Dallas P. Tonsager, Chairman and Chief Executive Officer

Jeffery S. Hall, Board Member

MINUTES OF THE REGULAR MEETING

OF THE

FARM CREDIT ADMINISTRATION BOARD

June 8, 2017 

These minutes reflect the business transacted at the June 8, 2017, 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 10:35 a.m. Members of the Board present were:

Dallas P. Tonsager, Chairman and Chief Executive Officer

Jeffery S. Hall, Member

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 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. 

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. 

Chairman Tonsager seconded the motion.

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

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

1
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. 

Chairman Tonsager seconded the motion.

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

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

OPEN SESSION

Approval of Minutes

Minutes for May 11, 2017

(BM-8-JUN-17-01) 

Mr. Hall moved to approve the minutes for the May 11, 2017, FCA Regular Board Meeting. 

Chairman Tonsager seconded the motion.

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

The Secretary polled the Board Members and the motion carried unanimously. (BM-8-JUN-17-01) 

(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: 2016 Results

Sal Iannetta 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: 2016 Results.

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.)

2
Quarterly Report on

Economic Conditions and Farm Credit System (FCS) Conditions

Steve Koenig of the Office of Regulatory Policy and Hal Johnson of the Office of Examination

presented the Quarterly Report on Economic Conditions and FCS Conditions. 

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.)

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.

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 F.)

CLOSED SESSION

Chairman Tonsager 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 in Closed Session. 

Chairman Tonsager convened the closed session of the meeting at 10:15 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. 

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 G.) 

Members of the Board present were:

Dallas P. Tonsager, Chairman and Chief Executive Officer

Jeffery S. Hall, Board Member

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. 

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, Chairman Tonsager indicated he would 

entertain a motion to adjourn the meeting.

Mr. Hall moved that the meeting be adjourned.

Chairman Tonsager seconded the motion.

Chairman Tonsager called the question. 

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

The meeting adjourned at 10:35 a.m.

NOTATIONAL VOTE ACTIONS 

There were three notational vote actions approved by the FCA Board from May 12, 2017, through 

June 7, 2017 as follows:

Item Number Action Date Voting Results Subject

NV 17-11 05/24/2017 Approved Treatment of Farm Credit Leasing Capital Elements

NV 17-12 06/05/2017 Approved Review of Significant Regulatory Actions Pursuant to Executive Order 

12866

NV 17-13 06/05/2017 Approved Bond Investment Request from CoBank, ACB to Invest in a continuous 

care facility in Texas

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 8, 2017. 

_______/s/__________________ _______/s/__________________

Dallas P. Tonsager Dale L. Aultman

Board Chairman and Chief Executive Officer Secretary to the Board

Approved: _July 13, 2017_____

4
Exhibit A

Page 1 of 2 

STAFF PRESENT AT THE 

FCA REGULAR BOARD MEETING

June 8, 2017

Dallas P. Tonsager, Chairman and Chief Executive Officer

Jeffery S. Hall, Board Member

OFFICE

OPEN 

SESSION

CLOSED 

SESSION

Office of the Board

Aultman, Dale X X

Laguarda, Wendy X X

Kramp, Kevin X X

Calhoun, Gaye X

Corey, Kathryn X

COO

Hoffman, William X X

OIT

Golley, Jerry X X

EEOI

Burlew, Thais X

OCPA

Stokke, Mike X X

Meaux, Willy X X

Middleton, Russell X X

OSMO

Rea, Laurie X X

OGC

Rawls, Charles X X

Donner, Mary Alice X

Strickland, Joy X X

OE

Coleman, Robert X X

Paulsen, Roger X X

Johnson, Hal X X

5
Exhibit A

Page 2 of 2

OFFICE OPEN 

SESSION

CLOSED 

SESSION

OIG

Gallo, Kathy X X

ORP

Van Meter, Gary X X

Mardock, Barry X X

Koenig, Steve X X

Iannetta, Sal X

Potter, Jessica X X

Johansen, Mark X

OCFO

Smith, Stephen X X

OAS

Fowlkes, Jerome X X

Bell, Vonda X X

FCSIC

Rubin, Howard X X

Pfitzinger, Rick X X

Wynn, Wade X X

GENERAL PUBLIC 2

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 8, 2017 

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 8, 2017. 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 11, 2017 

Reports

2 Annual Report on the Farm Credit System’s Young, Beginning, and Small Farmer Mission Performance: 2016

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 30, 2017_______ _______ /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 11, 2017 Regular Board Meeting

BM-8-JUN-17-01

Effective Date: June 8, 2017

Effect on Previous Action: None

THE FCA BOARD HEREBY:

 

Approves the minutes for May 11, 2017, Regular Board Meeting as submitted.

DATED THIS 8th DAY OF JUNE 2017 

BY ORDER OF THE BOARD

 

_________ /s/_______________________

Dale L. Aultman

Secretary to the Board 

8
2016 Results: 

FCA’s Annual Report on The Farm Credit System’s

Young, Beginning and Small Farmer

Mission Performance

FCA Board Meeting

June 8, 2017

Salvatore Iannetta, Policy Analyst

Jessica Potter, Policy Analyst 1

Exhibit D
Outline

Review the System’s YBS Mission 

YBS Numbers and Trends

Attributes of YBS Programs

2
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.
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
YBS Results 

5

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

YBS Loans Outstanding Number Percentage Dollar volume Percentage

As of December 31, 2016 of of total of loans of total

loans number in millions* volume

Young farmers/ranchers 190,995 18.3 $27,784 11.0

Beginning farmers/ranchers 279,019 26.7 $42,817 17.0

Small farmers/ranchers 501,874 48.1 $47,699 18.9

YBS Loans Made During 2016 Number Percentage Dollar volume Percentage

As of December 31, 2016 of of total of loans of total

loans number in millions* volume

Young farmers/ranchers 62,000 17.0 $9,247 11.7

Beginning farmers/ranchers 79,166 21.7 $12,707 16.0

Small farmers/ranchers 149,691 41.1 $12,207 15.4

Green numbers indicate measures that increased in 2016 relative to those in 2015.

* 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.
New YBS 

Loan Volume 

6

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

3.1

3.8

4.4 4.4

5.0 5.5

6.3

7.7

6.6

7.1 7.5

8.8

8.3 8.7

9.4 9.2

4.2

5.4

6.5

6.8

8.2

9.3

10.4

12.0

9.5

10.2

9.6

11.5

11.0

11.4

12.7 12.7

7.6

9.5

11.0

9.8

10.9

11.6

13.0

14.2

11.9 12.5

11.2

13.2

11.3

10.7

11.8 12.2

0

2

4

6

8

10

12

14

16

2001 2004 2007 2010 2013 2016

Dollars in Billions

Young Beginning Small
YBS Shares 

Total New Loan Volume

7

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

10.3

11.6 12.0 11.2 11.2 10.5 10.7 11.1 11.3 11.1 10.5

11.7 11.0 11.3 11.3 11.7

14.2

16.6

17.8 17.2

18.3 17.8 17.8 17.3

16.2 15.9

13.5

15.2 14.6

14.8 15.2 16.0

25.8

28.9

30.3

25.0

24.2

22.2 22.2

20.6 20.3 19.5

15.7

17.5

15.0

13.9 14.1

15.4

0

5

10

15

20

25

30

35

2001 2004 2007 2010 2013 2016

Percent of Total New Loan Volume

Young Beginning Small
New YBS 

Loan Counts 

8

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

33 36 39 40 42 46 51 53 51 54 53 57 58 59 62 62 37

44

51 50 55 58

64 67 61 66 62

69 73 74 80 79

114

130

150 148 148 148

155 151 146 150

138 143 143 141

150 150

0

20

40

60

80

100

120

140

160

180

2001 2004 2007 2010 2013 2016

Loan counts, (1,000s)

Young Beginning Small
YBS Shares 

Total New Loan Counts

9

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

15.6 15.7 15.3 16.0 16.5 17.0 16.6 16.7 16.4 16.2 15.8 16.5 16.3 16.9 17.2 17.0

17.7 19.3 19.8 20.0 21.3 21.2 21.1 21.1 19.9 19.9 18.6 20.2 20.5 21.2 22.0 21.7

54.5

57.2 58.7 59.6 57.6

54.3

51.0

47.7 47.2 45.3

41.2 41.7 40.1 40.2 41.4 41.1

0

10

20

30

40

50

60

70

2001 2004 2007 2010 2013 2016

Percent of total new farm loan counts

Young Beginning Small
Conclusions – The Numbers

10

 Most Systemwide YBS results either increased or kept pace 

to the levels achieved in 2015.

 Young and Beginning Farmer loans increased as a percent of 

overall loans outstanding. Small farmer loans kept pace.

 Young, Beginning, and Small all increased as a percent of 

loan volume made in 2016.
2016 YBS

Qualitative Results

11
Tools Used to 

Extend Credit

Source: YBS Questionnaire 12

72

64

61

59

45

36

15

5

74

62

59 58

43

41

16

5

70

54 55

53

41

35

15

5

0

10

20

30

40

50

60

70

80

Federal State

Loan Guarantees

Concessionary

Interest Rates

YBS Specific LUS Personal

Guarantors / CoSigners

Government

Loan

Particpations

Concessionary

Loan Fees

Differential Loan

Covenants

Other

Percent of Associations

Guarantees, Reduced Rates and Customized Standards Most Used to Extend 

Credit to YBS 

Young Beginning Small
Tools Used to 

Extend Credit

Source: YBS Questionnaire 13

Percent of Associations Who Used Tools to Extend Credit

Tool Young Beginning Small

Federal or State Loan Guarantee 72 74 70

Concessionary Interest Rates 64 62 54

YBS Specific Standards 61 59 55

Personal Guarantors / Co-Signers 59 58 53

Government Loan Participations 45 43 41

Concessionary Loan Fees 36 41 35

Differential Loan Covenants 15 16 15

Other 5 5 5
Continued Coordination to 

Extend Credit and Services

14 Source: YBS Questionnaire 

Organization 2015 2016

Farm Service Agency (FSA) 99% 99%

Other FCS Associations 80% 88%

District Farm Credit Bank 72% 85%

Producer Groups & Organizations 71% 82%

Ext nse ion Service 68% 81%

State/Local Government 68% 76%

Non-Profit Organizations 55% 70%

Natural Resources Conservation Service (NRCS) 47% 54%

US A D Outreach Staff 32% 46%

Commercial Lenders 28% 39%

Farmer Mac 25% 31%

Small Business Administration (SBA) 24% 31%

Agricultural Marketing Service (AMS) 17% 8%

Other 5% 7%
YBS Program Management

15 Source: YBS Questionnaire 

Best practices continue to be implemented resulting in 

more service of YBS needs.

– Advisory committees continue to provide valuable 

input to the Board and management.

– Performance standards for management and staff 

helped implement business plan objectives.

– Staff training increased in 2016. 
Associations Actively Study 

Their YBS Marketplace

16 Source: YBS Questionnaire 

 Associations identified new markets and developed 

actions to market to these YBS farmers and ranchers. 

 Research was conducted by a combination of internal 

and external sources. 

 Example of results from marketplace study: 

– Used current study to identify the unique characteristics of our 

market segmentation and identified underserved areas within 

our territory to market to. Efforts to reach those under-served 

areas, including YBS potential borrowers, include a new branch 

location, sponsorships and increased marketing efforts.
Training, Outreach, and 

Education

17 Source: YBS Questionnaire 

 The System continues to customize training 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, women and 

members of minority groups.

 Associations use both their internal experts and hire outside 

professionals to develop and present educational opportunities. 

 Educational resources include a variety of learning options such 

as: online libraries, courses, seminars, and speakers. 
Conclusions – Qualitative Data

18 Source: YBS Questionnaire 

 Increase in the amount of services and tools used to serve YBS 

borrowers.

 System coordination with third parties enhances credit delivery to 

YBS borrowers.

 Advisory committees, marketplace studies, and staff training 

improve knowledge of the YBS population.

 YBS training, outreach, and educational opportunities increased and 

are beneficial to current and potential borrowers. 
YBS Farm Lending Outperformed 

Systemwide Farm Lending

19

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

2015 2016

Change

(% pts.)

Volume of FCS Loans Made 8.8% -5.4% -14.2

Number of FCS Loans Made 3.7% 0.5% -3.2

Young Percent of FCS Loan Volume 11.3% 11.7% 0.4

Beginning Percent of FCS Loan Volume 15.2% 16.0% 0.8

Small Percent of FCS Loan Volume 14.1% 15.4% 1.3

Farm lending includes loans and commitments for real estate mortgages, production and intermediate loans, processing 

and marketing operations, and leases, but does not include rural home loans. Farm lending is a subset of total Farm Credit 

System lending. 
FCA Board Meeting 

June 2017

Quarterly Report on 

FCS Condition

June 8, 2017

Steve Koenig

Hal Johnson Exhibit E

27
Topics for Open Session

2

Economic Conditions Affecting the FCS

FCS Condition and Performance

28
Economic Conditions Affecting 

the Farm Credit System

Steve Koenig

Senior Agricultural Economist

Office of Regulatory Policy

29
Favorable economic trends

 World economic growth 

 Chinese economy chugs along

 U.S. business and consumer optimism

 Consumer wage and income growth

 Improving employment 

4

30
Some economic concerns

 Approaching 100 months of expansion

 Productivity challenges

 Consumer and business debt grows 

 Labor availability and labor costs

 Elevated dollar

 Interest rate increases

5

31
Federal Reserve rate adjustments 

6

Data Source: Board of Governors of the Federal Reserve System.

Possible Future

Adjustments

32
Forest products, nursery, rural 

housing

Higher mortgage rates could stall 

housing starts, affordability, and values

Rising labor & other costs

Trade issues benefit forestry prices 

7

33
Outlook for major cash crops

8

World supplies 

weigh on prices for 

grains and oilseeds

Data source: USDA/WAOB, May 10, 2017. 

34
Profits remain a challenge for 

major crops

9

Sources: USDA/WAOB data and FCA/AEPT.

35
Wheat production declining

10

Data source: USDA/NASS.

36
U.S. shift to corn and soybeans

11

Data source: USDA/NASS.

37
U.S. crop planting on time, but 

has had challenges 

12

Data source: USDA/NASS.

38
Summer conditions critical to 

crop size and price

13

• Major areas combined 

account for 75 percent of 

total national production.

 Major and minor areas 

combined account for 99% of 

total national production. Source: USDA/WAOB.

39
Protein sector outlook

Dairy, hogs, broilers, and cattle 

feeders have a favorable profit outlook

Favorable feed costs

Trade developments

14

40
Cattle feeders banking profits

15

Source: Informa Economics IEG.

41
Dairy profits ahead....

16

Source: Informa Economics IEG.

42
Hogs and broilers enjoy profits

17

Source: Informa Economics IEG

43
Land markets mixed

18

1st Quarter 2017 Bank Survey Results

Federal Reserve District Percent change from 

one year ago

Chicago:

 Farmland unchanged

Kansas City

 Cropland: 

 Non-irrigated -3.5

 Irrigated -7.6

 Ranchland -2.7

Sources: Chicago and Kansas City Federal Reserve Banks.

44
Looking ahead 

Summer weather 

Trade 

Economic progress

19

Questions

45
Farm Credit System 

Condition and Performance

as of 

March 31, 2017

Hal Johnson

Sr. Financial Analyst

Office of Examination

46
Topics

21

 System Growth

 Loan Portfolio

 Earnings

 Capital

 FIRS

47
1st quarter growth influenced by 

seasonal factors

Source: FCS Quarterly Information Statements 22

248 248 253 

261 264 266 271 

283 279 283 

291 304 305 

315 314 320 320 

192 193 194 201 205 205 208 

217 216 221 227 236 238 244 242 249 250 

-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% 2.3%

-0.7%

2.7%

0.6%

$ billions

 Total FCS Assets

 Total Gross Loans

% change in Gross Loans

 (quarter-over-quarter)

48
Little change in overall loan 

balances for the quarter

23 Source: FCS Quarterly Information Statements

1.1% 1.0%

-6.0%

10.5%

0.6% 1.5% 0.2%

-6.9%

11.8%

0.0%

Total Gross

Loans

Real Estate

 Mortgage

[46%]

Production &

 Intermediate

[19%]

Agribusiness

[17%]

Other

[18%]

Mar-16 Mar-17

2017 Loan Growth by Loan Type

(% change quarter-over-quarter) 

District Q1-'15 Q1-'16 Q1-'17

AgFirst District (10%) -1.0% 0.3% 0.0%

AgriBank District (39%) -1.9% 0.3% -0.7%

CoBank District (42%) 0.8% 2.0% 1.9%

Texas District (9%) 1.6% 2.3% 2.0%

Total FCS -0.4% 1.1% 0.6%

Loan Growth by District 

(% change quarter-over-quarter)

49
Portfolio credit quality remains 

favorable; risk measures edge higher

24 Source: FCS Quarterly Information Statements

Sector Nonaccruals as a % of Loans Outstanding

1,883

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

1,832 1,825

1,975 1,962 2,023

0.92%

0.85% 0.80% 0.82% 0.80% 0.76%

0.69%

0.77% 0.75%

0.82% 0.79% 0.81%

 Nonaccrual Loans Other Nonperforming Loans

% of Nonperforming Loans-to-Total Loans ($M)

5.8

5.7

10.0

4.8

2.5

1.4

5.5

5.2

8.9

5.1

2.9

1.3

5.6

5.0

9.4

5.4

3.0

2.3

5.3

4.8

8.9

5.2

2.8

2.2

0.0 2.0 4.0 6.0 8.0 10.0 12.0

Total - FCS

Real Estate

Mortgage

Production &

Intermediate

Agribusiness

Rural

Infrastructure

Other

Mar-17 Dec-16 Sep-16 Jun-16

% of Loans Classified Less than Acceptable

50
System reports solid 1st quarter 

financial results

25 Source: FCS Quarterly Information Statements

1,132 1,141 1,208 1,207 1,157 1,180 1,252 1,259 1,244 

27 23 37 19 69 91 58 48 37 

Provision for Loan Losses ($M)

System Net Income ($M)

System Earnings ($M) 

43.7 44.7 45.8 45.7 46.8 47.8 48.9 48.8 50.0 51.4 52.4 52.3 53.4 

16.6%16.8%16.9%

16.2%

16.8%16.9%16.8%

16.1%

16.4%16.3%

16.7%

16.4%

16.7%

Restricted Capital

Total Capital less Restricted

Restricted capital represents capital associated with the Insurance Fund.

Capital-to-Asset Ratio

Total System Capital ($B)

51
System FIRS ratings

26

FIRS Ratings

• Composite FIRS ratings reflect 

the System’s solid financial 

performance and favorable 

portfolio credit quality 

• Over 97% of System Banks and 

Associations have a Composite 

FIRS rating of 1 or 2

• 3 rated institutions account for 

less than 1.0% of total System 

assets

Source: FCA's FIRS ratings database

29 30 37 43 44 46 44 44 44 

46 44 

38 31 32 29 31 31 31 

12 12 10 8 3 3 2 2 2 

2 1 1 

1 

Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-16 Mar-17

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 – rising interest rates, strength of 

the dollar, consumer and business debt levels

 Farm sector concerns – persistent low grain prices, continued 

pressure on Midwest farmland values

 The System is financially strong and well-capitalized

 Portfolio loan quality remains good, but rising credit risk 

continues to be a concern

 System institutions are well-positioned for the challenges 

facing agriculture and have significant risk-bearing capacity

27

53
Questions

THANK YOU

54
FCA Board Meeting 

June 2017

Semi-Annual Report on 

Office of Examination 

Operations

June 8, 2017

Hal Johnson

Office of Examination

Exhibit F

55
Highlights of OE Operations

2

 Operating Plan Objectives

 OE Budget Performance Results

 Staffing Update

 Summary

56
2017 Operating Plan Objectives

 Risk Supervision & Examination Activities

• Onsite at 43 associations (59%), all funding banks, 4 other 

System entities, and Farmer Mac

• Issued 31 Reports of Examination and 13 Interim Activity Letters

• Issued: 2016 Compliance Horizontal Exam Activity (HEA) results, 

2016 Cybersecurity HEA results,

2016 Shared Assets Report, and;

2016 Loan Underwriting Standards Report

• 3 institutions are under a higher level of supervisory oversight

57
2017 Operating Plan Objectives

 Risk Supervision & Examination Initiatives

• New Capital Regulations became effective January 1, 2017

 Issued IM on Implementation of Tier 1/Tier 2 Capital 

Framework with new FIRS benchmarks (November 10, 2016)

 Updated Examination Manual sections and associated 

workpapers for Capital, Financial & Shareholder Reporting, 

Business Strategy & Planning, and FIRS

 Issued Examiner Talking Points and provided JIT training

 Workgroup established to review/validate System capital ratio 

calculations

• Internal Controls - developing guidance on lending and 

loan servicing controls 4

58
 Risk Supervision & Examination Initiatives (cont.)

• Credit and collateral risk

 Issued Examiner Talking Points on collateral risk

 Analyzing systemic credit and collateral risk

 Issued Memorandum to FCS on Attributed Customer 

Exposures (May 10, 2017)

• Other Informational Memorandums issued:

 The Military Lending Act (February 6, 2017)

 CFPB’s Mortgage Servicing Rule (April 17, 2017) 

• Other Examination Manual modules

 Information Technology & Security

 Affirmative Action Program Plan

2017 Operating Plan Objectives

5

59
2017 Operating Plan Objectives

 Public Mission as GSE

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

• Updating Examination Manual module on YBS 

 Human Capital 

• Integrating Job Analysis results into Commissioning Program 

• Revising Career Path Directive 52

• Supporting Agency human capital goal

 Operational Efficiency & Effectiveness

• Continued focus on developing and leveraging available 

technology (e.g., Loan Database, EDGe, and risk project tools)6

60
OE Budget Results (Fiscal YTD thru 3/31/17)

7

Funds 

Used

$15.5

48.1%

Funds 

Remaining

$16.7

51.9%

FY 2017 OE Budget - $32.2M

 Travel: YTD through March (1)

♦ Actual travel expense as a % of Budget 34%

♦ Actual travel days as a % of Budget 36%

 FTEs

♦ Projected Full Year FTE's 176.9

♦ Budgeted Full Year FTE's 177.8

 Budget Variance (0.9)

Fiscal Year 2017

(1) - Actual travel in the 1st half of fiscal year 2017 was 

notably lower than in previous years due to limitations 

on travel imposed by budget restrictions.

61
Staffing Update

8

Total OE Staff Planned Projected Variance

Beginning FY 2017 178 177 (1)

Attrition / Retirements (1) (19) (19) 0

Hirings 19 10 (9)

Ending FY 2017 178 168 (10)

(1) There have been 13 staff attritions/retirements fiscal year-to-date through May 31,2017

Commissioned Examiners Planned Projected Variance

Beginning FY 2017 90 90 0

Attrition / Retirements (8) (11) (3)

Hirings 0 0 0

Newly Commissioned 8 4 (4)

Ending FY 2017

62

90 83 (7)
Summary

 Continued emphasis on risk-based oversight and 

examination while maintaining a strong onsite supervision 

presence. 

 Commissioning and developing staff remains a priority

 On target to achieve 2017 Operating Plan objectives

 Committed to accomplishing Operating Plan objectives 

within 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 8, 2017, 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 8, 2017 

 Charles R. Rawls

General Counsel 

65