Farm Credit Council Annual Meeting

January 24, 2012

Farm Credit Administration

William Hoffman, Chief Operating Officer

Robert Coleman, Chief Examiner

Charles Rawls, General Counsel

Gary Van Meter, Director, Office of 

Regulatory Policy
Agenda

 FCA Operations and Organizational 

Changes

 FCA’s Strategic Plan

 Economic and Agricultural Outlook

 Risk Profile for the FCS

 Office of Examination Priorities

 Regulatory Overview

1
Agency Overview

 FCA Operations

 Travel, training, technology and retirements 

 Organizational Changes

 New people

 FCA’s Strategic Plan

 Mission

 Guiding Principles

2
Economic Outlook

 European sovereign debt crisis

 U.S. GDP growth rates

 Unemployment rate

 Inflation 

 Interest rates

3
Agricultural Outlook – Volatility

 Grain prices to remain volatile while input costs 

rise

 Tight corn supplies and weather concerns in 

South America

 Midwest farmland prices continue to surge

 Sustainability of incomes and cap rates raise 

concerns of the prospect of a correction

 Cow-calf, swine, dairy and ethanol sectors 

benefitting from strong product prices. Broiler 

margins should be positive after months of 

losses

 Substantial uncertainty exists—potential global 

economic problems could affect demand while 

feed (feedstock) costs remain volatile

4
Risk Level is Stable but Elevated

5 

82 83 

57 

26 29 30 

17 14 

31 

50 46 46 

1 3

6 

14 12 11 

1 3 

2 2 

12/31/06 12/31/07 12/31/08 12/31/09 12/31/10 09/30/11

1 Rated 2 Rated 3 Rated 4 Rated

Number of Banks and Associations by Composite FIRS rating

The above chart Includes only the 5 System banks and their affiliated direct-lender associations. 

Source: FCA's FIRS ratings database
Risk Level by Asset Volume

6 

Percentage of Bank and Association Assets by Composite FIRS Rating (1)

32.9%

33.2%

26.0%

65.2%

63.1%

70.0%

1.8%

3.5%

3.7%

0.2%

0.2%

0.3%

09/30/11

12/31/10

12/31/09

1 Rated 2 Rated 3 Rated 4 Rated

(1) represents cumulative Bank and Association assets prior to any adjustments for eliminations.

Source: FCA's FIRS ratings database and Consolidated Reporting System
Office of Examination Priorities 

 Proactive Risk Supervision

 Loan Portfolio Management

 Collateral Risk Management

 Profitability and Repayment Capacity

 Public Mission of the FCS

 Higher Risk Institutions

 Improving Loan Information 

7
Regulatory Overview

 Proposed Rules

 Planning—Diversity and Inclusion

 Senior Officer Compensation Disclosures

 Liquidity and Funding

 Investment Management

 Rural Community Investments

 Other Projects

 Rural Business Investment Companies

 Capital

8
Planning—Diversity and 

Inclusion

 Require business plans to include

 Human Capital Plan (HCP)

 Achieve diversity and inclusion within the institution’s 

workforce, management, and governance structure

 Marketing Plan

 Strategies for providing the institution’s products and 

services to all creditworthy and eligible persons

9
Senior Officer Compensation 

Disclosures

 Shareholders’ nonbinding advisory vote on 

senior officer compensation

 Disclose supplemental executive retirement 

plans for senior officers

 Disclose certain significant or material 

events

 Clarify and enhance responsibilities of 

compensation committees

10
Liquidity & Funding

 Specifies additional criteria and attributes to 

determine marketability of investments

 Two levels of liquidity

 First Level—Highly liquid assets to continue normal 

operations for 30 days

 Second Level—Maintain liquid assets sufficient to 

fund operations for the next 60 days during a 

prolonged stress scenario

 Supplemental liquidity buffer

 Strengthen contingency funding plan

11
Investment Management

 Additional board policy requirements and 

enhanced internal controls of investments

 Stress testing for all investments

 Determine eligibility of investments only at 

the time of purchase

 Seeks comment on alternative 

creditworthiness standards for eligible 

investments

12
Rural Community Investments

 Proposed rule resulted in over 10,000 

comment letters

 Working on another proposed rule

 Focusing on rural community essential facilities 

and infrastructure projects in collaboration with 

Federal and state agencies and other rural 

lenders

13
Rural Business Investment 

Companies (RBICs)

 USDA Regulation on non-leveraged 

RBICs

 Working with USDA

14
Capital

 Capital characteristics

 Proportional to risk

 Put at risk in one location

 Held where the risk is retained

 Available to absorb potential losses

 Sensitive to System structure

 Consistent with that required of other regulated 

financial institutions

 Supportive of the System’s mission and 

cooperative nature

15
Closing Comments

Questions

Thank you

16
Contact Information

Farm Credit Administration 

William Hoffman (703) 883-4340 

Robert Coleman (703) 883-4246

Charles Rawls (703) 883-4021 

Gary Van Meter (703) 883-4026

17