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A lower interest rate environment
has helped contribute to record years in 2001 and 2002,
according to Wayne Gustafson, president and CEO of 1st Farm
Credit Services (1st FCS) in his report to farmer-stockholders
at the agricultural financial cooperative's recent annual
meeting at its headquarters facility in Normal.
1st FCS, which serves 42 counties in
northern, central and western Illinois, has not only
experienced substantial business growth during the two year
period, but also has reached a number of other milestones, as
well, Gustafson reported.
With the Federal Reserve System
lowering interest rates 11 times in 2001 and once again in
2002, the declining interest rate market has resulted in
stronger farm real estate sales, as well as triggering a wave
of farm real estate mortgage refinancing as agricultural
producers move to take advantage of these lower rates.
"Interest rates are at the lowest level I have seen in my
career," Gustafson stated.
"The $253 million of new mortgage
volume in 2001 broke the previous annual record by nearly $100
million, and we estimate we will make $230 million in new
mortgage loans by the end of this year, our second best year
ever," informed Gustafson.
"Our average daily balance of
commercial loans (mostly operating and equipment financing),
stood at more than $248 million in 2001, up 17% over the
previous year. Our total mortgage and commercial growth rate
in 2002 remains strong at approximately 11.5%," he continued.
Agribusiness, leasing and
crop insurance also up
Robust new loan volume to
agribusinesses also has contributed to 1st FCS’ results in
2001 and 2002, as have participation loans with other lenders.
Lease financing, both for equipment
and for structures like grain bins and machine sheds, also
increased dramatically over the past two years as more and
more producers take advantage of leasing’s tax benefits,
according to Gustafson.
Income from crop insurance sales
reached about $1.6 million in 2001, and is estimated to reach
$2.2 million in 2002. "This significant growth is attributable
to the knowledge and value our crop insurance specialists are
bringing to the market. Unlike multi-line agents, our
specialists deal only with crop insurance, and that translates
into added expertise. This remains one of the fastest growing
areas of our business," he added.
"Not only have total earnings been
strong the past two years, credit quality also has remained
high. However, with low commodity prices, particularly in the
livestock sector, and reduced crop yields in a number of areas
in 2002, we have begun to see a modest deterioration in the
financial condition of some clients," Gustafson elaborated.
"Overall, we are very pleased with
the growth, profitability and maintenance of asset quality
that we have experienced in 2001 and 2002. It’s a tribute to
the clients we serve," stated the CEO.
Other meeting highlights
In addition to financial results,
Gustafson also reported on another organizational highlight.
The consolidation of 1st FCS into an Agricultural Credit
Association became effective January 1, 2002. The
organization’s stockholders had overwhelmingly approved the
consolidation in 2001. As part of the consolidation, 1st FCS
clients are now required to make just one stock investment –
capped at $1,000 – in the organization.
As part of the new capitalization
bylaws enacted with the consolidation, approximately $1.6
million in stock was retired and returned to about 2,500
eligible stockholders in early 2002, Gustafson added.
"The consolidation into an ACA is
allowing our organization to make better use of its capital,
provide more diversity and financial strength, reduce
redundancy in a number of internal processes and be better
positioned to provide clients competitively priced capital and
risk management products in this rapidly changing financial
industry," he related.
Also speaking at the annual meeting
was 1st Farm Credit Services, ACA, board chairman John Schmitt
of Ursa. Schmitt welcomed attendees to the new corporate
headquarters facility that opened this past June in Normal,
consolidating three locations. "It’s a real advantage to have
all our staff in this town now housed under one roof, and in a
facility designed to help us take advantage of new technology
to better serve our more than 8,500 clients," stated Schmitt.
The 1999 merger of the Farm Credit
Services of Northern Illinois and the Farm Credit Services of
West Central Illinois formed 1st Farm Credit Services.
"Directors and management at that time had a vision of what
might be accomplished as a result of having a larger
association better able to compete in the changing
agricultural marketplace, and better able to serve our
clients. The merger has helped us take significant steps
toward achieving that vision in just four short years," stated
Gustafson.
At the time stockholders approved
joint management in late1998, our combined loan and lease
volume stood at slightly more than $1.1 billion. Today, it has
surpassed $1.5 billion, making 1st FCS the largest
agricultural lender in Illinois – and the 12th largest in the
nation, Gustafson outlined. "Our earnings have improved over
that same time period, our operating costs have decreased and
our annual client service scores have climbed to an
unprecedented 97% satisfaction rating in 2002."
In summarizing, Gustafson stated,
"We will continue to bring strong value to our clients with
competitive interest rates, our individually focused array of
capital and risk management products and the outstanding
knowledge and expertise of our staff. We are passionate about
meeting the financial needs of our clients. It is our mission;
it is why we exist; and it is why we come to work every day."
1st FCS has 23 offices that can be
reached at 1-800-444-FARM or through the organization’s
Internet web site at www.usfarmcredit.com.
1st Farm Credit Services is the
leading provider of farm real estate financing; operating
loans with enhanced cash reserve account; equipment and
building leasing and loans; farm appraisals; and Crop Revenue
Coverage (CRC), multi-peril, crop hail and credit life
insurances.
Farm Credit Services, rural
America’s client-owned partner for 85 years, helps maintain
and improve the quality of life in rural America and on the
farm through its constant commitment to competitive lending,
expert financial services and advice, and a feeling of
partnership with its clients. |
