Dallas P. Tonsager, Chairman and Chief Executive Officer

Jeffery S. Hall, Board Member

MINUTES OF THE REGULAR MEETING

OF THE

FARM CREDIT ADMINISTRATION BOARD

April 13, 2017

These minutes reflect the business transacted at the April 13, 2017, Regular Meeting of the Farm 

Credit Administration Board (FCA Board) pursuant to the Government in the Sunshine Act (Act), 5 

U.S.C. § 552b, and the regulations of the Farm Credit Administration (FCA) adopted thereunder.

The FCA Board meeting was held at the FCA office in McLean, Virginia, beginning at 9:00 a.m. and 

concluding at 10:15 a.m. Members of the Board present were:

Dallas P. Tonsager, Chairman and Chief Executive Officer

Jeffery S. Hall, Member

Chairman Tonsager recognized the recent death of FCA Board Member Kenneth A. Spearman and 

read a statement. Chairman Tonsager directed that his statement be attached to the minutes. (A 

copy is attached as Exhibit A.) 

Mr. Hall also concurred with the remarks of Chairman Tonsager and asked, without objection, that a 

prepared statement of his be attached to the minutes. (A copy is attached as Exhibit B.)

Others present included Charles Rawls, General Counsel; Dale Aultman, Secretary to the Board; staff 

of the FCA; and three members of the general public. (A list of staff attendees is attached as Exhibit 

C.) 

The Secretary read a statement that announced the meeting would be conducted according to the 

requirements of the Government in the Sunshine Act. 

Chairman Tonsager reviewed the published Agenda. (A copy of the Public Announcement publishing 

the Agenda for the meeting is attached as Exhibit D.)

Mr. Hall moved to adopt the Agenda as published. 

1
Chairman Tonsager seconded the motion.

There being no further discussion, Chairman Tonsager called the question.

The Secretary polled the Board Members and the motion carried unanimously.

Mr. Hall noted that the Agenda did include portions of the meeting that should be closed to the 

public as permitted by the Government in the Sunshine Act and therefore moved that the meeting 

be closed at that point. 

Chairman Tonsager seconded the motion.

There being no further discussion, Chairman Tonsager called the question.

The Secretary polled the Board Members and the motion carried unanimously.

OPEN SESSION

Approval of Minutes

Minutes for March 9, 2017

(BM-13-APR-17-01) 

Mr. Hall moved to approve the minutes for March 9, 2017, FCA Regular Board Meeting. 

Chairman Tonsager seconded the motion.

There being no further discussion, Chairman Tonsager called the question.

The Secretary polled the Board Members and the motion carried unanimously. (BM-13-APR-17-01) 

(A copy of the official “Board Action Item” is attached as Exhibit E.)

Reports

Quarterly Report on

Economic Conditions and FCS Condition and Performance

Steve Gabriel of the Office of Regulatory Policy and Hal Johnson of the Office of Examination (OE) 

presented the Quarterly Report on Economic Conditions and Farm Credit System Condition and 

Performance. 

Chairman Tonsager asked if there were any questions or further discussion from the Board. 

There were no further questions or discussion. 

2
(A copy of the PowerPoint presentation is attached as Exhibit F.)

Farm Credit System Building Association Auditor’s Report on 2016 Financial Audit

Rick Albrecht, President of the Farm Credit System Building Association (FCSBA); and Craig Hunter, 

Brynn McNeil and Jeremy Burgess of Cherry Beakert, LLP presented the FCSBA Auditor’s Report on 

the 2016 Financial Audit.

Chairman Tonsager asked if there were any questions or further discussion from the Board.

There was no further discussion. 

(A copy of the PowerPoint presentation is attached as Exhibit G.)

CLOSED SESSION

Chairman Tonsager noted that this was a Closed Session and ensured that members of the public 

and nonessential FCA staff were not in the room so the Board could meet with Office of Examination 

staff in Closed Session. 

Chairman Tonsager convened the closed session of the meeting at 9:52 a.m. and instructed the 

Secretary to activate the electronic recording device so that the proceedings of the closed session 

were properly recorded as required by the Government in the Sunshine Act. 

Chairman Tonsager then instructed the General Counsel to furnish the Secretary with a certification, 

pursuant to 5 U.S.C. § 552b(f), that the portions of the meeting held in closed session may be 

properly closed to the public. 

(A copy of the Certification is attached hereto as Exhibit H.) 

Members of the Board present were:

Dallas P. Tonsager, Chairman and Chief Executive Officer

Jeffery S. Hall, Board Member

Others present included Dale Aultman, Secretary to the Board; and Charles Rawls, General Counsel. 

(A list of staff attendees is attached as Exhibit C).

Office of Examination Quarterly Report

Chairman Tonsager reminded those speaking to state their name before speaking. 

Robert Coleman and Roger Paulsen of the Office of Examination presented the OE Quarterly Report.

Chairman Tonsager thanked the OE staff at the conclusion of their report. 

3
CLOSED EXECUTIVE SESSION

Executive Session with External Auditor

Chairman Tonsager announced that the next topic on the Agenda was a closed executive session 

pursuant to previous Board action and 5 U.S.C. § 552b(c)(2). 

Chairman Tonsager instructed all to exit except for Board Members, Executive Assistants, the 

General Counsel, and the Secretary to the Board so that the Board could meet with Craig Hunter, 

Brynn McNeil and Jeremy Burgess as approved by the Board previously. 

Chairman Tonsager reminded those speaking to state their name before speaking and asked the 

Auditors to further discuss the audit. 

Chairman Tonsager asked if there were any questions or further discussion from the Board. 

There was no further discussion. 

ADJOURNMENT

There being no further business to come before the Board, Chairman Tonsager indicated he would 

entertain a motion to adjourn the meeting.

Mr. Hall moved that the meeting be adjourned.

Chairman Tonsager seconded the motion.

Chairman Tonsager called the question. 

The Secretary polled the Board Members and the motion carried unanimously.

The meeting adjourned at 10:15 a.m.

NOTATIONAL VOTE ACTIONS 

There were three notational vote actions approved by the FCA Board from March 10, 2017, through 

April 12, 2017 as follows:

Item Number Action Date Voting Results Subject

NV 17-07 03/14/2017 Approved Request of CoBank, ACB, to redeem the stock of former borrowers in the 

amount of $4,007.

NV 17-08 03/16/2017 Approved Request of CoBank to redeem its floating rate series 2007A subordinated 

notes in the outstanding principal amount of $500 million.

NV 17-09 04/07/2017 Approved Request from AgStar Financial Services, ACA, to invest up to $2.5 million in 

taxable bonds to be issued by a rural continuous care facility in Texas. These 

bonds will provide construction and permanent financing for the expansion 

of the facility on the existing campus.

4
The undersigned hereby certify that the foregoing minutes are the official minutes of the Regular

Meeting of the Farm Credit Administration Board held on April 13, 2017. 

__________/s/_______________ __________/s/_______________

Dallas P. Tonsager Dale L. Aultman

Board Chairman and Chief Executive Officer Secretary to the Board

 Approved: May 11, 2017__

5
Exhibit A

Statement

Dallas P. Tonsager, Chairman & Chief Executive Officer

Farm Credit Administration Board Meeting, April 13, 2017 

I would l ike to note today the passing of our good friend and colleague Ken Spearman. I had the 

good fortune to meet Ken and Maria almost ten years ago at an Agfirst meeting. It was clear from 

the beginning that Ken and Maria were a team. It was also clear that Ken was a gentleman with a big 

heart. That first discussion led to many more over the years -- many of them purposeful about the 

future of rural America but many of them about our families and friends and their wellbeing. 

When I returned here as board member it became clear that Ken’s leadership style was as a 

consensus builder. He was a person who sought out the best ideas and strove to make them happen. 

We have been the beneficiaries of that leadership. As has the Farm Credit System and its members. 

Ken was a gentleman, he always strove to make those around him comfortable. I am grateful to have 

known him and worked with him.

It is our hope to have an event in his memory in the near future where we would look forward to 

Maria and others from Ken’s family joining us.

6
Exhibit B

Statement

Jeffery S. Hall, Board Member

Farm Credit Administration Board Meeting, April 13, 2017 

I would like to add my thoughts and prayers for Ken’s family. While I only knew him for the past two 

years, he was a man of character that I respected both professionally and personally.

During the time I was fortunate enough to serve with him on the FCA Board, he demonstrated a 

vision to improve the agency, based on his previous experience. His combination of talent in 

financial accountability and his quiet yet strong manner lead us through some important changes. I 

always believe that he valued any opinion or suggestions that I might offer.

Personally, I always appreciated his willingness to just sit and talk. The conversation would always 

turn to family and there was no doubt how proud he was of his children and grandchildren. Whether 

it was academics or athletics, there was always something he wanted to share. He would also ask 

about my family and was genuinely interested in my latest news.

There was no doubt of the love and devotion shared between Ken and Maria. They were a model 

and an inspiration. I can’t imagine the loss Maria feels, but I know there is a lifetime of special 

memories, even though their time together was cut short.

Ken was the type of person that you may have not known for a long time, but wish you had known 

him your whole life. I will miss him, but will always be thankful for the opportunity to work with him 

and get to know him. I think this quote applies to Ken’s life, knowing that he passed both the test of 

men and angels.

Reputation is what men and women think of us. Character is what God and the angels know of us. 

Thomas Paine (1737-1809)

7
Exhibit C 

Page 1 of 2 

STAFF PRESENT AT THE 

FCA REGULAR BOARD MEETING

April 13, 2017

Dallas P. Tonsager, Chairman and Chief Executive Officer

Jeffery S. Hall, Board Member

OFFICE

OPEN 

SESSION

CLOSED 

SESSION

EXECUTIVE

SESSION

Office of the Board

Aultman, Dale X X X

Laguarda, Wendy X X X

Middleton, Russell X X

Kramp, Kevin X X X

Calhoun, Gaye X

Corey, Kathryn X

OIT

Shaffer, Jeannie X X

COO

Hoffman, William X X

OCPA

Stokke, Mike X X

Meaux, Willy X X

OSMO

Hudson, Bruce X X

OGC

Rawls, Charles X X X

Donner, Mary Alice X X

Strickland, Joy X X

8
Exhibit C 

Page 2 of 2

OFFICE OPEN 

SESSION

CLOSED 

SESSION

EXECUTIVE

SESSION

OE

Coleman, Robert X X

Paulsen, Roger X X

Johnson, Hal X X

OIG

Dean, Elizabeth X X

ORP

Van Meter, Gary X X

Mardock, Barry X X

Gabriel, Stephen X X

OCFO

Smith, Stephen X X

OAS

Fowlkes, Jerome X X

FCSBA

Albrecht, Rick X

Cherry Beakert, LLP

Hunter, Craig X X

McNeil, Brynn X X

Burgess, Jeremy X X

GENERAL PUBLIC 3

9
Exhibit D 

Farm Credit Administration Farm Credit Administration

 1501 Farm Credit Drive McLean, Virginia 22102-5090

 

PUBLIC ANNOUNCEMENT OF

MEETING SUBJECT TO THE GOVERNMENT IN THE SUNSHINE ACT

Farm Credit Administration Board

Regular Meeting

April 13, 2017 

Summary: Notice is hereby given, pursuant to the Government in the Sunshine Act (5 U.S.C. Sec. 552b (e) (1)), of the 

forthcoming regular meeting of the Farm Credit Administration Board.

Date and Time: The regular meeting of the Board will be held April 13, 2017. The meeting is scheduled to be held at the 

office of the Farm Credit Administration in McLean, Virginia, from 9:00 a.m. until such time as the Board may conclude its 

business.

Address: Farm Credit Administration, 1501 Farm Credit Drive, McLean, Virginia 22102-5090. Submit attendance 

requests via e-mail to VisitorRequest@FCA.gov. See SUPPLEMENTARY INFORMATION for further information about 

attendance requests. 

For Further Information Contact: Dale L. Aultman, Secretary to the Farm Credit Administration Board (703) 883-4009. 

TTY is (703) 883-4056.

Supplementary Information: Parts of this meeting of the Board will be open to the public (limited space available), and 

parts will be closed to the public. Please send an e-mail to VisitorRequest@FCA.gov at least 24 hours before the meeting. 

In your e-mail include: name, postal address, entity you are representing (if applicable), and telephone number. You will 

receive an e-mail confirmation from us. Please be prepared to show a photo identification when you arrive. If you need 

assistance for accessibility reasons, or if you have any questions, contact Dale L. Aultman, Secretary to the Farm Credit 

Administration Board, at (703) 883-4009. The matters to be considered at the meeting are:

OPEN SESSION

Approval of Minutes

1 March 9, 2017 

Reports

2 Quarterly Report on Economic Conditions and FCS Condition and Performance

3 Farm Credit System Building Association Auditor’s Report on 2016 Financial Audit

CLOSED SESSION

4 Office of Examination Quarterly Report1 

CLOSED EXECUTIVE SESSION

5 Executive Session - FCS Building Association Auditor’s Report2

_ April 4, 2017_______ __________/s/_______________

 Date Dale L. Aultman

 Secretary to the Board 1Session Closed-Exempt pursuant to 5 U.S.C. Section 552b(c)(8) and (9).

2Session Closed-Exempt pursuant to 5 U.S.C. Section 552b(c)(2).

10
Exhibit E 

Farm Credit Administration 1501 Farm Credit Drive

 McLean, Virginia 22102-5090

 (703) 883-4000

BOARD ACTION ITEM

 

FCA BOARD ACTION ON

Minutes for March 9, 2017 Board Meeting

BM-13-APR-17-01

Effective Date: April 13, 2017

Effect on Previous Action: None

THE FCA BOARD HEREBY:

 

Approves the minutes for March 9, 2017, Regular Board Meeting as submitted.

DATED THIS 13th DAY OF APRIL 2017 

BY ORDER OF THE BOARD

 

__________/s/_______________

Dale L. Aultman

Secretary to the Board 

11
FCA Board Meeting 

April 2017

Quarterly Report on 

FCS Condition

April 13, 2017

Stephen Gabriel

Hal Johnson Exhibit F

12
Topics for Open Session

2

Economic Conditions Affecting the FCS

FCS Condition and Performance

13
Economic Conditions Affecting 

the Farm Credit System

Stephen Gabriel

Chief Economist

Office of Regulatory Policy

14
Long-term interest rates expected 

to continue to rise

4

Consensus Forecasts (percent)

Red indicates forecast

Q1 

2016

Q2 

2016

Q3 

2016

Q4 

2016

Q1 

2017

Q2 

2017

Q3 

2017

Q4 

2017

Q1 

2018

Q2 

2018

Q3 

2018

Q4 

2018

GDP growth* 0.8 1.4 3.5 1.9 1.6 2.6 2.3 2.4 2.4 2.4 2.3 2.2

CPI* -0.2 2.3 1.8 3.0 3.2 1.8 2.3 2.3 2.3 2.3 2.3 2.4

Unemployment rate 4.9 4.9 4.9 4.7 4.7 4.6 4.6 4.5 4.5 4.5 4.4 4.4

10 Yr T-Bond 1.8 1.5 1.6 2.5 2.5 2.6 2.8 2.9 3.0 3.1 3.3 3.4

Source: Consensus Economics, Inc.

Survey date - March 13, 2017

* % change from prior quarter, seasonally adjusted annual rate

15
Farm sector developments and 

concerns

 USDA projects net farm income to decline 9% in 

2017; however, net cash income will be up 2%

 South America producing record corn and soybean 

crops this year

 Bird flu concerns rise as incident in TN is identified

 Corn and soybean margins near breakeven; wheat 

producers to see 4th year in the red

 Protein and dairy sectors largely profitable due to 

strong demand and low feed costs 5

16
Corn prices may stabilize in 2017

6

6.89

4.46

3.70

3.61

3.40

3.50

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

55%

60%

65%

70%

Ending U.S. Corn Stocks/Use Ratio (left axis)

Average Farm Corn Price - dollars/bu (right axis)

Source: USDA

17
A normal soybean crop will keep 

supplies ample this year

7

14.40 

13.00 

10.10 

8.95 9.60 

9.60 

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

0%

5%

10%

15%

20%

25%

30%

Ending U.S. Soybeans Stocks/Use Ratio (left axis)

Average Farm Soybean Price - dollars/bu (right axis) Source: USDA

18
Lower acreage and yields expected 

to lead to higher wheat prices

8

7.77

6.87

5.99

4.89

3.85

4.30

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

13%

23%

33%

43%

53%

63%

73%

83%

93%

Ending U.S. Wheat Stocks/Use Ratio (left axis)

Average Farm Wheat Price - dollars/bu (right axis) Source: USDA

19
Average corn margins to be near 

breakeven in 2017

9

0.68 

1.63 

0.96 

(0.10)

1.64 

2.23 

1.45 

(0.18) (0.29) (0.23) (0.13) (0.12)

3.03

4.29 4.10

3.59

5.23

6.20

6.92

4.49

3.71 3.52 3.39 3.49

2.66

2.80

3.32

3.84 3.74 4.11

5.66

4.81

4.39

4.02

3.58 3.61

-1.00

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016F 2017F

Dollars per Bushel

Iowa Season-average Corn Profit Margin Estimates

Using Iowa State University Cost of Production Estimates 

Margin w/ Government Payments Iowa Price Total Cost per Bushel

Source: FCA-ORP-AEPT using data from USDA and Iowa State University.

As of 2/23/17 

Record Yields

Help to 

Minimize Losses

20
Record yields increased soybean 

margins in 2016

10

0.28 

4.20 

1.98 

0.06 

2.85 3.55 

2.47 

1.20 

(0.90) (0.60)

0.63 

(0.11)

6.58

10.50 10.20

9.52

11.20

12.60

14.40

13.10

9.96

8.91

9.45

9.55

6.40

6.47

8.42

9.62

8.50

9.20

12.13 12.04

10.91

9.70

8.82

9.66

-2.00

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016F 2017F

Dollars per Bushel

Iowa Season-average Soybean Profit Margin Estimates

Iowa State University Cost of Production Estimates

Margin w/ Gov. Payments Iowa Price Total Cost per Bushel

As of 2/23/17 

Source: FCA-ORP using data from USDA and Iowa State University. 

Record Yields

Help to 

Boost Margins

21
Wheat producers may face 

another year in the red in 2017

11

(1.25)

0.79 0.98 1.53 

0.33 

(4.03)

(2.73)

(0.57) (1.83)

4.79

5.14

7.03 7.48

6.99

6.07

4.74

3.70 4.19

6.40

4.69

6.48 6.32

7.07

10.83 8.03

4.53

6.48

-6.00

-4.00

-2.00

0.00

2.00

4.00

6.00

8.00

10.00

12.00

2009 2010 2011 2012 2013 2014 2015 2016F 2017F

Dollars per Bushel

Kansas Season-average Wheat Profit Margin Estimates

Margin w/ Government Payments Kansas Price Total Cost per Bushel

Source: FCA/ORP/AEPT using data from USDA and Kansas State University.

Notes: For 2014-2017F, government payment is Agriculture Risk Coverage; ARC payment is estimated at $0.46 for 2017, compared 

with $0.94 for Price Loss Coverage. Excludes loan deficiency payments. 

Large loss due to low 

yield and high 

machinery cost.

As of 3/6/17

Small loss due 

to record yield. 

22
The U.S. is the largest world corn 

producer

12

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

Argentina Brazil United States

Source: USDA, FAS

Corn Production (1,000 MT)

23
Brazil’s soybean production has 

nearly caught up to the U.S.

13

0

20000

40000

60000

80000

100000

120000

140000

Argentina Brazil United States

Soybean Production (1,000 MT)

Source: USDA, FAS

24
The U.S. and Brazil compete head 

to head for soybean exports

14

0

10000

20000

30000

40000

50000

60000

70000

Argentina Brazil United States

Soybean Exports (1,000 MT)

Source: USDA, FAS

25
South America challenges U.S. 

corn export dominance

15

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000 Argentina Brazil United States Corn Exports (1,000 MT)

Source: USDA, FAS

26
South American Corn and Soybean 

production growth surpasses U.S.

16

100%

173%

56%

13%

43%

29%

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

200%

Argentina Brazil United States

2000-2016

2010-2016

Soybean Production Growth (% change)

Source: USDA, FAS

144%

120%

53% 49%

59%

22%

0%

20%

40%

60%

80%

100%

120%

140%

160%

Argentina Brazil United States

2000-2016

2010-2016

Corn Production Growth (% change)

Source: USDA, FAS

27
Cow-calf operations continue in 

the red

17

 26,000

 27,000

 28,000

 29,000

 30,000

 31,000

 32,000

 33,000

 34,000

 $(100)

 $-

 $100

 $200

 $300

 $400

 $500

 $600

200020012002200320042005200620072008200920102011201220132014201520162017

Beef Cows (Thousand Head)

$ per Head over Direct Costs

Estimated Average Cow/Calf Returns (Over Cash Costs) & Beef Cow 

Inventory

Net Return ($ per Head) Jan. 1 Beef Cow Inventory

Source: Informa Economics IEG

28
Strong demand benefits hog 

producers’ bottom line

18

 $(60)

 $(40)

 $(20)

 $-

 $20

 $40

 $60

 $80

 $100

 $120

 $140

Jan-10

May-10

Sep-10

Jan-11

May-11

Sep-11

Jan-12

May-12

Sep-12

Jan-13

May-13

Sep-13

Jan-14

May-14

Sep-14

Jan-15

May-15

Sep-15

Jan-16

May-16

Sep-16

Jan-17

May-17

Sep-17

$ per Head

Hog Producer Margins, Cash Based

Source: Informa Economics IEG

29
Broilers to maintain positive 

margins: bird flu concerns

19

 $(20)

 $(15)

 $(10)

 $(5)

 $-

 $5

 $10

 $15

 $20

 $25

 $30

Jan-10

May-10

Sep-10

Jan-11

May-11

Sep-11

Jan-12

May-12

Sep-12

Jan-13

May-13

Sep-13

Jan-14

May-14

Sep-14

Jan-15

May-15

Sep-15

Jan-16

May-16

Sep-16

Jan-17

May-17

Sep-17

Cents per Pound

U.S. Broiler Weighted Margins (80% Cutout/20% Whole)

Informa Economics IEG

30
Dairy margins have been positive 

on stronger milk prices

20

 $(6)

 $(4)

 $(2)

 $-

 $2

 $4

 $6

 $8

 $10

Jan-10

May-10

Sep-10

Jan-11

May-11

Sep-11

Jan-12

May-12

Sep-12

Jan-13

May-13

Sep-13

Jan-14

May-14

Sep-14

Jan-15

May-15

Sep-15

Jan-16

May-16

Sep-16

Jan-17

May-17

Sep-17

Milk Price Minus Estimated Total 

Cost

U.S. Dairy Producer Net Margin

Source: Informa Economics IEG

31
There is continued weakness in 

Midwest farmland markets

21

-13

1

-7

-4 -4

-6

-4

-5

-8

-6 -6

-10

-5

0

-10

-2

-7

-14

-12

-10

-8

-6

-4

-2

0

2

KS Western

MO

Mountain

States

NE OK Kansas

City

District

Nonirrigated Cropland

Irrigated Cropland

Ranchland

Source: Kansas City Federal Reserve Bank

Percent Change from the Previous Year, 4th Quarter 2016

-2

2

-2

-8

3

-1

-10

-8

-6

-4

-2

0

2

4

IL IN IA MI WI Chicago

District

Percent Change in the Value of “Good" Farmland from 

Previous Year, 4th Quarter 2016

Source: Chicago Federal Reserve Bank

n/a

32
Risks to watch

 Growing conditions for U.S. crops

 Bird flu outbreak

 U.S. and global economic growth

 Geopolitical developments

 Interest rates

 Strength of the dollar

 Deteriorating agricultural credit quality 22

33
Questions

THANK YOU

34
Farm Credit System 

Condition and Performance

as of 

December 31, 2016

35
Topics

25

 System Growth

 Loan Portfolio

 Earnings

 Capital

 FIRS

36
System grew at a slower pace in 2016

Source: FCS Annual Information Statements 26

101 111 117 125 

140 

163 

186 

215 230 230 

247 

261 

283 

304 

320 

83 90 93 96 

106 

123 

143 

161 165 175 175 

192 201 

217 

236 249 

9.9% 8.9%

3.1% 3.9%

10.3%

16.2% 15.8%

13.0%

2.1%

6.4%

-0.4%

9.9%

4.8%

8.0% 8.7%

5.5%

Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 $ billions

 Total FCS Assets

 Total Gross Loans

% change in Gross Loans

 (year-over-year)

37
Lending lags for most loan types 

as loan growth slows

27 Source: FCS Annual Information Statements

8.0%

5.9%

4.5%

21.8%

7.3%

8.7%

6.9% 6.3%

11.1%

14.3%

5.5% 6.2%

2.2%

8.3%

5.0%

Total Gross

Loans

Real Estate

 Mortgage

[46%]

Production &

 Intermediate

[20%]

Agribusiness

[16%]

Other

[18%]

2014 2015 2016

District 2014 2015 2016

AgFirst District (11%) 4.9% 7.1% 5.0%

AgriBank District (39%) 6.9% 7.3% 4.3%

CoBank District (41%) 9.2% 10.4% 6.5%

Texas District (9%) 9.2% 9.5% 5.9%

Total FCS 8.0% 8.7% 5.5%

Loan Growth by District 

(% change year-over-year)

38
Portfolio loan quality remains strong, 

but risk indicators were up in 2016

28 Source: FCS Annual Information Statements

Sector Nonaccruals as a % of Loans Outstanding

615 621

2,416

3,535 3,386

2,997

2,608

2,040

1,737 1,629

1,962

0.50% 0.43%

1.50%

2.14%

1.93%

1.72%

1.36%

1.01%

0.80% 0.69% 0.79%

$ millions

 Nonaccrual Loans Other Nonperforming Loans

% of Nonperforming Loans-to-Total Loans

5.5

5.2

8.9

5.1

2.9

1.3

4.0

3.8

5.4

4.3

2.6

1.2

3.6

3.6

4.5

3.9

1.9

1.6

0.0 5.0 10.0

Total - FCS

Real Estate

Mortgage

Production &

Intermediate

Agribusiness

Rural

Inrastructure

Other

Dec-16 Dec-15 Dec-14

% of Loans Classified Less than Acceptable

39
System’s loan portfolio is diversified 

within agriculture

29 Source: FCS Annual Information Statements

Sector Nonaccruals as a % of Loans Outstanding

Cash Grains

17.2%

Rural 

Infrastructure

11.0% Cattle

9.1%

Food Products

7.2%

Dairy Farms

6.6%

Rural Home

6.4%

Forestry

6.3%

Field Crops

5.6%

Tree Fruits, 

Nuts 

and Grapes

5.1%

Farm Supply & 

Marketing

4.2%

Poultry & Eggs

2.6%

Hogs

2.2%

Other

16.5%

 FCS Loan Portfolio ($M)

% of % Change

Portfolio over 2015

 Cash Grains 42,719 17.2% 41,710 2.4%

 Rural Infrastructure 27,440 11.0% 25,798 6.4%

 Cattle 22,653 9.1% 22,347 1.4%

 Food Products 17,942 7.2% 16,607 8.0%

 Dairy Farms 16,499 6.6% 15,481 6.6%

 Rural Home 15,999 6.4% 15,265 4.8%

 Forestry 15,554 6.3% 14,855 4.7%

 Field Crops 13,800 5.6% 12,774 8.0%

 Tree Fruits, Nuts 

 and Grapes 12,591 5.1% 11,392 10.5%

 Farm Supply & 

 Marketing 10,556 4.2% 9,330 13.1%

 Poultry & Eggs 6,504 2.6% 5,966 9.0%

 Hogs 5,582 2.2% 4,963 12.5%

 Other 40,929 16.5% 39,402 3.9%

 Total 248,768 100.0% 235,890 5.5%

Dec-16 Dec-15

40
System continued to report strong 

financial results in 2016

30 Source: FCS Annual Information Statements

2,916 2,850 

3,495 

3,940 4,118 

4,640 4,724 4,688 4,848 

408 

925 667 430 313 

(31)

40 106 266 

2008 2009 2010 2011 2012 2013 2014 2015 2016

System Net Income

Provisions for Loan Losses

System Earnings ($M) 

27.1 

30.0 

33.3 

35.9 

38.6 

42.6 

45.7 

48.8 

52.3 

12.7%

13.9%

14.5%

15.6% 15.7%

16.3% 16.2% 16.1% 16.4%

Restricted Capital

Total Capital less Restricted

Restricted capital represents capital associated with the Insurance Fund.

Capital-to-Asset Ratio

Total System Capital ($B)

41
System FIRS ratings

31

FIRS Ratings

• Composite FIRS ratings reflect 

the System’s solid financial 

performance and favorable 

portfolio credit quality 

• Over 96% of System Banks and 

Associations have a Composite 

FIRS rating of 1 or 2

• 3 rated institutions account for 

less than 1.0% of total System 

assets

Source: FCA's FIRS ratings database

26 29 30 37 43 44 46 44 

50 46 44 

38 31 32 29 31 

14 12 12 10 8 3 3 2 

3 

2 1 1 

1 

Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16

Composite FIRS Ratings

Farm Credit System Banks and Associations

1 Rated 2 Rated 3 Rated 4 Rated

42
Summary and final points

 Challenges for agriculture:

 General economic factors – economic growth in the U.S. and 

abroad, rising interest rates, strength of the dollar

 Farm sector concerns – persistent low commodity prices, Avian 

flu threat, weakness in Midwest farmland markets

 The System is financially strong and well-capitalized

 Portfolio credit quality remains good, but credit risk is expected 

to escalate as certain agriculture sectors face significant 

financial challenges

 System institutions are well-positioned for the risks facing 

agriculture and have significant risk-bearing capacity 32

43
Cherry Bekaert LLP

FCS Building Association

Report Regarding Financial Statement Audit 

for the Year Ended

December 31, 2016

Audit Team

Craig Hunter, Partner

Brynn McNeil, Senior Manager

Jeremy Burgess, Senior

Exhibit G

44
FCS Building Association

 Overview of Audit Results

 We have completed our audit procedures related to the FCS Building 

Association’s year ended December 31, 2016 financial statements.

 Our procedures and scope were substantially consistent with our planned 

audit strategy and we did not experience any significant problems during 

the audit process.

 We issued an unmodified (clean) opinion on the Company’s financial 

statements

 We received excellent cooperation from the Company’s personnel.

45
General Financial Statement Comments

 Strong Balance Sheet as of December 31, 2016

 Cash reserve balance of $963K

 Current Ratio of 2 to 1

 Total Liabilities to Equity Ratio 1 to 6

 Operating loss for the year ended December 31, 2016, as budgeted

 No new or unusual transactions noted for fiscal year 2016

 No significant new disclosures noted for fiscal year 2016

46
Areas of Focus for the 2016 Audit

 Procedures with respect to internal control

 Leasing activities

 Capital expenditures and repairs and maintenance

 We identified no significant deficiencies or material weaknesses

47
Required Communications

 The auditor’s responsibility under generally accepted auditing standards –

reasonable assurance that financial statements are materially correct

 Significant accounting policies are disclosed in Note 2 of the F/S’s

 We have considered management judgments and accounting estimates 

included in the financial statements and believe them to be reasonable

 There were no disagreements with management during the engagement

 There were no major issues discussed with management prior to our being 

retained

 No irregularities or fraud identified as part of our audit

48
Exhibit H 

Farm Credit Administration 1501 Farm Credit Drive McLean, Virginia 22102-5090

 

 

CERTIFICATE OF CLOSED MEETING

The General Counsel, in accordance with the Government in the Sunshine Act, 5 U.S.C. § 552b(f)(1), 

hereby certifies that the Farm Credit Administration Board regular meeting of April 13, 2017, was 

properly closed to the public on the basis of the exemptions set forth below:

• Supervisory and Oversight Activities of FCS Institution(s) – 5 U.S.C. § 552b(c)(8) 

and (9).

• Information related solely to the internal practices of an Agency – 5 U.S.C. 

§552b(c)(2).

 

 __________/s/______________ Date: April 13, 2017 

 Charles R. Rawls

General Counsel 

49