Special Annual Report Issue - AgGeorgia Farm Credit

More documents

Recommendations

Info

Annual ReportAgGeorgia Farm Credit, ACA Valuation methodologies — Management applies variousvaluation methodologies to assets and liabilities that ofteninvolve a significant degree of judgment, particularly whenliquid markets do not exist for the particular items beingvalued. Quoted market prices are referred to when estimatingfair values for certain assets for which an observable liquidmarket exists, such as most investment securities.Management utilizes significant estimates and assumptions tovalue items for which an observable liquid market does notexist. Examples of these items include impaired loans,pension and other postretirement benefit obligations, andcertain other financial instruments. These valuations requirethe use of various assumptions, including, among others,discount rates, rates of return on assets, repayment rates, cashflows, default rates, costs of servicing and liquidation values.The use of different assumptions could produce significantlydifferent results, which could have material positive ornegative effects on the Association’s results of operations.For additional information, refer to the Recently IssuedAccounting Pronouncements disclosed in this Annual Report. Pensions — The Bank and its related Associations participatein defined benefit retirement plans. These plans arenoncontributory and benefits are based on salary and years ofservice. In addition, the Bank and its related Associations alsoparticipate in defined contribution retirement savings plans.Pension expense for all plans is recorded as part of salariesand employee benefits. Pension expense is determined byactuarial valuations based on certain assumptions, includingexpected long-term rate of return on plan assets and discountrate. The expected return on plan assets for the year iscalculated based on the composition of assets at the beginningof the year and the expected long-term rate of return on thatportfolio of assets. The discount rate is used to determine thepresent value of our future benefit obligations. We selectedthe discount rate by reference to Moody’s Investors ServiceAa long-term corporate bond index, actuarial analyses andindustry norms. For additional information, refer to theRecently Issued Accounting Pronouncements disclosed in thisAnnual Report.ECONOMIC CONDITIONSDuring 2006, economic conditions in our region were generallyfavorable for farmers and ranchers, though rising interest ratesand energy prices increased their cost of production. During2006, the Association targeted certain segments of our businesswith the intention of increasing market share. Continued effortsare being made to expand services, increase public knowledgeof our services and streamline our current delivery of productsto enhance our existing portfolio.TOBACCO BUYOUT PROGRAMOn October 22, 2004, Congress enacted the “Fair and EquitableTobacco Reform Act of 2004” (Tobacco Act) as part of the“American Jobs Creation Act of 2004.” The Tobacco Actrepealed the Federal tobacco price support and quota programs,provided for payments to tobacco “quota owners” and producersfor the elimination of the quota and included an assessmentmechanism for tobacco manufacturers and importers to pay forthe buyout. Tobacco quota holders and producers will receiveequal annual payments under a contract with the Secretary ofAgriculture. The Tobacco Act also includes a provision thatallows the quota holders and producers to assign to a “financialinstitution” the right to receive the contract payments(Successor-in-Interest Contracts (SIIC)) so that they may obtaina lump sum or other payment. On April 4, 2005, the UnitedStates Department of Agriculture (USDA) issued a Final Ruleimplementing the “Tobacco Transition Payment Program”(Tobacco Buyout).The FCA recognized that the Tobacco Buyout has significantimplications for some System institutions and the tobaccoquota holders and producers they serve. The FCA determinedthat System institutions are “financial institutions” within themeaning of the Tobacco Act and are therefore eligible toparticipate in the Tobacco Buyout. The goal of this program isto provide quota holders and producers with the option toimmediately receive Tobacco Buyout contract payments andreinvest them in future business opportunities.On December 31, 2006, the Association had loans outstandingcollateralized by assignments of contract payments in theamount of $638 that are included in Loans on the ConsolidatedBalance Sheets and no SIIC’s.LOAN PORTFOLIOThe Association provides funds to farmers, rural homeowners,and farm-related businesses for financing of short andintermediate-term loans and long-term real estate mortgageloans through numerous product types.The gross loan volume of the Association as of December 31,2006, was $979,983, an increase of $101,755 or 11.59 percentas compared to $878,228 at December 31, 2005 and anincrease of $191,154 or 24.23 percent as compared to $788,829at December 31, 2004. Net loans outstanding (gross loans netof the allowance for loan losses) on December 31, 2006, were$972,338 as compared to $866,269 at December 31, 2005 and$776,515 at December 31, 2004. Net loans accounted for93.59 percent of total assets on December 31, 2006 ascompared to 93.69 percent of total assets at December 31, 2005and 94.42 percent of total assets at December 31, 2004.The diversification of the Association loan volume by type foreach of the past three years is shown below. See Note 4,“Loans and Allowance for Loan Losses,” of the Notes to theConsolidated Financial Statements for the loans outstandingamounts.Loan Type 12/31/06 12/31/05 12/31/04Real estate mortgage 37.14% 38.67% 38.88%Production and intermediate term 57.68 55.49 54.82Agribusiness:Processing and marketing 1.99 2.54 2.39Farm related business 1.43 1.21 1.36Rural residential real estate 1.76 2.09 2.55Total 100.00% 100.00% 100.00%AgGeorgia.38.Winter 200772006 Annual Report
AgGeorgia Farm Credit, ACAThe following table presents the contractual maturitydistribution of loans at December 31, 2006:Due afterDue in 1 year Due1 year through afterLoan Type or less 5 years 5 years Total(dollars in thousands)Production agriculture:Real estate mortgage $ 41,407 $ 94,834 $ 227,732 $ 363,973Production and intermediate term 179,780 257,979 127,510 565,269Agribusiness:Processing and marketing 10,996 3,053 5,476 19,525Farm related business 7,695 2,740 3,529 13,964Rural residential real estate 1,255 2,656 13,341 17,252Total $ 241,133 $ 361,262 $ 377,588 $ 979,983While we make loans and provide financially related servicesto qualified borrowers in the agricultural and rural sectors andto certain related entities, our loan portfolio is diversified. Thefollowing tables reflect the commodities financed and thegeographic locations served.The geographic distribution of the loans by branch/state for thepast three years is as follows:Branch 12/31/06 12/31/05 12/31/04Cartersville 5.51% 5.60% 5.88%Clarkesville 4.88 4.64 4.81Cordele 5.35 5.42 5.27Dalton 5.74 5.55 5.28Dublin 3.84 3.70 4.01Gainesville 7.18 8.08 8.38Moultrie 4.09 4.67 3.64Nashville 2.94 3.01 2.04Ocilla 1.90 1.77 2.11Perry 8.96 8.01 9.50Quitman 2.73 2.29 2.42Royston 15.97 16.19 16.80Sandersville 6.02 6.06 6.40Sylvester 2.64 2.83 2.22Tifton 7.40 6.87 7.80Washington 4.22 4.42 4.11Waynesboro 3.92 2.79 2.99Participations Purchased * 5.53 5.36 3.59Special Assets 1.18 2.74 2.75Total 100.00% 100.00% 100.00%* Excludes loans purchased, then sold under agency agreementwith the BankCommodity and industry categories are based upon theStandard Industrial Classification system published by thefederal government. The system is used to assign commodityor industry categories based upon the largest agriculturalcommodity of the customer.The major commodities in the Association loan portfolio areshown below. The predominant commodities are poultry,forestry, livestock, and cotton, which constitute over 77 percentof the entire portfolio.Percent of PortfolioCommodity Group 2006 2005 2004Poultry 41% 39% 33%Forestry 16 14 18Livestock 11 12 12Cotton 9 10 11Horticulture 7 9 10Landlords 4 4 5Row Crops 3 3 2Dairy 2 2 2Peanuts 2 2 2Rural Home 2 2 2Other 3 3 3Total 100% 100% 100%Repayment ability is closely related to the commoditiesproduced by our borrowers, and increasingly, the off-farmincome of borrowers. The Association’s loan portfoliocontains a concentration of poultry producers. Although alarge percentage of the loan portfolio is concentrated in theseenterprises, many of these operations have diversified incomesources that reduce overall risk exposure. Demand for poultryproducts, prices of feed, energy and other inputs andinternational trade are some of the factors affecting the incomeproducing capacity in the poultry industry. The risk in theportfolio associated with commodity concentration is reducedby the range of diversity of enterprises in the Association’sterritory.The increase in gross loan volume for the twelve months endedDecember 31, 2006, is primarily attributed to expansion in thepoultry industry in Georgia as well as enhanced marketing andsales efforts by our staff. The Association has attracted somelarge real estate loans from the sale of timber tracts in additionto normal business. An improvement in the processing time forsmall and moderate size credits has led to high customersatisfaction and increased operational efficiency.The short-term portfolio, which is heavily influenced byoperating-type loans, normally reaches a peak balance inOctober and rapidly declines in the winter months ascommodities such as cotton and peanuts are marketed andproceeds are applied to repay operating loans.During 2006, the Association increased activity in the buyingand selling of loan participations within and outside of theSystem. This provides a means for the Association to spreadcredit concentration risk and realize non-patronage sourcedinterest and fee income, which may strengthen its capitalposition.Loan Participations 2006 2005 2004(dollars in thousands)Participations Purchased– FCS Institutions $ 96,459 $ 72,642 $ 28,277Participations Purchased– Non-FCS Institutions 5,991 455 18Participations Sold (77,113) (63,359) (29,830)Total $ 25,337 $ 9,738 $ (1,535)AgGeorgia.39.Winter 200782006 Annual Report
Page 1 and 2: Inside:Special Annual Report Issue
Page 3 and 4: Table of ContentsThe annual AgGeorg
Page 5 and 6: When naturalist William Bartram exp
Page 7: Fresh Strawberry Cake1st Place Cake
Page 12 and 13: The Key to YourMortgage FinancingWh
Page 14 and 15: insured against theft, and where ap
Page 16 and 17: Cotton:From Field to FabricArticle
Page 18 and 19: The cotton belt spans the southern
Page 20 and 21: For each 100 pounds of fiber produc
Page 22 and 23: 2006 Farm Family of the Year -Broad
Page 24 and 25: It Was Hogs To Muscadines ForGeorgi
Page 26 and 27: AgGeorgia Farm Credit -Ag Loans and
Page 28 and 29: Whether you’re expanding your ope
Page 30 and 31: AgGeorgia Farm Credit is not only a
Page 32 and 33: Annual ReportAGGEORGIA FARMAgGeorgi
Page 34 and 35: Annual ReportAgGeorgia Farm Credit,
Page 36 and 37: (UNAUDITED)(UNAUDITED)Annual Report
Page 52 and 53: Annual ReportAg Georgia Farm Credit
Page 54 and 55: Annual ReportAg Georgia Farm Credit
Page 68: Office LocationsCartersville1300 Ea

Special Annual Report Issue - AgGeorgia Farm Credit

Create successful ePaper yourself

Delete template?

Save as template?