Kenneth A. Spearman, Board Chairman and Chief Executive Officer

Dallas Tonsager, Board Member

Jeffery S. Hall, Board Member

MINUTES OF THE REGULAR MEETING

OF THE

FARM CREDIT ADMINISTRATION BOARD

June 9, 2016 

These minutes reflect the business transacted at the June 9, 2016, 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 10:51 a.m. Members of the Board present were:

Kenneth A. Spearman, Board Chairman and Chief Executive Officer

Dallas Tonsager, Member

Jeffery S. Hall, 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 Farm Credit System Insurance Corporation (FCSIC); and four 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. 

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

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

Mr. Tonsager moved to adopt the Agenda as published. 

Mr. Hall seconded the motion.

1
There being no further discussion, Board Chairman Spearman 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. 

Mr. Tonsager seconded the motion.

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

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

OPEN SESSION

Approval of Minutes

Minutes for May 12, 2016 

(BM-9-JUN-16-01) 

Mr. Tonsager moved to approve the minutes for the May 12, 2016, FCA Regular Board Meeting. 

Mr. Hall seconded the motion.

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

The Secretary polled the Board Members and the motion carried unanimously. (BM-9-JUN-16-01) 

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

REPORTS

Annual Report on the Farm Credit System’s 

Young, Beginning, and Small Farmer Mission Performance: 2015 Results

Sal Iannetta, Steve Koenig, and Jessica Potter of the Office of Regulatory Policy presented the 

Annual Report on the Farm Credit System’s Young, Beginning, and Small Farmer Mission 

Performance: 2015 Results.

Board Chairman Spearman 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.)

2
Quarterly Report on

Economic Conditions and FCS Conditions

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 Conditions. 

Board Chairman Spearman 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.)

Semi-Annual Report on Office of Examination Operations

Hal Johnson of the Office of Examination presented the Semi-Annual Report on Office of Examination 

Operations.

Board Chairman Spearman 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 F.)

CLOSED SESSION

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

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

Examination staff in Closed Session. 

Board Chairman Spearman convened the closed session of the meeting at 10:23 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. 

The Board Chairman 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 G.) 

Members of the Board present were:

Kenneth A. Spearman, Board Chairman and Chief Executive Officer

Dallas Tonsager, Member

Jeffery S. Hall, Member

The above named constitute the full Board. 

3
Others present included Dale Aultman, Secretary to the Board; and Charles Rawls, General Counsel. 

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

Office of Examination Quarterly Report

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

Supervisory and Oversight Activities. 

Board Chairman Spearman 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 Spearman indicated he 

would entertain a motion to adjourn the meeting.

Mr. Hall moved that the meeting be adjourned.

Mr. Tonsager seconded the motion.

Board Chairman Spearman called the question. 

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

The meeting adjourned at 10:51 a.m.

NOTATIONAL VOTE ACTIONS 

There was one notational vote action approved by the FCA Board from May 13, 2016, through June 

8, 2016 as follows:

Item Number Action Date Voting Results Subject

NV 16-10 5/26/2016 Approved Review of Significant Regulatory Actions Pursuant to Executive Order 

12866

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

Meeting of the Farm Credit Administration Board held on June 9, 2016. 

_________/s/________________ _________/s/________________

Kenneth A. Spearman Dale L. Aultman

Board Chairman and Chief Executive Officer Secretary to the Board

 Approved: __July 14, 2016____

4
Exhibit A

Page 1 of 2 

STAFF PRESENT AT THE 

FCA REGULAR BOARD MEETING

June 9, 2016

Kenneth A. Spearman, Board Chairman and Chief Executive Officer

Dallas Tonsager, Board Member 

Jeffery S. Hall, Board Member

OFFICE

OPEN 

SESSION

CLOSED 

SESSION

Office of the Board

Aultman, Dale X X

Middleton, Russell X X

Laguarda, Wendy X X

Buccolo, Deb X

Corey, Kathryn X

Kramp, Kevin X X

Calhoun, Gaye X

Donerson, Alexandra (Summer Intern) X

EEOI

Burlew, Thais X

COO

Hoffman, William X X

OIT

Golley, Jerald X X

OCPA

Stokke, Mike X X

Meaux, Willy X X

OSMO

Rea, Laurie X X

OGC

Rawls, Charles X X

Donner, Mary Alice X X

5
Exhibit A

Page 2 of 2

OFFICE OPEN 

SESSION

CLOSED 

SESSION

OE

Coleman, Robert X X

Paulsen, Roger X X

Johnson, Hal X X

OIG

Dean, Elizabeth X X

Kaufman, Tori X

ORP

Van Meter, Gary X X

Mardock, Barry X X

Gabriel, Steve X X

Koenig, Steve X

Iannetta, Sal X

Johansen, Mark X X

Potter, Jessica X X

OCFO

Smith, Stephen X X

OAS

Connelly, Pat X X

FCSIC

Pfitzinger, Rick X X

GENERAL PUBLIC 4

6
Exhibit B 

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

June 9, 2016 

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 June 9, 2016. 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 May 12, 2016 

Reports

2 Annual Report on the Farm Credit System’s Young, Beginning, and Small Farmer Mission Performance: 2015

Results

3 Quarterly Report on Economic Conditions and FCS Conditions

4 Semi-Annual Report on Office of Examination Operations

CLOSED SESSION

5 Office of Examination Quarterly Report1

_ _May 31, 2016_______ _________/s/________________

 Date Dale L. Aultman

 Secretary to the Board

_________________________

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

7
Exhibit C 

Farm Credit Administration 1501 Farm Credit Drive

 McLean, Virginia 22102-5090

 (703) 883-4000

BOARD ACTION ITEM

 

FCA BOARD ACTION ON

Minutes for May 12, 2016, Regular Board Meeting

BM-9-JUN-16-01

Effective Date: June 9, 2016

Effect on Previous Action: None

THE FCA BOARD HEREBY:

 

Approves the minutes for May 12, 2016, Regular Board Meeting as submitted.

DATED THIS 9th DAY OF JUNE 2016 

BY ORDER OF THE BOARD

 

____________/s/____________________

Dale L. Aultman

Secretary to the Board 

8
FCA’s Annual Report on the Farm Credit System’s 

Young, Beginning, and Small Farmer Mission Performance: 

2015 Results

Office of Regulatory Policy

FCA Board Meeting

June 9, 2016

Steven Koenig, Senior Economist

Salvatore Iannetta, Policy Analyst

Jessica Potter, Policy Analyst Exhibit D

9
Outline

• Review the System’s YBS Mission 

• YBS Numbers and Trends

• District and Association Activity

• Overview of YBS Programs

2

10
YBS Mission

3

• Farm Credit Act - 1980 Amendments – FCS institutions must have programs to serve YBS Customers.

– Requires the reporting of YBS activities.

• Regulation – 614.4165 (2004) – Sets minimum YBS program components, reporting and disclosure 

requirements for associations.

• Bookletters

– 040 (2007) Provides flexibility on lending opportunities for YBS 

farmers and ranchers.

– 066 (2012) Provides guidance for serving farmers who market their 

agricultural products through local or regional food systems.

• Informational Memo - (2014) – Provides information on opportunities to coordinate lending, training, and outreach with the Farm Service Agency.

11
YBS Definitions

4

Definitions for FCA Reporting:

• Young Farmer: age 35 or younger.

• Beginning Farmer: 10 years or less farming experience.

• Small Farmer: gross annual farm sales of $250,000 or less.

Important Data Clarifications:

• Data are reported separately for each category.

• Borrowers may qualify under more than one category; one 

should not add Y, B, and S data together.

• Dollar volumes include advances and commitments.

• Counts are for loans, not for borrowers.

12
YBS Results 

5

YBS Loans Outstanding Number Percentage Dollar volume Percentage

As of December 31, 2015 of of total of loans of total

loans number in millions* volume

Young farmers/ranchers 188,696 18.1 $27,070 11.0

Beginning farmers/ranchers 274,942 26.4 $41,473 16.9

Small farmers/ranchers 502,398 48.2 $46,729 19.0

YBS Loans Made During 2015 Number Percentage Dollar volume Percentage

As of December 31, 2015 of of total of loans of total

loans number in millions* volume

Young farmers/ranchers 62,143 17.2 $9,430 11.3

Beginning farmers/ranchers 79,642 22.0 $12,741 15.2

Small farmers/ranchers 150,022 41.4 $11,815 14.1

Sources: Annual Young, Beginning, and Small Farmer Reports submitted by each System lender through the District Banks.

Green numbers indicate measures that declined in 2015 relative to those in 2014.

*

 Totals include loans, advancements, and commitments made to farmers, ranchers, and aquatic producers by the associations, and excludes 

rural home and Title III loans, and the Leasing Corporation activity.

Note: Because the three (young, beginning, and small) categories are not mutually exclusive, one should not add across the categories to count 

total YBS lending activity.

13
Loan Volumes on New YBS Loans

6

Sources: Annual Young, Beginning, and Small Farmer Reports submitted by each System lender through the District Banks.

14
YBS Share of Total New Loan Volume

7

Sources: Annual Young, Beginning, and Small Farmer Reports submitted by each System lender through the District Banks.

15
New YBS Loan Counts

8

Sources: Annual Young, Beginning, and Small Farmer Reports submitted by each System lender through the District Banks.

16
YBS Share of Total New Loan Counts

9

Sources: Annual Young, Beginning, and Small Farmer Reports submitted by each System lender through the District Banks.

17
District Lending to YBS Borrowers 

10

Source: Annual Young, Beginning, and Small Farmer Reports submitted by each System lender through the District Banks.

18
District Lending to YBS Borrowers 

11

Source: Annual Young, Beginning, and Small Farmer Reports submitted by each System lender through the District Banks.

19
Association YBS Lending Growth

12

Source: Annual Young, Beginning, and Small Farmer Reports submitted by each System lender through the District Banks. Excludes merged institutions. 

20
Conclusions – The Numbers

• Most Systemwide and district level YBS 

performance measures increase.

• Small farmer performance measures generally 

increase.

• The majority of associations reported growth in 

their YBS lending. 

13

21
2015 YBS 

Questionnaire Results

22
Program Component: Delivery of Credit 

15 Source: YBS Questionnaire.

77

68

60

39 39

8

59

69

60

39 39

8

53

67

53

37

33

7

0

10

20

30

40

50

60

70

80

90

Customized

Underwriting

Standards

Federal /State

Guarantees

Concessionary

Interest Rates

Government Loan

Participations

Concessionary Loan

Fees

Other

Percent of all associations

Customized Standards, Guarantees and Reduced Fees Most Used Tools to 

Make YBS Loans in 2015

Young Beginning Small

23
Program Component: Outreach

16 Source: YBS Questionnaire.

24
YBS Program Management

• YBS programs continue to serve the needs of YBS.

• Mission statements continue to incorporate the 

marketing plan regulation. 

• Advisory committees continue to provide valuable 

input to the Board and management.

• Staff training and performance standards for 

management and staff increased.

17 Source: YBS Questionnaire.

25
Training, Outreach, and Education – Training continues to be customized to address the needs of 

YBS farmers, including new entrants to agriculture. 

– Outreach and training efforts include YBS farmers involved in 

local and regional food systems, as well as veterans and 

members of minority groups.

– Associations also coordinate with other FCS institutions to 

train and educate YBS borrowers. 

– Associations use both their internal experts and hire outside 

professionals to develop and present educational 

opportunities. 

18 Source: YBS Questionnaire.

26
Conclusions – The Questionnaire

• YBS programs contributed to the overall increased performance in 2015.

• Federal loan guarantees and customized underwriting standards were the most 

commonly used tools to serve the YBS market.

• Input from YBS Advisory Committees continues to improve YBS programs.

• The System continues to emphasize YBS through staff training and performance 

standards.

• YBS Training, Outreach and Education addresses the needs of current and 

potential YBS borrowers. 

Source: YBS Questionnaire. 19

27
FCA Board Meeting 

June 2016

Quarterly Report on 

FCS Condition

June 9, 2016

Stephen Gabriel

Hal Johnson

Exhibit E

28
Topics for Open Session

2

Economic Conditions Affecting the FCS

FCS Condition and Performance

29
Economic Conditions Affecting 

the Farm Credit System

Stephen Gabriel

Chief Economist

Office of Regulatory Policy

30
Economic growth continues to 

underwhelm

4

Consensus Forecasts (percent)

Red indicates forecast

Q1 

2015

Q2 

2015

Q3 

2015

Q4 

2015

Q1 

2016

Q2 

2016

Q3 

2016

Q4 

2016

Q1 

2017

Q2 

2017

Q3 

2017

Q4 

2017

GDP growth* 0.6 3.9 2.0 1.4 0.8 2.2 2.5 2.4 2.3 2.3 2.2 2.2

CPI* -2.9 2.4 1.4 0.8 -0.3 1.9 2.2 2.3 2.1 2.4 2.3 2.4

Unemployment rate 5.6 5.4 5.2 5.0 4.9 4.9 4.8 4.7 4.7 4.6 4.6 4.5

10 Yr T-Bond 2.0 2.4 2.0 2.2 1.8 1.9 2.1 2.3 2.5 2.6 2.7 2.9

Source: Consensus Economics, Inc.

Survey date - May 9, 2016

* % change from prior quarter, seasonally adjusted annual rate

31
Farm sector developments and 

concerns

 Planting progress is generally good 

 South American weather boosts soybean/corn 

futures

 USDA projects a record corn crop in 2016

 Production growth in the protein and dairy sectors 

is pressuring prices and margins

 There are signs of emerging credit problems

 Continued farmland market weakness 5

32
USDA projects a record corn crop 

and greater stocks

6

6.89

4.46

3.70 3.60

3.35

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)

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

33
Reduced soybean plantings; more 

exports strengthen price prospects

7

14.40 

13.00 

10.10 

8.85 

9.10 

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 Soybeans Price - dollars/bu (right axis) Source: USDA

34
Large wheat supplies continue 

to weigh on prices

8

7.77

6.87

5.99

4.90

4.10

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

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

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

35
Corn profit margins face fourth 

year in the red

9

0.68 

1.63 

0.96 

(0.10)

1.64 

2.23 

1.45 

(0.18) (0.29) (0.09) (0.34) -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 2015F 2016F

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 5/10/16 

36
Current price outlook suggests tight 

margins for soybean producers

10

0.28 

4.20 

1.98 

0.06 

2.85 3.55 

2.47 

1.20 

(0.90) (0.53) -2.00 (0.75)

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 2015F 2016F

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 5/10/16 

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

37
Large supplies pressure wheat 

prices and profit margins

11

(1.25)

0.79 0.98 1.53 

0.33 

(4.03)

(2.64) (1.52)

-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 2015F 2016F

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.

As of 5/10/16

Kansas State University Cost of Production Estimates

38
Ample production pressures 

protein and dairy prices and profits

12

-6

-4

-2

0

2

4

6

8

10

Jan-04

Jul-04

Jan-05

Jul-05

Jan-06

Jul-06

Jan-07

Jul-07

Jan-08

Jul-08

Jan-09

Jul-09

Jan-10

Jul-10

Jan-11

Jul-11

Jan-12

Jul-12

Jan-13

Jul-13

Jan-14

Jul-14

Jan-15

Jul-15

Jan-16

Jul-16

Milk Price minus Estimated 

Total Cost

US Dairy Producer Net Margins

-100

-50

0

50

100

150

Jan-04

Jul-04

Jan-05

Jul-05

Jan-06

Jul-06

Jan-07

Jul-07

Jan-08

Jul-08

Jan-09

Jul-09

Jan-10

Jul-10

Jan-11

Jul-11

Jan-12

Jul-12

Jan-13

Jul-13

Jan-14

Jul-14

Jan-15

Jul-15

Jan-16

Jul-16

$/Head

Hog Producer Margin, Cash Based

-20

-10

0

10

20

30

Jan-04

Jul-04

Jan-05

Jul-05

Jan-06

Jul-06

Jan-07

Jul-07

Jan-08

Jul-08

Jan-09

Jul-09

Jan-10

Jul-10

Jan-11

Jul-11

Jan-12

Jul-12

Jan-13

Jul-13

Jan-14

Jul-14

Jan-15

Jul-15

Jan-16

Jul-16

Cents/Pound

US Broiler Weighted Margins

85% cutout, 15% whole bird

Source: Informa Economics

-120

-45

30

105

180

255

330

405

480

555

1974197619781980198219841986198819901992199419961998200020022004200620082010201220142016

$/Hd Over Direct Costs

Estimate Average Cow/Calf Returns (over cash costs)

39
Farmland prices continue soft in the 

Corn Belt and Plains

13

-8

-1

-7

-2

-1

-4

-6

na

13

-3

-10

-2

-3

2

10

-2

-1 -1

-15

-10

-5

0

5

10

15

KS MO Mnt

States

NE OK Kansas

City

District

Nonirrigated Cropland

Irrigated Cropland

Ranchland

Source: Kansas City Federal Reserve Bank

Percent change from the previous year, 1st quarter 2016

-5

-2

-5

-7

1

-4

-8

-7

-6

-5

-4

-3

-2

-1

0

1

2

IL IN IA MI WI Chicago

District

Percent change in the value of "good" farmland from 

previous year, 1st quarter 2016

Source: Chicago Federal Reserve Bank

40
There is evidence of rising 

carryover debt

14

0

5

10

15

20

25

30

35

40

KS & western MO Mountain States** NE OK

2012 2013 2014 2015 2016

Source: Ag Credit Survey, Federal Reserve Bank of Kansas City

Borrowers with an increase in carryover debt, 1st quarter (percent*)

* Average response of banks in each region.

** Mountain States include Colorado, northern New Mexico and Wyoming. 41
Commercial banks show signs of 

emerging credit issues

15

0

20

40

60

80

100

120

140

160

2008 2009 2010 2011 2012 2013 2014 2015 2016

Loan Repayment Rates Renewals and Extensions

Diffusion Index

Source: Ag Credit Survey, Federal Reserve Bank of Kansas City

42
Risks to watch

Growing conditions this summer

Interest rates

Strength of the dollar

Deteriorating agricultural credit quality

Market response to U.S. presidential election

Geopolitical developments

16

43
Questions

THANK YOU

44
Farm Credit System 

Condition and Performance

as of 

March 31, 2016

Hal Johnson

Sr. Financial Analyst

Office of Examination

45
Topics

19

 System Growth

 Loan Portfolio

 Earnings

 Capital

 FIRS

46
Balances inch higher in the 1st quarter

Source: FCS Quarterly Information Statements 20

247 248 248 253 261 264 266 271 

283 279 283 291 

304 305 

192 192 193 194 201 205 205 208 

217 216 221 227 

236 238 

3.5%

-0.1%

0.5% 0.7%

3.5%

1.7%

0.2%

1.5%

4.3%

-0.4%

2.0%

2.9%

4.0%

1.1%

Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16

 Total Assets Gross Loans % change in Gross Loans

47

 (quarter-over-quarter)
Loan growth influenced by 

seasonal factors

Source: FCS Quarterly Information Statements 21

1.0%

-6.0%

10.5%

1.5%

RE Mortgage

[46%]

Production &

 Intermediate

[19%]

Agribusiness

[17%]

Other

[18%]

1st Quarter 2016 Loan Growth by Loan Type 

(% change quarter-over-quarter) 

1.3% 2.3%

-0.1%

1.7%

-0.4%

1.1%

Q1 '11 Q1 '12 Q1 '13 Q1 '14 Q1 '15 Q1 '16

Total Gross Loans

(% change quarter-over-quarter)

District Mar-14 Mar-15 Mar-16

AgFirst District (11%) -0.2% -1.0% 0.3%

AgriBank District 

(39%) -1.1% -1.9% 0.3%

CoBank District (41%) 5.2% 0.8% 2.0%

Texas District (9%) 1.3% 1.6% 2.3%

Total System 1.7% -0.4% 1.1%

Loan Growth by District (% change quarter-overquarter)

48
Portfolio credit quality continues to be 

strong; risk measures edge upwards

22 Source: FCS Quarterly Information Statements

Sector Nonaccruals as a % of Loans Outstanding

• Nonperforming loans equaled 

0.77% of System loans 

outstanding

• Over 95% of System loans were 

classified as Acceptable

• Loan delinquencies were 0.32% 

of accruing loans 

• The System’s allowance for 

loan losses equaled 74% of 

nonperforming loans

• Total capital and the allowance for 

loan losses represented 21.6% of 

System loans at quarter-end

Portfolio Credit Quality

as of March 2016

2,068

1,883 1,764 1,737 1,771 1,766 1,724 1,629

1,832

1.01%

0.92% 0.85% 0.80% 0.82% 0.80% 0.76% 0.69% 0.77%

Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16

 Nonaccrual Loans Other nonperforming Loans

% of Nonperforming Loans-to-Total Loans

49
System reports solid 1st quarter 

financial results

Source: FCS Quarterly Information Statements 23

1,145 1,196 1,228 1,155 1,132 1,141 1,208 1,207 1,157 

(12) (23)

42 33 27 23 37 19 

69 

Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16

Qtrly System Net Income ($M) Provision for Loan Losses ($M)

System Earnings

4.24 4.06 3.79 3.59 3.46 3.41 3.46 

1.63 1.38 1.08 0.95 0.96 1.01 1.15

2.61 2.68 2.71 2.64 2.50 2.40 2.31 

2010 2011 2012 2013 2014 2015 Q1 '16

Rate: Earning Assets

Rate: Interest-Bearing Liabilities

Net Interest Spread

Net Interest Spread

100,000

175,000

250,000

325,000

2010 2011 2012 2013 2014 2015 Mar-16

Avg. Earning Assets

50
39.6 40.6 41.7 42.6 

43.7 

44.7 45.8 45.7 

46.8 47.8 48.9 48.8 50.0 

16.0% 16.3% 16.5% 16.3% 16.6% 16.8% 16.9%

16.2%

16.8% 16.9% 16.8%

16.1% 16.4%

Restricted Capital

Total Capital less

Restricted

Restricted capital represents capital associated with the Insurance Fund.

Capital-to-Asset Ratio

Strong earnings support continued 

growth in capital 

Source: FCS Quarterly Information Statements 24

• System capital as a percentage of 

total assets was 16.4% compared 

to 16.1% at year end 2015

• Surplus as a percentage of total 

capital equaled 82.4% 

• System liquidity equaled 172 days 

of coverage. Days of available 

liquidity for the four funding banks 

ranged from 144 days to 216 days.

Capital and Liquidity

as of March 2016

Total System Capital ($B)

51
System FIRS ratings

25

FIRS Ratings

• Composite FIRS ratings slip 

compared to the previous quarter

• 94% of System Banks and 

Associations have a Composite 

FIRS rating of 1 or 2

• 3 rated institutions account for 

less than 1.2% of total System 

assets

Source: FCA's FIRS ratings database

46 

26 29 29 

38 44 44 46 43 

39 

50 46 45 

36 30 32 29 30 

9 

13 12 12 11 8 3 3 5 

1 4 2 1 1 

1 

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

1 Rated 2 Rated 3 Rated 4 Rated

Composite FIRS Ratings - System Banks & Associations

Ratings Trend Quarter-over-Quarter

comparison

52
Summary and final points

 Challenges for agriculture:

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

and abroad, strong dollar, rising interest rates 

 Farm sector concerns – stress on cash grain producers, Midwest 

farmland values, shrinking margins for dairy and protein sectors

 The System continues to be safe and financially sound

 Portfolio credit risk remains low but loan quality expected to 

deteriorate

 System institutions remain well-positioned for the current risk 

environment with favorable earnings and strong capital levels

26

53
Questions

THANK YOU

54
FCA Board Meeting 

June 2016

Semi-Annual Report on 

Office of Examination 

Operations

June 9, 2016

Hal Johnson

Office of Examination

Exhibit F

55
Highlights of OE Operations

2

 Operating Plan Objectives

 OE Budget Performance Results

 Staffing Update

 Summary

56
2016 Operating Plan Objectives

 Risk Supervision & Examination Activities

 Onsite at 49 associations (66%), all funding banks, 5 other 

System entities, National Cooperative Bank, and Farmer Mac

 Issued 29 Reports of Examination and 12 Interim Activity Letters

 3 institutions are currently under a higher level of supervisory 

oversight

 Compliance Horizontal Examination Activity underway

 Cybersecurity Horizontal Examination Activity underway

 Issued 2015 Shared Assets Examination Results (March 2016)

3

57
2016 Operating Plan Objectives

 Risk Supervision & Examination Initiatives

 Internal controls – Refined internal controls workpapers, procedures, 

and talking points. Examination of System internal controls using 

new workprograms nearly complete.

 Loan Portfolio Management – Published Risk Identification 

Examination Manual module and two supporting documents. 

Revised guidance on collateral risk management, chattel evaluations 

and verification, and credit administration.

 Cash grain risk exposures analysis 

 Drought risk update and analysis

4

58
2016 Operating Plan Objectives

 Risk Supervision & Examination Initiatives (cont.)

 Other Examination Manual modules published:

o Earnings Management

o Allowance for Loan Losses

o FCA Examination Process and Financial Institution Rating System 

 Risk Supervision & Examination Informational 

Memorandums

 Servicing Loans to Borrowers in Distressed Industries (IM issued 1/21/16)

 Compliance w/ Section 4.38 of the Farm Credit Act -- Affirmative Action 

(IM issued 11/06/15)

5

59
2016 Operating Plan Objectives

 Public Mission as GSE

 Assessing systemic risk related to out-of-territory lending

 Human Capital 

 Integrating Job Analysis results in Commissioning Program 

 Developing Post‐Commission training courses 

 Implementing expanded development opportunities

 Operational Efficiency & Effectiveness

 Ongoing progress in Loan Database, EDGe, Examination 

Manual, and leveraging technology

6

60
OE Budget Results (Fiscal YTD thru 3/31/16)

7

 Travel

♦ FY 2016 Travel Budget Used 51%

♦ FY 2016 Travel Days Used 40%

 FTEs

♦ Projected Full Year FTE's 170.6

♦ Budgeted Full Year FTE's 169.6

 Budget Variance 0.97

Funds 

Used

$15.4

49.7%

Funds 

Remaining

$15.6

50.3%

FY 2016 OE Budget - $31.0M

61
Staffing Update

8

Planned Projected Variance

Staff on Board - starting Fiscal Year 2016 169 169 0

Staff Attritions and Retirements (1) (16) (16) 0

Projected Hirings 25 22 (3)

Staff on Board - Fiscal year end 2016 178 175 (3)

(1) There have been 8 staff attritions fiscal year-to-date through May 31, 2016.

62
Summary

 Continued emphasis on risk-based oversight and 

examination including maintaining a strong onsite 

supervision presence

 A small number of institutions remain under a higher level 

of supervision

 Significant progress achieved towards accomplishing OE’s 

2016 Operating Plan objectives 

 Recruiting and developing staff remains a priority

 Ongoing commitment to achieving Operating Plan 

objectives within operating budget parameters

9

63
Discussion

THANK YOU

64
Exhibit G 

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 June 9, 2016, was 

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

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

and (9).

 

 ____________/s/_________________ Date: June 9, 2016 

 Charles R. Rawls

General Counsel 

65