2016 FMFC Annual Report

B UI L D I N G A L EG AC Y O F T R U S T

ANNUAL

R EP O R T

2016 ANNUAL REPORT

FRESNO MADERA FARM CREDIT

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OUR MISSION

To provide access to credit and related services to farmers and ranchers in our region as an efficient organization that delivers service with people that are passionate about creating the best possible customer experience to the generations of farmers and ranchers that we proudly serve.

OUR VISION

To be the premier lender of choice in our region.

COMPANY VALUES

Collaborative Committed Customer Focused Excellence Responsible

FRESNO MADERA FARM CREDIT

Strategic

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2016 ANNUAL REPORT

TA B L E O F CO N T E N T S

02

Letter to Shareholders

04

Year in Review/Financial Highlights

06

Board of Directors / Executive Management Team

07

Giving Back to the Community

08

FMFC’s New Claim to Fame

10

Report of Management

11

Audit Committee Report

13

Five-Year Summary of Selected Consolidated Financial Data

14

Management’s Discussion and Analysis

29

Report of Independent Auditors

30

Consolidated Financial Statements

34

Notes to Consolidated Financial Statements

60

Disclosure Information

68

Young, Beginning and Small Farmers and Ranchers Program

FRESNO MADERA FARM CREDIT

2016 ANNUAL REPORT

1

LETTER TO SHAREHOLDERS

DEAR MEMBER: It is our pleasure to present you with the audited

We have noted an increased risk to agricultural trade

financial results of our operations for the fiscal year

as a result of the continued strengthening of the

2016. Overall the year was a financial success for the

U.S. dollar. Uncertainty around agricultural exports

organization, and reflected the continued success of

will continue as a result of currency exchange rates,

our membership. We again focused the organization

and as the terms of U.S. trade agreements with other

on the achievement of its mission through progress

countries are reviewed in the current environment.

toward

accomplishing

our

strategic

objectives.

Over the past few years, FMFC has been focused on

MEMBERS

increasing our financial strength through stronger

Overall, our members continue to benefit from

operating efficiency, investing in partnerships that

conditions that favor profits for most of the

help to increase our capacity, and also taking steps to

commodities that they grow despite select uncertain

effect the best-possible experience for our customers.

conditions involving trade, and the strength of the dollar against other currencies. Member liquidity

We are in fact a mission driven lender that is a farmer

is strong and reflects the overall profitability from

owned cooperative; we understand that we can create

the past several years. There are some challenges

value for our members by lending responsibly, and

that loom in the form of weakening prices in select

operating efficiently. When we successfully fulfill

commodities including raisins, and also because of

these objectives, we strengthen our value proposition

legislation intended to limit access to ground water in

with our member-customers.

future years.

CONDITIONS

2016 FINANCIAL RESULTS

Generally, the regional agronomic and economic

PORTFOLIO QUALITY

conditions were stable during our fiscal year 2016

Continued member profitability continues to drive

although global economic uncertainty persisted.

overall strength in our portfolio as credit quality

Fresno Madera Farm Credit services a region that

remains high. At the end of 2016, 100.0% of our total

features substantial diversification in the commodities

loans were classified as “Acceptable” or “OAEM” (Other

that are grown by our member-customers. Profitability

Assets Especially Mentioned). The Association had $31

for all commodities remained relatively stable, however

thousand of loans outstanding in nonaccrual status;

we did observe deterioration in the value of select crops

these levels are at historically strong levels.

FRESNO MADERA FARM CREDIT

including raisins. Our member-customers incurred

2

higher input costs to grow most crops including

EARNINGS

increased costs to source irrigation water, and higher

Our net interest income increased by 12.2% or

interest costs because of an increase in short-term

$3.0 million from 2015 as a result of growth in our

interest rates that occurred over the course of the year.

average loans outstanding. Our loan growth was

2016 ANNUAL REPORT

the result of new loans, and advances from loans we

amount distributed to members last year from our

2015 earnings. We strongly believe that our patronage made in previous years; overall our average loans REPORT OF MANAGEMENT program is an important part of our value proposition outstanding grew by $66.3 million, which represents to our members. a 6.7% increase from 2015. Noninterest income The consolidated financial statements ofalso Fresno Madera Farm Credit, ACA (Association) are prepared and reviewed by2015 Management, is responsible their integrity and objectivity, including amounts that must necessarily be increased from by $1.2 who million or 23.0% for to $6.5

based on judgments and estimates. In the opinion of Management, the accompanying financial statements fairly

CAPITAL million and is present mostlythe comprised of patronage income financial condition and results of operations of the Association, in conformity with accounting principles

generally in thebank, UnitedCoBank.

States of America.Member Other financial information included in the 2016 Annual Report is capital increased to $247.7 million at the that was received fromaccepted our funding consistent with that in the consolidated financial statements.

end of the fiscal year 2016; this 4.7% increase is the

To meet its responsibility for reliable financial information, Management depends on the Association’s accounting result of earnings that were retained after patronage The increasedandinterest and systems, non-interest internal control which income, have been designed to provide reasonable, but not absolute, assurance that assets are safeguarded and transactions are properly authorized Despite and recorded. monitorincompliance, was allocated.

6.7% Togrowth average the combined with continued expense control resulted in net Association engaged CoBank, ACB’s Internal Audit staff to perform audits of the accounting records, review loans outstanding, our average risk adjusted assets income for theaccounting fiscal year systems end 2016 $20.4 million. andofinternal controls,This and recommend improvements as appropriate. The consolidated financial statements are22.5% examined

by PricewaterhouseCoopers LLP, independent auditors.

The Association is also increased by just 0.6% because of a decrease in examined offrepresents a $3.7 million, or increase from 2015. by the Farm Credit Administration.

balance sheet assets which include unused loan

The Audit Committee of the Board of Directors has overall responsibility for the Association’s system of internal commitments. These factors combined to increase P A T R O N Acontrol GE and financial reporting. The Audit Committee meets and consults regularly with Management and the auditors to review the manner in which these groups performing Capital their responsibilities and to carry outend the Board’s ourarePermanent Ratio to 18.48% at the of One of the most unique aspects of FMFC is our oversight role with respect to auditing, internal controls, and financial reporting matters. These auditors also have 2016 compared to 17.54% for the previous year. These structure as a direct farmer owned cooperative.

As a result of access to the Audit Committee.

levels exceed the board-established minimum, and this structure,The excess margin is returned to members undersigned certify that the Fresno Madera Farm Credit, ACA 2016 Annual Report has been prepared and reviewed in accordance with all applicable statutory regulatory requirements, theorregulatory minimum. and that the information contained OF MANAGEMENT each year after current-year needs are met, and REPORT herein is true, accurate, and complete to the best of our knowledge and belief.

future needs such as projected growth and changes

The consolidated financial statements of Fresno Madera Farm Credit, ACA (Association) are prepared and reviewed

SUMMARY in credit quality are considered.

Once these needs March 16, by 2017 Management, who is responsible for their integrity and objectivity, including amounts that must necessarily be

basedinterest on judgments and estimates.

In the opinion Management, the accompanying financial statements are addressed, excess is returned to the We areof pleased to report these results to you, and fairly

present the financial condition and results of operations of the Association, in conformity with accounting principles

members accordinggenerally to our accepted patronage asof America. appreciate that among other included factors, in they in theprogram, United States Other financial information the represent 2016 Annualthe Report is consistent with thatofinthe theAudit consolidated financial statements.

Waite, Chairman Committee Keith Hesterberg, Presidentstewardship and cash patronageDenise dividends. ongoing operational and financial of our

FresnoTo Madera Farm Credit, ACA Executivedepends Officer on the Association’s accounting meet its responsibility for reliable financial information,Chief Management membership,Fresno and Madera on behalf the board of directors Fresnoand Madera PCA,control FLCA systems, which have been FarmofCredit, ACA internal designed to provide reasonable, but not absolute, assurance that Fresno Madera PCA, FLCA are safeguarded andmillion transactions authorized recorded.

To monitor compliance, This year, FMFC will assets be distributing $9.25 of are andproperly the staff, we want and to thank the membership for your the Association engaged CoBank, ACB’s Internal Audit staff to perform audits of the accounting records, review

cash patronage to the members which amounts to andcontinued of FMFC. Your ongoing loyalty and accounting systems and internal controls, recommendsupport improvements as appropriate.

The consolidated financial statements are examined by PricewaterhouseCoopers LLP, independent auditors.

The Association also examined 0.75% of our patronage sourced volume for 2016 support are critical to our continued success as iswe focus by the Farm Administration.

Jeff Yribarren, ViceCredit Chairman of the Audit Committee

Joe Soto, Senior Vice President and

and 51% of our patronage sourced This on delivering theFinancial capacity that you need to operate Fresno Madera Credit, earnings.

ACA Chief Officer The AuditFarm Committee of the Board of Directors has overall responsibility for the Association’s system of internal Fresno Madera PCA, FLCA Fresno Madera Farm Credit, ACA patronage paymentcontrol is a and 47% increase fromThethe your farmsmeets and ranches – in good times and bad. financial reporting.

Audit Committee and consults regularly with Management and the Fresno Madera PCA, FLCA and to carry out the Board’s auditors to review the manner in which these groups are performing their responsibilities oversight role with respect to auditing, internal controls, and financial reporting matters. These auditors also have direct access to the Audit Committee.

The undersigned certify that the Fresno Madera Farm Credit, ACA 2016 Annual Report has been prepared and

Daniel reviewed Errotabere, Audit Committee Daniel W. Kiggens, Senior Vice President and in accordance with all applicable statutory or regulatory requirements, and that the information contained Fresnoherein Madera Farmaccurate, Credit, ACA Chief Credit Officer is true, and complete to the best of our knowledge and belief.

Fresno Madera PCA, FLCA Fresno Madera Farm Credit, ACA Fresno Madera PCA, FLCA March 16, 2017

Keith President and KeithHesterberg, Hesterberg Chief Officer CHIEFExecutive EXECUTIVE OFFICER Fresno Madera Farm Credit, ACA Fresno Madera PCA, FLCA

Jeff Yribarren, Vice Chairman of the Audit Committee Fresno Madera Farm Credit, ACA Fresno Madera PCA, FLCA

Joe Soto, Senior Vice President and Chief Financial Officer Fresno Madera Farm Credit, ACA Fresno Madera PCA, FLCA

Daniel Errotabere, Audit Committee Fresno Madera Farm Credit, ACA

Daniel W. Kiggens, Senior Vice President and Chief Credit Officer

2016 ANNUAL REPORT

FRESNO MADERA FARM CREDIT

Jeff Jue,Denise Chairman of the Board (Ex-officio) Jeffrey Jue Waite, Chairman of the Audit Committee Fresno Madera Farm Credit, ACA ACA Fresno Farm Credit, CHAIRMAN OFMadera THE BOARD Fresno Madera PCA, FLCA Fresno Madera PCA, FLCA

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2016 Y E A R IN RE V I E W INFORMATION AS OF 12/31/16

TOTAL VO LU M E O U T STA N D IN G BY CO M M O D IT Y

11%

A lm o n d s Ag Related B u si ness

8%

2 0%

Oth er

8%

Vegetables & Melons Tr ee F r ui t

8%

D ai r y Rai s i n s

2 7%

8% 3%

Wi n e & T ab le Grapes

7%

B eef & Li ves tock

LOA N P RIN C IPA L CO M P O SIT IO N

34%

47%

BY COUNTY

FRESNO MADERA FARM CREDIT

19%

4

65%

18%

BY TYPE

8% 3%

6%

Fresno

Real Estate Mortgage

Madera

Production & Intermediate Term

Other

Processing and Marketing Cooperatives

2016 ANNUAL REPORT

Lease Receivables

1,122,152

20

16

1 , 1 32 , 087

15

1 , 05 2 , 489

20

20

20

13

12 20

18.48%

16 20

1 7. 5 4 %

15 20

1 7. 4 8 %

20

14

1 7. 67 %

20

13

1 7. 6 8 %

20

12

16 20

15 20

40.2%

42.0%

43.0%

14 20

49.7%

20

13

45.0%

12 20

14

9 7 5 , 36 3

1 , 05 6 , 7 46

20

15

16

1 , 002 , 1 09

20

20

13 20

20

1.84%

20

P E RMA NE NT CA PI TA L RATI O

E F F I C I E NC Y RAT I O

16

1.60%

15 20

1.63%

14 20

1.51%

13 20

14

9 2 8, 1 31

12

16

1 6 , 6 37

20

20

15

15,792

14

1 4, 2 5 7

20

13

1 3, 9 88

20

12 20 20

12

1.53%

RETURN ON AVERAGE ASSETS

995,557

DOLL ARS IN TH O USA NDS

1 , 07 2 , 86 8

TOTA L ASSE TS

DOLL ARS IN THOU SANDS

9 48, 443

LOA N P RI NC I PA L 2 0, 37 7

N ET INCO ME DO L L A R S I N T H O U SAN D S

PAT RONAG E DIS T R IBU T IONS More than $32 Million declared since 2012 DOLL ARS IN THOU SANDS

9 , 251 6, 47 8 6 , 29 3 5, 498

20 12

20 13

2 01 4

2 01 5

2 01 6

2016 ANNUAL REPORT

FRESNO MADERA FARM CREDIT

4 , 570

5

2016 BOARD OF DIRECTORS

BOTTOM LEFT TO RIGHT

Fred Fagundes, Lance Shebelut, Jeff Yribarren, Edward Martinazzi, Jeffrey Jue TOP LEFT TO RIGHT

Daniel Errotabere, Steve Schafer, Denise Waite, John Simpson, Victor Sahatdjian

EXECUTIVE MANAGEMENT TEAM

Keith Hesterberg

FRESNO MADERA FARM CREDIT

CHIEF EXECUTIVE OFFICER

6

CHIEF CREDIT OFFICER

Stephanie Graham

CHIEF ADMINISTRATIVE OFFICER

2016 ANNUAL REPORT

Joe Soto

Dan Kiggens

David Ylarregui

CHIEF FINANCIAL OFFICER

SVP FIELD OPERATIONS

GIVING BACK to t h e Com m un it y

At Fresno Madera Farm Credit, we believe that supporting our community is an essential part of serving our mission.

That’s why we are proud to help sustain a wide variety of programs and events that promote the future of agriculture. In 2016, we donated more than $131,000 to local non-profit organizations and ag-related programs.

In addition to the monetary donations, our staff also volunteered at various events to further support these organizations and programs. It’s through the dedication and efforts of our staff that we are able to impact the future of agriculture.

FR E S N O MA D ER A FA R M CR ED IT ’S

NEW CLAIM TO FAME

Nothing says farming, food and fun like The Big Fresno

To be nominated and inducted into The Big Fresno Fair

Fair, and nothing demonstrates Fresno Madera Farm

Hall of Fame is a sincere honor for Fresno Madera Farm

Credit’s commitment to this time honored tradition

Credit. For years, we’ve sponsored the Champions Club,

like our 2016 induction into The Big Fresno Fair Hall of

belt buckles, livestock auction add-ons and hosted the

Fame.

4-H/FFA breakfasts held 4 mornings during the fair.

Most recently, we supported the new Toolbox program,

Established in 2007, the Hall of Fame honors those

in which 4-H and FFA leaders submit applications for

who demonstrate long-time continued support and

deserving students in need of tools to further their

extraordinary passion for the

education or future career goals.

betterment of The Big Fresno Fair. “The Hall of Fame provides

Above

an

monetary support, our staff

opportunity

FRESNO MADERA FARM CREDIT

announce

8

and

to

publicly

display

our

spent

and

beyond

numerous

the

volunteer

appreciation for those who

hours working at the livestock

have shown the highest level

auction,

of commitment to the Fair,” said

and conducting Champions of

John C. Alkire, CEO of The Big

Excellence interviews. Standing

Fresno Fair. “Each one of the

behind

inductees has demonstrated

ranchers – young and old, new

cooking

our

breakfasts

farmers

and

immense support and extraordinary desire to see The

and experienced, small and large – is just what we do.

Big Fresno Fair improve for our community each year.

We take pride in providing reliable access to credit and

It is because of them that the traditions of the Fair

other financial services because we are fulfilling our

continue to thrive year after year.”

mission and investing in the future of agriculture.

2016 ANNUAL REPORT

REPORT OF

REPORT OF MANAGEMENT

MANA G Estatements M E NofTFresno Madera Farm Credit, ACA (Association) are prepared and reviewed The consolidated financial

by Management, who is responsible for their integrity and objectivity, including amounts that must necessarily be based on judgments and estimates. In the opinion of Management, the accompanying financial statements fairly present financial condition and results of operations of the Association, in conformity accounting financial principles statements The the consolidated financial statements of Fresno as appropriate.

Thewith consolidated generally accepted in the United States of America. Other financial information included inRthe 2016 OF Annual Report is EPORT M ANAGEMENT REPORT OF MANAGEMENT Madera Farm Credit, ACA (Association) are prepared are examined by PricewaterhouseCoopers LLP, consistent with that in the consolidated financial statements. and reviewed by Management, who is responsible

independent auditors. The Association is also examined

To meet its responsibility for reliable financial information, Management depends onofthe Association’s accounting The consolidated financial statements of Fresno Madera Credit, ACA The consolidated financial statements Fresno Madera Farm Credit, ACA (Association) areFarm prepared and(Ar forinternal their integrity and objectivity, amounts byisreasonable, the Farm Credit Administration. by Management, is responsible for their amounts integrity and objectivity, includ and control systems, which haveincluding beenbydesigned to provide but absolute, that including Management, who responsible fornot their integrityassurance andwho objectivity, that must neces based on judgments and estimates.

In the opinion of Management, the ac assets safeguarded andbetransactions properly authorized andestimates. recorded.InTo the the accompanying based on judgments and themonitor opinion compliance, of Management, financial stateme that are must necessarily based onare judgments and present the financial condition and results of operations of the Association, in Association engaged CoBank, ACB’s Internal present Audit staff to perform auditsand of results the accounting records, review the financial condition of operations of the Association, conformity with accounting p generally accepted in the Statesin ofhas America. Other financial informatio estimates.

In the opinion of Management, the The Audit Committee of the Board ofUnited Directors accounting systems and internal controls, and recommend improvements as appropriate.

The consolidated financial generally accepted in the United States of America.

Other financial information included in the 2016 Annual consistent with that in the consolidated financial statements. statements are examined

by PricewaterhouseCoopers LLP, independent The Association is alsoAssociation’s examined accompanying financial statements fairly overall responsibility forstatements. the system consistent that in the auditors. consolidated financial REPORT OFpresent Mwith ANAGEMENT To meet its responsibility for reliable financial information, Management de by the Farm Credit Administration. and internal control systems, which haveThe been on designed to provide reason the financial condition and results To of meet operations of internal control and financial reporting. its responsibility for reliable financial information, Management depends the Association’s acc assets are safeguarded and transactions are properly authorized and re The Audit Committee of the Board of Directors has overall responsibility for the Association’s system of internal and internal control systems, which have been designed to provide reasonable, but not absolute, assura The financialinstatements of Fresno Farm Credit, ACA (Association) prepared and consults reviewed of consolidated the Association, conformity with Madera accounting Audit Committee are meets and regularly Association engaged CoBank, ACB’s Internal Audit staff to perform audi control and financial The for Audit Committee meets and consults regularly with Management and the assets are safeguarded and transactions are properly authorized and recorded.

To monitor complia

by Management, whoreporting. is responsible their integrity and objectivity, including amounts that must necessarily accounting systems and internal controls, and recommend improvements as principles generally accepted in thegroups United States with Management and the auditors tobereview the auditors to review the manner in which these are performing their responsibilities and to carry out the Board’s Association engaged CoBank, ACB’s Internal Audit staff to perform audits of the accounting records statements are examined

by PricewaterhouseCoopers LLP, independent aud based on judgments and estimates. In the opinion of Management, the accompanying financial statements fairly oversight role with respect to auditing, internal controls, reporting matters.

These auditors also have by the Farm Creditare Administration. of America.

Other financial included infinancial manner which these groups performing accounting systems and internal controls, and recommend improvements astheir appropriate. The consolidated present the financial condition andinformation results of operations ofand the Association, inin conformity with accounting principles direct access to the Audit Committee. statements are examined by PricewaterhouseCoopers LLP, independent auditors.

The is also ef R EPORT OF M ANAGEMENT Audit of the isBoard of Directors hasAssociation overall responsibility generally accepted the United States of America.

Otherinfinancial included inThe thecarry 2016Committee Annual REPORT OF and MANAGEMENT the 2016 Annualin Report is consistent with that the information responsibilities to out theReport Board’s oversight control and financial reporting. The Audit Committee meets and consults by the Farm Credit Administration. consistent with that in the consolidated financial statements.

The undersigned certify that the Fresno Madera Farm Credit, ACA 2016 Annual Report has been prepared and to review the manner in which these consolidated financial statements. role with respect toauditors auditing, internal controls, andgroups are performing their resp reviewed instatements accordance applicable statutory orfinancial regulatory requirements, andof that information contained The Audit Committee ofofthe Board Directors has overall responsibility Association’s system of TheFarm consolidated statements Fresno Madera Farm Credit, ACA (Association) are andthe reviewed oversight role with respect to prepared auditing,for internal controls, and financial repo Tofinancial meet its responsibility forall reliable financial information, Management depends on thethe Association’s accounting The consolidated ofwith Fresno Madera Credit, ACA (Association) are prepared and reviewed financial reporting matters.

These auditors also have herein isistrue, accurate, complete to the best of our knowledge and belief. by Management, who is to responsible for their integrity and objectivity, including amounts that must necessarily direct access to the Audit Committee. control and financial reporting.

The Audit Committee meets and consults regularlybewith Management and internal control systems, which have been designed provide reasonable, but not absolute, assurance that

by Management, who responsible forand their integrity and objectivity, including amounts that must necessarily be based on auditors estimates.

In the opinion of Management, theare accompanying financial statements fairly and to carry out the toand review thedirect manner in which these groups performing their responsibilities To and meet its responsibility for reliable financial access to the Committee. assets are estimates. safeguarded andopinion transactions arejudgments properly authorized andfinancial recorded.

To Audit monitor compliance, the The undersigned certify that the Fresno Madera Farm Credit, ACA 2016 A based on judgments In the of Management, the accompanying statements fairly present the financial condition and results of operations of the Association, in conformity with accounting principles oversight role with respect to auditing, internal controls, and financial reporting matters.

These auditors reviewed in accordance with all applicable statutory or regulatory requiremea Association engaged CoBank, ACB’s Internal Audit staff to perform audits of the accounting records, review present the financial condition of operations of the accepted Association, in conformity accounting principles March 16, 2017 and results generally United States of with America.

Other financial information included in the 2016 Annual Report is information, Management depends onin thethe herein is true, and complete to the best of our knowledge and belie direct access to the Audit financial Committee. accounting systems andofinternal controls, and recommend improvements as consolidated financial generally accepted in the United States America.

Other financial included in theappropriate.

2016 AnnualThe Report is accurate, consistent withinformation that in the consolidated statements.

Association’s accounting andstatements. internal control systems, The undersigned certify thatisthe Fresno Madera Farm statements are examined

by PricewaterhouseCoopers LLP, independent auditors.

The Association also examined consistent with that in the consolidated financial To meet its responsibility for reliable financial information, Management depends on the Association’s accounting The undersigned certify that the Fresno Madera Farm Credit, ACA 2016 Annual Report has been prepa March 16, 2017 bywhich the Farm Credit Administration. have been designed to provide reasonable, but Credit, ACA 2016 Annual Report has been prepared andand that and internal control systems, which have been designed to provide reasonable, but not absolute, assurance that the information co reviewed independs accordance all applicableaccounting statutory or regulatory requirements, To meet its responsibility for reliable financial information, Management on with the Association’s assets are safeguarded andKeith transactions are properly authorized and recorded. To monitor compliance, the Denise Waite, Chairman of the Audit Committee Hesterberg, President and herein is true, accurate, and complete to the best of our knowledge and belief.

The Committee of the Board ofAssociation Directors has overall responsibility forAudit Association’s system of the internal and internal control systems, which have been designed toare provide reasonable, but not absolute, assurance that notAudit absolute, assurance that assets safeguarded reviewed intheaccordance with all of applicable statutory engaged CoBank, ACB’s Internal staff to perform audits accounting records, review Fresno Madera Farm Credit, ACAproperly Chief Executive Officer control and reporting.

The Audit Committee meets and consults regularly with Management and the assets OF areM safeguarded andfinancial transactions are authorized and recorded.

To and monitor compliance, the as appropriate. accounting systems and internal controls, recommend improvements The consolidated financial REPORT ANAGEMENT and transactions are properly authorized and recorded. or regulatory requirements, and that the information Denise Waite, Chairman of the Audit Committee Keith Hesterb FresnoCoBank, Madera PCA, Madera Farm Credit, ACA auditors to review theFLCA manner whichstatements thesetogroups are their responsibilities and to carryauditors. out theThe Board’s are examined

by Fresno PricewaterhouseCoopers LLP, independent Association is also examined Association engaged ACB’s InternalinAudit staff perform audits of the accounting records, review March 16,performing 2017 Fresno Madera Farm Credit, ACA Chief Executiv Fresno Madera PCA, FLCA byinternal theimprovements Farm controls, Credit Administration.

Toand monitor compliance, the Association engaged contained herein is true, accurate to the oversight role with respectand to recommend auditing, and financial reporting matters.

These auditorsand alsocomplete have accounting systems internal controls, as appropriate.

The consolidated financial

Fresno Madera PCA, FLCA nts of Fresno Madera Farm Credit, ACA (Association) are prepared and reviewed direct access to the Audit Committee. statements areobjectivity, examined byACB’s PricewaterhouseCoopers LLP,to independent auditors.

The is also responsibility examined The Audit Committee of the Board of Association Directors overall for the Association’s system of internal CoBank, Internal staff perform audits best of our has knowledge and belief. e for their integrity and including amounts thatAudit must necessarily be control and financial reporting. The Audit Committee meets and consults regularly with Management and the by the Farm Credit Administration. s. In the opinion of Management, the accompanying financial statements fairly The undersigned certify that the Fresno Madera Farm Credit, ACA 2016 Annual Report has been prepared and of the accounting records, reviewauditors accounting systems to review the manner in which these groups are performing their responsibilities and to carry out the Board’s results ofThe operations thereviewed Association, in conformity with principles Denise Waite, Chairman of the Audit Committee KeithThese Hesterberg, President accordance withaccounting all applicable statutory or respect regulatory requirements, and that the information Audit of Committee of in the Board of Directors hasAudit overall responsibility forto the Association’s system internal oversight role with auditing, internal controls, andof financial reportingcontained matters. auditors also have and Jeff Yribarren, Vice Chairman of the Committee Joe Soto, Senior Vice President and ates of America. Other financial information included in theand 2016recommend Annualdirect Report is and internal controls, improvements March 16, 2017 Fresno Madera Farm Credit, ACA Chief Executive Officer access to the Audit Committee.

Jeff Yribarren, Vice Chairman of the Audit Committee herein is true, accurate, and complete to the best of our knowledge and belief. control and financial reporting.

The Audit Committee meets and consults regularly with Management and the Chief Financial Officer ated financial statements. Fresno Madera Farm Credit, ACA Fresno Madera Farm Credit, ACA

Fresno Mader Fresno Mader

Joe Soto, Seni

Chief Financia Fresno Madera PCA, FLCA Fresno Farm Credit, auditors to reviewFresno the manner inPCA, which these groups are performing their responsibilities and toFarm carry out the Board’s The undersigned certify thatFresno the Fresno Madera Farm Credit, ACA 2016 Annual Report hasMadera been prepared and ACA Madera FLCA Madera Credit, ACA Fresno Madera PCA, FLCA Fresno Mader le financial information, on theinternal Association’s accounting Fresno Madera PCA, FLCA reviewed accordance with Fresno all applicable statutory or regulatory requirements, and that the information contained oversight roleManagement with respectdepends to auditing, controls, and in financial reporting matters.

These auditors also have Madera PCA, FLCA Fresno Mader March 16, 2017 but not absolute, assurance h have been designed to provide reasonable, that herein is true, accurate, and complete to the best of our knowledge and belief. direct access to the Audit Committee.

sactions are properly authorized and recorded. To monitor compliance, the B’s Internal staff to perform of the accounting review ACA 2016 Annual Report has been prepared and TheAudit undersigned certify audits that the Fresno Maderarecords, Farm Credit, March 16, 2017 ntrols, and recommend improvements as appropriate.

Thestatutory consolidated financial requirements, and that the information contained reviewed in accordance with all applicable or regulatory Daniel Errotabere, Committee Daniel W. Kigg JeffYribarren Yribarren, Vice Chairman of the AuditVice Committee Joe Soto, Senior Vice President and Denise Waite The Jeff Daniel Errotabere Daniel Errotabere, Audit Committee W. Kiggens, Senior President andAudit waterhouseCoopers LLP, independent auditors.

Association isofalso examined Deniseand Waite, Chairman of the Committee Keith Hesterberg, President and herein is true, accurate, complete to the bestAudit our knowledge and belief. Daniel

Fresno Farm Credit, ACA Chief Credit O AUDIT COMMITTEE CHAIR AUDIT VICE CHAIR AUDITMadera COMMITTEE MEMBER FresnoCOMMITTEE MaderaChief Farm Credit, ACA Chief Financial Officer Fresno Madera Farm Credit, ACA Credit Officer Fresno Madera PCA,Farm FLCACredit, ACA Fresno Mader Fresno ACA Chief Executive Fresno Madera Madera Farm Farm Credit, Credit, ACA Fresno Madera Farm Credit, ACA Officer Fresno Madera Fresno Madera PCA, FLCA Fresno Madera Farm Credit, ACA Fresno PCA, FLCA Fresno Madera Waite, Chairman of PCA, the Audit Committee Keith Hesterberg, and Fresno Mader FresnoMadera Madera PCA, FLCA Fresno Madera FLCA Fresno MaderaPresident PCA, FLCA d of Directors has overall responsibility for the Association’s system ofDenise internal Fresno Madera PCA, FLCA Fresno Madera Farm Farm Credit, Credit, ACA ACA Fresno Madera PCA, FLCA 16, 2017 Madera Farm Credit, Fresno ACA Chief Executive Officer Madera PCA, FLCA he Audit March Committee meets and consults regularly with Management Fresno and the Fresno Madera PCA, FLCA Fresno Madera PCA, FLCA Fresno Madera Farm Credit, ACA

hich these groups are performing their responsibilities and to carry out the Board’s ting, internal controls, and financial reporting matters. These auditors also have ee.

FRESNO MADERA FARM CREDIT

Fresno Madera PCA, FLCA Jeff Jue, Chairman of the Board (Ex-officio) Fresno Madera Farm Credit, ACA Daniel Errotabere,President Audit Committee Daniel W. Kiggens, Senior Vice President and Denise Waite, Chairman of Annual the Audit Committee and Jeff Jue Fresno Madera Farm Credit, ACA 2016 has been prepared andKeith Hesterberg, Jeff Jue, Chairman of the Board Fresno Jeff Yribarren, ViceReport Chairman of(Ex-officio) the Audit Committee Joe Soto, Senior Vice President andMadera PCA, FLCA Fresno Madera Farm Credit, ACA Chief Credit CHAIRMAN OF THE BOARD Fresno Madera Farm Credit, ACA Chief Executive Officer Jeff Yribarren, Vice Chairman of the Audit Committee Joe Soto, Senior Vice President and Officer plicable statutory or regulatory requirements, and that the information contained Fresno Madera Farm Credit, ACA Fresno Madera Farm Credit, ACA Chief Financial Officer Fresno Madera Farm Credit, ACA Fresno Madera PCA, Credit, FLCA Fresno Madera Farm Credit,Farm ACA Chief Financial Officer Fresno Madera Farm Credit, ACA ete to the best of our knowledge and belief.

Fresno Madera PCA, FLCA Fresno Madera ACA Fresno Madera PCA, FLCA Fresno FLCA Fresno Madera Farm Credit, Fresno ACA Madera Farm Credit, Fresno Madera Madera PCA, PCA, FLCA Fresno Madera PCA, FLCA PCA, ACA Fresno Madera PCA, FLCA Fresno Madera FLCA Fresno Madera PCA, FLCA Fresno Madera PCA, FLCA

Committee (Ex-officio)Daniel W. Kiggens, Senior Vice President and JeffSoto, Jue,Audit Chairman ofPresident the Boardand Jeff Yribarren, Vice Chairman of the Audit Committee Daniel Errotabere, Joe Senior Vice Joe Soto Daniel W.Officer Kiggens Daniel W. Kiggens, Senior Vice President and Fresno Madera Farm Credit,Officer ACA Chief Credit Fresno Madera Farm Credit, ACA Chief Financial SENIOR VICE PRESIDENT AND CHIEF SENIOR VICE PRESIDENT AND CHIEF Fresno Madera PCA, FLCA Chief Credit Officer Fresno Madera Farm Credit, ACA FresnoMadera Madera PCA, Credit, FLCA ACA Fresno Farm FINANCIAL OFFICER CREDIT OFFICER Madera PCA, FLCA Fresno Madera Farm Credit, Fresno ACA Fresno Fresno Madera Farm Credit, ACA FresnoMadera MaderaFarm PCA,Credit, FLCA ACA Fresno Madera PCA, FLCA Fresno Madera PCA, FLCA Fresno Madera PCA, FLCA

Keith Hesterberg Daniel Errotabere, Audit and Committee dit Committee Keith Hesterberg, President Fresno Madera Farm Credit, ACA PRESIDENT AND CHIEF EXECUTIVE Fresno Madera Farm Credit, ACA Chief Executive Officer Fresno Madera PCA, FLCA OFFICER Fresno Madera PCA, FLCA Fresno Madera Farm Credit, ACA Fresno Madera Farm Credit, ACA Fresno Madera PCA, FLCA Fresno Madera PCA, FLCA

Jeff Jue, Chairman of the Board (Ex-officio)

Fresno Madera Farm Credit, ACA e Audit Committee JoeAudit Soto, Senior Vice President and Daniel Errotabere, Committee Daniel W. Kiggens, Senior Vice President and Fresno Madera PCA, FLCA Jeff Jue, Chairman Chief Financial Officerof the Board (Ex-officio) Fresno Madera Farm Credit, ACA Chief Credit Officer FresnoMadera Madera Farm Credit, ACA Fresno Fresno Madera PCA, FLCA Farm Credit, ACA Fresno Madera Farm Credit, ACA 2016 ANNUAL REPORT Fresno Madera PCA, FLCA 10 Fresno Madera PCA, FLCA

Fresno Madera PCA, FLCA

AU D I T CO MMIT TEE

REPORT The Audit Committee (Committee) is comprised of four

generally accepted in the United States of America. PwC

members from the Board of Directors of Fresno Madera

is responsible for performing an independent audit of

Farm Credit, ACA (Association). In 2016, eight Committee

the Association’s consolidated financial statements in

meetings were held. The Committee oversees the

accordance with auditing standards generally accepted

scope of the Association’s internal audit program, the

in the United States of America and to issue a report

independence of the outside auditors, the adequacy

AUDIT COMMITTEE RE thereon. The Committee’s responsibilities include

of the Association’s system of internal controls and

monitoring and overseeing these processes.

procedures, and the adequacy of management’s action

The Audit Committee (Committee) is comprised of four membe

with respect to recommendations arising from those

Madera Farm Credit, ACA In this context, the Committee reviewed and (Association). discussed In 2016, eight Commit

auditing activities. The Committee’s responsibilities are described more fully in the Internal Controls Policy and

the Association’s Quarterly Reports of and theAssociation’s Association’s the adequacy the system of internal controls management’s action with audited financial statements for the yearrespect endedto recommendations arisi

the Audit Committee Charter.

December 31, 2016 Committee (the “Financial Statements”) with Charter.

The

Committee

approved

the

appointment

of

PricewaterhouseCoopers, LLP (PwC) as the Association’s

oversees the scope of the Association’s internal audit program,

Committee’s responsibilities are described more fully in the

management. The Committee also reviews with PwC The Committee approved the appointment of PricewaterhouseC auditors by for Statements 2016. The fees for professional serv the matters requiredindependent to be discussed

independent auditor, PwC, during 2016 were $63,700 for audi

independent auditors for 2016. The fees for professional

on Auditing Standards.

Both PwC and the Committee reviewed theAssociation’s non-audit services provided by PwC incompatible maintaining the independent auditor’s indepen internal auditors directly providewith reports on significant

services rendered for the Association by its independent

matters to the Committee.

Management is responsible for the Association’s internal control

auditor, PwC, during 2016 were $63,700 for audit services, $15,325 for tax services. The Committee reviewed the non-audit services provided by PwC and concluded these services were not incompatible with

financial statements in accordance with accounting principles g America. PwC is responsible for performing an independent financial statements in accordance with auditing standards ge Based on the foregoing review and discussions and America and to issue a report thereon. The Committee’s respons relying thereon, the Committee recommended that the these processes.

Board of Directors include the Financial Statements in

In this context, the Committee reviewed and discussed the A

maintaining the independent auditor’s independence.

the Association’s Annual Report toaudited Shareholders the Association’s financialforstatements for the year ende Statements”) with management.

The Committee also review year ended December 31, 2016 and for filing with the

Management is responsible for the Association’s internal

Farm Credit Administration. provide reports on significant matters to the Committee.

controls and the preparation of the consolidated financial statements in accordance with accounting principles

discussed by Statements on Auditing Standards. Both PwC and

Based on the foregoing review and discussions and relying there March 2017 Statements in the Assoc Board of Directors include the16, Financial the year ended December 31, 2016 and for filing with the Farm C

March 16, 2017

Denise Waite, AUDIT COMMITTEE CHAIR

Denise Waite, Chairman of the Audit Committee

FRESNO MADERA FARM CREDIT

AUDIT COMMITTEE MEMBERS Audit Committee Members Denise Waite, AUDIT COMMITTEE CHAIRCommittee Denise Waite, Chairman of the Audit Jeff Yribarren, Vice Chairman ofCHAIR the Audit Committee Jeff Yribarren, AUDIT COMMITTEE VICE Daniel Errotabere Daniel Errotabere, AUDIT COMMITTEE MEMBER Jeff Jue, Chairman of the Board (Ex-officio) Jeff Jue, CHAIRMAN OF THE BOARD

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Report of Independent Auditors

To the Board of Directors of Fresno Madera Farm Credit, ACA We have audited the accompanying consolidated financial statements of Fresno Madera Farm Credit, ACA, and its subsidiaries (the Association), which comprise the consolidated statement of condition as of December 31, 2016, 2015, and 2014, and the related consolidated statements of comprehensive income, of changes in members’ equity, and of cash flows for the years then ended.

Management's Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility Our responsibility is to express an opinion on the consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Association’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Association's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Fresno Madera Farm Credit, ACA and its subsidiaries as of December 31, 2016, 2015, and 2014 and the results of their operations and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

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March 16, 2017

PricewaterhouseCoopers LLP, 1100 Walnut, Suite 1300, Kansas City, MO 64106 T: (816) 472 7921, F: (816) 218 1890, www.pwc.com/us 2016 ANNUAL REPORT

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The accompanying notes are an integral part of these consolidated financial statements.

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The accompanying notes are an integral part of these consolidated financial statements.

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The accompanying notes are an integral part of these consolidated financial statements.

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The accompanying notes are an integral part of these consolidated financial statements.

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MADERA

KINGSBURG

4635 West Spruce Fresno, CA 93722 (559) 277-7000

305 North "I" Street Madera, CA 93637 (559) 674-2437

1698 Draper Street Kingsburg, CA 93631 (559) 419-5411

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