Thursday, July 1, 2010

The Big Ten-Oh

Ten years ago, five separate associations—Central Maryland Farm Credit, Chesapeake Farm Credit, Delaware Farm Credit, Keystone Farm Credit, and Marva Farm Credit came together to create one entity: MidAtlantic Farm Credit.

At the time, it was the largest merger in Farm Credit history (and it might still be—I’m not sure. But I do know that we are still one of the largest in history).

The board members involved in that agreement will tell you that pulling five associations together wasn’t easy. The negotiations definitely had their highs and their lows, and at times it looked like wasn’t going to come together at all. But those boards recognized that the world around them was changing. They saw that the big farms were getting bigger and the small farms were getting smaller. They knew that they were getting more and more vulnerable as their portfolios were becoming less and less diverse. And they knew that their individual associations would have to change if they wanted to continue to serve their market and meet their mission.

So they persevered. And they worked through the challenges. The five associations merged their operations on July 1, 2000. Ten years ago today.

I’m not going to say it was all smooth sailing after that. As we all know (including our friends in the Valley region who have joined our family most recently!), the real work for staff starts after the merger.

Throughout this month, I’m going to devote my blogs to looking back over the past 10 years, and looking forward to the next. But today I’d like to thank those board members who had the foresight, the courage, and the tenacity to pull us all together and make it work.

Thank you. And happy anniversary.

Bob

Thursday, June 10, 2010

Reaction to Animal Abuse

Last week, someone forwarded to me a sickening video of animal abuse recently posted by Mercy for Animals on its Web site.

If you haven’t seen the video, let me summarize it for you: it shows a dairy farm employee in Ohio abusing both calves and cows, stabbing them with pitchforks in the face, hitting them with pipes, and throwing calves down on their backs, and kicking them in the head.

I must confess: I could not watch the entire video. I cringed through the first part, and finally had to close the file. It was too upsetting to watch it any further.

I don’t support this kind of treatment of animals. No one in the dairy industry supports it. No one in any industry — agriculture or otherwise — supports it.

Law enforcement doesn’t support it. The employee shown in the video was subsequently arrested and charged with 12 counts of cruelty to animals — after the dairy fired him.

In the dairy industry, the health and proper care of the animals is of the utmost importance to farmers, both from a business perspective, and from a moral one.

As the chief executive officer of MidAtlantic Farm Credit, a major agricultural lender, I’ve visited many dairy farms over the years. Dairy accounts for 11 percent of our portfolio. It is an important industry to us.

We have two dairy farmers on our board of directors. I’ve been to both of their farms, as well as their neighbor’s farms, and their neighbors’ neighbors farms. These farms differ in size; they differ in the number of employees. Their barns look different, and they use different equipment.
One thing is the same on all of these well-run farms. Making sure that the cows have nutritious feed and fresh water, appropriate housing and veterinary care, and — ALWAYS — fair and humane treatment is expected and required. Anything less is not tolerated.

It bothers me that video footage of bad actions, and cruel people, is the dominant picture that many people see, rather than images of the good farmers who make their livelihood by producing milk.

June just happens to be Dairy Month, and I will hopefully be able to visit with some of the wonderful dairy farmers in our area. When I go, I might just borrow my daughter’s flip camera, and see if I can figure out how to take a video of my own.

Tuesday, June 8, 2010

Hanging Out at Career Café.

6.8.10

As you may remember from an editorial I wrote in the Leader last year, I started my career with Farm Credit as part of what the Bank of Baltimore then called its “Field Bank Representative Program.”

The idea was that the Bank hired a bunch of people at once—mostly new college graduates—then paired us up with existing Farm Credit employees so that we could learn the ropes.

It was kind of like teaching someone to swim by throwing them in the water (even if there was a life guard present to save us!) The program might have been frightening at times to a new employee, but it was effective. We all quickly learned what made Farm Credit tick, and what our role was in keeping that ticking going.

After a few months of that hands-on training, we were deployed out to any association with an opening for a loan officer. And that’s when we realized how important our training had been.

Training can make the difference between being good at your job and liking it, and being great at your job and loving it.

That’s why I’m so excited about our new Career Café.

Like a lot of our employees, I just got a glimpse of this new tool. Our training administrator Sharmequa was nice enough to give our senior management team an overview of the Career Café website. I was pretty impressed with some of the bells and whistles that Sharmequa has added to the site—the animation, for instance, is very slick, and the whole site seems user friendly (which is important to me!)

But after the bells and whistles wore off, it dawned on me how helpful this tool will be.

A couple of years ago, we initiated an IDP, or individual development plan, for each of our employees. That was a great first step, but it wasn’t easy for you to see what training was available for you to take, or what you had already taken.

Career Café will let you do that. You can see at a glance all of the courses available—face-to-face courses, Centra seminars, and off-site training opportunities. Finally, all of our training notes will be in one place—so if someone takes a training offered by the Bank (like the ones being planned now for our new AccountAccess program), or by the System (like those of us enrolled in the Leadership Development Program), or even by your own department, all of that information will be collected in one place.

This way, employees can talk to their supervisor about training that they’ve taken (all of it), and figure out what additional training will help them meet their career goals.
I’m also happy because I think that this tool will help us train new employees more efficiently and more completely than we’ve done in the past (and, since we had two retirements just last week, that will be a continuing priority for us!) As I said earlier, I know how overwhelming it can be to be dropped into a new position—having this training at your fingertips will make that adjustment easier and (hopefully) quicker.

Speaking of adjustments, I may be making some adjustments of my own. As I looked at the Career Café website, I noticed a couple of topics that I could use a refresher on. I’m already planning to take a couple of these…because I know that training will make me better at my job, too!

Hopefully, I’ll see you in the Café sometime in the next few weeks!

Bob

Monday, April 26, 2010

We Care Too!

I got some great news the other week, and it almost got lost in the shuffle of our stockholder meetings.

Earlier this month, our Frederick office was given the “Care Award Affiliate Office” from the Frederick County Association of Realtors (FCAR). You can read the story about it in the Frederick News Post at www.fredericknewspost.com/sections/news/display.htm?StoryID=103557. (We’re in the second to last paragraph).

Since the article doesn’t go into a lot of details about the award, I’ll share this information from the program that night: The Care Award is to be given to an Affiliate Office to recognize local achievements of the office in community and charitable actions…The award is designed to raise the profile of Affiliates belonging to the Frederick County Association by focusing on offices that have demonstrated an extraordinary record of local community service involvement and to include endeavors by members who are part of a group, team, office or individually.

The Frederick office was recognized for their participation in last year’s Day of Service event, as well as their individual efforts of service to the community. At MidAtlantic we realize that it’s a *critical* part of every company’s mission to serve the community. I talked at the annual meetings about our association’s commitment to serving agriculture, and it’s so great to see one of our offices recognized for that, as well as for the time that they all spend individually giving back to local organizations.
Congratulations!!

Bob

Friday, April 23, 2010

Meeting the People

In the past two weeks, I’ve talked to a ton of people at our annual stockholder meetings. In fact, I may have seen you! We had a total of almost 1800 people at the five meetings.

I made a deliberate effort to talk to borrowers that I didn’t know at each of the meetings. Some nights I got caught up talking to some of our guests, or I visited with borrowers that I had met before, and as a result I spoke with less people than I wanted to (although it’s always nice to catch up with old friends too!). No matter who I spoke to each night, I heard time and time again that Farm Credit is the nicest organization that they’ve ever worked with.

Now, I hear that every year, but it never gets old! I think they’re right…and I’d like to thank our staff for that. There is no such thing as a friendly organization—just friendly people looking out for their customers.

This year, I also heard from borrowers who said that no one else was making agricultural loans in their area, and they were grateful that we had not lost our commitment to our borrowers. That means a lot to me too. It’s great to be nice, but it’s wonderful to be needed.

Earlier this week, I sent an email to all staff thanking them for building our reputation in the community. I know that that kind of goodwill grows just one person at a time, and I know it represents a lot of emails, phone calls and visits. I really appreciate their efforts in making MidAtlantic an important partner for the ag community.

If you were able to attend one of our meetings…I hope I got a chance to talk to you. If not, feel free to respond to this blog—I’m always happy to talk to our borrowers!

Bob

Wednesday, March 10, 2010

Telling the Story

Last week, I was invited to be a panelist for the Farm Foundation Forum.

As you may remember, I was asked to be a panelist for a similar event in the fall of 2008, as the financial/debt crisis was unfolding. This year, I was asked to talk about the impact that the crisis had on agriculture and food industries, and the challenges ahead for 2010.

It was a little nerve-wracking, since the audience was a pretty distinguished group of people.

Since you’re a pretty distinguished group of people as well, I thought you might like to read my remarks. (You can actually hear them at the Farm Foundation Forum’s website…but it’s a huge file.)

As you read my thoughts on the greatest challenges to agriculture for 2010, think about what you’re seeing in your area and let me know what you think. Am I on track? What do you see as the greatest challenges to agriculture for 2010?

Opening Remarks:
Thank you for inviting me to be a part of today’s panel. It has been an honor to participate in previous Farm Foundation Forum events and it’s a pleasure to be here with you today.

I represent the Farm Credit System, a nationwide network of borrower-owned institutions. Today, Farm Credit provides nearly $165 billion in loans to member owners in all 50 states and the Commonwealth of Puerto Rico. Our loans and leases support farmers, ranchers, rural homeowners, aquatic producers, timber harvesters, agribusinesses, and agricultural and rural utility cooperatives.

Farm Credit was created by Congress to serve as the permanent source of sound and dependable credit and related services to agriculture and rural America. We reverse the usual flow of capital and deliver the financial power of national and international money markets to the rural communities we serve nationwide. Farm Credit’s near-century of experience demonstrates the focus and commitment of its directors and employees and leaders to serving as the stable and reliable lender. Since we focus solely on supporting agriculture and rural America, we are uniquely positioned to understand the needs of our customers.

Farm Credit institutions are owned and operated by the very same farmers, ranchers and rural customers we serve. This unique structure keeps the Farm Credit System involved in the industries we finance and the local communities we represent. The approximately 90 local Farm Credit associations in the System have their own boards of directors and are owned cooperatively by those who borrow from them. Five wholesale System banks are in turn owned by the associations they serve and also have their own board of directors. Each bank and association manages and controls its own business activities, operations and financial performance.

To generate the capital the System lends to support rural America, the Federal Farm Credit Banks Funding Corporation issues a variety of Farm Credit Systemwide debt securities on behalf of the Farm Credit System banks. The System also has its own independent regulator, the Farm Credit Administration.

I’m the CEO of one of the retail associations and I can tell you that our Board of owner users embraces the public policy charge of the Congress and challenges me to deliver on that promise while doing it safely, soundly and efficiently.

In many ways, 2009 was a year of uncertainty – and in some cases, fear – for the U.S. and global financial markets. The perfect storm of declining asset valuations, ongoing weakness in the housing market, rising unemployment and a massive buildup of U.S. government debt were all harbingers of an overleveraged, poorly supervised financial sector. In stark contrast to that, Farm Credit’s financial results speak volumes about the accountability, strength and stability of our unique model.

Today, I’ll talk about where Farm Credit stands financially. I’ll discuss what the System has done to help ensure it’s success, and I’ll talk about our plans to maintain that strong record of success going forward.

Where We Stand
Within the generally gloomy financial sector, Farm Credit’s performance in 2009 was exceptional. The System remains fundamentally sound and has been able to meet its funding needs, build capital, and sustain its earnings performance. For year-end 2009, we reported combined net income of $2.850 billion for 2009, and capital as a percentage of assets grew from 12.7% at year-end 2008 to 13.9% in 2009. We did experience some deterioration in credit quality as non-accrual loans increased from $2.33 billion to $3.4 billion over the prior year and non-performing loans increased from 1.5% to 2.1% of total loans. We saw an increase in loan charge-offs from $99 million to $518 million. This weakening reflected performance issues with loans in the livestock, poultry, dairy and ethanol segments of our portfolio.

Throughout the market turmoil, Farm Credit was provided uninterrupted funding market access. The System’s cooperative model, conservative management and solid financials were much appreciated by domestic investors and our selling group, making them more inclined to participate in our debt offerings. Transparency and increased communication of our financing needs were welcomed. The willingness and ability of our Banks to respond to specific investor and dealer interest and increased flexibility in their funding requests contributed to the successful sale and distribution of $116 billion of term debt throughout 2009, surpassing the 2008 total of $111 billion.

What We Did
Much of Farm Credit’s success results from our position as a financially strong, mission-focused and strongly regulated government sponsored enterprise. Our financial reporting is transparent. We report results not only to our members but also to investors and other stakeholders. Farm Credit securities are also protected by our own independent insurance fund. Self-funded by our individual institutions, we are the only GSE that offers such protection to investors. The fund is administered by the U. S. government-controlled Farm Credit System Insurance Corporation holds some $3.3 billion to provide a means to pay investors in the event that a System bank is unable to retire a debt issuance on schedule.

The current economic crisis had a major impact on Farm Credit’s funding programs and practices. In response, the Federal Farm Credit Banks Funding Corporation initiated a comprehensive analysis of Farm Credit funding sources, capital levels, and liquidity positions. As a result of this study, several focus areas were identified by the Banks and the Funding Corporation for further consideration and action. Those areas include issues such as Systemwide liquidity and balance sheet management issues. This ongoing effort will allow us to better prepare Farm Credit to respond to the challenges and lessons learned through this crisis.

What Our Members Faced
Behind the story of our strong performance for 2009, is the story that many of our borrowers suffered financially. Producers in the dairy, swine, forest products and ethanol sectors weathered extended periods of losses and negative cash flows. Volatility on both the revenue and expense sides of the income statement was an added risk element for our borrowers to manage. While agriculture in aggregate has fared better than the general economy, it too has experienced the aftershocks of global economic distress.

In good economic times and bad, the Farm Credit System assists its borrower-owners in coping with their financial challenges. Since the 1980s, Farm Credit has operated with clearly stated “borrower rights,” that apply to borrowers in distress. The Farm Credit System's borrower rights are thorough and fair, and stand as a model among lending institutions, including private banks. In fact, Farm Credit has been positively cited by the Congressional Oversight Panel – which was created to oversee the expenditure of TARP funds – and others for their effectiveness in helping troubled agriculture borrowers avoid foreclosures.

What We’ll DoFarm Credit is well positioned to withstand the headwinds of economic and political uncertainty. The System continues to face many challenges caused by a weak U.S. and global economy, huge amounts of government debt, and significant uncertainty in Federal government policy. Such an environment raises risks in many aspects of our business, including market access. Through our Funding Corporation, Farm Credit will continue to focus on being prepared for market changes and will continue our efforts to improve and increase communication between the System, our selling group members and investors.

Farm Credit has been fulfilling our mission for almost 100 years and we have been with our customers in all economic climates. We will continue to demonstrate carefully managed growth and a commitment to financial discipline and responsible business practices; this responsiveness ultimately benefits all our borrower-owners. The System will also continue to adhere to good underwriting standards and make prudent decisions in the months and years to come, all while fulfilling our mission to serve agriculture and rural America.

Conclusion
In conclusion, I’d like to say on behalf of Farm Credit that we are proud to help improve the income and well-being of American farmers and ranchers by furnishing sound, adequate and constructive credit to them, their cooperatives and others necessary for efficient farming operations.

We are honored to serve the producers and agribusinesses that are at the core of the American economy and provide food and fiber that affordably, nutritiously supports the health and welfare of the United States and the world. As that economy continues through this time of flux, we believe that Farm Credit has built the strong foundation necessary to help us weather the storm and continue to build on our legacy.

Friday, March 5, 2010

All Things Considered

Recently, the Wall Street Journal reported that 5.09% of all mortgages in the country were more than 90-days overdue in the fourth quarter of 2009.

The number comes from the Mortgage Bankers Association, and you can see the full report here. The percentage represents all mortgages in the United States, and it includes data from all of the country’s commercial banks.

There was no good news in that number, particularly as we have all been telling ourselves that the recession is over and the economy is beginning to rebound.

I’m sure that it doesn’t feel like a rebound for 5% of mortgage holders.

In our own financial institution, we watch overdue accounts very carefully. It’s one indicator of the overall health of our portfolio.

According to our December numbers, just 1.12% of our borrowers were 90-days (or more) overdue on their payments. That’s significantly lower than the percentage overdue at commercial banks.

We don’t think that there’s ever an acceptable level of overdue accounts. In fact, we have a very stringent procedure to help struggling borrowers, called “Borrower’s Rights.” Borrower’s Rights is a procedure followed by all Farm Credit institutions, and it ensures our borrowers that we will work with them—using all the tools that we can—to help them keep their property and preserve their businesses until the economy does rebound. And rebound for everyone.

Until this economy truly does turn around, I’m proud to report that Farm Credit continues to fare better than our competitors. And that’s good news for all of our borrowers.