Pub. 10 2015-2016 Issue 1

May/June 2015 19 Extraordinary Service for Extraordinary Members. orders, it does provide some data regarding those orders. That data, though, is not clear-cut. For instance, the FCS’ 2014 annual Information Statement reported that at the end of 2014, the FCA “had entered into written agreements with three associations whose assets totaled $1.191 billion, as comparedwith eight associations whose assets totaled $4.803 billion as of Dec. 31, 2013.” On the surface, that decline looks pretty good. However, a March 31, 2015, report issued by the FCA’s Inspector General (IG) on the FCA’s special supervision and enforcement processes paints a more disturbing picture. According to the FCA’s IG, during the fiscal year ended Sept. 30, 2014, eight FCS institutions were under enforcement orders and three were subject to “special supervision,” which is one step away from an enforcement action. Assuming all 11 are FCS associations, this means that approxi- mately one of every seven FCS associations experienced supervisory issues during fis- cal year 2014, a time of exceptionally good economic conditions in American agricul- ture. Ten of the 11 associations’ “areas of concern” involved management issues and nine related to asset quality. Clearly some associations generated both management and asset quality concerns. Especially troubling is how long it takes the FCA to resolve supervisory issues. Eight institutions falling within the scope of the IG’s report were “under enforcement [that] ranged fromone and a half to five years, with an average of 39months”—over three years! It appears from data in the FCS annual Information Statements that most of these associations are relatively small—well under $1 billion in total assets—which raises this question: Why does it take the FCA so long to get these problems resolved? Further, the FCA has had to take numerous formal supervisory actions against some of these associations—six over 46 months in one case and five over 60 months in another case. Possibly some of these associations have been resolved through mergers with stronger associations. Putting a spotlight on these problem associations by publicizing their enforcement orders would help greatly to reduce these problems. The new FCA Chairman Ken Spearman should so order. FCS Southwest Saga Continues FCS Southwest, which serves most of Arizona plus California’s Imperial Valley, announced last October that due to “a sud- den significant increase in the level of delin- quent loans” it would have to restate its financial results. At the same time, the FCA removed from its website all call reports Southwest had filed since 2010. That financial restatement process still has not been completed. The FCA website simply states that a “data correction is underway [for Southwest] and data is not available at this time.” In February, Southwest an- nounced its intent to merge with Farm Credit West, a large California FCS association. Shortly thereafter, Farm Credit West’s CEO assumed the CEO position at Southwest and the  Bert Ely — continued on page 21 The EFT You can TRUST NetWorks is the Electronic Funds Transfer (EFT) service provider that Nebraskans have used and learned to trust like family for over 30 years. Our highly experienced staff is extremely knowledgeable and resourceful when it comes to assisting your institution. Give us a call to learn more about our services, you’ll have the opportunity to talk to someone who truly cares about and understands your EFT service needs. www.netseft.com Toll Free 800-735-6833 Local 402-434-8202