A Conversation With ... Rob Guinn

How does FCS Financial fit into the broader lending landscape?
We are a cooperative, so we are owned by our borrowers and we are chartered and really only loan in the field of agriculture. We seldom stray outside of that. We are chartered to make agriculture loans to farmers, ranchers, rural homeowners and on a limited-type basis, some agribusiness. It’s sort of structured like a credit union.

Locally, the Springfield branch is part of FCS Financial, which is its own cooperative that covers 102 counties in the state of Missouri. FCS Financial is a part of the nationwide Farm Credit System. That means we are a local association that serves Missouri, and there are several other Farm Credit Associations throughout the nation that serve their local areas.

We are member owned, so every borrower we have buys stock in our organization. The stock doesn’t appreciate in value, what it does is help capitalize the organization.

What is a typical return on investment for FCS Financial stockholders?
Since we are a cooperative, we return a portion of our earnings back to our borrowers each year in the form of a patronage dividend. This year, we are paying back more than $8.5 million in the state of Missouri. That’s a cash dividend, and they get a check. Since 2006, we have paid back a little more than $38 million. That’s one of the benefits of the cooperative structure.

FCS Financial has about 15,000 association members as a whole, and we have a little over $3 billion in loans outstanding. If you come down to the local level, in Springfield we have about 900 local members and this office runs about $110 million in loans.

FCS Financial is a member of the Farm Credit System, the largest single provider of agricultural credit in the United States. Area community bankers have said direct consumer loans by FCS put the government in direct competition with the private sector. Is this true?
It’s not true. We are a government-sponsored entity. There are several of them out there; Fannie Mae and Freddy Mac are two examples. The local commercial banks also use Fannie Mae and Freddy Mac, so they receive benefit from those GSEs as well. We are not a government agency or government employees.

The Farm Credit System started in 1916. It was enacted through Congress to provide a dependable and long-term solution of credit for rural Americans and the farmers. We were established by Congress, but we are independently owned by our cooperative of borrowers. To fund our loans, we sell bonds on Wall Street. Then those funds are funneled down to local associations, and we loan them out to our borrowers.

We are not government backed. That’s where the misconception comes in that we are a government entity.

The nearly $1 trillion Agricultural Act of 2014 was signed into law Feb. 7 and reportedly prevents further expansion of the Farm Credit System. How does this affect the Springfield office?
We have heard that, too, but our attorneys have read the farm bill cover to cover and we don’t see anything that limits our growth or expansion. There has been nothing brought down to us from our federal regulator. We are regulated by the federal government, just like banks are regulated by Federal Deposit Insurance Corp., state and federal auditors. We are regulated by the Farm Credit Administration. Nothing has come down through the farm bill that will affect us as an institution and how we grow.

There are a lot of things that will affect our customers, such as the way the farm bill changes crop insurance and the way it will limit direct payments to farmers. That inadvertently may impact the demand for loans.

Consumer sentiment is beginning to trend toward more organic food. How do such trends affect the industry and the association?
A couple things over the last five, six, seven, maybe 10 years have really started to change the landscape of agriculture and what people decide to grow. One was ethanol. Whenever they enacted ethanol in the blending laws, there was a greater demand for that, so it increased the demand for corn.

The other piece is organic and niche markets. They are really growing. About 10 years ago, they were kind of an oddity. But in today’s world, there are more and more larger scale operations doing those type of things. The thing we have seen drive loan demand the most is corn prices and demand. That has had a large impact on the profitability of farmers during the last seven or eight years. The demand to expand and update lines of machinery – the things they might need a loan for.

How is the agriculture industry doing?
As a whole, the agriculture industry is as strong as I have ever seen it in my career. People I work with who have been here 30 or 40 years would tell you the same thing. If you look at customers’ financial positions, their balance sheets, the earnings they have had, agriculture is in the best shape it has been in a long time.

We are seeing a plateau here. The past five or six years we saw really heavy growth. Over the last six months, we have seen that start to level off. Again, a lot of that is coming back to commodity prices dropping, corn and soybeans. We have seen the demand for loans somewhat plateau and level off.

We have $110 million in volume in this office. Last year, the office would have been similar. In new loan production in a year, this office will loan somewhere in the $15 million range.

We don’t foresee the type of loan production over the next 18 months that we saw during the previous 18 months, but we don’t see a crash. We see more of a leveling back off.

What other services does FCS Financial offer?
Another piece of the business is crop insurance. We also focus on youth and community. Something new we just started for 4-H and FFA members is a funding agreement. They are minors, so we can’t loan them money, but we can fund their projects interest free. They come in, fill out an application, go through a cash flow and get the benefit of seeing the business side and the production side. Then, we can fund their project, up to $2,000. When they sell their project in the end, they just pay us back.