Operating Expenses
Components of Operating Expenses
(dollars in thousands)
2015
2014
2013
Salaries and employee benefits
Purchased and vendor services
Communications
Occupancy and equipment
Advertising and promotion
Examination
Farm Credit System insurance
Other
$28,850
3,948
968
3,147
1,641
777
3,456
3,157
$25,098
4,581
950
2,854
1,396
722
3,030
2,840
$26,944
3,353
963
2,896
1,379
655
2,324
3,753
Total operating expenses
$45,944
$41,471
$42,267
1.4%
1.3%
1.5%
For the year ended December 31
Operating rate
The operating expense increases were primarily related to increases in salaries and employee benefits expenses and FCSIC insurance expenses, which
were partially offset by a decrease in purchased and vendor services.
FCSIC insurance expense increased in 2015 primarily due to loan growth and an increase in the premium rate charged on accrual loans by FCSIC from 12
basis points in 2014 to 13 basis points in 2015. The Insurance Corporation has announced premiums will increase to 16 basis points for the first half and 18
basis points for the second half of 2016.
Provision for (Benefit from) Income Taxes
The variance in provision for (benefit from) income taxes is related to our estimate of taxes based on taxable income. Patronage distributions to members
reduced our tax liability in 2015, 2014, and 2013. Additional discussion is included in Note 7 to the accompanying Consolidated Financial Statements.
FUNDING AND LIQUIDITY
We borrow from AgriBank, under a note payable, in the form of a line of credit, as described in Note 5 to the accompanying Consolidated Financial
Statements. This line of credit is our primary source of liquidity and is used to fund operations and meet current obligations. At December 31, 2015, we had
$342.2 million available under our line of credit. We generally apply excess cash to this line of credit.
Note Payable Information
(dollars in thousands)
For the year ended December 31
Average balance
Average interest rate
2015
2014
2013
$2,668,861
1.7%
$2,547,012
1.6%
$2,378,301
1.6%
The repricing attributes of our line of credit generally correspond to the repricing attributes of our loan portfolio which significantly reduces our market interest
rate risk. Due to the cooperative structure of the Farm Credit System and as we are a stockholder of AgriBank, we expect this borrowing relationship to
continue into the foreseeable future. Our other source of lendable funds is from unallocated surplus.
CAPITAL ADEQUACY
Total members’ equity increased $48.1 million from December 31, 2014, primarily due to net income for the year, which was partially offset by patronage
distribution accruals.
Members' Equity Position Information
(dollars in thousands)
As of December 31
Regulatory
Minimums
Members' equity
Surplus as a percentage of members' equity
Permanent capital ratio
Total surplus ratio
Core surplus ratio
7.0%
7.0%
3.5%
2015
2014
2013
$704,940
98.2%
17.5%
17.2%
17.2%
$656,850
98.0%
17.3%
16.9%
16.9%
$600,854
97.9%
16.2%
15.8%
15.8%
Our capital plan is designed to maintain an adequate amount of surplus and allowance for loan losses which represents our reserve for adversity prior to
impairment of stock. We manage our capital to allow us to meet member needs and protect member interests, both now and in the future.
Additional discussion of these regulatory ratios is included in the Note 6 to the accompanying Consolidated Financial Statements.
8