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

June 14, 2018

These minutes reflect the business transacted at the June 14, 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 10:37 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 Joy Strickland, Deputy 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.) 

Board Chairman Tonsager recognized FCA’s Chief Economist Steve Gabriel as retiring soon 

after 34 years in the Federal Government and thanked him for his service. Board Chairman 

Tonsager noted Steve also leads the Agricultural and Economic Policy Team in FCA and his 

quarterly reports to the Board regarding economic conditions will be missed. 

Mr. Hall also thanked Steve for his service and recognized Steve’s passion for agriculture and 

economics, and providing vital information to the Board.

Mr. Smith noted Steve’s knowledge of history, insights, and predictions as being invaluable to 

the FCA. 

Board Chairman Tonsager then called the meeting into order.

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.)
2

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.

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 May 10, 2018

(BM-14-JUN-18-01)

Mr. Hall moved to approve the minutes for the May 10, 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-14-JUN18-01)

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

Reports

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 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.)
3

Semi-Annual Report on Office of Examination Operations 

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

Examination Operations.

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.)

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 10:19 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 Deputy 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 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.

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.

The meeting adjourned at 10:37 a.m.
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NOTATIONAL VOTE ACTION

There was one notational vote action approved by the FCA Board from May 10, 2018, through 

June 13, 2018 as follows:

Item 

Number

Action Date Voting 

Results

Subject

NV 18-08 05/23/2018 Approved Concluded that no regulatory action in FCA’s Unified Regulatory 

Agenda meets the definition of “significant regulatory action” and 

therefore FCA is not required to develop a regulatory plan for 

submission to the Office of Information and Regulatory Affairs.

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 14, 2018.

_________/s/_____________

Dallas P. Tonsager

Board Chairman and Chief Executive Officer

_______/s/______________

Dale L. Aultman

Secretary to the Board

Approved: July 12, 2018___
5

Exhibit A

STAFF PRESENT AT THE

FCA REGULAR BOARD MEETING

June 14, 2018

Dallas P. Tonsager, Chairman and Chief Executive Officer

Jeffery S. Hall, Board Member

Glen R. Smith, Board Member

OFFICE OPEN 

SESSION

CLOSED 

SESSION

Office of the Board

Aultman, Dale X X

Batta, Todd X X

Kramp, Kevin X X

Morris, James 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

Middleton, Russell X X

OSMO

Rea, Laurie X X

Hudson, Bruce X X

OGC

Strickland, Joy X X

Virga, Jane 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 X

Tulman, Sarah X

Johansen, Mark X
6

OFFICE OPEN 

SESSION

CLOSED 

SESSION

OCFO

Smith, Stephen X X

Gandy, Doug X X

OAS

Bell, Vonda X X

FCSIC

Rubin, Howard X X

Pfitzinger, Rick X X

GENERAL PUBLIC 2 N/A
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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

June 14, 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 June 14, 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 May 10, 2018

Reports

2 Quarterly Report on Economic Conditions and FCS Conditions and Performance 

3 Semi-Annual Report Office of Examination Operation

Closed Session

4 Office of Examination Quarterly Report

______June 4, 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 May 10, 2018 Regular Board Meeting

BM-14-JUN-18-01

Effective Date: June 14, 2018

Effect on Previous Action: None

THE FCA BOARD HEREBY:

Approves the minutes for May 10, 2018, Regular Board Meeting as submitted.

DATED THIS 14th DAY OF JUNE 2018

BY ORDER OF THE BOARD

____________/s/________________

Dale L. Aultman

Secretary to the Board
FCA Board Meeting 

June 2018

Quarterly Report on 

FCS Condition 

June 14, 2018

Stephen Gabriel

Hal Johnson

Exhibit D

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Topics for Open Session

▶ Economic Conditions Affecting the FCS

▶ FCS Condition and Performance

10
Economic Conditions Affecting 

the Farm Credit System

Stephen Gabriel

Chief Economist

Office of Regulatory Policy
The expansion continues; interest rates rise 

with inflationary pressures

Consensus Forecasts (percent)

Red indicates forecast

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 

2017 2017 2017 2017 2018 2018 2018 2018 2019 2019 2019 2019

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

CPI* 3.0 0.1 2.1 3.3 3.5 1.9 2.3 1.9 2.1 2.1 2.4 2.4

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

3 Month T-Bill 0.8 1.0 1.0 1.4 1.7 1.9 2.1 2.3 2.5 2.7 2.8 2.9

10 Yr T-Bond 2.4 2.3 2.3 2.8 2.7 3.0 3.1 3.2 3.3 3.4 3.5 3.6

Source: Consensus Economics, Inc.

Survey date: May 14, 2018

*% change from prior quarter, seasonally adjusted annual rate

12
Farm sector developments and concerns

▶ Trade policy poses risk for agriculture

▶ USDA projects higher crop prices in 2018/19 crop year

▶ Rising interest rates pressure cash flows and land

values

▶ Higher oil prices may stoke inflation and fuel prices

▶ Extreme drought in the Southwest and Southern Plains

is affecting pasture and winter wheat

▶ Farm Bill deliberations add to uncertainty

13
Corn price projected to strengthen in the 

2018/19 crop year

Source: USDA 14
Soybean price to rise as ending stocks decline

Source: USDA

15
Wheat price projected to rise for second year 

in a row

16 Source: USDA
Corn margins to improve in 2018

17

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
Soybean margins to remain positive for third 

year

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 18
Poor yields push wheat margins lower

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, ARC payment is expected to be zero, 

compared with about 50 cents for Price Loss Coverage. For 2018, payment for both programs is expected to be 

about 45 cents per bu.

19
Livestock profitability diminishing

Source: Informa Economics IEG 20
Drought causing poor pasture and winter 

wheat conditions

21
Rising interest rates and declining rents to 

pressure farmland values

Source: USDA, NASS; Federal Reserve Board; FCA 22
23

The United States leads the world in corn 

production and exports
24

The U.S. and Brazil dominate the world 

soybean market
25

World corn production is up by a quarter since 

2010
26

World soybean production has risen by more 

than a quarter since 2010
27

Several countries vie for top exporter of red 

meat
28

Brazil is the leading broiler exporter; the EU 

leads in NF dry milk exports
Risks to watch

▶ International trade policy developments

▶ Summer weather and crop conditions

▶ Rising interest rates

▶ Geopolitical developments (Eurozone, Iran, North

Korea)

▶ Farm Bill

29
Questions

THANK YOU

30
Farm Credit System 

Condition and Performance 

as of 

June 14, 2018

Hal Johnson

Sr. Financial Analyst

Office of Examination

31
Topics

▶ System Growth

▶ Portfolio Credit Quality

▶ Earnings

▶ Capital

▶ FIRS

32
1st quarter growth influenced by seasonal 

factors

Source: FCS Information Statements 33
Little change in portfolio credit quality 

34

Source: FCS Information Statements
System reports strong 1st quarter financial 

results

System Earnings Net Interest Spread

Source: FCS Information Statements 35
The System is well-capitalized

36

Total System Capital ($B)

Source: FCS Quarterly Information Statements
System FIRS ratings

37

Composite FIRS Ratings

System Banks & Associations

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

▶ Risks for agriculture:

▪agricultural trade policies, rising interest rates, higher oil prices, inflation,

drought in the Southwest

▶ The System is financially strong and well-capitalized

▶ Portfolio loan quality is good, but agricultural producers in

certain sectors face significant challenges

▶ System institutions have substantial risk-bearing capacity

and are well-positioned for the risks facing agriculture.

38
Questions

THANK YOU

39
FCA Board Meeting 

June 2018

Semi-Annual Report on 

Office of Examination 

Operations

June 14, 2018

Hal Johnson

Office of Examination

Exhibit E

40
Highlights of OE Operations

▶ Operating Plan Objectives

▶ OE Budget Performance Results

▶ Staffing Update

▶ Summary

41
Risk Supervision & Examination

$330.0

billion

Total Assets

$261.4

billion

Gross Loans

$1.3

billion Qtrly Earnings

System 

Profile

as of 

3/31/18

73 Lending Institutions

• 4 Funding Banks

• 69 Associations

 7 Service Entities

FCS Institution Activities and 

Guidance

▶ Onsite at all funding banks, 45

associations and 7 other System

entities

▶ Issued 25 Reports of Examination

and 15 Interim Activity Letters

▶ 5 institutions are under a higher

level of supervisory oversight

▶ Examination Manual Updates &

Revisions

▶ Informational Memorandums

42
Supervision & Examination Initiatives

43

2018 NOP Risk Topics

Risk topics are nationally focused areas of emphasis 

that address material or emerging risk issues.

▶ Portfolio Risk – Weathering the Storm

▪Credit Guidance

▪Automated Lending Systems

▪Borrower Rights

▶ Internal Controls over Financial Reporting (ICFR)

▪ICFR and Audit Examination

▪ICFR Informational Memorandum
Operational Efficiency & Effectiveness

44

▶ EDGe Loan Workpaper enhancements

▶ Ongoing technology initiatives

▶ OE Budget results (Fiscal YTD thru 3/31/18)

FY 2018 OE Budget - $33.2M

Funds 

Used

$15.8

47.6%

Funds 

Remaining

$17.4

52.4%

♦ Projected Full Year FTE's 175.8

♦ Budgeted Full Year FTE's 176.9

 Budget Variance (1.1)

 FTEs
Human Capital Update

▶ Revised FCA Examiner Career Development Program

▶ Staffing

Total OE Staff Planned Projected Variance

Beginning FY 2018 171 170 (1)

Attrition / Retirements (1) (16) (16) 0

Hirings 21 20 (1)

Ending FY 2018 176 174 (2)

Commissioned Examiners

Beginning FY 2018 83 83 0

Attrition / Retirements (7) (7) 0

Hirings 0 0 0

Newly Commissioned 9 3 (6)

Ending FY 2018 85 79 (6)

(1) There have been 6 staff attritions/retirements fiscal year-to-date through May 31,2018 45
Summary

▶ Maintain a strong onsite supervision presence with a

continued emphasis on risk-based oversight and

examination

▶ Development of commissioned examiners and ensuring

OE has sufficient highly skilled staff to accomplish its

mission remains a critical priority

▶ On target to accomplish 2018 Operating Plan objectives

within budget parameters

46
Discussion

THANK YOU

47
48

Exhibit F

Farm Credit Administration 1501 Farm Credit Drive

McLean, VA 22102-5090

(703) 883-4000

CERTIFICATE OF CLOSED MEETING

The Deputy 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 14, 2018, 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).

____June 14, 2018_________

Date

___________/s/______________

Joy Strickland

Deputy General Counsel