Remarks by 

Dallas P. Tonsager

Board Chairman and CEO

Farm Credit Administration

FCC Services’ Group of 30 Annual Meeting

Jacksonville, Florida 

May 3, 2018

Good morning. I appreciate the opportunity to be with all of you, and I look forward to a 

constructive dialogue this morning. 

Before we start, I would like to quickly recognize Todd Batta, my executive assistant, who’s 

with us this morning. Prior to coming to FCA, Todd ran the U.S. Department of Agriculture’s 

Office of Congressional Relations and served as one of Secretary Vilsack’s senior policy 

advisors. 

I will be brief with my remarks as I would rather have a back-and-forth with you this 

morning because it’s important to me to hear what’s on your minds — the good and the 

bad. 

Over the past year, many of you have heard me talk about five key areas that I’m focused

on during my chairmanship — confidence, best possible outcomes, all services to all 

borrowers, partnerships, and structure. 

I believe that each of these areas provides an opportunity to strengthen the Farm Credit 

System and its mission. So this morning I want to briefly provide all of you a little more 

color on my thought process for focusing on these areas. 

Best outcomes

I started my career as a dairyman back in Oldham, South Dakota, in the late ’70s and early 

’80s. This was a difficult period to get into farming. Many friends, neighbors, and colleagues

fell on hard times. This wasn’t just the case in South Dakota; this scenario played out 

across the country. 

There were thousands of bankruptcies and the displacement of tens of thousands of 

farmers, ranchers, and rural residents who had to leave rural America to find livelihoods 

elsewhere. 

Seeing the on-the-ground impact of the farm crisis was, in part, what led me to work at the 

South Dakota Farmers Union. There we worked with producers and their lenders to make 

sure we could bridge the downturn for those producers who had a good chance of making it 

when the economy improved. We also had to have tough conversations when it was clear 

that there were no options left. 

In many cases, credit became a substitute for income, which led to bad outcomes. It’s my 

hope we can avoid the tough conversations by identifying troubled borrowers early. Do they 

have a good business plan? Do they have a good operation? Do they have a good chance of 

making it when the economy improves? 
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If the answer to these questions is yes, I encourage you to think about what you can do —

within the bounds of safe and sound lending — to help them through their difficulties. 

But if the answer to any of these questions is no, then it may be time for a tougher 

conversation. In the long run, credit cannot be a substitute for income. You don’t want to 

enable a borrower to go further into debt and to deplete their equity if they aren’t likely to 

achieve their goals.

Right now, I think the System is doing a great job in this area. 

Some associations like Farm Credit Services of America, Yankee, and MidAmerica are 

giving some of their borrowers the option to defer the principal portion of their 2018 

payments to help with cash flows. 

Greenstone and some other associations have implemented mentoring relationships,

which pair staff with 1980’s type of credit experience with younger staff to ensure 

the best possible outcomes for distressed situations.

American Ag Credit, Farm Credit West, and others worked aggressively to help their 

membership deal with the impacts of wildfires. They provided information and 

updates to staff while the wildfires were approaching and as they moved through the 

territory. The associations worked with borrowers to deal with insurance claims and 

get operations back online as quickly as possible. 

Puerto Rico, ACA, was able to meet borrowers’ credit needs soon after the 

hurricane(s) hit — even before FEMA representatives reached them. The ACA 

authorized deferrals for 30 to 90 days and offered emergency loans during this 

timeframe. Many other associations provided support to other associations and 

people affected by Hurricane Harvey. 

These are all great examples of associations working to make sure their membership has 

the best possible outcome. But there are also areas for improvement. For example, our 

examinations continue to find instances where associations do not provide required 

distressed loan notices even though they are constructively working with borrowers. This 

may seem like a little thing, but borrower rights are critically important and required by the 

Farm Credit Act. 

We’ve also seen a slight uptick in the number of borrower complaints. Nothing drastic, but 

something to be aware of. With the hyper focus on farm conditions today, it only takes one 

bad story to paint a negative picture for the System. So I encourage you to continue to dot 

the “i’s” and cross the “t’s” and continue to find the best outcomes. 

All services to all borrowers

It’s no secret that I believe the System’s congressional mission involves providing all 

System services to all eligible, creditworthy borrowers. It’s my belief that if borrowers in 

some territories can obtain rural home loans or ag operating loans, then borrowers in all 

System territories should have that same access. 

In any given area of lending, the System has institutional experts. Utilize this expertise! 

There are great examples throughout the System where this is happening. Northwest and 

Farm Credit West have a great partnership to provide rural home loans. Similar, Farm Credit 

Illinois and Farm Credit MidAmerica have a partnership on country home living loans. 
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AgFirst Farm Credit Bank continues to offer rural home lending back-office services across 

System districts.

AgDirect and Farm Credit Express provide most associations with point-of-service financing 

options for ag equipment purchases.

ProPartners provides point-of-service financing options for operators purchasing farm 

supplies from their cooperatives and other System farm supply partners.

These partnerships are exactly what I mean when I say, “All services for all borrowers.” 

I believe more can be done to facilitate the cooperative spirit and raise the level of service 

for all System members. I strongly encourage you to look for ways to collaboratively 

partner so that the people in your territories can get the services they need.

Partnerships

I had the opportunity to serve as undersecretary for rural development at the U.S. 

Department of Agriculture prior to coming back to FCA. The agency has an incredible 

mission. It works hard to improve rural vitality by investing in community facilities, housing, 

broadband, and infrastructure.

But investments alone are not enough. USDA needs partners. It needs the expertise of the 

local communities, counties, economic development organizations, and lenders to provide

opportunities that allow the next generation to live and raise their families in rural America 

— rather than migrate to cities for opportunities. 

I see an important role the System can play in strengthening rural America. Using your 

statutory authority to finance rural development projects — especially energy and water 

projects — you bring equity capital and liquidity to rural America’s countless communities. 

Rural business investment companies (RBICs) are a great example of the partnerships. 

They require only a modest amount of capital. But they can do an enormous amount of 

good by injecting investment capital to reenergize the rural economy, helping small 

businesses grow, and strengthening local communities. 

The Farm Credit Council has been a leader of the Rebuild Rural Infrastructure Coalition. This 

partnership of more than 200 organizations is making sure that the voice for rural America’s 

infrastructure needs is heard. I really commend the System for this work. The farm bill that 

Congress is currently deliberating also provides an opportunity for your voice to be heard. 

Beyond direct investments, I’ve been impressed with operational partnerships within the 

System. 

System institutions continue to buy and sell participation interests in agribusiness 

and rural infrastructure loans — providing portfolio diversification benefits. 

Collaborative efforts are happening to attract staff with expertise in capital markets 

lending. For example, the Commercial Finance Group and the Capital Markets Group 

are enabling smaller institutions to use purchased participations as a form of credit 

risk diversification. 
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And associations continue to work together in information technology service 

corporations and other back-office operations to provide a consistent level of service 

for their members across the System.

One partnership area I would like to see the System improve is with Farmer Mac. This might 

not be a popular thought with everyone in the room. But I believe Farmer Mac can provide a 

strong tool for the System to manage credit risk. It’s a partnership I would like to see 

strengthened. 

Structure and capital

Earlier this year I said, “The System has been in a constant state of renewal since its 

inception in 1916. As it continues to evolve, we must evaluate how any proposed change 

could impact the integrity and cooperative structure of the System. We must look at the 

operational, managerial, and reputational risks that might result from the change. And we

must consider how the change might affect the relationship between the funding bank and 

its associations.” 

There have been some very productive discussions between the agency and groups of 

institutions regarding System structure — particularly regarding the level of capital and the 

dual capitalization issue. The third-party studies regarding capital have yielded very useful 

information and prompted meaningful discussion. 

But I also believe there needs to be a more robust discussion within the System about 

where the System is going regarding further merger and consolidation. I believe System 

institutions need to give careful thought to the implications of all changes in structure. And 

by System institutions, I truly mean all System institutions — not just those contemplating 

mergers or other structural changes. Again, because the System is a network of institutions, 

the actions of a few impact all others.

Confidence 

There are many things that the System is doing to strengthen stakeholder confidence in the 

System. I appreciate all the work each of you do to build confidence in the System’s brand. 

The System’s financial position and returns continue to be excellent. I could go through the 

numbers, but you know them better than I do. All System institutions continue to exceed 

the new requirements with a healthy margin of safety. Patronage to membership continues 

to be strong and creates positive press. And there is a strong demand from investors for 

System debt. 

You’ve all heard me say this time and time again, “It only takes one issue to shake

confidence in the System.” I know I sound like a broken record. But examinations continue 

to see standards of conduct issues. Most of these events don’t get media attention, but they 

could potentially detract from confidence in System institutions. We will be issuing an 

updated standards of conduct proposed rule soon, and I’m looking forward to your 

comments when the rule is issued. 

I’ve quickly covered a lot of ground this morning. As I said at the top of my remarks. I’m 

looking forward to hearing from you. Thanks again for the opportunity to be with you this 

morning.