Fitch Affirms Farm Credit System Ratings; Outlook Stable

Business Wire, May 28, 2008

NEW YORK -- Fitch has affirmed the long-term Issuer Default Rating (IDR) and short-term IDR of the Farm Credit System at 'AAA' and 'F1+', respectively. In addition, Fitch affirmed the debt rating for the system debt issued by the Federal Farm Credit Banks. The Rating Outlook is Stable.

Fitch has affirmed the following ratings with at Stable Outlook:

Farm Credit System

--Long-term IDR at 'AAA';

--Short-term IDR at 'F1+';

--Support at '1';

--Support Floor at 'AAA'.

Federal Farm Credit Banks

--Senior Debt at 'AAA'.

The Farm Credit System (the System) is a Government Sponsored Enterprise (GSE). The System was created by Congress in 1916 to provide a reliable source of credit and liquidity to the U.S. agricultural community. Today, the System operates through 94 Associations (lenders to farmers, ranchers and other qualified borrowers), which are cooperatively owned and are organized within five District Banks (the Banks). The Banks (CoBank, ACB, AgFirst FCB, U.S. AgBank, FCB, AgriBank, FCB and Farm Credit Bank of Texas) jointly own the Federal Farm Credit Banks Funding Corporation (Funding Corp), which acts as their agent in the issuance of Federal Farm Credit Banks consolidated systemwide debt. The five Banks are jointly and severally liable for the Federal Farm Credit Banks systemwide debt securities. As of March 31, 2008, systemwide debt outstanding totaled $165.1 billion, all of which is senior in ranking, and comprised of $146 billion in bonds, $1.5 billion in medium term notes and $17.6 billion in discount notes.

As a GSE, the System fulfills an important public mission, helping to promote a healthy agricultural industry by ensuring that there is reliable availability of credit and liquidity for creditworthy agricultural borrowers. Neither the System nor any of its constituent entities, including the Associations and the District Banks, are guaranteed by the U.S. government. That said, Fitch believes that if the System were in need of support, it is extremely likely that it would be provided. In the late 1980s, the System benefited from support in the form of access to funding that was issued with a guarantee from the U.S. Treasury. That debt and all associated interest has been repaid by the System.

The System has adopted prudent risk management and corporate governance standards. Strong credit underwriting and risk monitoring throughout the organization, along with a healthy agricultural economy, has resulted in excellent asset quality and reasonable interest rate risk sensitivity. The System benefits from good diversification by geography, borrower and crop/product. In addition, borrower repayment capacity is enhanced by the increasing number of borrowers with off-farm income. Loan loss reserves and very solid capital levels throughout the System institutions provide considerable cushion. The System had combined net income of $2.7 billion in 2007.

The Stable Outlook reflects Fitch's view that the Farm Credit System is well positioned to sustain its current financial strength even in a scenario of significant stress.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.