NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FCS Financial, ACA
NOTE 1: ORGANIZATION AND OPERATIONS
Farm Credit System and District
The Farm Credit System (System) is a nationwide system of cooperatively owned banks and associations established by Congress to meet the credit needs
of American agriculture. As of January 1, 2018, the System consisted of three Farm Credit Banks, one Agricultural Credit Bank, and 69 customer-owned
cooperative lending institutions (associations). AgriBank, FCB (AgriBank), a System Farm Credit Bank, and its District associations are collectively referred to
as the AgriBank Farm Credit District (AgriBank District or the District). At January 1, 2018, the District consisted of 14 Agricultural Credit Associations (ACA)
that each have wholly-owned Federal Land Credit Association (FLCA) and Production Credit Association (PCA) subsidiaries.
FLCAs are authorized to originate long-term real estate mortgage loans. PCAs are authorize d to originate short-term and intermediate-term loans. ACAs are
authorized to originate long-term real estate mortgage loans and short-term and intermediate-term loans either directly or through their subsidiaries.
Associations are authorized to provide lease financing options for agricultural purposes and are also authorized to purchase and hold certain types of
investments. AgriBank provides funding to all associations chartered within the District.
Associations are authorized to provide, either directly or in participation with other lenders, credit and related services to eligible borrowers. Eligible borrowers
may include farmers, ranchers, producers or harvesters of aquatic products, rural residents, and farm-related service businesses. In addition, associations
can participate with other lenders in loans to similar entities. Similar entities are parties that are not eligible for a loan from a System lending institution, but
have operations that are functionally similar to the activities of eligible borrowers.
The Farm Credit Administration (FCA) is authorized by Congress to regulate the System banks and associations. We are examined by the FCA and certain
association actions are subject to the prior approval of the FCA and/or AgriBank.
The Farm Credit Act established the Farm Credit System Insurance Corporation (FCSIC) to administer the Farm Credit Insurance Fund (Insurance Fund).
The Insurance Fund is used to ensure the timely payment of principal and interest on Farm Credit Systemwide debt obligations, to ensure the retirement of
protected borrower capital at par or stated value, and for other specified purposes.
At the discretion of the FCSIC, the Insurance Fund is also available to provide assistance to certain troubled System institutions and for the operating
expenses of the FCSIC. Each System bank is required to pay premiums into the Insurance Fund until the assets in the Insurance Fund equal 2.0% of the
aggregated insured obligations adjusted to reflect the reduced risk on loans or investments guaranteed by federal or state governments. This percentage of
aggregate obligations can be changed by the FCSIC, at its sole discretion, to a percentage it determines to be actuarially sound. The basis for assessing
premiums is debt outstanding with adjustments made for nonaccrual loans and impaired investment securities which are assessed a surcharge while
guaranteed loans and investment securities are deductions from the premium base. AgriBank, in turn, assesses premiums to District associations each year
based on similar factors.
Association
FCS Financial, ACA (the Association) and its subsidiaries, FCS Financial, FLCA and FCS Financial, PCA (subsidiaries) are lending institutions of the
System. We are a customer-owned cooperative providing credit and credit-related services to, or for the benefit of, eligible members for qualified agricultural
purposes in 102 counties in the state of Missouri.
We borrow from AgriBank and provide financing and related services to our members. Our ACA holds all the stock of the FLCA and PCA subsidiaries.
We offer credit life, term life, credit disability, crop hail, and multi-peril crop insurance to borrowers and those eligible to borrow. We offer fee appraisals.
In addition, we offer leasing through Farm Credit Leasing.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Principles and Reporting Policies
Our accounting and reporting policies conform to accounting principles generally accepted in the United States of America (GAAP) and the prevailing
practices within the financial services industry. Preparing financial statements in conformity with GAAP requires us to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements
and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates.
Principles of Consolidation
The Consolidated Financial Statements present the consolidated financial results of FCS Financial, ACA and its subsidiaries. All material intercompany
transactions and balances have been eliminated in consolidation.
Significant Accounting Policies
Loans: Loans are carried at their principal amount outstanding net of any unearned income, cumulative charge-offs, unamortized deferred fees and
costs on originated loans, and unamortized premiums or discounts on purchased loans. Loan interest is accrued and credited to interest income based
upon the daily principal amount outstanding. The net amount of loan fees and related origination costs are not material to the Consolidated Financial
Statements taken as a whole.
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