ended the year at $3.49 per bushel, down $0.28 per bushel from a year earlier but up modestly from a post-harvest low price of $3.37 per bushel. United States soybean production in 2015 was similar to 2014 at 3.9 billion bushels. Average yields at 48 bushels per acre were a record-high but only slightly above 2014. Iowa production was up 11.1 percent as yields increased 5.5 bushels per acre to 56.5 bushels per acre. Nebraska production likewise increased by 6.2 percent as yields jumped 4 bushels per acre to 58 bushels per acre. South Dakota production was up 2.4 percent as yields increased 1 bushel per acre to 46 bushels per acre. The growth in production contributed to a 7 percent increase in United States soybean stocks as of December 1, 2015, which led to a decline in soybean prices. Omaha cash soybean prices ended the year at $8.33 per bushel, down $1.70 per bushel for the year. Soybean meal averaged $342 per ton in 2015, down $110 per ton from 2014. Meal prices ended the year at $277 per ton, $141 per ton lower than last year.

Cow-Calf: Cow-calf producers were again profitable, although at a reduced level when compared to 2014. Feeder cattle prices declined similarly to fed cattle prices, reducing returns to the producer by approximately $50 per head; however, returns still exceeded $400 per cow. The calf supply remained low, but the industry now appears to be in a rapid expansion mode based on the strong calf prices and ideal pasture conditions across much of the country. Beef Feedlot: Cattle feeders had a difficult 2015. Losses for 2015, without the impact of risk management programs, averaged $175 per head compared to $210 per head profit in 2014. The large losses occurred despite cash prices averaging only 4 percent or $6 per cwt. less in 2015 as break-evens were considerably higher than 2014 due to the high initial cost of feeder cattle replacements. The year proved to be the most volatile in history with cash prices declining $55 per cwt. or 47 percent. The decline began slowly toward the end of the second quarter before accelerating through year-end leading to losses at times exceeding $400 per head in the fourth quarter. The price decline was driven by reduced exports as a result of the dollar strengthening, increased protein supplies and heavier slaughter weights. Beef exports were down 12 percent from a year earlier while imports were up over 20 percent, resulting in excess beef on the market. With average costs of gain in the $0.80 per pound range, cattle feeders were motivated to make cattle heavier, and packers, for the first half of 2015, did not enforce discounts for excess size. As a result, carcass weights reached all-time highs and marketing’s were slowed, leading to even larger losses in the second half of the year as prices eroded under the challenging economic environment. Swine: Swine production was up 7 percent in 2015, leading to significantly lower hog prices and a marginally profitable year for most producers. Hog cash prices averaged about $51 per cwt. for the year, down nearly $26 per cwt. from 2014. A drop in feed expense led to $5 to $10 per cwt. decline in production costs helping offset part of the revenue decline. Pork supply increased as the industry recovered from the 2013-2014 outbreak of Porcine Epidemic Diarrhea virus, which caused substantial numbers of piglet deaths. A 2 percent increase in imports, mostly Canadian, also contributed to the supply increase. Pork exports were hampered by the West Coast port closure during the first half of 2015 but recovered in the second half of the year. Hog prices declined below the cost of production during the final two months of the year. With pork supplies projected to modestly increase again in 2016, the industry is expecting even tighter margins for 2016. Dairy: Dairy profits narrowed in 2015 as the United States All Milk price fell to an estimated $17 per cwt. following a record-high dairy price of $24 per cwt. in 2014. The lower milk price was partially offset by reduced feed expenses, resulting in an average profit of roughly $250 per cow in the Midwest. United States milk production in 2015 was estimated at 209 billion pounds, up 1.3 percent over

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2014. Lower prices were driven by a higher world supply of milk products, processor capacity challenges that led to a lower milk basis over Class III milk futures, and weaker export demand. The United States Department of Agriculture forecast for 2016 is for a 2 percent increase in production, leading to modestly lower milk prices. Poultry: Record-high egg prices and lower feed costs resulted in record profits in 2015 for egg producers and egg product companies not impacted by High Pathogenic Avian Influenza (HPAI). Producers benefited from record-high prices beginning in June through September as the industry reacted to the loss of nearly 30 million layers from HPAI. While egg prices declined in the fourth quarter, the year still closed with record-setting highs in shell eggs and liquid whole eggs. Layer inventories decreased from 308 million at the beginning of 2015 to 270 million in June following the HPAI outbreak before rebounding to 282 million in December. Midwest large-shell egg prices averaged $1.88 per dozen during 2015, $0.41 per dozen higher than a year ago. Unpasteurized whole eggs averaged $1.18 per pound, up $0.37 per pound from 2014 while average breaker prices were up from $0.91 per dozen to $1.25 per dozen. All quarantines have been lifted from HPAI-infected sites, allowing repopulation to commence. Recovery from HPAI is projected to be slow for the egg industry, as it will take 12 to 18 months to replace all the laying hens. Lower layer inventory levels are projected to support egg prices during 2016. Ethanol: The United States ethanol industry was marginally profitable in 2015 with most Corn Belt plants operating at or slightly above break-even levels. Even though corn prices were lower than a year ago, profit levels declined as ethanol and gasoline prices fell due to dramatically declining crude oil prices. The industry and most producers were well-positioned to withstand the market downturn resulting from an exceptionally profitable year in 2014. Most ethanol producers capitalized on this liquidity opportunity by building cash reserves, reducing term debt or investing in capital projects to gain efficiency or incrementally expand production. The industry ended 2015 with most plants running in excess of their nameplate capacity, leading to a market surplus.

Loan Portfolio

Our loan volume experienced another solid year of growth and increased $1.5 billion during 2015, an increase of 7 percent. Approximately 70 percent of the loan volume increase came from long-term agricultural mortgage loans, and approximately 10 percent came from each of the production and intermediate-term loan, processing and marketing and rural residence categories. Our loan portfolio consists primarily of agricultural real estate loans, production operating loans and intermediate-term installment loans, and credit facilities to agricultural businesses. A high percentage of real estate loan installments are due in the December to March period. Most operating loans mature and are refinanced after the fall

harvest and before spring planting. Operating loan volume tends to peak late in the fall, decline toward January and trend upward during the remainder of the year. Equipment loans generally have annual installments that correlate to customer commodity sales. Our chartered territory includes Iowa, Nebraska, South Dakota and Wyoming. The geographic distribution of loan volume follows:

December 31,

State 2015 2014 2013

Iowa 39% 39% 41%

Nebraska 29 29 29

South Dakota 18 18 17

Wyoming 2 2 2

Other states 12 12 11

100% 100% 100%

The following table summarizes risk asset and delinquency information (accrual loans include accrued interest receivable; amounts are in thousands):

December 31,

2015 2014 2013

Risk loans:

Nonaccrual $73,484 $60,964 $78,289

Restructured 10,658 6,329 8,799

90 days past due still accruing interest 638 4,900 466

Total risk loans 84,780 72,193 87,554

Other property owned, net – 4,279 3,642

Total risk assets $84,780 $76,472 $91,196

Risk loans as a percentage of total loans 0.35% 0.32% 0.43%

Total delinquencies as a percentage of total loans 0.33% 0.21% 0.23%

Total risk loans have increased since the end of 2014. The increase in nonaccrual loans is primarily due to several large accounts in the grain industry being classified as nonaccrual. Restructured loans increased primarily due to the restructuring of a large account in the grain industry. Based on our analysis, loans 90 days or more past due and still accruing interest were adequately secured and in the process of collection. Risk loans as a percentage of total loans remain at acceptable levels. Our adversely classified assets increased during 2015, ending the year at 2.9 percent of the portfolio, compared to 1.6 percent of the portfolio at December 31, 2014. Adversely classified assets are assets we have identified as showing some credit weakness outside our credit standards.




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 loan loss history, probability of default, estimated loss severity, portfolio quality, and current economic and environmental conditions. Comparative allowance coverage of various loan categories follows:

December 31,

2015 2014 2013

Allowance as a percentage of:

Total loans 0.27% 0.26% 0.26%

Nonaccrual loans 88.45% 95.14% 66.42%

Total risk loans 76.67% 80.34% 59.39%

In our opinion, the allowance for loan losses at December 31, 2015, is adequate to provide for probable and estimable losses in the loan portfolio.

Results of Operations

The following table provides profitability information:

December 31,

2015 2014 2013

Net income (in thousands) $514,047 $536,481 $514,642

Return on average assets 2.20% 2.48% 2.60%

Return on average members’ equity 12.28% 14.07% 15.00%

Changes to our return on average assets and return on average members’ equity are related directly to the changes in income as described below, the changes in assets discussed in the Loan Portfolio section and the changes in members’ equity discussed in the Members’ Equity section. Major components of the changes in net income for 2015, 2014 and 2013 are outlined in the following table (in thousands):

December 31,

2015 2014 2013

Net income prior year $536,481 $514,642 $481,086

Increase (decrease) in net income attributableto changes in:

Net interest income 30,489 43,030 45,248

Provision for credit losses (9,179) (21,762) 33,798

Noninterest income (21,075) 22,640 (13,620)

Noninterest expense (26,573) (26,497) (23,394)

Provision for income taxes, net 3,904 4,428 (8,476)

Net income for the year $514,047 $536,481 $514,642

The effects on net interest income from changes in average volumes and rates are presented in the following table (in thousands):

Changes in Net InterestIncome Due To: 2015 vs. 2014 2014 vs. 2013

Changes in volume $50,286 $56,315

Changes in rates (18,514) (9,292)

Change in nonaccrual income (1,283) (3,993)

Net change $30,489 $43,030

The average lending rate was 4.04 percent for 2015 compared to 4.07 percent for 2014. The average cost of debt was 1.50 percent for 2015 compared to 1.47 percent for 2014. The net interest margin was 2.81 percent in 2015 compared to 2.89 percent in 2014. Net interest income included income on nonaccrual loans that totaled $1.7 million in 2015, $3 million in 2014 and $7 million in 2013. Nonaccrual income is recognized when:

• received in cash,• collection of the recorded investment is fully expected, and• prior charge-offs have been recovered.

We recorded a $12.2 million provision for credit losses for 2015 compared to a $3 million provision for credit losses for 2014. The provision for credit losses includes the provision for loan losses and the provision for unfunded lending commitments. The increase in the provision for credit losses is primarily due to an increase in the allowance for the grain industry and net charge-offs partially offset by decreases in the allowance for the energy/electric, swine and dairy industries.



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We recorded net charge-offs of $5.2 million in 2015 (0.02 percent of average loans). We recorded $1 million of net recoveries of charge-offs in 2014 ((0.01) percent of average loans) and net charge-offs of $7.7 million in 2013 (0.04 percent of average loans). The reserve for unfunded lending commitments is based on our best estimate of losses inherent in lending commitments made to customers but not yet disbursed. Factors such as likelihood of disbursal and likelihood of losses given disbursement were utilized in determining this contingency. The reserve for unfunded commitments was $8 million at December 31, 2015, compared to $8 million at the end of 2014 and $10 million at the end of 2013. The decrease in noninterest income is primarily due to a decrease in AgriBank, FCB patronage, a nonrecurring gain from the sale of other property owned in 2014 and a decrease in AgDirect program distributions and fees. The increase in noninterest expense is primarily due to salary, benefits and other expenses for increased staffing levels to support business initiatives and growth, operating expenses related to the alliance with Frontier Farm Credit partially offset by expense recoveries paid by Frontier Farm Credit and an increase in insurance fund premiums.

Patronage Program

Our Board adopted a patronage program for eligible customers in 2015. The patronage program has been in place for more than a decade. The 2015 program is based on each customer’s eligible average loans outstanding during the year. The patronage program is a qualified (cash) distribution, referred to as cash-back dividends. The Board declared a cash-back dividend of $160 million at its December 2015 meeting to be distributed no later than April 30, 2016. We recorded a liability of $160 million in December 2015. The 2014 and 2013 patronage programs were also based on each customer’s eligible average loans outstanding during the year. The 2014 and 2013 programs had a qualified (cash) and nonqualified distribution. The Board declared a cash-back dividend of $160 million at its December 2014 meeting and $145 million at its December 2013 meeting to be distributed no later than April 30 of the following respective years. We recorded a liability of $160 million in December 2014 and $145 million in December 2013. The 2014 and 2013 nonqualified patronage distributions are also not intended to be redeemed except in the unlikely event of liquidation. Our Board has also adopted a patronage program for 2016. The 2016 patronage program will once again be based on each customer’s eligible average daily balance of eligible loans outstanding during 2016.

AgriBank, FCB Patronage Income

We receive three different types of discretionary patronage from AgriBank, FCB. AgriBank, FCB’s Board of Directors sets the level of patronage for each of the following:

• patronage on our notes payable with AgriBank, FCB; • patronage based on the balance and net earnings of the pool of

loans sold to AgriBank, FCB in October 2008; and• partnership distribution based on our share of the net earnings of

the loans in the AgDirect trade credit financing program, adjusted for required return on capital and servicing and origination fees.

We received patronage income based on the average balance of our notes payable to AgriBank, FCB. We recorded patronage income of $49.3 million in 2015, $59.1 million in 2014 and $55.8 million in 2013. Changes in our note payable to AgriBank, FCB and patronage rate changes caused the variances in the patronage income amounts. The patronage rates paid by AgriBank, FCB were 26 basis points in 2015, 33.5 basis points in 2014 and 34.5 basis points in 2013. We also received patronage income related to our sale of a participation interest in certain real estate loans to AgriBank, FCB. We received patronage income in an amount that approximates the net earnings of those loans. Net earnings represents the net interest income associated with these loans adjusted for certain fees and costs specific to the related loans, as well as adjustments deemed appropriate by AgriBank, FCB related to the credit performance of the loans, as applicable. Similar to the patronage on our note payable described earlier, we also received patronage income based on the estimated note payable of the asset pool loans. Patronage declared on these pools is solely at the discretion of the AgriBank, FCB Board of Directors. We recorded asset pool patronage income of $15.8 million in 2015, $20.0 million in 2014 and $24.3 million in 2013. All patronage income earned as part of the AgriBank, FCB asset pool is paid in cash. The partnership distribution on our share of net earnings of the loans in the AgDirect trade financing program is described under “AgDirect, LLP” later in this section of the annual report. Beginning in 2014, patronage income earned on our note payable with AgriBank, FCB is paid in cash. Patronage income for 2013 on our note payable with AgriBank, FCB was paid in the form of cash and AgriBank, FCB stock.




Funding and Liquidity

Our approach to sustaining sufficient liquidity to fund operations and meet current obligations is to maintain an adequate line of credit with AgriBank, FCB. At December 31, 2015, we had a $21 billion revolving line of credit with AgriBank, FCB. We generally apply excess cash to this line of credit. As described in Note 8 to the consolidated financial statements, “Notes Payable,” this line of credit is governed by a General Financing Agreement and is collateralized by a pledge of substantially all of our assets and is also subject to regulatory borrowing limits. The line of credit is renegotiated annually. We expect this line of credit to be sufficient to fund our operations. The note payable related to this line of credit reprices monthly. At December 31, 2015, the direct loan balance was $20.1 billion compared to $18.8 billion at the end of 2014 and $17.3 billion at the end of 2013. The interest rate risk inherent in our loan portfolio is substantially mitigated through this funding relationship. AgriBank, FCB manages interest rate risk through its direct loan pricing and asset/liability management processes. The direct loan pricing mechanism simulates matching the cost of underlying debt with substantially the same terms as the anticipated terms of our loans to customers. The primary risks we manage include pipeline risk and basis risk. Pipeline risk occurs when we commit a fixed interest rate to a customer in advance of the loan’s closing date and is effectively mitigated through use of rate-lock agreements. Basis risk occurs when the interest rate on a loan reprices according to one index, while the debt supporting that loan reprices according to another index. We provide financing to eligible customers with various interest rate programs. New loans are priced with consideration given to the local competitive conditions, the cost of debt that will be incurred to fund the loan, the individual risk elements of the loan and profit objectives. Interest on real estate loans is generally paid in full annually, while interest on agricultural production loans is generally paid in full at the annual renewal date of the loan. We offer variable-rate loan products that include variable-rate loans repriced at our discretion, as dictated by market conditions, and market-indexed variable-rate loans that provide customers with the option of indexing their interest rate to external market indices such as LIBOR or the prime rate. We also offer fixed-rate operating loans for up to two years, fixed-rate installment loans for up to 10 years, and fixed-rate mortgage loans in yearly increments from 5-35 years.

In addition, we offer real estate adjustable-rate loans that are indexed to one-, three- or five-year United States Treasury rates. The loans reprice at one-, three- or five-year intervals at a rate equal to the corresponding United States Treasury rate plus a contractual spread. The one-, three- and five-year adjustable-rate loans are generally subject to periodic caps ranging from 2-2.50 percent with a 6 percent life cap. The cost of debt supporting these loans is capped accordingly. We also offer a prepayment-restricted loan product. This is a fixed-rate product with a prepayment penalty provision if prepayments are made during the initial three, five or seven years of the loan term. For agreeing to restricted prepayments, the customer receives a reduced interest rate that remains in effect for the entire loan term. A breakdown of the loan portfolio by rate type, as a percentage of total volume at December 31, is shown in the table below:

December 31,

2015 2014 2013

Variable rate 42.5% 42.4% 38.8%

Fixed rate 57.4 57.4 61.0

Adjustable rate 0.1 0.2 0.2

100.0% 100.0% 100.0%

Our other source of lendable funds is unallocated surplus.

Members’ Equity

Our equity structure is described in Note 9 to the consolidated financial statements, “Members’ Equity.” Members’ equity increased to $4.325 billion at December 31, 2015, compared to $3.969 billion at December 31, 2014. The increase in 2015 was due to net income recorded in 2015 partially offset by patronage payable and net capital stock issued. Members’ equity as a percentage of total assets increased to 17.46 percent at December 31, 2015, compared to 17.16 percent at December 31, 2014. The increase in the members’ equity-to-assets ratio was due to the growth rate of members’ equity exceeding the growth rate of assets.

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Farm Credit Administration regulations require us to maintain a permanent capital ratio of at least 7 percent, a total surplus ratio of at least 7 percent and a core surplus ratio of at least 3.5 percent. The calculation of these ratios according to Farm Credit Administration regulations is discussed below:

• The permanent capital ratio is average at-risk capital divided by average risk-adjusted assets. At December 31, 2015, our ratio was 15.38 percent compared to 15.20 percent at December 31, 2014.

• 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, 2015, our ratio was 15.19 percent compared to 14.99 percent at December 31, 2014.

• The core surplus ratio is average unallocated surplus less any deductions made in the computation of total surplus divided by average risk-adjusted assets. At December 31, 2015, our ratio was 15.19 percent compared to 14.99 percent at December 31, 2014.

The capital adequacy ratios are directly impacted by the changes in members’ equity as more fully explained earlier and the changes in assets as further discussed in the Loan Portfolio section. In February 2008, we entered into a credit default swap agreement that is intended to mitigate risk in our loan portfolio and, consequently, decrease the risk-weighting of certain assets for regulatory capital purposes. Further details are discussed in Note 3 to the consolidated financial statements, “Loans and Allowance for Loan Losses.” We are not aware of any reason why the capital ratios would fall below the regulatory requirements during 2016.

Relationship with AgriBank, FCB

We borrow from AgriBank, FCB to fund our lending operations in accordance with the Farm Credit Act of 1971, as amended. Approval from AgriBank, FCB is required for us to borrow elsewhere. A General Financing Agreement, as discussed in Note 8 to the consolidated financial statements, “Notes Payable,” governs this lending relationship. Cost of funds under the General Financing Agreement includes:

• a marginal cost-of-debt component,• a spread component, which includes cost of servicing, cost of

liquidity and bank profit, 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 matching the cost of underlying debt with substantially the same terms as the anticipated terms of our loans to borrowers. This methodology substantially protects us from market interest rate risk. We are required to invest in AgriBank, FCB capital stock as a condition of borrowing. This investment may be in the form of purchased stock or stock representing previously distributed patronage refunds and capital distributions from AgriBank, FCB. On March 5, 2014, the AgriBank, FCB Board of Directors approved an amendment to the AgriBank, FCB capital plan, which reduced the base required stock investment for all affiliated associations, including Farm Credit Services of America, ACA, from 2.50 percent to 2.25 percent effective March 31, 2014. As of December 31, 2015, we were required to maintain a stock investment equal to 2.25 percent of the average quarterly balance of our note payable to AgriBank, FCB, plus an additional 1 percent on growth that exceeded a targeted rate. AgriBank, FCB’s current bylaws allow AgriBank, FCB to increase the required investment to 4 percent. However, AgriBank, FCB currently has not communicated a plan to increase the required investment. In addition, we are required to hold AgriBank, FCB common stock equal to 8 percent of the quarter-end balance of a pool of real estate loans sold to AgriBank, FCB. At December 31, 2015, $306.9 million of our investment in AgriBank, FCB consisted of stock representing distributed AgriBank, FCB patronage refunds and capital distributions, and $180.4 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. Although it is not a direct association investment in AgriBank, FCB, AgDirect, LLP, which facilitates the AgDirect trade credit financing program, is required to own stock in AgriBank, FCB in the amount of 6 percent of the AgDirect program’s outstanding participation loan balance at quarter-end, plus 6 percent of the expected balance to be originated during the following quarter. All partners, in turn, are required to own the same amount of stock in AgDirect, LLP. We receive patronage income based on the annual average daily balance of our note payable to AgriBank, FCB, patronage income in an amount that approximates the net earnings of the asset pool loans, and patronage income based on the estimated note payable of the asset pool loans. AgriBank, FCB’s Board of Directors sets the patronage rates. Due to the nature of our financial relationship with AgriBank, FCB, the financial condition and results of operations of AgriBank, FCB materially affect our stockholders’ investment in Farm Credit Services of America. To request a free copy of the combined AgriBank, FCB and affiliated associations’ financial reports, contact us at PO Box 2409, Omaha, NE 68103-2409, (800) 531-3905 or via email to [email protected]. You may also contact AgriBank, FCB at 30 East 7th Street, Suite 1600, St. Paul, MN 55101, (651) 282-8800 or via email to [email protected]. The reports are also available through AgriBank, FCB’s website at agribank.com.


AgDirect, LLP

We have entered into agreements with 15 other Farm Credit System associations inside and outside of the AgriBank, FCB District to provide access to our AgDirect trade credit financing program. The AgDirect program includes origination and refinancing of agricultural equipment loans through independent equipment dealers. The Farm Credit Administration has approved requests from these associations to invest in a limited liability partnership (LLP) that facilitates this collaborative AgDirect trade credit financing program and allows us to leverage the AgDirect program for the mutual benefit of our associations, and the farmers and ranchers we collectively serve. Our investment is reflected as “AgDirect, LLP investment in AgriBank, FCB” on our Consolidated Balance Sheet. The LLP is an unincorporated business entity and purchases participations in AgDirect loans from us that were originated under the agreements described earlier. The LLP subsequently sells a like amount of loan participations to AgriBank, FCB. The LLP pays us a fee for originating these loans. Total outstanding participations sold to the LLP at December 31, 2015, were $3.1 billion compared to $2.9 billion at the end of 2014 and $2.5 billion at the end of 2013. AgriBank, FCB, at the discretion of its Board of Directors, pays patronage on these loan participations to AgDirect, LLP. Any patronage declared is accrued quarterly and paid by AgriBank, FCB in the first month of the subsequent quarter. AgDirect, LLP distributes any patronage paid by AgriBank, FCB as partnership distributions to the AgDirect, LLP partners. At December 31, 2015, AgDirect, LLP assets primarily consist of a $185.6 million investment in AgriBank, FCB to capitalize the loan participations sold to AgriBank, FCB. We hold $73.8 million of this investment, and other Farm Credit System entities hold the remaining investment. At December 31, 2015, AgDirect, LLP had liabilities of $7.2 million consisting of a distribution payable to LLP partners from patronage declared by AgriBank, FCB for the fourth quarter of 2015. AgDirect, LLP had liabilities of $4.6 million at December 31, 2014, and $2.6 million at December 31, 2013. AgDirect, LLP had net income of $22.1 million for the year ended 2015, $22.5 million for the year ended 2014 and $12.7 million for the year ended 2013 from patronage paid by AgriBank, FCB.

Rural Business Investment Company

We and other Farm Credit institutions are among the forming limited partners for a $154.5 million Rural Business Investment Company established on October 3, 2014. The Rural Business Investment Company facilitates private equity investments in agriculture-related businesses that create growth and job opportunities in rural America. Our total commitment is $20 million through October 2019. The Rural Business Investment Company investment increased due to capital calls to fund new investments during 2015. As of December 31, 2015, our investment is $4.2 million compared to $0.8 million at December 31, 2014. The investment was evaluated for impairment and is included in “Other assets” on the Consolidated Balance Sheet.

Farm Credit Foundations

We purchase human resource information systems and benefit and payroll services from Farm Credit Foundations. The Farm Credit System entities using Farm Credit Foundations’ services contributed an investment into the service corporation in January 2012. Our investment was $0.1 million at December 31, 2015; December 31, 2014; and December 31, 2013. The total cost of services purchased from Farm Credit Foundations was $1.1 million in 2015, $0.9 million in 2014 and $0.9 million in 2013.

Regulatory Matters

On May 8, 2014, the Farm Credit Administration Board approved a proposed rule to modify the regulatory capital requirements for Farm Credit System banks and associations. The stated objectives of the proposed rule are to:

• modernize capital requirements while ensuring that institutions continue to hold sufficient regulatory capital to fulfill their mission as a government-sponsored enterprise;

• ensure that the Farm Credit System’s capital requirements are comparable to the Basel III framework and the standardized approach that the federal banking regulatory agencies have adopted, but also to ensure that the rules recognize the cooperative structure and the organization of the Farm Credit System;

• make Farm Credit System regulatory capital requirements more transparent; and

• meet the requirements of Section 939A of the Dodd-Frank Wall Street Reform and Consumer Protection Act.



no. 29

The most recent comment period closed July 10, 2015. The initial comment period on the proposed rule, after extension, closed February 16, 2015. On June 12, 2014, the Farm Credit Administration Board approved a proposed rule to revise the requirements governing the eligibility of investments for Farm Credit System banks and associations. The stated objectives of the proposed rule are to:

• strengthen the safety and soundness of Farm Credit System banks and associations;

• ensure that Farm Credit System banks hold sufficient liquidity to continue operations and pay maturing obligations in the event of market disruption;

• enhance the ability of the Farm Credit System banks to supply credit to agricultural and aquatic producers;

• comply with the requirements of Section 939A of the Dodd-Frank Wall Street Reform and Consumer Protection Act;

• modernize the investment eligibility criteria for Farm Credit System banks; and

• revise the investment regulation for Farm Credit System associations to improve their investment management practices so they are more resilient to risk.

The public comment period ended on October 23, 2014.




We prepare the consolidated financial statements of Farm Credit Services of America, ACA (Association) and are responsible for their integrity and objectivity, including amounts that must be necessarily 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 the Association. 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 consult regularly with us and meet 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 the Association.

The undersigned certify that we have reviewed the Association’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.

Douglas R. StarkPresident and CEOMarch 9, 2016

Craig P. KinnisonSenior Vice President – CFOMarch 9, 2016

Jeremy W. HeitmannChairperson, Board of DirectorsMarch 9, 2016

Farm Credit Services of America, ACA Report of Management

no. 31

Farm Credit Services of America, ACA’s (Association) 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 Board 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, 2015. In making the assessment, management used the 2013 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, 2015, 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, 2015.

Douglas R. StarkPresident and CEOMarch 9, 2016

Craig P. KinnisonSenior Vice President – CFOMarch 9, 2016

Farm Credit Services of America, ACA Report on Internal Control Over Financial Reporting


Farm Credit Services of America, ACA Report of Audit Committee

The consolidated financial statements of Farm Credit Services of America, ACA (Association) were prepared under the oversight of the Audit Committee. The Audit Committee is composed of three individuals from the Association Board of Directors. In 2015, the Audit Committee met seven times. 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 auditing standards generally accepted 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, 2015, with management. The Audit Committee also reviewed with PwC the matters required to be discussed by Statement on Auditing Standards AU-C260, The Auditor’s Communication With Those Charged With Governance, and both PwC and the internal auditors directly provided reports on any 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 any other matters and received any 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, 2015.

Jennifer L. Zessin Chair, Audit CommitteeFarm Credit Services of America, ACAMarch 9, 2016

Audit Committee Members: Jim KortanSteve Henry

no. 33

Independent Auditor’s Report

To the Board of Directors of Farm Credit Services of America, ACA,

We have audited the accompanying consolidated financial statements of Farm Credit Services of America, ACA (the Association) and its subsidiaries, which comprise the consolidated balance sheets as of December 31, 2015, 2014 and 2013, and the related consolidated statements of income, changes in members’ equity and cash flows for the years then ended.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on the consolidated financial statements based on our audits. We conducted our audits 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 consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Association’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Association’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Farm Credit Services of America, ACA and its subsidiaries as of December 31, 2015, 2014 and 2013, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

March 9, 2016

PricewaterhouseCoopers LLP, Suite 1400, 225 South Sixth Street, Minneapolis, MN 55402T: (612) 596 6000, F: (612) 373 7160, www.pwc.com/us



Consolidated Balance Sheet (Dollars in thousands)

December 31,

2015 2014 2013

Assets

Loans $23,638,506 $22,098,426 $20,211,770

Less allowance for loan losses 65,000 58,000 52,000

Net loans 23,573,506 22,040,426 20,159,770

Cash 60,832 48,246 86,363

Accrued interest receivable 328,690 296,966 265,553

Investment in AgriBank, FCB 487,333 465,880 486,438

AgDirect, LLP investment in AgriBank, FCB 73,783 82,975 86,972

Premises and equipment, net 146,219 135,298 130,793

Other property owned – 4,279 3,642

Deferred tax asset, net 6,106 6,036 5,848

Other assets 96,197 47,847 48,892

Total assets $24,772,666 $23,127,953 $21,274,271

Liabilities

Notes payable $20,077,076 $18,790,035 $17,333,892

Accrued interest payable 74,353 66,205 61,031

Patronage payable 160,000 160,000 145,000

Reserve for unfunded lending commitments 8,000 8,000 10,000

Other liabilities 128,481 134,361 131,874

Total liabilities 20,447,910 19,158,601 17,681,797

Commitments and contingencies (Note 13)

Members’ Equity

At-risk capital:

Class D common stock 46,644 45,410 45,078

Class E common stock 1,136 1,070 1,040

Retained earnings 4,276,976 3,922,872 3,546,356

Total members’ equity 4,324,756 3,969,352 3,592,474

Total liabilities and members’ equity $24,772,666 $23,127,953 $21,274,271

The accompanying notes are an integral part of these consolidated financial statements.

no. 35


Consolidated Statement of Income (Dollars in thousands)

Year Ended December 31,

2015 2014 2013

Net Interest Income

Interest income $909,986 $853,808 $788,799

Interest expense 281,532 255,843 233,864

Net interest income 628,454 597,965 554,935

Provision for (reversal of) credit losses 12,194 3,015 (18,747)

Net interest income after provision for credit losses 616,260 594,950 573,682

Noninterest Income

Patronage income from AgriBank, FCB 65,131 79,082 80,099

Loan fees 21,399 19,493 18,842

Insurance services 46,830 43,957 37,670

AgDirect program fees 35,438 36,896 33,650

AgDirect, LLP patronage income from AgriBank, FCB 13,057 14,792 9,736

Servicing fee income from AgriBank, FCB 1,237 1,485 1,776

Gains on other property owned 32 6,715 3,400

Other noninterest income 6,445 8,223 2,831

Total noninterest income 189,569 210,643 188,004

Noninterest Expense

Salaries and employee benefits 182,421 164,054 150,288

Occupancy and equipment expense 25,228 23,740 20,822

Insurance fund premiums 25,979 22,165 16,671

Other operating expenses 52,632 49,422 44,928

Capital transaction expense 558 863 1,039

Total noninterest expense 286,818 260,244 233,748

Income before income taxes 519,011 545,349 527,938

Provision for income taxes 4,964 8,868 13,296

Net income $514,047 $536,481 $514,642




Consolidated Statement of Changes in Members’ Equity (Dollars in thousands)

At-Risk Capital

Total Members’ Equity

CapitalStock

Retained Earnings

Balance at December 31, 2012 $46,978 $3,176,676 $3,223,654

Net income 514,642 514,642

Patronage declared (145,000) (145,000)

Patronage accrual adjustment 38 38

Capital stock and participation certificates:

Issued 4,666 4,666

Retired (5,526) (5,526)

Balance at December 31, 2013 46,118 3,546,356 3,592,474

Net income 536,481 536,481



Capital stock:

Issued 4,937 4,937

Retired (4,575) (4,575)

Balance at December 31, 2014 46,480 3,922,872 3,969,352

Net income 514,047 514,047



Capital stock:

Issued 5,124 5,124

Retired (3,824) (3,824)

Balance at December 31, 2015 $47,780 $4,276,976 $4,324,756


no. 37


Consolidated Statement of Cash Flows (Dollars in thousands)


2015 2014 2013

Cash Flows from Operating Activities:Net income $514,047 $536,481 $514,642 Adjustments to reconcile net income to net cash provided by operating activities: Provision for (reversal of) credit losses 12,194 3,015 (18,747) Increase in stock patronage received from AgriBank, FCB – (12,350) (25,232) Gain on sales of other property owned (66) (6,728) (3,732) (Gain) loss on sales of premises and equipment (1,198) (461) 153

Carrying value write-downs on premises and equipment 1,317 684 –

Carrying value write-downs on other property owned – – 292 Depreciation on premises and equipment 13,491 12,571 11,060 Increase in accrued interest receivable (31,724) (31,413) (17,634) Increase in accrued interest payable 8,148 5,174 3,089 Increase in deferred tax asset (70) (188) (500) (Increase) decrease in other assets (48,350) 1,045 (2,398)

Income recognized on deferred AgDirect program fees 6,772 6,570 5,130

(Decrease) increase in other liabilities (12,652) (4,083) 1,939 Total adjustments (52,138) (26,164) (46,580)Net cash provided by operating activities 461,909 510,317 468,062

Cash Flows from Investing Activities:Increase in loans, net (1,545,274) (1,890,936) (1,715,249)(Purchases) redemptions of investment in AgriBank, FCB (21,453) 32,908 (6,003)AgDirect, LLP redemptions (purchases) of investment in AgriBank, FCB 9,192 3,997 (4,584)Purchases of premises and equipment, net (27,539) (19,197) (21,565)Proceeds from sales of other property owned 4,345 11,356 5,440 Proceeds from sales of premises and equipment 3,008 1,898 1,846 Net cash used in investing activities (1,577,721) (1,859,974) (1,740,115)

Cash Flows from Financing Activities:Increase in notes payable, net 1,287,041 1,456,143 1,273,129 Patronage paid in cash (159,943) (144,965) (129,962)At-risk capital stock and participation certificates issued 5,124 4,937 4,666 At-risk capital stock and participation certificates retired (3,824) (4,575) (5,526)Net cash provided by financing activities 1,128,398 1,311,540 1,142,307

Net increase (decrease) in cash 12,586 (38,117) (129,746)

Cash at beginning of year 48,246 86,363 216,109 Cash at end of year $ 60,832 $ 48,246 $ 86,363

Supplemental Schedule of Non-Cash Investing and Financing Activities:Loan amounts transferred to other property owned $ – $5,265 $842 Cash patronage distribution declared $160,000 $160,000 $145,000

Supplemental Cash Flow Information:

Interest paid on notes payable $140,974 $128,607 $230,775 Income taxes paid $8,659 $13,080 $8,053



Farm Credit Services of America, ACA Notes to Consolidated Financial Statements

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. As of January 1, 2016, the Farm Credit System consisted of three Farm Credit Banks, one Agricultural Credit Bank and 74 customer-owned cooperative lending institutions (associations). The Farm Credit System serves all 50 states, Washington, D.C., and Puerto Rico. This network of financial cooperatives is owned and operated by the rural customers the Farm Credit System serves – the American farmer and rancher. AgriBank, FCB and its affiliated associations are collectively referred to as the AgriBank Farm Credit Bank District. At January 1, 2016, the AgriBank Farm Credit Bank District consisted of 17 Agricultural Credit Associations that each has 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 authorized to provide lease financing options for agricultural purposes and are also authorized to purchase and hold certain types of investments including mission-related investments. AgriBank, FCB provides funding to all associations chartered within the AgriBank Farm Credit District. 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.

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, FCB.

Farm Credit Insurance Fund The Farm Credit Act established the Farm Credit System Insurance Corporation to administer the Farm Credit Insurance Fund. The Farm Credit Insurance Fund is used to ensure the timely payment of principal and interest on Farm Credit Systemwide debt obligations, to ensure the retirement of protected borrower capital at par or stated value, and for other specified purposes.

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 is required to pay premiums into the Farm Credit Insurance Fund until the assets in the Farm Credit Insurance Fund equal 2 percent of the aggregated insured obligations adjusted to reflect the reduced risk on loans or investments guaranteed by federal or state governments. This percentage of aggregate obligations can be changed by the Farm Credit System Insurance Corporation, at its sole discretion, to a percentage it determines to be actuarially sound. The basis for assessing premiums is debt outstanding with adjustments made for nonaccrual loans and impaired investment securities which are assessed a surcharge, while guaranteed loans and investment securities are deductions from the premium base. AgriBank, FCB, in turn, assesses premiums to AgriBank Farm Credit Bank District associations each year based on similar factors.

Association Farm Credit Services of America, ACA (ACA) and its subsidiaries, Farm Credit Services of America, FLCA (FLCA) and Farm Credit Services of America, PCA (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 states of Iowa, Nebraska, South Dakota and Wyoming. We borrow from AgriBank, FCB and provide financing and related services to our members. Our ACA holds all the stock of the FLCA and PCA subsidiaries. The FLCA makes secured long-term agricultural real estate and rural home mortgage loans, and provides lease financing options in collaboration with Farm Credit Leasing Services and CoBank, ACB. The PCA makes short-term and intermediate-term loans for agricultural production or operating purposes, and provides lease financing options in collaboration with Farm Credit Leasing Services and CoBank, ACB. We offer risk management services, including crop insurance and crop-hail insurance, for borrowers and those eligible to borrow.

Alliance with Frontier Farm Credit On May 20, 2014, the Boards of Directors of Farm Credit Services of America and Frontier Farm Credit signed a letter of intent to form a strategic alliance. The alliance is designed to benefit the farmers and ranchers who own and support the two financial services cooperatives by ensuring that both Associations have the strength and capacity to serve agricultural customers’ needs for years to come. As part of the new alliance, Farm Credit Services of America and Frontier Farm Credit continue to exist as separate associations while integrating their day-to-day business operations, technology systems and leadership teams. Each Association continues to have its own Board, with representatives participating in a coordinating committee to facilitate Board governance between the two organizations. In October 2014, Frontier Farm Credit stockholders voted to approve the alliance. Farm Credit Services of America provided information concerning the alliance to its stockholders. The alliance was implemented January 1, 2015.

no. 39


Under the alliance agreement, Farm Credit Services of America and Frontier Farm Credit have agreed to share current-year income and expenses based on the average total assets of each entity for the prior calendar year. Due to the transition period required to fully implement the alliance, the agreement specifies generally that pre-tax net income will be shared on fixed percentages of 94 percent for Farm Credit Services of America and 6 percent for Frontier Farm Credit for 2015, and 93 percent for Farm Credit Services of America and 7 percent for Frontier Farm Credit for 2016. For the year ending December 31, 2015, Farm Credit Services of America recorded $10.4 million of operating expense credits under the income and expense sharing provisions of the alliance agreement primarily due to the recovery of salary and related expenses incurred by Farm Credit Services of America for former Frontier Farm Credit employees added to the Farm Credit Services of America payroll. Frontier Farm Credit has $1.9 billion in assets and serves multiple counties in eastern Kansas. Farm Credit Services of America has $24.8 billion in assets and serves the states of Iowa, Nebraska, South Dakota and Wyoming.

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 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 period. Actual results could differ from those estimates. The consolidated financial statements present the consolidated financial results of Farm Credit Services of America, ACA (the parent) and Farm Credit Services of America, FLCA and Farm Credit Services of America, PCA (the subsidiaries). All material intercompany transactions and balances have been eliminated in consolidation. The following are our significant accounting policies:

Loans Mortgage loan terms range from 5-35 years at origination. Almost all commercial loans are made for agricultural production or operating purposes with original terms of 10 years or less. Loans are carried at their principal amount outstanding net of any unearned income, cumulative charge-offs and unamortized premiums or discounts on purchased loans. Loan interest is accrued and credited to interest income based upon the daily principal amount outstanding.

We place loans in nonaccrual status when:

• 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.

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 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 charge-offs. Nonaccrual loans may be returned to accrual status when:

• principal and interest are current,• prior charge-offs 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.

In situations where, for economic or legal reasons related to the borrower’s financial difficulties, we grant a concession for other than an insignificant period of time to the borrower that we would not otherwise consider, the related loan is classified as a troubled debt restructuring, also known as a restructured loan. A concession is generally granted in order to minimize economic loss and avoid foreclosure. Concessions vary by program and borrower, and may include interest rate reductions, term extensions, payment deferrals or an acceptance of additional collateral in lieu of payments. In limited circumstances, principal may be forgiven. Loans classified as troubled debt restructurings are considered risk loans. Loans are charged off at the time they are determined to be uncollectible. Loans that are sold as participations are transferred as entire financial assets, groups of entire financial assets or participating interests in the loans. The transfers of such assets or participating interests are structured such that control over the transferred assets or participating interests have been surrendered and that all of the conditions have been met to be accounted for as a sale.

Allowance for Loan Losses and Reserve for

Unfunded Lending Commitments 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:

• loan loss history,• changes in credit risk classifications,• changes in collateral values,• changes in risk concentrations, and• changes in economic and environmental conditions.



Loans in our portfolio that are considered impaired are analyzed individually to establish a specific allowance for impaired loans or are analyzed on a pool basis if they have similar risk characteristics. 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:

• nonaccrual loans,• formally restructured loans, and• loans that are 90 days or more past due and still accruing interest.

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. An allowance is recorded for probable and estimable credit losses as of the financial statement date for loans that are not individually assessed as impaired. Changes in the allowance for loan losses consist of provision activity, recorded as “Provision for (reversal of) credit losses” on the Consolidated Statement of Income, and charge-offs and recoveries. The reserve for unfunded lending commitments is based on our best estimate of losses inherent in lending commitments made to customers but not yet disbursed. Factors such as likelihood of disbursal and likelihood of losses given disbursement were utilized in determining this contingency. Changes in the reserve for unfunded commitments consist of provision activity, recorded as “Provision for (reversal of) credit losses” on the Consolidated Statement of Income.

Investment in AgriBank, FCB Accounting for our investment in AgriBank, FCB is on a cost plus allocated equities basis.

AgDirect, LLP Investment in AgriBank, FCB Accounting for the AgDirect, LLP investment in AgriBank, FCB is on a cost basis.

Other Property Owned We record other property owned, consisting of real and personal property acquired through a collection action, at fair value, less estimated selling costs at the time of acquisition. Revised estimates of the fair value, less estimated selling costs, are reported as adjustments to the carrying amount of the asset, provided that the adjusted value is not in excess of the carrying amount at acquisition. Income and expenses from operations, carrying value adjustments and realized gains on sales are recorded as “Gains on other property owned” on the Consolidated Statement of Income.

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, which are normally 5-40 years for building and improvements and 3-10 years for furniture and equipment. Gains and losses on premises and equipment dispositions are reflected in current-year income. Maintenance and repairs are included in operating expense and improvements are capitalized.

Leases We operate under an agreement with CoBank, ACB where we purchase a participation in loans made by CoBank, ACB to Farm Credit Leasing Services to fund capital markets leases, agricultural equipment leases and agricultural facilities leases that we originate. Under provisions of this agreement, Farm Credit Leasing Services participates approximately 50 percent funding for these leases to CoBank, ACB and CoBank, ACB participates a similar amount to us. Lease participations purchased under this agreement are included in “Loans” on the Consolidated Balance Sheet and totaled $171 million at December 31, 2015, $148.9 million at December 31, 2014, and $148.9 million at December 31, 2013. Beginning January 1, 2012, we operate under an agreement with CoBank, ACB where we purchase a participation in loans made by CoBank, ACB to Farm Credit Leasing Services to fund agricultural equipment leases that are originated under the AgDirect trade credit financing program. Under provisions of this agreement, Farm Credit Leasing Services participates approximately 50 percent funding for these leases to CoBank, ACB and CoBank, ACB participates a similar amount to us. We participate a similar amount to AgDirect, LLP and AgDirect, LLP participates a similar amount to AgriBank, FCB. Farm Credit Leasing Services pays us a fee for the portion of the funding it retains and AgDirect, LLP pays us a fee for the portion of the funding we participate to it. Loans participated to AgDirect, LLP under this program at December 31, 2015, totaled $265.3 million.

Advance Conditional Payments We are authorized under the Farm Credit Act to accept advance conditional payments from customers. We net the advance conditional payments against the customer’s related loan balance to the extent the real estate customer’s loan balance exceeds the advance payments. Real estate funds held balances totaled $6.3 million at December 31, 2015, $5.6 million at December 31, 2014, and $11.5 million at December 31, 2013. The amount of commercial advance conditional payments accepted cannot exceed the commitment amount of the customer’s note. We classify commercial advance conditional payments as “Other liabilities” on the Consolidated Balance Sheet since the limit on commercial advance conditional payments is based on note commitments. Commercial advance conditional payments totaled $0.6 million at December 31, 2015, $4.8 million at December 31, 2014, and $0.9 million at December 31, 2013. We pay interest on advance conditional payments and they are not insured. Advance conditional payments are primarily for customers who are required to maintain them as part of their loan agreement.

no. 41


Employee Benefit Plans Our employees participate in a defined contribution plan. Benefit plans are described in Note 10, “Employee Benefit Plans.” The costs of the defined contribution plan are funded as accrued. In addition, we provide a retiree health care benefit to employees who meet specific hire-date and years-of-service requirements.

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. The expected future tax consequences of uncertain income tax positions are accrued. The FLCA is exempt from federal and other taxes to the extent provided in the Farm Credit Act.

Patronage Program We accrue patronage distributions as declared by the Board of Directors, normally in December of each year. We pay the accrued patronage during the first quarter of each subsequent year. Cash patronage distributions are referred to as cash-back dividends.

Statement of Cash Flows For purposes of reporting cash flow, cash includes cash on hand and on deposit at commercial banks.

Fair Value Measurement The Financial Accounting Standards Board guidance on Fair Value Measurements describes three levels of inputs that may be used to measure fair value. Level 1: Quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2: Observable inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly or indirectly. Level 2 inputs include the following:

• quoted prices for similar assets or liabilities in active markets; • quoted prices for identical or similar assets or liabilities in markets

that are not active so that they are traded less frequently than exchange-traded instruments, quoted prices that are not current or principal market information that is not released publicly;

• inputs that are observable such as interest rates and yield curves, prepayment speeds, credit risks and default rates; and

• inputs derived principally from, or corroborated by, observable market data by correlation or other means.

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. These unobservable inputs reflect our own assumptions

that market participants would use in pricing the asset or liability. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. We currently have no material financial statement items required to be accounted for within the consolidated financial statements at fair value.

Recently Issued or Adopted Accounting Pronouncements We have assessed the potential impact of accounting standards that have been issued, but are not yet effective, and have determined that no such standards are expected to have a material impact to our consolidated financial statements. Except as noted below, no accounting pronouncements were adopted during 2015. In February 2016, the Financial Accounting Standards Board issued guidance entitled Leases. The guidance modifies the recognition and accounting for lessees and lessors and requires expanded disclosures regarding assumptions used to recognize revenue and expenses related to leases. The guidance is effective for nonpublic entities for annual reporting periods beginning after December 15, 2019, and interim periods the subsequent year. Early adoption is permitted and modified retrospective adoption is required. We are currently evaluating the impact of the guidance on our financial condition, results of operations, cash flows and financial statement disclosures. In August 2014, the Financial Accounting Standards Board issued guidance entitled Presentation of Financial Statements-Going Concern. The guidance requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year after the date the financial statements are issued or within one year after the financial statements are available to be issued, when applicable. Substantial doubt to continue as a going concern exists if it is probable that the entity will be unable to meet its obligations for the assessed period. This guidance becomes effective for all entities for interim and annual periods ending after December 15, 2016, and early application is permitted. We do not expect the adoption of this guidance to have an effect on our financial condition, results of operations, cash flows or financial statement disclosures. In May 2014, the Financial Accounting Standards Board issued guidance entitled Revenue from Contracts with Customers. The guidance governs revenue recognition from contracts with customers and requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Financial instruments and other contractual rights within the scope of other guidance issued by the Financial Accounting Standards Board are excluded from the scope of this new revenue recognition guidance. In this regard, a majority of our contracts would be excluded from the scope of this new guidance. The guidance is effective for nonpublic entities for annual reporting periods after December 15, 2017, and interim


periods within annual periods beginning after December 15, 2018. We are in the process of reviewing contracts to determine the effect, if any, on our financial condition or our results of operations. In January 2016, the Financial Accounting Standards Board issued guidance entitled Recognition and Measurement of Financial Assets and Financial Liabilities. The guidance is intended to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information. The amendments address certain aspects of recognition, measurement, presentation and disclosure of financial statements. The guidance is effective for nonpublic entities for annual reporting periods beginning after December 15, 2018, and interim periods with annual periods

beginning after December 15, 2019. Certain disclosure changes are permitted to be immediately adopted for annual reporting periods that have not yet been made available for issuance. Nonpublic entities are no longer required to include certain fair value of financial instruments disclosures as part of these disclosure changes. We have immediately adopted this guidance and have excluded such disclosures from our “Notes to Consolidated Financial Statements.” Early adoption is only permitted for interim and annual reporting periods beginning after December 15, 2017, for other applicable sections of the guidance. We are currently evaluating the impact of the remaining guidance on our financial condition, results of operations, cash flows or financial statement disclosures.


Note 3 – Loans and Allowance for Loan Losses

Loans, including participations purchased and nonaccruals, consisted of the following (in thousands):

December 31,

2015 2014 2013

Amount Percentage Amount Percentage Amount Percentage

Long-term agricultural mortgage $13,776,611 58.4% $12,704,711 57.5% $11,899,951 58.9%

Production and intermediate term 6,047,685 25.6 5,901,561 26.7 5,165,416 25.6

Processing and marketing 1,582,609 6.7 1,464,746 6.6 1,252,810 6.2

Rural residential real estate 1,419,664 6.0 1,310,354 5.9 1,215,418 6.0

Farm-related business 282,989 1.2 280,219 1.3 360,155 1.8

Communications 149,147 0.6 123,056 0.5 73,845 0.4

Energy 126,152 0.5 100,710 0.5 127,175 0.6

Mission-related investments 103,737 0.4 123,373 0.6 107,297 0.5

Loans to cooperatives 79,261 0.3 14,908 0.1 9,703 –

International 70,654 0.3 74,799 0.3 – –

Water and waste water (3) – (11) – – –

Total loans $23,638,506 100.0% $22,098,426 100.0% $20,211,770 100.0%

The negative number for water and waste water results from an unamortized discount on a letter of credit that was purchased and has not been drawn. This negative number appears on several loan tables within this footnote.

no. 43


We may purchase or sell participation interests with other parties in order to diversify risk, manage loan volume or comply with Farm Credit Administration regulations. The following table presents information regarding participations purchased and sold (participations purchased do not include syndications; amounts are in thousands):

AgriBank, FCBOther Farm Credit

InstitutionsNon-Farm Credit

Institutions TotalParticipations Participations Participations Participations

Purchased Sold Purchased Sold Purchased Sold Purchased SoldAs of December 31, 2015Long-term agricultural mortgage $ – $636,341 $ 414,987 $ 306,263 $ 26,971 $ 3,349 $ 441,958 $ 945,953 Production and intermediate term – 79,032 820,557 389,768 2,372,632 2,583,713 3,193,189 3,052,513

Processing and marketing – 76,452 785,084 822,344 6,017 164 791,101 898,960

Farm-related business – – 29,196 30,578 9,808 – 39,004 30,578 Communications – – 151,258 2,000 – – 151,258 2,000 Energy – – 127,670 1,370 – – 127,670 1,370

Mission-related investments – – – – 86,815 – 86,815 –Loans to cooperatives – – 49,525 23,424 – – 49,525 23,424 International – – 70,654 – – – 70,654 –

Total $ – $791,825 $2,448,931 $1,575,747 $2,502,243 $2,587,226 $4,951,174 $4,954,798

As of December 31, 2014

Long-term agricultural mortgage $ – $750,210 $ 242,974 $ 231,700 $ 35,408 $ 2,876 $ 278,382 $ 984,786 Production and intermediate term – 48,793 786,234 276,321 2,271,424 2,890,825 3,057,658 3,215,939

Processing and marketing – 52,066 648,239 742,164 11,709 234 659,948 794,464

Farm-related business – – 31,028 30,950 – – 31,028 30,950

Communications – – 123,173 – – – 123,173 –

Energy – – 100,833 – – – 100,833 –

Mission-related investments – – – – 106,392 – 106,392 –

Loans to cooperatives – – 14,908 – – – 14,908 –

International – – 74,799 – – – 74,799 –

Total $ – $851,069 $2,022,188 $1,281,135 $2,424,933 $2,893,935 $4,447,121 $5,026,139


Long-term agricultural mortgage $ – $876,085 $ 232,574 $ 204,163 $ 27,699 $ 3,119 $ 260,273 $1,083,367 Production and intermediate term – 38,964 510,218 257,370 2,085,220 2,479,033 2,595,438 2,775,367

Processing and marketing – 74,396 550,408 777,307 15,991 – 566,399 851,703

Farm-related business – – 116,714 5,775 12,144 – 128,858 5,775

Communications – – 73,866 – – – 73,866 –

Energy – – 119,397 – – – 119,397 –

Mission-related investments – – – – 98,453 – 98,453 –

Loans to cooperatives – – 9,703 – – – 9,703 –

Total $ – $989,445 $1,612,880 $1,244,615 $2,239,507 $2,482,152 $3,852,387 $4,716,212



Participations purchased increased $504.1 million in 2015, while participations sold decreased by $71.3 million. The changes are primarily due to activity in our AgDirect agricultural equipment financing program as described in Note 5, “AgDirect, LLP Investment in AgriBank, FCB,” and loan participations purchased and sold by our Agribusiness Finance and Capital Markets teams. At December 31, 2015, participations purchased under the AgDirect program were $2.6 billion, while participations sold were $3.1 billion. On October 1, 2008, we sold a pool of approximately $1.9 billion of real estate loans to AgriBank, FCB. The sale was intended to enhance our regulatory capital ratios and reduce credit risk. AgriBank, FCB has established a separate patronage pool for these assets and intends to pay the net earnings on the pool to us as patronage. We anticipate our net income after patronage from the pool will not be materially affected. Patronage declared on this pool is solely at the discretion of the AgriBank, FCB Board of Directors. We will continue to provide servicing for the loans in the pool, and AgriBank, FCB will pay us a fee for this servicing. As part of this transaction, we purchased additional common stock in AgriBank, FCB equal to 8 percent of the pool assets. The volume in this pool of assets at December 31, 2015, was $566.8 million. We have received $15.8 million of asset pool patronage in 2015, $20 million in 2014 and $24.3 million in 2013 related to this participation. We have concentrations with individual borrowers within various agricultural commodities. At December 31, 2015, loans outstanding plus commitments to our 10 largest borrowers, net of participations sold, totaled an amount equal to 17.3 percent of members’ equity. No single borrower’s loans outstanding plus commitments exceeds 5 percent of members’ equity. Our credit risk concentration in various agricultural commodities is shown in the following table. While the amounts represent our maximum potential credit risk related to recorded loan principal, a substantial portion of our lending activities is collateralized, which reduces our exposure to credit loss associated with lending activity. We include an estimate of our credit risk exposure in determining the allowance for loan losses. Agricultural concentrations were as follows:

December 31,2015 2014 2013

Grain 45.9% 46.5% 47.6%Beef feedlot 9.9 10.6 9.2Landlords/investors 9.9 9.7 9.7Cow-calf 6.8 6.6 6.4Swine 6.7 6.4 7.2Dairy 4.2 4.5 4.6Poultry 1.7 1.7 1.5General livestock 1.6 1.6 1.6Forest products 1.3 1.3 1.6Farm supply 1.0 0.9 0.9Meat/proteins processing 1.0 0.9 0.8Renewable fuels 0.7 0.6 0.8Other 9.3 8.7 8.1 Total 100.0% 100.0% 100.0%

The amount of collateral obtained, if deemed necessary upon extension of credit, is based on our credit evaluation of the borrower. Collateral held varies but typically includes farmland and income-producing property, such as crops and livestock, as well as receivables. Long-term real estate loans are secured by a first lien on the underlying real property. Federal regulations state that long-term real estate loans are not to exceed 85 percent (97 percent if guaranteed by a government agency) of the property’s appraised value. However, internal lending procedures require a more conservative loan-to-value ratio, which results in an average loan-to-value ratio in the real estate portfolio of less than 50 percent of current market values. Risk loans (accruing loans include accrued interest receivable) are loans for which it is probable that all principal and interest will not be collected according to the contractual terms. The following table presents information concerning the recorded investment in risk loans (in thousands):

December 31,

2015 2014 2013

Nonaccrual loans:

Current as to principal and interest $44,760 $43,725 $56,601

Past due 28,724 17,239 21,688

Total nonaccrual loans 73,484 60,964 78,289

Impaired accrual loans:

Restructured 10,658 6,329 8,799

90 days or more past due 638 4,900 466

Total risk loans $84,780 $72,193 $87,554

Total risk loans have increased since year-end. The increase in nonaccrual loans is primarily due to several large accounts in the grain industry being classified as nonaccrual. Restructured loans increased primarily due to the restructuring of a large account in the grain industry. Based on our analysis, loans 90 days or more past due and still accruing interest were adequately secured and in the process of collection. At December 31, 2015, there were approximately $2.3 million in commitments to lend additional funds to customers whose loans were at risk. Interest income is recognized and cash payments are applied on nonaccrual loans as described in Note 2, “Summary of Significant Accounting Policies.” The following table sets forth interest income recognized on risk loans (in thousands):


2015 2014 2013

Interest income recognized on nonaccrual loans $1,687

$2,970 $6,963

Interest income on risk accrual loans 824 690 686

Interest income recognized on risk loans $2,511 $3,660 $7,649

no. 45


Risk assets by loan type are as follows (accruing volume includes accrued interest receivable; amounts are in thousands):

December 31,

2015 2014 2013

Nonaccrual loans:

Long-term agricultural mortgage $33,843 $20,446 $28,468

Production and intermediate term 32,735 33,161 44,673

Processing and marketing – – 4

Rural residential real estate 6,591 3,185 4,115

Farm-related business 315 349 390

Energy – 3,823 639

Total nonaccrual loans $73,484 $60,964 $78,289

Accruing restructured loans:

Long-term agricultural mortgage $ 5,878 $ 5,013 $ 2,793

Production and intermediate term 4,780 946 1,826

Processing and marketing – – 3,810

Rural residential real estate – 370 370

Total accruing restructured loans $10,658 $ 6,329 $ 8,799

Accruing loans 90 days or more past due:

Production and intermediate term $ 638 $ 67 $ 466

Mission-related investments – 4,833 –

Total accruing loans 90 days or more past due $ 638 $ 4,900 $ 466

Total risk loans 84,780 72,193 87,554

Other property owned – 4,279 3,642

Total risk assets $84,780 $76,472 $91,196


All risk loans are considered to be impaired loans. The following table provides additional impaired loan information (in thousands):

As of December 31, 2015For the Period Ended December 31, 2015

Recorded Investment (1)

Unpaid Principal Balance (2)

Related Allowance

Average Impaired Loans

Interest Income Recognized

Impaired loans with a related allowance for loan losses:

Long-term agricultural mortgage $ 232 $ 233 $ 182 $ 146 $ –

Production and intermediate term 16,069 16,707 4,721 14,423 100

Rural residential real estate 152 154 16 156 –

Total $16,453 $17,094 $4,919 $14,725 $100

Impaired loans with no related allowance for loan losses:

Long-term agricultural mortgage $39,489 $ 49,044 $ – $33,929 $ 782

Production and intermediate term 22,084 46,382 – 33,235 1,411

Processing and marketing – – – 7 –

Rural residential real estate 6,439 6,984 – 5,660 108

Farm-related business 315 380 – 339 1

Energy – – – 1,739 –

Mission-related investments – – – 2,158 108

Total $68,327 $102,790 $ – $77,067 $2,410

Total impaired loans:

Long-term agricultural mortgage $39,721 $ 49,277 $ 182 $34,075 $ 782

Production and intermediate term 38,153 63,089 4,721 47,658 1,511

Processing and marketing – – – 7 –

Rural residential real estate 6,591 7,138 16 5,816 108


Energy – – – 1,739 –


Total $84,780 $119,884 $4,919 $91,792 $2,510

(1) The recorded investment in the receivable is the face amount increased or decreased by applicable accrued interest and unamortized premium, discount, finance charges or acquisition costs, and may also reflect a previous write-down of the investment.

(2) Unpaid principal balance represents the contractual principal balance of the loan.


Notes to Consolidated Financial Statements

no. 47






Related Allowance






Energy 3,823 3,890 2,140 1,415 4

Total $20,410 $21,561 $9,988 $15,160 $185


Long-term agricultural mortgage $25,423 $33,968 $ – $29,614 $1,051


Processing and marketing – – – 1,466 88



Mission-related investments 4,833 4,597 – 1,586 80

Total $51,783 $73,451 $ – $76,999 $3,475


Long-term agricultural mortgage $25,461 $34,006 $ 38 $29,654 $1,051


Processing and marketing – – – 1,466 88



Energy 3,823 3,890 2,140 1,415 4

Mission-related investments 4,833 4,597 – 1,586 80

Total $72,193 $95,012 $9,988 $92,159 $3,660




One credit quality indicator we utilize is the Farm Credit Administration Uniform Loan Classification System that categorizes loans into five categories. The categories are defined as follows:

• acceptable – assets are expected to be fully collectible and represent the highest quality;

• other assets especially mentioned (OAEM) – assets are currently collectible but exhibit some potential weakness;

• substandard – assets exhibit some serious weakness in repayment capacity, equity and/or collateral pledged on the loan;

• doubtful – assets exhibit similar weaknesses to substandard assets; however, doubtful assets have additional weaknesses in existing factors, conditions and values that make collection in full highly questionable; and

• loss – assets are considered uncollectible.

We had no loans categorized as loss at December 31, 2015, 2014 or 2013.





Related Allowance






Farm-related business 3 3 1 4 –

Energy 639 657 600 765 –

Total $24,232 $25,346 $5,657 $4,827 $380


Long-term agricultural mortgage $31,221 $40,952 $ – $36,903 $1,816


Processing and marketing 3,814 7,454 – 4,316 262




Total $63,322 $85,351 $ – $96,802 $7,270


Long-term agricultural mortgage $31,262 $ 40,993 $ 41 $ 36,946 $1,816


Processing and marketing 3,814 7,454 – 4,316 262


Farm-related business 390 658 1 492 4

Energy 639 657 600 765 –


Total $87,554 $110,697 $5,657 $101,629 $7,650



no. 49



The following table shows loans and related accrued interest classified under the Farm Credit Administration Uniform Loan Classification System as a percentage of total loans and related accrued interest receivable by loan type:

Acceptable OAEM Substandard/Doubtful Total

Amount % Amount % Amount % Amount


Long-term agricultural mortgage $13,218,966 94.45% $442,051 3.16% $335,067 2.39% $13,996,084

Production and intermediate term 5,476,899 89.29% 360,333 5.88% 296,265 4.83% 6,133,497

Processing and marketing 1,552,571 97.68% 21,244 1.33% 15,782 0.99% 1,589,597

Rural residential real estate 1,375,047 95.95% 25,201 1.76% 32,856 2.29% 1,433,104

Farm-related business 281,717 98.86% 2,330 0.82% 890 0.32% 284,937

Communications 149,306 100.00% – – – – 149,306

Energy 126,465 100.00% – – – – 126,465

Mission-related investments 104,102 100.00% – – – – 104,102

Loans to cooperatives 74,310 93.51% – – 5,156 6.49% 79,466

International 70,641 100.00% – – – – 70,641

Water and waste water (3) 100.00% – – – – (3)

Total $22,430,021 93.59% $851,159 3.55% $686,016 2.86% $23,967,196


Long-term agricultural mortgage $12,592,830 97.60% $152,424 1.18% $157,623 1.22% $12,902,877




Farm-related business 279,281 99.05% 711 0.25% 1,962 0.70% 281,954


Communications 123,104 100.00% – – – – 123,104

Energy 97,299 96.22% – – 3,823 3.78% 101,122

International 74,722 100.00% – – – – 74,722


Water and waste water (11) 100.00% – – – – (11)

Total $21,716,217 96.97% $315,140 1.41% $364,035 1.62% $22,395,392


Long-term agricultural mortgage $11,819,963 97.87% $ 84,977 0.70% $172,176 1.43% $12,077,116




Farm-related business 350,081 96.48% 10,414 2.87% 2,308 0.65% 362,803


Communications 73,887 100.00% – – – – 73,887

Energy 121,480 95.10% – – 6,262 4.90% 127,742


Total $19,776,393 96.58% $297,784 1.45% $403,146 1.97% $20,477,323



The following table provides an aging analysis of past due loans by loan type (accruing volume includes accrued interest receivable; amounts are in thousands):

30-89 Days Past Due

90 Days or More Past Due

TotalPast Due

Not Past Due or Less Than

30 Days Past Due

Total Loans

90 Days or More Past Due and Accruing


Long-term agricultural mortgage $19,288 $ 5,879 $25,167 $13,970,917 $13,996,084 $ –

Production and intermediate term 28,767 16,311 45,078 6,088,419 6,133,497 638

Processing and marketing – – – 1,589,596 1,589,596 –

Rural residential real estate 4,667 2,302 6,969 1,426,135 1,433,104 –

Farm-related business 2,838 306 3,144 281,793 284,937 –

Communications – – – 149,306 149,306 –

Energy – – – 126,465 126,465 –

Mission-related investments – – – 104,102 104,102 –

Loans to cooperatives – – – 79,467 79,467 –

International – – – 70,641 70,641 –

Water and waste water – – – (3) (3) –

Total $55,560 $24,798 $80,358 $23,886,838 $23,967,196 $638


Long-term agricultural mortgage $ 3,245 $ 6,143 $ 9,388 $12,893,489 $12,902,877 $ –


Processing and marketing 46 – 46 1,471,122 1,471,168 –

Rural residential real estate 2,088 79 2,167 1,320,012 1,322,179 –

Farm-related business 510 349 859 281,095 281,954 –

Communications – – – 123,104 123,104 –

Energy – – – 101,122 101,122 –

Mission-related investments 3,584 4,833 8,417 115,597 124,014 4,833


International – – – 74,722 74,722 –

Water and waste water – – – (11) (11) –

Total $31,250 $15,706 $46,956 $22,348,436 $22,395,392 $4,900


Long-term agricultural mortgage $ 8,093 $ 8,239 $16,332 $12,060,784 $12,077,116 $ –


Processing and marketing 147 4 151 1,257,455 1,257,606 –

Rural residential real estate 2,716 707 3,423 1,221,905 1,225,328 –

Farm-related business – 387 387 362,415 362,802 –

Communications – – – 73,887 73,887 –

Energy – – – 127,742 127,742 –

Mission-related investments 3,560 – 3,560 104,209 107,769 –


Total $27,662 $18,685 $46,347 $20,430,976 $20,477,323 $466

no. 51


A restructuring of a loan constitutes a troubled debt restructuring if the creditor for economic or legal reasons related to the debtor’s financial difficulties grants a concession to the debtor that it would not otherwise consider. Concessions vary by program and borrower, and may include interest rate reductions, term extensions, payment deferrals or the acceptance of additional collateral in lieu of payments. In limited circumstances, principal may be forgiven. As a restructured loan constitutes a troubled debt restructuring, these loans are included within our risk loans. All risk loans are analyzed within our allowance for loan losses. The following tables present information regarding troubled debt restructurings that occurred during the year ended December 31 (in thousands):

Premodification Outstanding

Recorded Investment

Postmodification Outstanding

Recorded Investment

2015

Long-term agricultural mortgage $1,567 $1,567

Production and intermediate term 5,009 5,031

Rural residential real estate 55 56

Total $6,631 $6,654

2014

Long-term agricultural mortgage $2,149 $2,330

Production and intermediate term 554 490

Total $2,703 $2,820

2013

Long-term agricultural mortgage $ 797 $ 798

Production and intermediate term 1,241 1,174

Total $2,038 $1,972

Premodification represents the recorded investment just prior to restructuring, and postmodification represents the recorded investment immediately following the restructuring. The recorded investment is the face amount of the receivable increased or decreased by applicable accrued interest and unamortized premium, discount, finance charges or acquisition costs, and may also reflect a previous direct write-down of the investment.

The following table presents information regarding troubled debt restructurings that occurred within the previous 12 months and for which there was a subsequent payment default during the respective reporting period (in thousands):

2015 2014 2013

Production and intermediate term $ – $ – $87

Rural residential real estate 56 – –

$56 $ – $87

Troubled debt restructurings outstanding at December 31, 2015, totaled $13.7 million, of which $3.1 million were in nonaccrual status, compared to a December 31, 2014, total of $11.1 million, of which $4.8 million were in nonaccrual status, and $16.4 million at December 31, 2013, of which $7.6 million were in nonaccrual status. Additional commitments to lend to borrowers whose loans have been modified in a troubled debt restructuring were $1.1 million at December 31, 2015. The “Provision for (reversal of) credit losses” on the Consolidated Statement of Income includes a provision for (reversal of) loan losses and a (reversal of) provision for unfunded lending commitments. A summary of changes in the allowance for loan losses and reserve for unfunded lending commitments follows (in thousands):

December 31,

Allowance for Loan Losses 2015 2014 2013

Balance at beginning of year $58,000 $52,000 $60,000

Provision for (reversal of) loan losses 12,194 5,015 (15,747)

Loans charged off (6,530) (1,523) (3,598)

Recoveries 1,336 2,508 11,345

Balance at end of year $65,000 $58,000 $52,000

Reserve for Unfunded Lending Commitments

December 31,

2015 2014 2013

Balance at beginning of year $8,000 $10,000 $13,000

(Reversal of) provision for unfunded lending commitments – (2,000) (3,000)

Balance at end of year $8,000 $8,000 $10,000



A summary of changes in the allowance for loan losses and period-end recorded investments in loans by loan type is as follows (in thousands):

Allowance for Loan Losses: Recorded Investments in Loans Outstanding:

Balance at December 31, 2014

Provision for (Reversal of) Loan Losses Loan Recoveries Loan Charge-Offs


Ending Balance Individually Evaluated

for Impairment

Ending Balance Collectively Evaluated

for ImpairmentEnding Balance at December 31, 2015

Ending Balance for Loans Individually

Evaluated for Impairment

Ending Balance for Loans Collectively


Long-term agricultural mortgage $24,153 $12,433 $ 119 $ (58) $36,647 $ 182 $36,465 $13,996,084 $39,721 $13,956,363 Production and intermediate term 21,300 759 1,155 (5,288) 17,926 4,721 13,205 6,133,497 38,153 6,095,344Processing and marketing 4,768 (90) – – 4,678 – 4,678 1,589,596 – 1,589,596Rural residential real estate 2,829 513 12 – 3,354 16 3,338 1,433,104 6,591 1,426,513Farm-related business 425 223 – – 648 – 648 284,937 315 284,622Communications 524 45 – – 569 – 569 149,306 – 149,306Energy 3,389 (1,498) 50 (1,184) 757 – 757 126,465 – 126,465Mission-related investments 187 (67) – – 120 – 120 104,102 – 104,102Loans to cooperatives 370 (180) – – 190 – 190 79,467 – 79,467International 55 56 – – 111 – 111 70,641 – 70,641

Water and waste water – – – – – – – (3) – (3)

Total $58,000 $12,194 $1,336 $(6,530) $65,000 $4,919 $60,081 $23,967,196 $84,780 $23,882,416






for Impairment


for ImpairmentEnding Balance at

December 31, 2014





Long-term agricultural mortgage $20,517 $3,687 $ 51 $ (102) $24,153 $ 38 $24,115 $12,902,877 $25,461 $12,877,416 Production and intermediate term 19,036 1,488 2,157 (1,381) 21,300 7,810 13,490 5,979,289 34,173 5,945,116Processing and marketing 6,150 (1,459) 83 (6) 4,768 – 4,768 1,471,168 – 1,471,168Rural residential real estate 2,836 16 11 (34) 2,829 – 2,829 1,322,179 3,554 1,318,625Farm-related business 652 (433) 206 – 425 – 425 281,954 349 281,605Communications 224 300 – – 524 – 524 123,104 – 123,104Energy 2,119 1,270 – – 3,389 2,140 1,249 101,122 3,823 97,299Mission-related investments 161 26 – – 187 – 187 124,014 4,833 119,181Loans to cooperatives 305 65 – – 370 – 370 14,974 – 14,974International – 55 – – 55 – 55 74,722 – 74,722


Total $52,000 $5,015 $2,508 $(1,523) $58,000 $9,988 $48,012 $22,395,392 $72,193 $22,323,199



(Reversal of) Provision for Loan Losses Loan Recoveries Loan Charge-Offs



for Impairment



December 31, 2013





Long-term agricultural mortgage $18,933 $ 1,655 $ 236 $ (307) $20,517 $ 41 $20,476 $12,077,116 $31,262 $12,045,854 Production and intermediate term 24,189 (13,244) 10,902 (2,811) 19,036 5,015 14,021 5,235,331 45,881 5,189,450Processing and marketing 8,672 (2,495) – (27) 6,150 – 6,150 1,257,606 3,814 1,253,792Rural residential real estate 3,549 (728) 24 (9) 2,836 – 2,836 1,225,328 4,485 1,220,843Farm-related business 947 (359) 183 (119) 652 1 651 362,802 390 362,413Communications 1,230 (1,006) – – 224 – 224 73,887 – 73,887Energy 1,741 378 – – 2,119 600 1,519 127,742 639 127,103Mission-related investments 421 65 – (325) 161 – 161 107,769 – 107,769

Loans to cooperatives 318 (13) – – 305 – 305 9,742 – 9,742

Total $60,000 $(15,747) $11,345 $(3,598) $52,000 $5,657 $46,343 $20,477,323 $86,471 $20,390,852

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A summary of changes in the allowance for loan losses and period-end recorded investments in loans by loan type is as follows (in thousands):






for Impairment


for ImpairmentEnding Balance at December 31, 2015





Long-term agricultural mortgage $24,153 $12,433 $ 119 $ (58) $36,647 $ 182 $36,465 $13,996,084 $39,721 $13,956,363 Production and intermediate term 21,300 759 1,155 (5,288) 17,926 4,721 13,205 6,133,497 38,153 6,095,344Processing and marketing 4,768 (90) – – 4,678 – 4,678 1,589,596 – 1,589,596Rural residential real estate 2,829 513 12 – 3,354 16 3,338 1,433,104 6,591 1,426,513Farm-related business 425 223 – – 648 – 648 284,937 315 284,622Communications 524 45 – – 569 – 569 149,306 – 149,306Energy 3,389 (1,498) 50 (1,184) 757 – 757 126,465 – 126,465Mission-related investments 187 (67) – – 120 – 120 104,102 – 104,102Loans to cooperatives 370 (180) – – 190 – 190 79,467 – 79,467International 55 56 – – 111 – 111 70,641 – 70,641


Total $58,000 $12,194 $1,336 $(6,530) $65,000 $4,919 $60,081 $23,967,196 $84,780 $23,882,416






for Impairment



December 31, 2014





Long-term agricultural mortgage $20,517 $3,687 $ 51 $ (102) $24,153 $ 38 $24,115 $12,902,877 $25,461 $12,877,416 Production and intermediate term 19,036 1,488 2,157 (1,381) 21,300 7,810 13,490 5,979,289 34,173 5,945,116Processing and marketing 6,150 (1,459) 83 (6) 4,768 – 4,768 1,471,168 – 1,471,168Rural residential real estate 2,836 16 11 (34) 2,829 – 2,829 1,322,179 3,554 1,318,625Farm-related business 652 (433) 206 – 425 – 425 281,954 349 281,605Communications 224 300 – – 524 – 524 123,104 – 123,104Energy 2,119 1,270 – – 3,389 2,140 1,249 101,122 3,823 97,299Mission-related investments 161 26 – – 187 – 187 124,014 4,833 119,181Loans to cooperatives 305 65 – – 370 – 370 14,974 – 14,974International – 55 – – 55 – 55 74,722 – 74,722


Total $52,000 $5,015 $2,508 $(1,523) $58,000 $9,988 $48,012 $22,395,392 $72,193 $22,323,199



(Reversal of) Provision for Loan Losses Loan Recoveries Loan Charge-Offs



for Impairment



December 31, 2013





Long-term agricultural mortgage $18,933 $ 1,655 $ 236 $ (307) $20,517 $ 41 $20,476 $12,077,116 $31,262 $12,045,854 Production and intermediate term 24,189 (13,244) 10,902 (2,811) 19,036 5,015 14,021 5,235,331 45,881 5,189,450Processing and marketing 8,672 (2,495) – (27) 6,150 – 6,150 1,257,606 3,814 1,253,792Rural residential real estate 3,549 (728) 24 (9) 2,836 – 2,836 1,225,328 4,485 1,220,843Farm-related business 947 (359) 183 (119) 652 1 651 362,802 390 362,413Communications 1,230 (1,006) – – 224 – 224 73,887 – 73,887Energy 1,741 378 – – 2,119 600 1,519 127,742 639 127,103Mission-related investments 421 65 – (325) 161 – 161 107,769 – 107,769

Loans to cooperatives 318 (13) – – 305 – 305 9,742 – 9,742

Total $60,000 $(15,747) $11,345 $(3,598) $52,000 $5,657 $46,343 $20,477,323 $86,471 $20,390,852



Our adversely classified assets increased during 2015, ending the year at 2.9 percent of the portfolio, compared to 1.6 percent of the portfolio at December 31, 2014. Adversely classified assets are assets we have identified as showing some credit weakness outside our credit standards. 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 loan loss history, probability of default, estimated loss severity, portfolio quality and current economic and environmental conditions. We recorded a $12.2 million provision for credit losses for 2015 compared to a $3 million provision for credit losses for 2014. The provision for credit losses includes the provision for loan losses and the (reversal of) provision for unfunded lending commitments. The increase in the provision for credit losses is primarily due to an increase in the allowance for the grain industry and net charge-offs partially offset by decreases in the allowance for the energy/electric, swine and dairy industries. We recorded net charge-offs of $5.2 million in 2015 (0.02 percent of average loans). We recorded $1 million of net recoveries of charge-offs in 2014 ((0.01) percent of average loans) and net charge-offs of $7.7 million in 2013 (0.04 percent of average loans). During February 2008, we entered into a credit default swap with Omaha 2008-A LLC (2008 LLC). The balance of the loans and accrued interest under the credit default swap was $220.6 million at December 31, 2015. Pursuant to the credit default swap, following the occurrence of a known loss, the 2008 LLC will be required to pay us an amount equal to the principal amount of the defaulted loan, plus covered interest and costs, less any recoveries. However, the 2008 LLC is not required to pay us until the Retained Subordinate Notional Amount we hold is reduced to zero. In addition to loss events, proportionate reductions in the Retained Subordinate Notional Amount will occur due to reductions of the Aggregate Notional Amount of the Reference Obligations associated with nonloss events such as repayment of loan principal. The balance of the Retained Subordinate Notional Amount at December 31, 2015, was $1.9 million. The credit default agreement will remain in place over the life of the loans under the credit default swap. The maximum amount of losses the 2008 LLC will be required to pay under the credit default swap as of December 31, 2015, is $8.9 million. As of December 31, 2015, no losses had been incurred by the 2008 LLC or us. We capitalized costs of $1.6 million relating to the establishment of the credit default swap. The capitalized costs are included in other assets and amortized over the expected remaining life of the loans under the agreement. Fees related to the credit default swap are paid based on the volume of loans under the agreement over the life of the agreement. “Capital transaction expense” presented in the Consolidated Statement of Income includes fees and amortized costs for each year presented. The 2008 LLC is a variable-interest entity created to acquire eligible securities, which are used as collateral to secure the Failure to Pay Credit Event payment of the LLC under a credit default swap with us. The securities are limited to direct obligations of, and

obligations fully guaranteed as to timely payment of principal and interest by, the United States of America or obligations of any agency or instrumentality of the United States of America, the obligations of which are backed by the full faith and credit of the United States of America. Eligible securities, however, will not include “real estate mortgages” (or interest therein) as defined in Section 7701(i) of the Internal Revenue Code and the accompanying United States Treasury regulations. We are not the primary beneficiary of the variable-interest entity.

Note 4 – Investment in AgriBank, FCB

We are required to invest in the capital stock of AgriBank, FCB as a condition for maintaining a readily available source of funds. The minimum investment required by AgriBank, FCB is based on our quarterly average notes payable. At December 31, 2015, the required investment is 2.25 percent. AgriBank, FCB’s current bylaws allow the required investment to increase to 4 percent. Our required investment in AgriBank, FCB also includes an additional 1 percent on growth that exceeds a targeted rate set by AgriBank, FCB. We were not subject to the additional 1 percent requirement in 2015. The required investment is subject to change quarterly and increased by $21.5 million in 2015 to $487.3 million at December 31, 2015. At the sole discretion of the AgriBank, FCB Board of Directors, they may make quarterly equalization payments to us based on the investment that is in excess of the required investment. In addition, the investment in AgriBank, FCB makes us eligible for patronage income paid by AgriBank, FCB. The patronage is paid quarterly at the sole discretion of the AgriBank, FCB Board of Directors. Patronage amounts paid on a quarterly basis may be reversed by AgriBank, FCB at any time during the year should unforeseen events occur that, had they been known, would have reduced or eliminated the amount of patronage paid. In addition to the investment described earlier, as disclosed in Note 3, “Loans and Allowance for Loan Losses,” we sold a pool of real estate loans to AgriBank, FCB in the fourth quarter of 2008. AgriBank, FCB requires us to maintain a stock investment equal to 8 percent of this loan pool. At December 31, 2015, the investment required by the loan pool was $45.7 million.

Note 5 – AgDirect, LLP Investment in AgriBank, FCB

We have entered into agreements with 15 other Farm Credit System associations inside and outside of the AgriBank, FCB District to provide access to our AgDirect trade credit financing program. The AgDirect program includes origination and refinancing of agricultural equipment loans through independent equipment dealers. The Farm Credit Administration has approved requests from these associations to invest in a limited liability partnership (LLP) that facilitates this collaborative AgDirect trade credit financing program and allows us to leverage the AgDirect program for the mutual benefit of our associations, and the farmers and ranchers we collectively

no. 55


serve. Our investment is reflected as “AgDirect, LLP investment in AgriBank, FCB” on our Consolidated Balance Sheet. The LLP is an unincorporated business entity and purchases participations in AgDirect loans from us that were originated under the agreements described earlier. The LLP subsequently sells a like amount of loan participations to AgriBank, FCB. The LLP pays us a fee for originating these loans. Total outstanding participations sold to the LLP at December 31, 2015, were $3.1 billion compared to $2.9 billion at the end of 2014 and $2.5 billion at the end of 2013. AgriBank, FCB, at the discretion of its Board of Directors, pays patronage on these loan participations to AgDirect, LLP. Any patronage declared is accrued quarterly and paid by AgriBank, FCB in the first month of the subsequent quarter. AgDirect, LLP distributes any patronage paid by AgriBank, FCB as partnership distributions to the AgDirect, LLP partners. At December 31, 2015, AgDirect, LLP assets primarily consist of a $185.6 million investment in AgriBank, FCB to capitalize the loan participations sold to AgriBank, FCB. We hold $73.8 million of this investment, and other Farm Credit System entities hold the remaining investment. At December 31, 2015, AgDirect, LLP had liabilities of $7.2 million consisting of a distribution payable to LLP partners from patronage declared by AgriBank, FCB for the fourth quarter of 2015. AgDirect, LLP had liabilities of $4.6 million at December 31, 2014, and $2.6 million at December 31, 2013. AgDirect, LLP had net income of $22.1 million for the year ended 2015, $22.5 million for the year ended 2014 and $12.7 million for the year ended 2013 from patronage paid by AgriBank, FCB.

Note 6 – Premises and Equipment

Premises and equipment consisted of the following (in thousands):

December 31,

2015 2014 2013

Land, buildings and improvements $158,748 $148,217 $144,631

Construction/improvements in progress 5,212 5,842 1,205

Furniture and equipment 83,770 79,606 73,905

247,730 233,665 219,741

Less accumulated depreciation 101,511 98,367 88,948

Premises and equipment, net $146,219 $135,298 $130,793

Note 7 – Other Assets

We and other Farm Credit institutions are among the forming limited partners for a $154.5 million Rural Business Investment Company established on October 3, 2014. The Rural Business Investment Company facilitates private equity investments in agriculture-related

businesses that create growth and job opportunities in rural America. Our total commitment is $20 million through October 2019. The Rural Business Investment Company investment increased due to capital calls to fund new investments during 2015. As of December 31, 2015, our investment is $4.2 million compared to $0.8 million at December 31, 2014. The investment is included in “Other assets” on the Consolidated Balance Sheet and was evaluated for impairment. No impairments were recognized on this investment during 2015 or 2014. We have not received any distributions from the funds during the years ended December 31, 2015 or 2014.

Note 8 – Notes Payable

The notes payable to AgriBank, FCB represent borrowings to fund our net assets. This indebtedness is collateralized by a pledge of substantially all of our assets and is governed by a General Financing Agreement. AgriBank, FCB has established a $21 billion revolving line of credit for us that is renegotiated annually. The interest rate is periodically adjusted by AgriBank, FCB and at December 31, 2015, was 1.54 percent for the ACA, 1.87 percent for the FLCA and 0.60 percent for the PCA. The consolidated notes payable balance is presented in the following table (in thousands):

December 31,

2015 2014 2013

Notes payable to AgriBank, FCB $20,077,076 $18,790,035 $17,333,892

Under the Farm Credit Act, we are obligated to borrow only from AgriBank, FCB unless AgriBank, FCB approves borrowing from other funding sources. AgriBank, FCB, consistent with Farm Credit Administration regulations, has established limitations on our ability to borrow funds based on specified factors or formulas relating primarily to credit quality and financial condition. At December 31, 2015, we were within the specified limitations.

Note 9 – Members’ Equity

A description of our capitalization requirements, protection mechanisms, regulatory capitalization requirements and restrictions, and equities are provided below.

Capital Stock and Participation Certificates 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. Our capitalization bylaws require a customer to invest in capital stock equal to $1,000 or 2 percent of the amount of the loan, whichever is less. Our Board of Directors may increase the amount of investment, if necessary, to meet capital needs. A customer acquires ownership of the capital stock at the time the loan is made but usually does not make a cash investment. The aggregate par value is added to


the principal amount of the related loan obligation. We retain a first lien on the stock or participation certificates owned by customers. Retirement of equities will generally be at the lower of par or book value, and repayment of a loan does not automatically result in retirement of the corresponding stock or participation certificates. Each customer purchasing capital stock is entitled to one vote as a stockholder regardless of the number of shares held. The customer acquires ownership of the capital stock at the time the loan is made.

Regulatory Capitalization Requirements

and Restrictions The Farm Credit Administration’s capital adequacy regulations require us to accumulate and maintain permanent capital of at least 7 percent of risk-adjusted assets and off-balance-sheet commitments. Failure to meet the 7 percent capital requirement can initiate certain mandatory and possibly additional discretionary actions by the Farm Credit Administration that, if undertaken, could have a direct material effect on our consolidated financial statements. We are prohibited from reducing permanent capital by retiring stock or making certain other distributions to stockholders unless the prescribed permanent capital standards are met and maintained. Farm Credit Administration regulations also require that additional minimum standards for capital be achieved. These standards require all Farm Credit System institutions to achieve and maintain ratios of total surplus as a percentage of risk-adjusted assets of 7 percent and of core surplus (generally retained earnings less investment in AgriBank, FCB) as a percentage of risk-adjusted assets of 3.5 percent. At December 31, 2015, our regulatory capital ratios were:

• 15.38 percent for permanent capital,• 15.19 percent for total surplus, and• 15.19 percent for core surplus.

We are not aware of any reason why the regulatory capital requirements would not be met during 2016. Effective January 1, 2003, we executed an Allotment Agreement with AgriBank, FCB that provides the methodology used to determine the amount of our investment in AgriBank, FCB that we count for regulatory permanent capital and total surplus ratio calculations. The amount is subject to change quarterly. At December 31, 2015, all of our investment in AgriBank, FCB is counted by AgriBank, FCB. A Farm Credit Administration regulation empowers it to direct a transfer of funds or equities by one or more Farm Credit System institutions to another institution of the Farm Credit System under specified circumstances. We have not been called upon to initiate any transfers and are not aware of any proposed action under this regulation.

Description of Equities The following table presents information regarding the classes and number of shares of stock outstanding as of December 31, 2015. All shares are at-risk and have a par or stated value of $5 per share.

Shares Outstanding

Class D common stock 9,328,853

Class E common stock 227,133

Our bylaws authorize us to issue an unlimited number of shares of Class D common stock and Class E common stock with a par or face value of $5 per share. Class D common stock is voting and is issued solely to a farmer, rancher, or producer or harvester of aquatic products. Class E common stock has no voting rights and is issued to customers to capitalize rural home and farm-related business loans or to become eligible for financial services. Class D common stock and Class E common stock may be retired at the discretion of the Board, at book value not to exceed par, provided we meet minimum capital adequacy standards under Farm Credit Administration regulations. Subject to our policies, Class D and Class E common stock are transferable to any person eligible to hold the respective class of stock. Class D common stock and Class E common stock cannot be transferred when we do not meet capital adequacy standards under Farm Credit Administration regulations. At any time within two years after the loan of a customer is repaid in full, any voting stock held by the customer is converted to nonvoting stock. The nonvoting stock may be converted back to voting stock if the owner of the stock borrows additional funds. As determined by the Board of Directors, we may declare dividends in stock, cash or any combination provided we meet capital adequacy standards under Farm Credit Administration regulations and no stock is impaired. Losses that result in impairment of stock and participation certificates will be allocated ratably to stock and participation certificates. In the event we would liquidate or dissolve, any assets remaining after payment or retirement of all liabilities would be distributed to the holders of stock in the following order of priority:

• first, to the holders of common stock and participation certificates, equally and pro rata in proportion to the number of shares or units of common stock and participation certificates issued and outstanding, until an amount equal to the aggregate par value of all common stock and participation certificates has been distributed;

• second, to the holders of allocated surplus pro rata, on the basis of oldest allocations first, until an amount equal to the total account has been distributed; and

• third, any remaining assets would be distributed among current and former stockholders in the proportion which the aggregate patronage of each stockholder bears to the total patronage of all current and former stockholders, to the extent practicable and as determined by the Board unless otherwise provided by law.


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Patronage Distributions Subject to the Farm Credit Act and Farm Credit Administration regulations, and provided that at the time of declaration no class of stock is impaired, patronage distributions may be declared and paid in amounts determined by the Board of Directors. Patronage distributions may be paid in any class of stock that the recipient is eligible to hold, in allocated surplus, in cash, in qualified or nonqualified notices of allocation, or in any combination, and must be paid on an equitable and nondiscriminatory basis as determined by the Board of Directors. The Board of Directors declared cash patronage distributions, referred to as cash-back dividends, of $160 million in 2015, $160 million in 2014 and $145 million in 2013. In addition, the 2014 and 2013 patronage programs provided for nonqualified patronage distributions that are not intended to be redeemed except in the unlikely event of liquidation. We are prohibited from distributing earnings on a patronage basis to the extent they would reduce our permanent capital ratio below the Farm Credit Administration’s minimum permanent capital adequacy requirements. We do not foresee any events that would result in this prohibition in 2016.

Note 10 – Employee Benefit Plans

We participate in the benefits plans administered by Farm Credit Foundations, a service corporation for Farm Credit System entities. The Farm Credit Foundations Plan Sponsor and Trust Committees provide governance and oversight for the benefit plans. The governance committees are either elected or appointed representatives (senior leadership or Board of Director members) from the participating organizations. The Plan Sponsor Committee is responsible for decisions regarding benefits at the direction of the participating employers. The Trust Committee is responsible for fiduciary and plan administration functions. The Association has senior officers that serve on both committees. Under the alliance agreement described in Note 1 “Organization and Operations,” the 2015 benefits expense of $43.8 million was shared between the Association and Frontier Farm Credit on a 94 percent and 6 percent basis respectively, which excluded any Frontier Farm Credit pension plans expense in excess of the Association’s retirement programs. The employee benefits expense is included in the “Salaries and employee benefits” on the Consolidated Statement of Income.

Defined Contribution Plan The Association participates in the Farm Credit Foundations Defined Contribution/401(k) Plan for benefits-eligible employees. The plan is a qualified plan up to the limits provided under the Internal Revenue Code.

The Association matches employee’s contributions dollar for dollar up to a maximum of 6 percent of the employee’s compensation on both pre-tax and post-tax contributions. In addition, the Association contributes a fixed 3 percent of the employee’s compensation to the plan. For employees hired prior to January 1, 1991, the percentage is based on the employee’s years of service and is a fixed contribution that does not change from year to year. For employees hired prior to January 1, 2007, an additional amount known as the Integrated Employer Non-Elective Contribution is made to the plan for the portion of compensation exceeding the Federal Insurance Contributions Act tax base (Social Security tax limit).

Nonqualified Deferred Compensation Plan The Farm Credit Foundations Nonqualified Deferred Compensation Plan serves two purposes. The plan provides for employer matching or fixed contributions that exceed the Internal Revenue Code limits of the Defined Contribution Plan. In addition, eligible employees may defer a portion of their base salary, variable pay and other compensation into this plan. Under the plan, eligible participants include the Chief Executive Officer and other employees who meet certain compensation thresholds as determined by the Internal Revenue Code.

Pre-409A Frozen Nonqualified Deferred

Compensation Plan We also participate in the Farm Credit Foundations Pre-409A Frozen Nonqualified Deferred Compensation Plan. This plan serves the same purposes as the Nonqualified Deferred Compensation Plan. However, the plan was frozen effective January 1, 2007. As such, no additional participants are eligible to enter the plan and no additional employer contributions are made to the plan.

Retiree Health Care The Association participates in the Farm Credit Foundations Retiree Medical Plan. We provide a health care subsidy to retired employees under the age of 65 who meet certain age and service requirements. Employees hired January 1, 2002, or later are not eligible for the subsidy. The subsidy is not considered material to the Association’s financial position.

Defined Benefit Pension Plan The Association does not have any defined benefit pension plan or supplemental pension plans for the Chief Executive Officer, senior officers or any employees; therefore, there is no current or future liability for such plans.



Note 11 – Income Taxes

Our provision for income taxes follows (in thousands):


2015 2014 2013

Current:

Federal $4,287 $7,584 $11,637

State 748 1,471 2,159

5,035 9,055 13,796

Deferred:

Federal (61) (182) (510)

State (10) (5) 10

(71) (187) (500)

Total provision for income taxes $4,964 $8,868 $13,296

The decrease in provision for taxes for 2015 is primarily due to a decrease in taxable income for our taxable subsidiary. The following table calculates the differences between the provision for income taxes and income taxes at the statutory rates (in thousands):


2015 2014 2013

Federal tax at statutory rate $181,654 $190,872 $184,778

State tax, net 523 887 1,935

Tax effect of:

Exempt FLCA earnings (142,177) (146,010) (135,049)

Deferred tax valuation allowance (944) 149 (5,973)

Patronage distribution (34,357) (37,333) (32,622)

Other 265 303 227

Provision for income taxes $ 4,964 $ 8,868 $ 13,296

The following table provides the components of deferred tax assets and liabilities (in thousands):


2015 2014 2013

Allowance for loan losses $9,033 $10,408 $10,212

Nonaccrual loan interest 1,208 767 814

AgDirect servicing fee 5,247 5,237 5,078

Postretirement benefit liability 197 200 195

Other 927 874 849

Deferred tax asset 16,612 17,486 17,148

Deferred tax asset valuation allowance (10,506) (11,450) (11,300)

Net deferred tax asset $6,106 $ 6,036 $ 5,848

We adopted an annual patronage program beginning in 2004. Since the qualified cash distributions are estimated to substantially reduce our taxable income, a valuation reserve has been established beginning December 31, 2004, for the portion of the net deferred tax asset for which timing reversals are uncertain. Deferred income taxes have not been provided on patronage distributions from AgriBank, FCB prior to January 1, 1993, the adoption date of the Financial Accounting Standards Board guidance on income taxes. Our intent is:

• to permanently invest these and other undistributed earnings in AgriBank, FCB, which indefinitely postpones their conversion to cash, or

• to pass through any distribution related to pre-1993 earnings to our borrowers through qualified patronage allocations.

We have also not recorded deferred income taxes on amounts allocated to us that relate to AgriBank, FCB’s post-1992 earnings to the extent that these earnings will be passed through to our borrowers through qualified patronage allocations. Additionally, deferred income taxes have not been provided on AgriBank, FCB’s post-1992 unallocated earnings. AgriBank, FCB currently has no plans to distribute unallocated earnings to us, and we do not contemplate circumstances that, if distributions were made under our current structure, would result in taxes being paid. We have also not recorded deferred income taxes on accumulated FLCA earnings of $3.6 billion, as it is our intent to permanently maintain this investment in the FLCA subsidiary or to distribute the earnings to stockholders in a manner that results in no additional tax liability. Our income tax returns are subject to review by various United States taxing authorities. We record accruals for items that we believe may be challenged by these taxing authorities. However, we had no uncertain income tax positions at December 31, 2015. In addition, we believe we are no longer subject to income tax examinations for years prior to 2012.

Note 12 – Related Party Transactions

In the ordinary course of business, we may enter into loan transactions with our directors, senior officers, employees and other organizations with whom such persons may be associated. These loans are subject to special approval requirements contained in the Farm Credit Administration regulations and/or our policy, and are made on the same terms, including interest rates and collateral, as those prevailing at that time for comparable transactions with unrelated customers. Total loans to these persons at December 31, 2015, amounted to $112.7 million compared to $115.9 million at December 31, 2014, and $105.6 million at December 31, 2013. The related parties can be different each year-end primarily due to changes in the composition of the Board of Directors and the mix of organizations with which such person may be associated.

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In our opinion, loans outstanding to directors and senior officers at December 31, 2015, did not involve more than a normal risk of collectability. We purchase human resource information systems and benefit and payroll services from Farm Credit Foundations. The Farm Credit System entities using Farm Credit Foundations’ services contributed an investment into the service corporation when it was formed as a separate service corporation. Our investment was $0.1 million at December 31, 2015, December 31, 2014, and December 31, 2013. The total cost of services purchased from Farm Credit Foundations was $1.1 million in 2015, $0.9 million in 2014 and $0.9 million in 2013.

Note 13 – Commitments and Contingencies

In the normal course of business, we have various outstanding commitments and contingent liabilities, such as commitments to extend credit, which are not reflected in the accompanying consolidated financial statements. Commitments to extend credit are agreements to lend to a customer as long as there is not a violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since some of the commitments may expire without being drawn upon, the total commitments do not necessarily represent future cash requirements. We evaluate each customer’s creditworthiness on a case-by-case basis using the same credit policies as for on-balance-sheet financial instruments. The amount of collateral obtained, if deemed necessary upon extension of credit, is based on our credit evaluation of the counterparty. Collateral held upon exercise of commitments varies but may include accounts receivable, inventory, property, plant and equipment, and income-producing property. We had remaining commitments for additional borrowing at December 31, 2015, of approximately $6.7 billion. We also participate in standby letters of credit to satisfy the financing needs of customers. These letters of credit are irrevocable agreements to guarantee payments of specified financial obligations. At December 31, 2015, $118.6 million of standby letters of credit were outstanding. Outstanding standby letters of credit have expiration dates ranging to 2036. The maximum potential amount of future payments we are required to make under the guarantees is equal to the total amount of the letters of credit outstanding. Actions are pending against us in which claims for money damages are asserted. In our opinion, based on current information, the ultimate liability, if any, would not have a material impact on our financial position.

Note 14 – Fair Value Measurements

The Financial Accounting Standards Board guidance on Fair Value Measurements and Disclosures defines fair value as the exchange

price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants in the principal or most advantageous market for the asset or liability. The guidance also establishes a fair value hierarchy, with three levels of inputs that may be used to measure fair value. See Note 2, “Summary of Significant Accounting Policies,” for a more complete description of the three input levels. We do not have any assets or liabilities measured at fair value on a recurring basis. We may be required, from time to time, to measure certain assets at fair value on a nonrecurring basis. The following tables provide information on assets measured at fair value on a nonrecurring basis (in thousands):


Fair Value Measurement Using

Total Fair

ValueTotal

(Gains)Level 1 Level 2 Level 3

Loans – – $17,815 $17,815 $(5,069)

Other property owned – – – – $(32)



Total Fair

Value

Total Losses (Gains)Level 1 Level 2 Level 3

Loans – – $17,911 $17,911 $4,331

Other property owned – – $4,319 $4,319 $(6,715)



Total Fair

Value

Total Losses (Gains)Level 1 Level 2 Level 3

Loans – – $38,471 $38,471 $18

Other property owned – – $3,668 $3,668 $(3,400)

The amount of loans in the previous tables represents the fair value of certain loans that were evaluated for impairment based on the estimated appraised value of the underlying collateral. The fair value measurement process uses independent appraisals and other market-based information, but in many cases, it also requires significant input based on our 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 collateral, less estimated costs to sell, is less than the carrying value of the loan, a specific reserve is established. The amount of other property owned represents the fair value and related (gains) of foreclosed assets that were measured at fair value based on the collateral value. Costs to sell represent transaction costs and are not included as a component of the asset’s fair value.



Note 15 – Subsequent Events

We have evaluated subsequent events through March 9, 2016, which is the date the consolidated financial statements were available to be issued. There have been no material subsequent events that would require recognition in our 2015 consolidated financial statements or disclosures in the “Notes to Consolidated Financial Statements.”

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Disclosure Information Required by Farm Credit Administration Regulations (Unaudited)

Description of Business

The description of the territory served, persons eligible to borrow, types of lending activities engaged in, financial services offered and related Farm Credit System institutions required to be disclosed in this section are incorporated herein by reference from Note 1 to the consolidated financial statements, “Organization and Operations,” included in this annual report to stockholders. The description of significant developments that had, or could have, a material impact on earnings, interest rates to customers, acquisitions or dispositions of material assets, and material changes in the manner of conducting the business, if any, required to be disclosed in this section are incorporated herein by reference from “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this annual report to stockholders.

Description of Property

Our corporate office is located in Omaha, Nebraska, and is owned. The locations of our retail offices are incorporated herein by reference to the last page of this annual report to stockholders. All retail office locations are owned. During 2015, building additions were completed in Red Oak, Iowa; Emmetsburg, Iowa; and Norfolk, Nebraska. Construction of building additions began during 2015 in Carroll, Iowa; Decorah, Iowa; and Cedar Rapids, Iowa. The construction of a new retail office in Yankton, South Dakota, was completed and construction of a new retail office in Pierre, South Dakota, began with completion planned for 2016. Building additions will begin in DeWitt, Iowa, and Grand Island, Nebraska, in 2016.

Legal Proceedings

Information required to be disclosed in this section is incorporated herein by reference from Note 13 to the consolidated financial statements, “Commitments and Contingencies,” included in this annual report to stockholders.

Description of Capital Structure

Information required to be disclosed in this section is incorporated herein by reference from Note 9 to the consolidated financial statements, “Members’ Equity,” included in this annual report to stockholders.

Description of Liabilities

The description of debt outstanding required to be disclosed in this section is incorporated herein by reference from Note 8 to the consolidated financial statements, “Notes Payable,” included in this annual report to stockholders. The description of contingent liabilities required to be disclosed in this section is incorporated herein by reference from Note 13 to the consolidated financial statements, “Commitments and Contingencies,” included in this annual report to stockholders.

Customer Privacy

Customer privacy is important to us. We hold customer financial and other personal information in strict confidence. We do not sell or trade customers’ personal information to marketing companies or information brokers for their use. By Farm Credit Administration regulations, we are required to provide a list of current stockholders to any stockholder who requests such information for defined purposes. Additional information regarding this Farm Credit Administration rule governing the disclosure of customer information can be obtained by contacting the Farm Credit Administration or our Legal team at PO Box 2409, Omaha, NE 68103-2409.

Financial and Supervisory Relationship with

the Association’s Funding Bank

Information required to be disclosed in this section is incorporated herein by reference from the “Relationship with AgriBank, FCB” section of “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and from Note 8 to the consolidated financial statements, “Notes Payable.”

Selected Financial Data

The selected financial data for the five years ended December 31, 2015, required to be disclosed in this section is incorporated herein by reference from the “Consolidated Five-Year Summary of Selected Financial Data” included in this annual report to stockholders.




Management’s Discussion and Analysis of

Financial Condition and Results of Operations

“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which appears in this annual report to stockholders and is required to be disclosed in this section, is incorporated herein by reference.

Directors and Compensation of Directors

The listing of directors, term of office, business experience during the past five years, principal occupation and employment during the past five years, and any other business interests, which are required to be disclosed in this section, are incorporated herein by reference from the “FCSAmerica, ACA Directors” section in this annual report to stockholders. Our bylaws permit compensation of directors for service on the Board. Compensation is provided for attendance at Board and committee meetings, special assignments, training and development, and travel time associated with these responsibilities. Per diem for 2015 was $500. Monthly retainers for 2015 were $2,300 for the Board Chairperson, $2,000 for the Board Vice-Chairperson and Committee Chairpersons, and $1,800 for all other directors. An additional $200 per month is included in the monthly retainer for a director who serves as a Board Vice-Chairperson and a Committee Chairperson.

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Compensation information for each director who served in 2015 follows:

Number of Days At

Name2015 Board Committee Assignment(s)

Board Meetings

Other Official Duties

Committee Compensation**

Total 2015Compensation

Robert Bruxvoort* Strategic Relations/Governance 8.0 30.0 $1,500 $ 43,100

Jim Ehlers Strategic Relations/Governance 6.5 34.5 $1,250 42,200

Jeremy Heitmann, Board Chairperson Executive 8.0 30.0 $1,500 46,700

Steve Henry Audit 8.0 28.5 $1,500 39,950

Nicholas Hunt, Board Vice-Chairperson Executive, Human Capital 8.0 35.5 $2,750 45,850

Robert Joki (1) Audit 1.5 6.5 $500 9,400

Jim Kortan (2) Audit 6.5 24.0 $1,000 31,550

Rick Maxfield (2) Business Risk 6.5 20.5 $1,000 29,800

Cris Miller Human Capital 8.0 27.0 $1,500 39,200

Randy Peters Strategic Relations/Governance 6.5 27.0 $1,000 38,450

John Reisch* Business Risk 8.0 33.0 $1,250 44,600

Timothy Rowe (3) Strategic Relations/Governance 8.0 20.5 $1,500 35,950

Nancy Tarver (1) Strategic Relations/Governance 1.5 14.5 $500 13,400

Jon Van Beek Business Risk 8.0 30.0 $1,250 40,700

Nick Vande Weerd (4) Human Capital 1.5 14.5 $250 13,400

Kim Vanneman* Human Capital 7.5 32.5 $1,500 44,100

Susan Voss Human Capital 8.0 28.5 $1,500 39,950

Mark Weiss Business Risk 8.0 23.0 $1,250 37,200

Jennifer Zessin* Audit 8.0 35.5 $1,500 45,850

Total Compensation $681,350

* Denotes committee chair. ** Included in total compensation. (1) Board term ended March 31, 2015.(2) Joined the Board April 1, 2015.(3) Total compensation includes $6,500 earned in 2015 and paid in 2016.(4) Elected to the AgriBank, FCB Board of Directors in March 2015.

Total compensation is rounded to the nearest dollar and includes retainers and all per diems paid in 2015.




Compensation of CEO and Senior Officers

The CEO and senior officers as of December 31, 2015, are shown below. As of January 1, 2015, the CEO and senior officers provide joint management for Farm Credit Services of America (Association) and Frontier Farm Credit.

Name Current PositionDate Started in

Current PositionPrevious Position(s) During

Past Five Years

Douglas Stark President and CEO March 2005 –

Robert Campbell Senior Vice President April 1999 –

Scott Coziahr (1) Senior Vice President – General Counsel February 2006 –

Frank W. (Bill) Davis Senior Vice President – Chief Credit Officer July 2005 –

Ann Finkner (2) Senior Vice President – Chief Administrative Officer July 2005 –

Douglas Hofbauer (3) Executive Vice President January 2015 Frontier Farm Credit – President and CEO

James M. (Mark) Jensen Senior Vice President – Chief Risk Officer September 2013 Senior Vice President –

Enterprise Risk Management

Anthony Jesina Senior Vice President – Related Services June 2015 Vice President –

Country Home Loans

Kenneth Keegan Executive Vice President August 2013

Executive Vice President – Chief Risk Officer;Senior Vice President – Chief Risk Officer

Craig Kinnison (4) Senior Vice President – Chief Financial Officer November 2006 –

Jim Knuth Senior Vice President September 2001 –

Timothy Koch Senior Vice President – Specialized Lending June 2015 Vice President –

Agribusiness Credit

David Martin (5) Senior Vice President – Chief Strategy Officer December 2008 –

James Roberge Senior Vice President – Commercial Lending March 2012 CoBank – Regional Manager,

Minneapolis Banking Center

Robert Schmidt Senior Vice President May 1999 –

(1) Scott Coziahr is also managing member of JDI Properties, LLC, a residential rental property company.(2) Ann Finkner serves on the Farm Credit Foundations Board of Directors and Plan Sponsor Committee.(3) Douglas Hofbauer was a leased executive to the Association from Frontier Farm Credit.(4) Craig Kinnison serves on the Farm Credit Foundations Trust Committee.(5) David Martin is also president and treasurer of DCM Ventures, LLC, a residential rental property company.

Compensation Overview: The Association’s compensation programs are market-based and designed to provide competitive compensation, including base salary, incentives and benefits that attract, retain, motivate and reward an engaged and talented workforce while achieving business results aligned with the best interests of our shareholders. The design and governance of our CEO and senior officer compensation program are consistent with prudent risk

management standards and provide total compensation that promotes our mission to ensure a safe, sound and dependable source of credit and related services for agriculture and rural America. The design of the compensation program supports our risk management goals and includes (1) a competitive mix of base salary and variable pay, (2) a balanced use of variable pay performance measures that are risk-adjusted where appropriate, (3) a pay-for-performance process that allocates individual awards based on

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individual performance and contributions, and (4) a long-term portion of variable pay to align with the strategic direction of the Association, provide for competitive market-based compensation and align with shareholder interests. Compensation for the CEO and senior officers includes base salary, short-term incentive plan opportunity and long-term incentive plan opportunity. Compensation for all other employees includes base salary and short-term incentive plan opportunity. The CEO and senior officers participate in benefit plans generally available to all employees. Under the alliance agreement described in Note 1 “Organization and Operations,” the 2015 compensation and benefits expense for the CEO, senior officers, and all Association and Frontier Farm Credit employees was shared between the Association and Frontier Farm Credit on a 94 percent and 6 percent basis respectively, excluding any Frontier Farm Credit pension plans expense in excess of the Association’s retirement programs. There were no senior officers under the Frontier Farm Credit pension plans in 2015. As of January 1, 2015, the CEO is employed pursuant to an employment agreement through December 31, 2019. The agreement provides specified compensation and related benefits in the event his employment is terminated, except for termination for cause or voluntary termination without notice. The employment agreement also provides certain limited payments upon death or disability. To receive payments and other benefits under the agreement, the CEO must sign a separation agreement and release of all legal claims against the Association that relate to his employment with the Association. The agreement also provides for noncompetition by the CEO for two years following termination of employment. Base Salaries: Base salaries for all employees, including the CEO and senior officers, are determined based upon position, experience and responsibilities, performance and market-based compensation data. CEO and senior officers’ base salaries are reviewed and approved by the Board of Directors. Employer expense for base salaries is included in “Salaries and employee benefits” on the Consolidated Statement of Income, which was shared by the Association and Frontier Farm Credit as part of the overall allocation of salaries and benefits. Short-Term Incentive: The Board of Directors approves the annual short-term incentive plan, including the performance measures. Select 2015 short-term incentive plan performance measures included combined results for the Association and Frontier Farm Credit. The senior officers participate in the annual short-term incentive plan along with the other eligible Association employees. Select employees must sign an assignment, nonsolicitation and nondisclosure agreement to participate in the short-term incentive plan. Payouts under the short-term incentive plan are based on financial and business results, select initiatives and credit performance measures, and are approved by the Board of Directors. Payouts are not provided unless specific levels of performance are achieved. No more than one-half of the short-term incentive-plan award opportunity may be paid in the fourth quarter of the plan year (first award payout), and the remainder of the award payout (final award payout) is paid no later than March 15 after the end of the plan year. The first award payout is based on the results achieved as

of September 30 for select performance measures. The final award payout is based upon the year-end results net of the first award payout. The first payout under the 2015 short-term incentive plan occurred in November 2015. The second and final payout occurred in February 2016 and was net of the November 2015 payout. The CEO’s short-term incentive opportunity is established by the Board of Directors. The Board has full discretion as to the amount of any payout to the CEO under the short-term incentive plan and has historically and for 2015 used the results from the short-term incentive plan to determine the payout amount. The expense for the annual short-term incentive plan was $27.2 million for 2015, which was shared by the Association and Frontier Farm Credit as part of the overall allocation of salaries and benefits. Long-Term Incentive: The CEO and senior officers are eligible for long-term senior officer incentive plans. The long-term incentive plans were approved by the Board of Directors to align CEO and senior officer compensation with the strategic business plan and the goals of the Association while providing the opportunity for competitive market-based compensation at a level that will attract, retain and reward key staff for the accomplishment of Association goals. The CEO and senior officers must sign an assignment, nonsolicitation and nondisclosure agreement to participate. The plans are nonqualified performance unit plans that are effective January 1, 2013, through December 31, 2015; January 1, 2014, through December 31, 2016; and January 1, 2015, through December 31, 2017. The plans have independent performance goals measured over the three-year term of the plans that include core return on assets, customer experience index, employee engagement, adverse assets to risk funds and nonaccrual loans to total classified assets. The 2015 results included in the plans were combined results for the Association and Frontier Farm Credit. Payments are made no later than March 15 after the end of each three-year plan’s term. The Board of Directors approves the total dollars available for the long-term incentive plans, which are then converted into units. The value of each unit is determined by the results achieved toward the established goals. The CEO has discretion as to the distribution of the units to the senior officers for each three-year plan, which is based on consideration of market compensation and individual contributions and performance. The CEO’s long-term incentive opportunity is established by the Board of Directors. The Board has full discretion as to the amount of any payout to the CEO under the long-term incentive plan and has historically used the results from the long-term senior officer incentive plan to determine the unit value for the payout amount. A liability and salary and benefits expense of $2.6 million was recorded in 2015 for the long-term incentive plans. The expense was shared by the Association and Frontier Farm Credit as part of the overall allocation of salaries and benefits. The payout for the 2013-2015 plan occurred in February 2016 and is reflected in the Summary Compensation Table in the “Long-Term Incentive” column for the calendar year 2015. The payouts for the 2011-2013 and the 2012-2014 plans were paid in the first quarter of 2014 and first quarter of 2015 respectively, and are reflected in the Summary Compensation Table in the “Long-Term Incentive” column for the calendar years 2013 and 2014.




The following Summary Compensation Table includes compensation paid to the CEO and the senior officers during fiscal years 2015, 2014 and 2013.

Summary Compensation Table

Name of CEO Year SalaryShort-Term Incentive (1)

Long-Term Incentive (2) Deferred (3) Other (4) Total

Douglas Stark, CEO 2015 (5) $635,000 $289,920 $381,700 $204,451 $9,839 $1,520,910

Douglas Stark, CEO 2014 $600,000 $283,640 $366,792 $177,408 $9,072 $1,436,912

Douglas Stark, CEO 2013 $525,000 $244,024 $340,200 $157,832 $6,348 $1,273,404

Aggregate No. of Sr. Officers in Year Excluding CEO (6) Year Salary

Short-Term Incentive (1)

Long-Term Incentive (2) Deferred (3) Other (4) Total

15 2015 (5) $3,714,420 $1,946,555 $1,546,880 $1,123,728 $133,456 $8,465,039

12 2014 $3,106,980 $1,678,914 $1,578,869 $799,525 $77,908 $7,242,196

13 2013 $3,088,404 $1,483,384 $1,562,625 $788,119 $96,668 $7,019,200

(1) Short-term incentive earned in the fiscal year.(2) Incentive earned at the end of the respective three-year long-term incentive plan; includes prorated amounts for an executive who retired in 2013 and an

executive who retired in 2015. For 2015, only 12 of the 15 senior officers participated in the long-term incentive.(3) The amounts represent the Association’s contributions to the Defined Contribution Plan and Nonqualified Deferred Compensation Plan.(4) The amounts represent executive physicals, vacation-leave payout, recognition and referral awards, health and fitness account payouts, health incentives,

taxable vehicle use, long-term disability premiums and group life insurance imputed income.(5) The Association paid 94 percent and Frontier Farm Credit paid 6 percent of the compensation expense.(6) Includes employees designated as senior officers at any time during the fiscal year. The 2015 data includes a senior officer who retired in 2015 plus the

addition of two senior officers and the former Frontier Farm Credit CEO who was a senior officer during the year.

Disclosure of the total compensation paid during 2015 to any senior officer included in the Summary Compensation Table is available to stockholders upon written request to Farm Credit Services of America, PO Box 2409, Omaha, NE 68103-2409. Details of the benefit plans are described in Note 10 to the consolidated financial statements, “Employee Benefit Plans.”

Travel, Subsistence and Other Related Expenses

Director reimbursements for travel, subsistence and other related expenses are set forth in the Board’s Governance Guidelines. The policy regarding employee reimbursements is set forth in the Human Resources Manual. Each provides authority for and control over reimbursement of travel and subsistence expenses for authorized individuals traveling on official business. Copies of the related Governance Guidelines and Human Resources Manual provisions are available to our stockholders upon written request to Farm Credit Services of America, PO Box 2409, Omaha, NE 68103-2409. The aggregate amount of reimbursement for travel, subsistence and other related expenses for all our directors was $614 thousand in 2015, $373 thousand in 2014 and $364 thousand in 2013.

Transactions with Directors, Senior Officers

and Employees

Directors and certain employees may obtain loans from us, provided they meet all eligibility requirements and provided that such loans are made on the same terms available to other customers. Approval of AgriBank, FCB is required for loans to our directors and employees, and for loans to any customer if a director or employee is to receive more than $100 thousand of the loan proceeds, has a significant personal interest in the loan or its security, may exercise control over the customer, or guarantees or cosigns a loan in excess of $100 thousand. Further, directors and employees are required to refrain from taking any part in the consideration or decision on any loan in which they or their relatives have an interest. Our bylaws and policies require that directors’ loans be maintained at a high level of credit quality. Any director whose loan is classified “substandard” must prepare and obtain approval of a plan to improve and upgrade the loan within a specified period of time. For directors, failure to comply with our bylaws and policies would result in the director’s position being vacated. Directors whose loans are classified “doubtful” or “loss,” or have any portion of a loan charged off, must resign immediately.

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The Farm Credit Act and Farm Credit Administration regulations require certain disclosures to stockholders concerning loans to directors and employees, their relatives, organizations with which they are affiliated or entities that they may control. Disclosure is required where such loans were made on terms other than those available to other customers, or where such loans are considered to have more than a normal risk of collectability. None of our loans made to directors or employees, their relatives, affiliated organizations or entities they may control were made on terms other than those available to all customers, nor were any such loans considered to have more than a normal risk of collectability. Director, senior officer and employee nonloan transactions with us are regulated by our policy. Concerning property that was mortgaged or pledged as security for Farm Credit System debt within the preceding 12 months, the policy requires that senior officers and employees obtain approval from the Standards of Conduct officer for purchase of the property. Concerning property acquired within the preceding 12 months in satisfaction of Farm Credit System debt, this policy:

• prohibits lease, purchase or acquisition except through inheritance by senior officers and employees; and

• prohibits lease, purchase or acquisition except through inheritance, public auction or other open competitive bidding process by directors.

The policy does permit directors, senior officers and employees to purchase furniture and equipment owned by us provided that any item having a value of greater than $5 thousand must be purchased through an open competitive bidding process. The Farm Credit Act and Farm Credit Administration regulations also require certain disclosures to stockholders concerning nonloan transactions a director or senior officer, or any of his or her relatives, affiliated organizations or entities he or she may control have with us. Such disclosure is required if such transactions did not involve competitive bidding, involved amounts in excess of $5 thousand or provided a special benefit to the director or senior officer. No such transactions took place during 2015.

Involvement in Certain Legal Proceedings

There were no material legal proceedings or enforcement actions involving Farm Credit Services of America, our directors or senior officers that require disclosure in this section.

Relationship with Qualified Public Accountant

PricewaterhouseCoopers LLP serves as our qualified public accountant. There were no changes in our qualified public accountant since the prior annual report to stockholders, and there were no material disagreements on any matter of accounting principles or financial statement disclosures during this period. Expenses recognized in the 2015 consolidated financial statements for services provided by PricewaterhouseCoopers LLP were approved by the Board Audit Committee and include $206 thousand for audit services and $50 thousand for agreed upon procedures related to the AgDirect trade credit financing program.

Financial Statements

The “Consolidated Financial Statements,” “Notes to Consolidated Financial Statements,” “Report of Management,” “Report on Internal Control Over Financial Reporting,” “Report of Audit Committee” and “Independent Auditor’s Report” required to be disclosed in this section are incorporated herein by reference from this annual report to stockholders.

Credit and Services to Young, Beginning and

Small Producers

We have specific programs in place to serve the credit and related needs of young, beginning and small producers in our territory. Programs focus on providing sound financial services, education and networking opportunities. The definitions of young, beginning and small producers follow:

Definitions• Young – producers age 35 and under.• Beginning – producers with 10 years or less of production

agriculture as their primary source of income.• Small – producers who generate less than $250,000 in annual

gross sales of agricultural products.

Program Elements Our program for serving young, beginning and small producers includes the following:

Conventional Loans: Producers age 35 and under, or with 10 years or less of farming or ranching experience, may have sufficient capacity, credit history or financial backing to meet our traditional loan approval standards.




AgStart Loans: Producers age 35 and under, or with 10 years or less experience, can benefit from modified credit approval standards to help them get started. The goal is to graduate participating producers from the AgStart program into conventional product offerings over time.

Development Fund: This new program, which launched January 1, 2015, is designed to assist young, beginning and small producers who are beginning, growing or enhancing an agriculturally based operation by providing them with needed working capital loans and business planning assistance.

Youth in Agriculture Loans for Breeding Livestock: The Breeding Livestock loan program for youth provides loans for terms of 1-5 years, up to $10,205 including stock, for the purpose of purchasing breeding livestock. These loans require a cosigner of legal age and are approved based on the strength and credit scores of the cosigner.

Education and Finance Sponsorships: We provide donations and sponsor state and local FFA activities and conventions, state 4-H activities and conventions, and agricultural leadership programs.

College Scholarships: In 2015, we offered twenty-four $2,500 scholarships to qualified students studying agriculture at land-grant universities within our four-state territory. In addition, we offered forty-four $1,000 scholarships to qualified students studying agriculture at selected junior colleges within our four-state territory.

Small Producer Financing: Small producers are served primarily through three loan programs: Country Home Loans®, AgDirect® and the full line of products and services offered through our retail marketplaces. All of these programs are designed to meet the needs of small producers, part-time farmers or rural residents with a convenient and efficient delivery of financial services. Small producers who also meet the definition of young or beginning are eligible for the young and beginning program.

Credit Underwriting Standards Young and beginning producers who do not meet traditional credit standards are considered under an outreach loan program called AgStart. Through this program, applicants’ requests are analyzed and assessed based primarily on character and capacity credit factors. Farm Service Agency guarantees are used as deemed necessary, with additional support provided by our payment of the first $2,500 of external fees. As of December 31, 2015, AgStart customers account for 4,312 loans to 2,126 customers with an outstanding commitment of $557 million. AgStart loan volume grew by 11 percent in 2015.

Results and Goals As of December 31, 2015, we had 22,840 unique young, beginning and small customers, with total loan volume of $5.5 billion. These include:

• 5,167 customers who qualify as young, with total loan volume of $1.4 billion.

• 7,195 customers who qualify as beginning, with total loan volume of $1.7 billion.

• 18,634 customers who qualify as small, with total loan volume of $4.1 billion.

Young and Beginning Segment: In our territory, the young and beginning definitions result in 14,600 producers age 35 and under and 27,731 producers with 10 years or less of production experience, according to the 2012 United States Department of Agriculture Census of Agriculture. The 2012 data is the most recent census data available. As of December 31, 2015, we had 5,167 young customers and 7,195 beginning customers, some of whom are counted in both categories. This equates to a young market share of 35.39 percent and a beginning market share of 25.94 percent. Total loan volume to young and beginning customers was $2.32 billion.

Small Producer Segment: According to 2012 United States Department of Agriculture Census of Agriculture data, 131,681 farms representing 72.2 percent of all farms in our four-state territory meet the definition of small (less than $250,000 in annual gross sales of agricultural products). The 2012 United States Department of Agriculture Census of Agriculture includes any operation with farm income in its definition of a farm. In the census data, 65,933 operations have gross farm income of less than $10,000, representing 3.14 percent of the total farm sales of the small producers. We believe that farm income in these operations is incidental to total income and that our services are likely not needed or may not even be eligible under the Farm Credit Administration regulations.

PotentialCustomers*

FCSAmericaCustomers Market Share***

Young 14,446 5,167 35.76%

Beginning 20,452 7,195 35.17%

Small** 36,038 18,634 51.70%

* 2012 United States Department of Agriculture Census of Agriculture data of farms with debt.

** Potential customers in the small category are those who reported annual gross sales between $10,000 and $249,999.

*** Market share was computed by comparing the number of producers in the young, beginning or small categories maintaining a loan relationship with FCSAmerica to the total number of producers with debt in those categories.

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Young, Beginning and Small Producer New Customer Growth

2016 Goals 2017 Goals 2018 Goals

Young 840 885 900

Beginning 1,075 1,115 1,155

Small 1,035 1,075 1,115

Special Program Goal (AgStart): This program goal will positively affect all three young, beginning and small categories. Use of this outreach loan program is seen as a critical component of long-term success in the marketplace. The Association’s goal is to increase AgStart loan commitments by 8-12 percent annually.

Related Services Young and Beginning Producer Conference: The seventh annual Side by Side Conference was held in Omaha, Nebraska, on July 29-31, 2015. There were 240 young and beginning producers in attendance at this conference, bringing the total number of producers impacted by this program to more than 890. Producers benefited from the opportunity to network with one another, learn from the speakers, and learn more about Farm Credit Services of America. The conference provided benefits by creating an opportunity for participants to become better-informed business managers and by building customer loyalty.

Education and Finance Sponsorships: We awarded $104,000 in college scholarships for 68 students in 2015. We loaned more than $80,500 through the Youth in Agriculture and Breeding Livestock loan programs. We donated $190,000 for state and local FFA and 4-H activities, and provided additional funding and resources for young and beginning producer education, leadership development programs and local scholarships.

Awareness Young and Beginning Team: We maintain a standing team of 10 employees that meets periodically to monitor, review and modify our young and beginning program to most effectively meet the needs of the segment and the goals of the organization. The team continues to periodically rotate members as a way to bring new, innovative ideas to the team.




4835 Sixth Avenue SEAberdeen, SD 57401

2390 Highway 2Alliance, NE 69301

4101 N. Sixth StreetBeatrice, NE 68310

535 S. 10th AvenueBroken Bow, NE 68822

919 Bella Vista DriveCarroll, IA 51401

1401 Wilkins CircleCasper, WY 82601

7419 Nordic DriveCedar Falls, IA 50613

4865 Old Monastery RoadColumbus, NE 68601

2328 Millennium RoadDecorah, IA 52101

1621 11th StreetDeWitt, IA 52742

3675 450th AvenueEmmetsburg, IA 50536

3333 W. Faidley AvenueGrand Island, NE 68803

1812 Hawkeye AvenueHarlan, IA 51537

1525 Boyson RoadHiawatha, IA 52233

81 33rd Street SWHuron, SD 57350

513 Court StreetImperial, NE 69033

4715 Second AvenueKearney, NE 68847

855 Fallbrook Blvd.Lincoln, NE 68521

1301 W. Main StreetManchester, IA 52057

203 W. Merle Hibbs Blvd.Marshalltown, IA 50158

4056 Fourth Street SWMason City, IA 50401

1700 N. Highway 83McCook, NE 69001

401 Cabela DriveMitchell, SD 57301

322 First Avenue EMobridge, SD 57601

2216 James AvenueMount Pleasant, IA 52641

2125 W. 20th Street SNewton, IA 50208

207 N. 34th StreetNorfolk, NE 68701

3021 E. Philip AvenueNorth Platte, NE 69101

507 E. Highway 20O’Neill, NE 68763

700 Farm Credit DriveOttumwa, IA 52501

105 Theater CirclePerry, IA 50220

123 W. Missouri AvenuePierre, SD 57501

2510 N. Plaza DriveRapid City, SD 57702

700 Senate AvenueRed Oak, IA 51566

411 Valley View DriveScottsbluff, NE 69361

3000 E. Park StreetSheldon, IA 51201

4512 S. Lakeport StreetSioux City, IA 51106

5011 S. Broadband LaneSioux Falls, SD 57108

1015 590th StreetStorm Lake, IA 50588

1114 29th Street SE Watertown, SD 57201

345 Fairmeadow DriveWebster City, IA 50595

3808 Broadway AvenueYankton, SD 57078

Farm Credit Services of America Retail Office Locations

800-884-FARM // fcsamerica.com

Agriculture Works Here, AgriPoint, Country Home Loans and GrowingOn are registered service marks of Farm Credit Services of America.

Farm Credit Services of America strives to be environmentally conscious. If you would like to receive an additional copy of our 2015 annual report, please contact us at 1-800-884-FARM (1-800-884-3276).

800-884-FARM // fcsamerica.com

AW-MKT 2015

Documents

2015 ANNUAL REPORT - Farm Credit Services of America · In 2015, we leveraged the ... Matt, Aaron & John Anderson, Anderson Farms LOCATION: Elgin, Nebraska ... / 2015 Annual Report