1

Dallas P. Tonsager, Chairman and Chief Executive Officer

Jeffery S. Hall, Board Member

Glen R. Smith, Board Member

MINUTES OF THE REGULAR MEETING

OF THE

FARM CREDIT ADMINISTRATION BOARD

April 12, 2018

These minutes reflect the business transacted at the April 12, 2018, Regular Meeting of the Farm 

Credit Administration Board (FCA Board) pursuant to the Government in the Sunshine 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 10:43 a.m. Members of the Board present were:

Dallas P. Tonsager, Chairman and Chief Executive Officer

Jeffery S. Hall, Member

Glen R. Smith, Member

The above named constitute the full Board.

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

Board; staff of the FCA and the Farm Credit System Insurance Corporation; and two members of 

the general public. (A list of staff attendees is attached as Exhibit A.) 

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

the requirements of the Government in the Sunshine Act. 

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

Announcement publishing the Agenda for the meeting is attached as Exhibit B.)

Mr. Hall moved to adopt the Agenda as published. 

Mr. Smith seconded the motion.

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

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

Mr. Smith 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 meeting be 

closed as shown on the Agenda.

Mr. Hall seconded the motion.
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There being no further discussion, Board Chairman Tonsager called the question.

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

OPEN SESSION

Approval of Minutes

Minutes for March 8, 2018

(BM-12-APR-18-01)

Mr. Hall moved to approve the minutes for the March 8, 2018, FCA Regular Board Meeting.

Mr. Smith seconded the motion.

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

The Secretary polled the Board Members and the motion carried unanimously. (BM-12-APR18-01)

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

Report

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 presented the Quarterly Report on Economic Conditions and FCS Condition and 

Performance.

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

Board.

There were no further questions or discussion.

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

Farm Credit System Building Association Auditor’s

Report on 2017 Financial Audit 

Rick Albrecht, President of the Farm Credit System Building Association and Brynn McNeil 

and Jeremy Burgess of Cherry Bekaert, LLP presented the FCSBA Auditor’s Report on the 

2017 Financial Audit. 

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

Board.

There were no further questions or discussion.

(A copy of the PowerPoint presentation is attached as Exhibit E.)
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CLOSED SESSION

Board Chairman Tonsager noted that this was a Closed Session and ensured that nonessential 

staff were not in the room so the Board could meet in Closed Session with the Office of 

Examination.

Board Chairman Tonsager convened the closed session of the meeting at 10:05 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. 

Board 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 F.)

Office of Examination Quarterly Report

Robert Coleman and Roger Paulsen of the Office of Examination presented the OE 

Quarterly Report.

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

Board.

There were no further questions or discussion.

CLOSED EXECUTIVE SESSION

Farm Credit System Building Association Auditor’s Report

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

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

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

Assistants, the General Counsel and the Secretary to the board so that the board could meet with 

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

Board Chairman Tonsager reminded those speaking to state their name before speaking and 

asked the Auditors to further discuss the audit.

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

Board.

There were no further questions or discussion.

ADJOURNMENT

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

he would entertain a motion to adjourn the meeting.

Mr. Smith moved that the meeting be adjourned.

Mr. Hall seconded the motion.

Board Chairman Tonsager called the question.

The Secretary polled the Board Members and the motion carried unanimously.
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The meeting adjourned at 10:43 a.m.

NOTATIONAL VOTE ACTION

There was one notational vote action approved by the FCA Board from March 9, 2018, through 

April 11, 2018 as follows:

Item 

Number

Action Date Voting 

Results

Subject

NV 18-04 03/20/2018 Approved Compeer Financial, ACA investment in a healthcare foundation in 

rural Illinois, subject to conditions.

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 12, 2018.

___________/s/___________

Dallas P. Tonsager

Board Chairman and Chief Executive Officer

_______/s/______________

Dale L. Aultman

Secretary to the Board

Approved: _May 10, 2018____
5

Exhibit A

STAFF PRESENT AT THE

FCA REGULAR BOARD MEETING

April 12, 2018

Dallas P. Tonsager, Chairman and Chief Executive Officer

Jeffery S. Hall, Board Member

Glen R. Smith, Board Member

OFFICE OPEN 

SESSION

CLOSED 

SESSION

CLOSED 

EXECUTIVE 

SESSION

Office of the Board

Aultman, Dale X X X

Kramp, Kevin X X X

Morris, James X X X

Batta, Todd X X X

Corey, Kathryn X

Roque-Brehm, Awilda X

Calhoun, Gaye X

COO

Hoffman, William X X

OIT

Golley, Jerald X X

OCPA

Stokke, Michael X X

Delancey, Toni X

Meaux, Willy X

Middleton, Russell X

OSMO

Rea, Laurie X X

Hudson, Bruce X X

OGC

Rawls, Charles X X X

Donner, Mary Alice X

Strickland, Joy X X

OE

Coleman, Robert X X

Paulsen, Roger X X

Johnson, Hal X X

OIG

Laguarda, Wendy X X

ORP

Van Meter, Gary X X

Mardock, Barry X X

Gabriel, Steve X

EEOI

Burlew, Thais X

OCFO

Smith, Stephen X X

Gandy, Doug X X
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OFFICE OPEN 

SESSION

CLOSED 

SESSION

CLOSED 

EXECUTIVE 

SESSION

FCSBA

Albrecht, Rick X

Duffy, Morgan X

CHERRY BEKAERT, LLP

McNeil, Brynn X X

Burgess, Jeremy X X

OAS

Fowlkes, Jerome X X

Bell, Vonda X X

FCSIC

Rubin, Howard X X

Grimaldi, Andrew X X

Pfitzinger, Rick X X

GENERAL PUBLIC 2 N/A N/A
7

Exhibit B

Farm Credit Administration 1501 Farm Credit Drive

McLean, VA 22102-5090

(703) 883-4000

PUBLIC ANNOUNCEMENT OF

MEETING SUBJECT TO THE GOVERNMENT IN THE SUNSHINE ACT

Farm Credit Administration Board

Regular Meeting

April 12, 2018

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 12, 2018. 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. 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 8, 2018

Reports

2 Quarterly Report on Economic Conditions and FCS Condition and Performance 

3 FCSBA Auditor’s Report on 2017 Financial Audit

Closed Session

4 Office of Examination Quarterly Report

5 Executive Session – FCS Building Association Auditor’s Report

______April 2, 2018______

Date

______________/s/_____________

Dale L. Aultman

Secretary to the Board
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Exhibit C

Farm Credit Administration

BOARD ACTION ITEM

1501 Farm Credit Drive

McLean, VA 22102-5090

(703) 883-4000

FCA BOARD ACTION ON

Minutes for March 8, 2018 Regular Board Meeting

BM-12-APR-18-01

Effective Date: April 12, 2018

Effect on Previous Action: None

THE FCA BOARD HEREBY:

Approves the minutes for March 8, 2018, Regular Board Meeting as submitted.

DATED THIS 12th DAY OF APRIL 2018

BY ORDER OF THE BOARD

____________/s/________________

Dale L. Aultman

Secretary to the Board
Quarterly Report on 

FCS Condition 

April 12, 2018

Stephen Gabriel

Hal Johnson

FCA Board Meeting 

April 2018 Exhibit D

1
Topics for Open Session

▶ Economic Conditions Affecting the FCS

▶ FCS Condition and Performance

2
Economic Conditions Affecting 

the Farm Credit System

Stephen Gabriel

Chief Economist

Office of Regulatory Policy
The expansion continues; interest rates rise 

with inflationary pressures

4

Consensus Forecasts (percent)

Red indicates forecast

Q1 

2017

Q2 

2017

Q3 

2017

Q4 

2017

Q1 

2018

Q2 

2018

Q3 

2018

Q4 

2018

Q1 

2019

Q2 

2019

Q3 

2019

Q4 

2019

GDP growth* 1.2 3.1 3.2 2.9 2.4 3.1 3.0 2.8 2.5 2.4 2.2 2.1

CPI* 3.0 0.1 2.1 3.3 3.2 1.6 2.1 1.9 2.1 2.2 2.3 2.3

Unemployment rate 4.7 4.3 4.3 4.1 4.1 4.0 3.9 3.8 3.7 3.6 3.6 3.6

3 Month T-Bill 0.8 1.0 1.0 1.4 1.6 1.8 2.0 2.2 2.4 2.6 2.7 2.8

10 Yr T-Bond 2.4 2.3 2.3 2.8 2.8 2.9 3.0 3.2 3.3 3.4 3.5 3.5

Source: Consensus Economics, Inc.

Survey date - March 12, 2018

* % change from prior quarter, seasonally adjusted annual rate
Inflationary pressures are emerging

Employment Cost Index: Total Compensation: All Civilian, 

Percent Change from Year Ago, Quarterly, Seasonally Adjusted

Source: U.S. Bureau of Labor Statistics 5
Interest rates are on the rise

Source: Board of Governors of the Federal Reserve System 6
Farm sector developments and concerns

▶ USDA projects net farm income to decline 7% in 2018; 

net cash income will be down 5%

▶ Trade retaliation is a concern for agriculture

▶ Dry weather in Argentina is causing price volatility

▶ Drought in the southwest and Plains is threatening 

pasture and winter wheat crops

▶ Dairy sector is facing negative margins

▶ Farmland values may be stabilizing; higher interest 

rates pose a risk 7
Real net cash income returning to “normal” 

levels

Source: USDA 8
All USDA regions projected to face lower farm 

business net cash income

Farm business average net cash farm income by resource region, 2018F 

compared with 2017F

Source: USDA, Economic Research Service, Farm Income and Wealth Statistics 9
Average corn price to remain at last year’s 

level

Source: USDA 10
Soybean stocks soar relative to use

Source: USDA 11
Declining wheat production to push prices 

higher

Source: USDA 12
Slim margins are expected for corn producers 

in 2018

Iowa Season-average Corn Profit Margin Estimates

Using Iowa State University Cost of Production Estimates 

Source: FCA-ORP using data from USDA and Iowa State University. 2018 forecast assumes USDA baseline 13

price and trendline yields.
Profits are projected for soybean producers in 

2018

Iowa Season-average Soybean Profit Margin Estimates

Iowa State University Cost of Production Estimates

Source: FCA-ORP using data from USDA and Iowa State University. 2018 forecast uses USDA Baseline prices 14

and trendline yields. 
Higher prices help reduce losses on wheat 

farms

Kansas Season-average Wheat Profit Margin Estimates

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

Notes: For 2014-2018F, government payment is Agriculture Risk Coverage and excludes loan deficiency payments. 

For 2017 and 2018, ARC payment is expected to be zero, compared with about 55-60 cents for Price Loss Coverage. 15
Weather in Argentina and tariffs from China 

causing price volatility

Corn (Cme) May, 2018 . Cents/bu Soybeans (Cme) May, 2018 Cents/bu

Source: Wall Street Journal 16
Dry weather threatens pasture and winter 

wheat regions

17
Southwest faces continued drought

18
Livestock producers posting profits; dairy 

struggling

Source: Informa Economics IEG 19
Farmland values may be stabilizing; but rising 

interest rates are a risk

Fourth quarter 2017 (% change in value from prior year)

Source: Federal Reserve Banks of Chicago, Kansas City, St. Louis, and Dallas 20
Change in value of nonirrigated 

cropland varies

Fourth quarter 2017 percent change from previous year

*Mountain States include Colorado, northern New Mexico, and Wyoming, which are grouped because of 

limited survey responses from each state.

Sources: Federal Reserve District Agricultural Credit Surveys (Chicago, Dallas, Kansas City and Minneapolis). 21
Risks to watch

▶ International trade policy and trade retaliation

▶ Interest rates

▶ Crop growing conditions

▶ Farm Bill

▶ Geopolitical developments

22
23

Questions

Thank you
Farm Credit System 

Condition and Performance

as of 

December 31, 2017

Hal Johnson

Senior Financial Analyst

Office of Examination 24
Topics ▶ System Growth ▶ Loan Portfolio ▶ Earnings ▶ Capital ▶ FIRS

25
System grew at a modest pace in 2017; growth 

concentrated the 4th quarter

26

2.9%

5.9%

6.9% 6.2%

4.4%

2.0%

4.5%

6.3%

2.2% 2.9%

13.4%

21.8%

11.1%

8.3%

6.5%

0%

5%

10%

15%

20%

25%

30%

2013 2014 2015 2016 2017

RE Mortgage (46%)

Prod. & Intermediate (20%)

Agribusiness (16%)

Total Loan Portfolio

Source: FCS Information Statements
Loan quality remains favorable, but risks to 

agriculture are significant

Nonperforming Loans as a % of Gross Loans

27

%

Nonperforming Loans ($B)

 of Loans Classified Less Than Acceptable

Source: FCS Information Statements
System’s loan portfolio is diversified 

geographically and by commodity

28

California 10.6%

Texas 6.9%

Iowa 5.4%

Illinois 5.0%

Minnesota 4.9%

Nebraska 3.9%

Ohio 3.7%

Wisconsin 3.0%

Kansas 3.0%

Indiana 3.0%

FCS Loan Portfolio 

Geographical Distribution

as of December 31, 2017

Source: FCS Information Statements
Favorable earnings support strong capital 

levels

System Earnings ($M)

Source: FCS Information Statements

System Capital ($B) 

29
System FIRS ratings

30

FIRS Ratings

Composite FIRS Ratings

Farm Credit System Banks and Associations

Source: FCA's FIRS ratings database
Summary and final points

▶ Risks for agriculture:

▪supply vs. demand for agricultural commodities, rising interest rates, 

agricultural trade policies, farm debt and income levels, inflation, 

emerging drought

▶ The System is financially strong and well-capitalized

▶ Portfolio loan quality continues to be good, but the 

risks to certain agriculture sectors are significant

▶ System institutions are well-positioned for the current 

risk environment and have substantial risk-bearing 

capacity 31
32

Questions

Thank you
SPEAKERS

FCS Building 

Association

Report Regarding Financial 

Statement Audit for the Year 

Ended December 31, 2017

Brynn McNeil, Partner

bmcneil@cbh.com

Jeremy Burgess, Manager

jburgess@cbh.com

Exhibit E
FCS Building Association

We have completed our audit procedures related to the FCS Building Association’s 

year ended December 31, 2017, 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.

Overview of Audit Results
 Strong Balance Sheet as of 

December 31, 2017

 Cash reserve balance of $678K

 Current ratio of 2:1

 Total liabilities-to-equity ratio 1:7

 Operating loss for the year ended 

December 31, 2017, as budgeted

 No new or unusual transactions 

noted for fiscal year 2017

 No significant new disclosures 

noted for fiscal year 2017

General Financial 

Statement Comments
Areas of Focus for the 2017 Audit

Procedures 

with respect 

to internal 

control

Leasing 

activities

Capital 

expenditures 

and repairs 

and 

maintenance

No significant 

deficiencies 

or material 

weaknesses 

identified
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 

Firm being retained

No irregularities or fraud 

identified as part of the 

audit
Recent Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued 

Accounting Standards Update (“ASU”) 2016-02, "Leases (Topic 842)." ASU 2016-02 is 

intended to improve financial reporting about leasing transactions.

The ASU affects all companies and other organizations that lease assets such as real 

estate, airplanes and manufacturing equipment.

The ASU will require organizations that lease assetsc, referred to as “Lessees,” to 

recognize on the balance sheet the assets and liabilities for the rights and obligations 

created by those leases.
Recent Accounting Pronouncements (cont’d)

An organization is to provide disclosures designed to enable users of financial 

statements to understand the amount, timing and uncertainty of cash flows arising 

from leases. These disclosures include qualitative and quantitative requirements 

concerning additional information about the amounts recorded in the financial 

statements. 

Under the new guidance, a lessee will be required to recognize assets and liabilities 

for leases with lease terms of more than 12 months. 
Recent Accounting Pronouncements (cont’d)

Consistent with current GAAP, the recognition, measurement and presentation of 

expenses and cash flows arising from a lease by a lessee primarily will depend on its 

classification as a finance or operating lease. However, unlike current GAAP, which 

requires only capital leases to be recognized on the balance sheet, the new ASU will 

require both types of leases (i.e., operating and capital) to be recognized on the 

balance sheet.

Non-public companies will be required to adopt the new leasing standard for fiscal 

years beginning after December 15, 2019.
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Exhibit F

Farm Credit Administration 1501 Farm Credit Drive

McLean, VA 22102-5090

(703) 883-4000

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 12, 2018, 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).

____April 12, 2018_________

Date

_________/s/________________

Charles R. Rawls

General Counsel