In December 2009, FCS Financial’s Board of Directors made the decision to retain earnings for capital and a patronage will not be returned for the 2009 calendar year.
If you have any questions, please contact your local branch office.
Why did FCS Financial decide to retain earnings?
The board has determined that due to the current economic environment it is financially prudent to retain the association's earnings in capital. A strong capital position allows us to continue offering competitive rates and strengthens our ability to withstand the economic cycles in agriculture.
Is FCS Financial having financial problems?
No. FCS Financial remains financially strong and has positive earnings. The credit quality of our loan portfolio has declined but remains sound. Most of the decline was seen in the agribusiness segment which is now showing some signs of recovery.
Is FCS Financial still a stable lender?
Yes. We are a cooperative owned by our member-customers and our loan portfolio is diverse consisting of 25 different agricultural commodities and agribusiness segments. Additionally, FCS Financial has a strong capital base of more than 14 percent. The required regulatory amount is seven percent. Retaining our 2009 earnings will allow us to maintain our financial strength as we work through difficult times for borrowers.
Has FCS Financial used capital for loan losses?
No. FCS Financial has put a portion of 2009 earnings into a Loan Loss Account to protect the association against possible loan losses. If losses are incurred they are charged against the reserves in the Loan Loss Account. As such, this account is unavailable for lending purposes.
Has FCS Financial minimized expenses?
Yes. In addition to increasing funds in the Loan Loss Account, FCS Financial has decreased expenses. During 2009 operating expenses were 10 percent below budget and four percent below 2008 operating expenses.
Where can I find FCS Financial statements?
FCS Financial quarterly statements and annual report are located on the web site under the About Us tab. You will see the last four statements on the left side of the screen under Links.
How does FCS Financial receive its funding?
FCS Financial is a member of the Farm Credit System in the AgriBank district. AgriBank is the Farm Credit bank that loans money to the association. The Farm Credit Funding Corporation is AgriBank’s fiscal agent. By selling Farm Credit system-wide notes and bonds in the US and international money markets, the Funding Corporation secures money for AgriBank. The notes and bonds are distributed to investors through a selling group. Investors look at business factors such as sources of revenue, consistent profitability and strong capitalization when deciding to purchase Farm Credit bonds. Therefore, it is important that each association in the Farm Credit System continue to operate safely and soundly. To learn more about the funding process for Farm Credit, please visit www.farmcreditnetwork.com and click on the Funding Farm Credit tab at the top of the page.
How much patronage has FCS Financial disbursed in previous years?
Since 2006, we have disbursed approximately $10.6 million.
Does the patronage program pay out capital that has been earned over a number of years from long-time member-owners?
No. The tax code governing patronage programs requires that current year earnings be distributed to the member-owners who generated the earnings in that year. Capital that has been accumulated from prior years’ earnings cannot be distributed through a tax qualified patronage program.
Will FCS Financial pay cash patronage in future years?
We are optimistic about paying patronage in future years. However, our focus is to proactively manage the business for the positive outcome of our member-owners and the organization. Whether that outcome is to pay patronage or to retain those earnings in capital will be a board decision made at the end of each year after our financial results for the year are known. Future distributions will continue to balance our growth, earnings and other business conditions. For this reason, we cannot guarantee patronage payments for any given year.
If a patronage distribution is declared in future years, the amount and specifics of the program will be determined at the end of each year based on a variety of business and economic factors. It is the board's intent to run the business soundly for the benefit of all members and rural America.
Have more questions?
Contact the FCS Financial office that services your loan and talk to your loan officer. They’ll be happy to discuss the benefits of patronage distributions.
