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    "ocrText": "Jill Long Thompson, Board Chair and Chief Executive Officer\nKenneth A. Spearman, Board Member\nLeland A. Strom, Board Member\nCOMMUNICATION CREET FARM * * EEGL\nESTABLISHED\nMINUTES OF THE REGULAR MEETING\nOF THE\nFARM CREDIT ADMINISTRATION BOARD\nDecember 11, 2014\nThese minutes reflect the business transacted at the December 11, 2014, Regular Meeting of the\nFarm Credit Administration Board (FCA Board) pursuant to the Government in the Sunshine Act (Act),\n5 U.S.C. $ 552b, and the regulations of the Farm Credit Administration (FCA) adopted thereunder.\nThe FCA Board meeting was held at the FCA office in McLean, Virginia, beginning at 9:00 a.m. and\nconcluding at 10:32 a.m. Members of the Board present were:\nJill Long Thompson, Board Chair and Chief Executive Officer\nKenneth A. Spearman, Member\nLeland A. Strom, Member\nThe above named constitute the full Board.\nOthers present included Charles Rawls, General Counsel; Dale Aultman, Secretary to the Board; staff\nof the FCA and Farm Credit System Insurance Corporation (FCSIC); and three members of the general\npublic. (A list of staff attendees is attached as Exhibit A.)\nThe Secretary read a statement that announced the meeting would be conducted according to the\nrequirements of the Government in the Sunshine Act.\nBoard Chair Long Thompson reviewed the published Agenda. (A copy of the Public Announcement\npublishing the Agenda for the meeting is attached as Exhibit B.)\nMr. Spearman moved to adopt the Agenda as published.\nMr. Strom seconded the motion.\n1\nThere being no further discussion, Board Chair Long Thompson called the question.\nThe Secretary polled the Board Members and the motion carried unanimously.\nMr. Strom noted that the Agenda did include a portion of the meeting that should be closed to the\npublic as permitted by the Government in the Sunshine Act and therefore moved that the meeting\nbe closed at that point.\nMr. Spearman seconded the motion.\nThere being no further discussion, Board Chair Long Thompson called the question.\nThe Secretary polled the Board Members and the motion carried unanimously.\nOPEN SESSION\nApproval of Minutes\nMinutes for November 13, 2014 Regular Board Meeting\n(BM-11-DEC-14-01)\nMr. Strom moved to approve the minutes for November 13, 2014 Regular Board Meeting.\nMr. Spearman seconded the motion.\nThere being no further discussion, Board Chair Long Thompson called the question.\nThe Secretary polled the Board Members and the motion carried unanimously. (BM-11-DEC-14-01)\n(A copy of the official \"Board Action Item\" is attached as Exhibit C.)\nNew Business\nOrganization, Mergers, Consolidations and\nCharter Amendments of Banks or Associations\nProposed Rule\n(BM-11-DEC-14-02)\nShirley Hixson of the Office of Regulatory Policy and Laura McFarland of the Office of General\nCounsel presented the Organization, Mergers, Consolidations and Charter Amendments of Banks or\nAssociations, Proposed Rule.\nBoard Chair Long Thompson opened the discussion for questions by the Board.\n2\nBoard Chair Long Thompson asked if there was any further discussion and asked staff to provide\ntheir recommendation. Staff provided their recommendation.\nBoard Chair Long Thompson called for a motion on the staff's recommendation regarding the\nproposed rule.\nMr. Strom moved that the Board approve the Organization, Mergers, Consolidations and Charter\nAmendments of Banks or Associations proposed rule.\nMr. Spearman seconded the motion.\nBoard Chair Long Thompson asked if there was any further discussion.\nThere being no further discussion, the Board Chair called the question.\nThe Secretary polled the Members and the motion carried unanimously. (BM-11-DEC-14-02)\n(A copy of the \"Board Action Item\" is attached as Exhibit D.)\nReports\nQuarterly Report on Economic Conditions and Farm Credit System Conditions\nSteve Gabriel of the Office of Regulatory Policy and Hal Johnson of the Office of Examination\npresented the Quarterly Report on Economic Conditions and Farm Credit System Conditions.\nFor the next quarterly report, Mr. Strom asked staff to provide information and data related to the\nimpact of declining oil prices on agriculture.\nBoard Chair Long Thompson asked if there were any questions or further discussion from the Board.\nThere were no further questions or discussion.\n(A copy of the PowerPoint presentation is attached as Exhibit E.)\nSemi-Annual Report on Office of Examinations Operations\nHal Johnson of the Office of Examination presented the Semi-Annual Report on Office of\nExaminations Operations.\nBoard Chair Long Thompson asked if there were any questions or further discussion from the Board.\nThere were no further questions or discussion.\n(A copy of the PowerPoint presentation is attached as Exhibit F.)\n3\nCLOSED SESSION\nBoard Chair Long Thompson announced that the next topic on the Agenda was a closed session item\npursuant to previous Board action.\nThe Board Chair thanked the members of the public for attending and asked them to exit.\nBoard Chair Long Thompson convened the closed session of the meeting at 10:05 a.m. and\ninstructed the Secretary to activate the electronic recording device so that the proceedings of the\nclosed session were properly recorded as required by the Government in the Sunshine Act.\nThe Board Chair then instructed the General Counsel to furnish the Secretary with a certification,\npursuant to 5 U.S.C. § 552b(f), that the portions of the meeting held in closed session may be\nproperly closed to the public.\n(A copy of the Certification is attached hereto as Exhibit G.)\nMembers of the Board present were:\nJill Long Thompson, Board Chair and Chief Executive Officer\nKenneth A. Spearman, Member\nLeland A. Strom, Member\nThe above named constitute the full Board.\nOthers present included Dale Aultman, Secretary to the Board; and Charles Rawls, General Counsel.\n(A list of staff attendees is attached as Exhibit A).\nReports\nOffice of Examination Quarterly Report\nRobert Coleman and Roger Paulsen of the Office of Examination presented the OE Quarterly Report.\nBoard Chair Long Thompson asked if there were any questions or further discussion from the Board.\nThere were no further questions or discussion.\nThe closed session ended at 10:31 a.m.\n4\nADJOURNMENT\nThere being no further business to come before the Board, Board Chair Long Thompson indicated she\nwould entertain a motion to adjourn the meeting.\nMr. Spearman moved that the meeting be adjourned.\nMr. Strom seconded the motion.\nBoard Chair Long Thompson called the question.\nThe Secretary polled the Board Members and the motion carried unanimously.\nThe meeting adjourned at 10:32 a.m.\nNOTATIONAL VOTE ACTION\nThere was one notational vote action approved by the FCA Board from November 14, 2014, through\nDecember 10, 2014, as follows:\nItem Number\nAction Date\nVoting Results\nSubject\nNV 14-23\n11/19/2014\nApproved\nFarm Credit System Building Association 2015 Budget,\nOperating Plan, and Bank Assessments\nThe undersigned hereby certify that the foregoing minutes are the official minutes of the Regular\nMeeting of the Farm Credit Administration Board held on December 11, 2014.\n/s/\n/s/\nJill Long Thompson\nDale L. Aultman\nBoard Chair and Chief Executive Officer\nSecretary to the Board\nApproved: January 8, 2015\n5\nExhibit A\nPage 1 of 2\nSTAFF PRESENT AT THE\nFCA REGULAR BOARD MEETING\nDecember 11, 2014\nJILL LONG THOMPSON, Board Chair and Chief Executive Officer\nKENNETH A. SPEARMAN, Board Member\nLELAND A. STROM, Board Member\nOPEN\nCLOSED\nOFFICE\nSESSION\nSESSION\nOffice of the Board\nAultman, Dale\nX\nX\nSmulkstys, Inga\nX\nX\nCorey, Kathryn\nX\nBuccolo, Deb\nX\nJohansen, Mark\nX\nX\nCalhoun, Gaye\nX\nMiddleton, Russell\nX\nX\nOCOO\nHoffman, William\nX\nX\nOCPA\nStokke, Mike\nX\nX\nMeaux, Willy\nX\nX\nOSMO\nRea, Laurie\nX\nX\nOGC\nRawls, Charles\nX\nX\nStrickland, Joy\nX\nX\nMcFarland, Laura\nX\nDonner, Mary Alice\nX\nX\n6\nExhibit A\nPage 2 of 2\nOPEN\nCLOSED\nOFFICE\nSESSION\nSESSION\nOE\nColeman, Robert\nX\nX\nPaulsen, Roger\nX\nX\nJohnson, Hal\nX\nX\nOIG\nDean, Elizabeth\nX\nX\nCerne, Sonya\nX\nX\nORP\nVan Meter, Gary\nX\nX\nGabriel, Steve\nX\nX\nHixson, Shirley\nX\nWilson, Debbie\nX\nX\nOMS\nSmith, Stephen\nX\nX\nFowlkes, Jerome\nX\nX\nFCSIC\nRubin, Howard\nX\nX\nPfitzinger, Rick\nX\nX\nEEO & Inclusion\nBurlew, Thais\nX\nGENERAL PUBLIC\n3\n7\nExhibit B\nFarm Credit Administration\nFarm Credit Administration\n1501 Farm Credit Drive\nMcLean, Virginia 22102-5090\nPUBLIC ANNOUNCEMENT OF\nMEETING SUBJECT TO THE GOVERNMENT IN THE SUNSHINE ACT\nFarm Credit Administration Board\nRegular Meeting\nDecember 11, 2014\nSummary: Notice is hereby given, pursuant to the Government in the Sunshine Act (5 U.S.C. Sec. 552b(e) (1)), of the\nforthcoming regular meeting of the Farm Credit Administration Board.\nDate and Time: The regular meeting of the Board will be held December 11, 2014. The meeting is scheduled to be held\nat the office of the Farm Credit Administration in McLean, Virginia, from 9:00 a.m. until such time as the Board may\nconclude its business.\nAddress: Farm Credit Administration, 1501 Farm Credit Drive, McLean, Virginia 22102-5090. Submit attendance\nrequests via e-mail to [email protected]. See SUPPLEMENTARY INFORMATION for further information about\nattendance requests.\nFor Further Information Contact: Dale L. Aultman, Secretary to the Farm Credit Administration Board (703) 883-4009.\nTTY is (703) 883-4056.\nSupplementary Information: Parts of this meeting of the Board will be open to the public (limited space available), and\nparts will be closed. Please send an e-mail to [email protected] at least 24 hours before the meeting. In your e-\nmail include: name, postal address, entity you are representing (if applicable), and telephone number. You will receive\nan e-mail confirmation from us. Please be prepared to show a photo identification when you arrive. If you need\nassistance for accessibility reasons, or if you have any questions, contact Dale L. Aultman, Secretary to the Farm Credit\nAdministration Board, at (703) 883-4009. The matters to be considered at the meeting are:\nOPEN SESSION\nApproval of Minutes\n1\nNovember 13, 2014\nNew Business\n2\nOrganization, Mergers, Consolidations and Charter Amendments of Banks or Associations - Proposed Rule\nReports\n3\nQuarterly Report on Economic Conditions and FCS Conditions\n4\nSemi-Annual Report on Office of Examination Operations\nCLOSED SESSION\n5\nOffice of Examination Supervisory and Oversight Activities Report 1\nDecember 1, 2014\n/s/\nDate\nDale L. Aultman\nSecretary to the Board\n1 Session Closed-Exempt pursuant to 5 U.S.C. Section 552b(c)(8) and (9).\n8\nExhibit c\nFarm Credit Administration\n1501 Farm Credit Drive\nMcLean, Virginia 22102-5090\n(703) 883-4000\nBOARD ACTION ITEM\nFCA\nFARM CREDIT ADMINISTRATION\nFCA BOARD ACTION ON\nMinutes for November 13, 2014 Regular Board Meeting\nBM-11-DEC-14-01\nEffective Date:\nDecember 11, 2014\nEffect on Previous Action:\nNone\nTHE FCA BOARD HEREBY:\nApproves the minutes for November 13, 2014, Regular Board Meeting as submitted.\nDATED THIS 11th DAY OF DECEMBER 2014\nBY ORDER OF THE BOARD\n/s/\nDale L. Aultman\nSecretary to the Board\n9\nExhibit D\nFarm Credit Administration\n1501 Farm Credit Drive\nMcLean, Virginia 22102-5090\n(703) 883-4000\nBOARD ACTION ITEM\nFCA\nFARM CREDIT ADMINISTRATION\nFCA BOARD ACTION ON\nOrganization, Mergers, Consolidations and\nCharter Amendments of Banks or Associations\nBM-11-DEC-14-02\nEffective Date:\nDecember 11, 2014\nTHE FCA BOARD HEREBY:\nApproves the proposed rule that would modify FCA regulations in part 611\npertaining to the merger or consolidation of Farm Credit System banks and\nassociations as well as make other related changes; and\nAuthorizes staff to make any technical or grammatical changes that may be\nnecessary for publication in the Federal Register.\nDATED THIS 11th DAY OF DECEMBER 2014\nBY ORDER OF THE BOARD\n/s/\nDale L. Aultman\nSecretary to the Board\n10\nCHEDE\nFCA Board Meeting\nDecember 2014\nQuarterly Report on\nFCS Condition\nDecember 11, 2014\nStephen Gabriel\nHal Johnson\nEXHIBIT E of December 12,\n2014 FCA Board Meeting\n11\nMinutes\nTopics for Open Session\nEconomic Conditions Affecting the FCS\nFCS Condition and Performance\n12\n2\nEconomic Conditions Affecting\nthe Farm Credit System\nStephen Gabriel\nChief Economist\nOffice of Regulatory Policy\n13\nModest economic growth expected;\nlong-term rates to rise gradually\nConsensus Forecasts (percent)\nRed indicates forecast\nQ3\nQ4\nQ1\nQ2\nQ3\nQ4\nQ1\nQ2\nQ3\nQ4\nQ1\nQ2\n2013\n2013\n2014\n2014\n2014\n2014\n2015\n2015\n2015\n2015\n2016\n2016\nGDP growth*\n4.5\n3.5\n-2.1\n4.6\n3.9\n2.6\n2.9\n2.8\n2.9\n2.9\n3.0\n3.0\nCPI*\n2.2\n1.1\n1.9\n3.0\n1.1\n0.8\n1.5\n1.9\n2.0\n2.1\n2.1\n2.1\nUnemployment rate\n7.3\n7.0\n6.7\n6.2\n6.1\n5.9\n5.7\n5.6\n5.6\n5.5\n5.4\n5.4\n10 Yr T-Bond\n2.6\n3.0\n2.7\n2.5\n2.4\n2.5\n2.7\n2.9\n3.1\n3.3\n3.4\n3.6\nSource: Consensus Economics, Inc.\nSurvey date - November 10, 2014\n* % change from prior quarter, seasonally adjusted annual rate\n14\n4\nCurrent expansion longer than\nISHED\naverage; shorter than recent ones\nExpansion Duration in Months\n140\n120\n120\n106\n100\n92\n80\n73\n66\n58\n58\n60\n45\n37\n39\n36\n40\n24\n20\n12\n0\n1945 1948 1953 1957 1960 1969 1973 1980 1981 1990 2001 2007 Present 2009)\nOct\nOct.\nNov 1949 May Jul 1954 Apr Aug 1958 Feb Apr 1961 Nov Dec 1970 Mar Nov 1975 15 Jul Jan 1980 Nov Jul 1982 Mar Jul 1991 Nov Mar 2001 June Dec 2009 Average (1949\n5\nSource: National Bureau of Economic Research\nDespite recent strength, the outlook\nis for somewhat lackluster growth\nQuarterly GDP Growth (Compounded Annual Rate of Change)\n10.0\n8.0\n6.0\n4.6\n3.9\n4.0\n2.0\n0.0\n-2.0\n-2.1\n-4.0\n-6.0\n-8.0\n-10.0\n2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014\n16\n6\nSource: Bureau of Economic Analysis\nISHED IDVENTS\nLabor markets continue to\nimprove slowly\n20\n—\n18\nTotal unemployed, plus all marginally attached workers plus total\nemployed part time for economic reasons (%)\n16\n—\nCivilian Unemployment Rate (%)\n14\n12\n11.5\n10\n8\n6\n5.8\n4\n2\n0\n94\n95\n96\n97\n98\n99\n00\n07\n02\nEO\n04\n05\n90\n0>\n08\n09\nOL\nLL\n12\nE%\nDL\nDL\n17\nSource: Bureau of Labor Statistics\nDWEDE\nFarm sector developments and\nconcerns\nRecord corn & bean yields and production\nprojected for 2014\nAverage corn & soybean prices to fall sharply\nCrop margins are compressing\nFarmland markets are cooling\nStrong dollar hurting exports\nCalifornia drought persists\n8\nIDVENTIST\nLarge corn and soybean crops\npush prices lower\n30%\n16.00\n70%\n8.00\n14.40\n65%\n6.89\n14.00\n60%\n7.00\n25%\n55%\n6.00\n12.00\n13.00\n50%\n20%\n45%\n5.00\n10.00\n10.00\n40%\n4.46\n35%\n4.00\n15%\n8.00\n30%\n3.50\n25%\n3.00\n6.00\n10%\n20%\n2.00\n4.00\n15%\n5%\n10%\n1.00\n2.00\n5%\n0%\n0.00\n0%\n0.00\n1981 1975/76 1978/79\n1/884/8571 7188\n////////\n2018/19\n1980/81\n183\n189\n193\n103\nEnding U.S. Corn Stocks/Use Ratio (left axis)\nEnding U.S. Soybeans Stocks/Use Ratio (left axis)\nAverage Farm Corn Price - dollars/bu (right axis)\nAverage Farm Soybeans Price - dollars/bu (right axis) 9\nSource: USDA\nSource: USDA\nCow-calf returns reaching\nunprecedented levels\n12-Nov-14\nESTIMATED AVERAGE COW/CALF RETURNS\n(Over Cash Costs) & BEEF COW INVENTORY\n480\n440\nReturns\n400\n43,000\n360\n$/Hd Over Direct Costs\n320\n40,000\n280\n240\n200\n37,000\n160\n120\n80\n34,000\n40\nBeef Cows (000 Hd)\n0\n31,000\n-40\n-80\nJan 1 Beef Cow Inventory (lagged 2 years)\n-120\n28,000\n1974\n1976\n1978\n1980\n1982\n1984\n1986\n1988\n1990\n1992\n1994\n1996\n1998\n2000\n2002\n2004006\n2008\n20102012\n2014\n10\nSource: Informa Economics\nLOWELL\nBroiler margins are expected to\nbe strong through next year\n12-Nov-14\nUS Broiler Weighted Margins\n30\n25\n85% cutout, 15% whole bird\n20\n15\nCents/Pound\n10\n5\n0\n-5\n-10\n-15\n-20\nJan-04\nJul-04n-05\nJul-05n-06\nJul-06n-07\nJUI-07\nJan-08\nJul-08n-09\nJul-09\nJan-10\nJul-10n-11\nJul-11\nJan-12\nJul-12n-13\nJul-13\nJan-14\nJul-14n-15\nSL-inf\n21\n11\nSource: Informa Economics\nMulti-year stretch of hog\nLISHED\nproducer profits is expected\n12-Nov-14\nHog Producer Margin, Cash Based\n140\n120\n100\n80\n60\n$/Head\n40\n20\n0\n-20\n-40\n-60\nJan-04\nMay-04\nto-das\nso-uer\nMay-05\nso-ders\nJan-06\nMay-06\n90-ders\nLo-der\n80-uer\n80-ders\n60-uer\nMay-09\n60-des OL OL -Xew\nMay- Sep- Sep- Jan- Jan- 77 Sep-10 77 7 1 10\nMay- Sep- 12 12 Jan-12\n≥1\nEL EL -uer -Xew\nDL DL DL EL -das -uer -Xew\nGL GL GL -uer -das -Xew 12\nSource: Informa Economics\nDairy margins to stay positive while\nsupplies add pressure this Spring\n12-Nov-14\nUS Dairy Producer Net Margins\n10\n8\n6\nMilk Price minus Estimated Total Cost\n4\n2\n0\n-2\n-4\n-6\nJan-04\nAug-04\nMar-05\nOct-05\nMay-06\nDec-06\n20-Inr\nFeb-08\nSep-08\nApr-09\nNov-09\nOL-unr\nOL\nJan-11\n\"\nAug-11\n\"\nMar-12\nOct-12 May-13 Dec-13\n15 Jul-14 Sep-15 Feb-15\nGL\n13\nSource: Informa Economics\nMidwest farmland values weaken\nin the 3rd quarter\nPercent change from previous quarter\nPercent change in value of \"good\" farmland from the previous quarter\n6\n6\n4.8\nKansas City Federal Reserve District\n5\n5\nChicago Federal Reserve District\n5\n3.8\n4\n3.3\n3.3\n4\n3\n2.3\n2.4\n3\n2\n1.5\n1\n2\n1\n0\n1\n-1\n0\nNonirrigated Cropland\n-2\nIrrigated Cropland\n-1\n-1.9\nRanchland\n-3\n-2\n-4\n-2\n-4.2\n-3\n-5\n2012:Q3\n2013:Q3\n2014:Q3\n2012:Q3\n2013:Q3\n2014:Q3\n14\nSource: Federal Reserve Bank of Kansas City\nSource: Federal Reserve Bank of Chicago\nRisks to watch\nFarmland values correction\nCash flow squeeze for grain/soybean\nfarmers\nCalifornia drought\nWorld oil markets\nGeopolitical developments\n25\n15\nGREDE ESTABLE ISHED DISNEY THE\nQuestions\nTHANK YOU\n26\nFarm Credit System\nCondition and Performance\nas of\nSeptember 30, 2014\nHal Johnson\nOffice of Examination\nISHED\nTopics\nSystem Growth\nEarnings / Capital\nPortfolio Credit Quality\nFIRS\n28\n18\nSystem growth continues at a\nmodest pace\nTotal Assets\nGross Loans\n% change in Gross Loans (quarter-over-quarter)\n271\n264\n266\n261\n253\n247\n248\n248\n240\n236\n231\n230\n228\n230\n231\n208\n($ billions)\n205\n205\n201\n192\n192\n193\n194\n185\n178\n179\n182\n174\n175\n171\n3.5%\n3.5%\n2.4%\n2.3%\n2.1%\n1.6%\n1.7%\n1.5%\n1.3%\n0.5%\n0.7%\n0.2%\n-2.1%\n-1.8%\n-0.1%\n1Q-11\n2Q-11\n3Q-11\n4Q-11\n1Q-12\n2Q-12\n3Q-12\n4Q-12\n1Q-13\n2Q-13\n3Q-13\n4Q-13\n1Q-14\n2Q-14\n3Q-14\n29\nSource: FCS Quarterly Information Statements\n19\nLoan growth largely due to real estate\nmortgage and agribusiness lending\nLoan Growth by Loan Type (% change year-to-date)\nLoan Growth by District (% change year-to-date)\nYTD Sept '12\nYTD Sept '13\nYTD Sept '14\nYTD Sept '12\nYTD Sept '13\nYTD Sept '14\nAgFirst\n1.3%\nDistrict\n0.7%\n(11%)\n11.8%\n3.6%\n10.5%\n8.6%\nAgriBank\n7.0%\n6.2%\n5.4%\nDistrict\n3.8%\n4.8%\n4.3%\n3.5%\n3.2%\n(40%)\n2.9%\n2.6%\n2.4%\n1.2%\n0.4%\nCoBank\n5.9%\nDistrict\n-1.3%\n-1.6%\n(40%)\n3.4%\nTexas\n6.2%\n-8.2%\nDistrict\n2.8%\nTotal Gross\nRE\nProduction &\n(9%)\n5.5%\nLoans\nMortgage\nIntermediate Agribusiness\nOther\n[46%]\n[22%]\n[15%]\n[17%]\nSource: FCS Quarterly Information Statements\n20\nSystem reports solid results for\nthe 3rd quarter\nSystem Earnings ($M)\nNet Interest Spread (1)\n(for the 9 months ending September)\nYTD Sep '12\nYTD Sep '13\nYTD Sep '14\nNI $3,158M\nNI: $3,499M\nNI: $3,569M\nProvisions: $188M\nProvisions: $9M\nProvisions: $7M\n2.67\n2.72\n2.60\n2.65\nNet Income\n1,253\n1,196\n1,228\n2.50\n1,142\n1,104\n1,141\n1,145\n2.36\n1,052\n1,067\n1,039\n960\n2.04\n1.99\n1.76\n1.73\nProvision for Loan Losses /\n(Loan Loss Reversal)\n121\n125\n32\n35\n22\n19\n42\n(32)\n(40)\n(12)\n(23)\nMar-12\nJun-12\nSep-12\nDec-12\nMar-13\nJun-13\nSep-13\nDec-13\nMar-14\nJun-14\nSep-14\n2005\n2006\n2007\n2008\n2009\n2010\n2011\n2012\n2013\n2014\n31\n(1) annualized\nSource: FCS Quarterly Information Statements\n21\nICHEDE\nDEPARTMENT\nSystem is well-capitalized\nSystem Capital ($B)\nRestricted\nCapital and Liquidity\nCapital\nTotal less\nas of September 2014\nRestricted\n45.8\n44.7\n43.7\nSystem capital as a percentage of\n42.6\n41.7\n40.6\ntotal assets increased to 16.9%\n39.6\n38.5\n38.6\n37.5\nSurplus as a percentage of total\ncapital equaled 82.0%\nSystem liquidity equaled 174 days\nof coverage. At a bank level, days\nof available liquidity ranged from\n159 days to 238 days.\nJun-\n12\nSep-1\n12\nDec-12\nMar-13\nJun-13\nSep-13\nDec-\n13\nMar-14\nJun-14\nSep-14\nRestricted capital represents capital associated with the Insurance Fund.\n32\nSource: FCS Quarterly Information Statements\n22\nCredit measures continue to trend\nfavorably; portfolio risk is low\nPortfolio Credit Quality\n% of Nonperforming Loans-to-Total Loans\nas of September 2014\n1.53%\nNonperforming loans equaled\n-\n1.36%\n1.41%\n—\n1.31%\n—\n0.85% of System loans outstanding\n1\n1.15%\nI\nOver 96% of System loans were\n1.01%\n1.01%\n0.92%\n0.85%\nclassified as Acceptable\n2,832\n2,711\n2,608\n2,522\nThe System's allowance for loan\n2,238\n2,040\n2,068\nlosses equaled 67% of\n1,883\n1,764\nnonperforming loans\nTotal capital and the allowance for\nloan losses represented 22.6% of\nSystem loans at quarter-end\nSep-12\nDec-12\nMar-13\nJun-13\nSep-13\nDec-13\nMar-14\nJun-14\nSep-14\nNonaccrual Loans\nOther nonperforming Loans\nSource: FCS Quarterly Information Statements\n23\nNEW ADVINIST\nSystem FIRS ratings\nComposite FIRS Ratings - System Banks & Associations\n1 Rated\n2 Rated\n3 Rated\n4 Rated\nFIRS Ratings\nRatings Trend\nQuarter-over-Quarter\ncomparison\nWith the most recent FIRS update,\n3\n2\n2\n1\n1\nComposite ratings continue to\n12\n1\n15\n11\n10\n8\n7\nbe very good\n4\nOver 93% of System Banks and\n36\n29\n33\n52\n49\n46\n40\nAssociations have a Composite\nFIRS rating of 1 or 2\n3 and 4 rated institutions account\nfor less than 1% of total System\n41\n46\n43\n30\n35\nassets\n28\n26\nSep-09\nSep-10\nSep-11\nSep-12\nSep-13\nJun-14 Sep-14\n34\nSource: FCA's FIRS ratings database\n24\nSummary and final points\nRisk factors for agriculture:\nCrop prices drop due to record production, compressing\nmargins for producers\nMidwest farmland values weakened in the 3rd quarter; lower\ncrop prices will continue to put pressure on land prices\nDrought persists in California\nThe System is financially sound, well-capitalized, with\nsolid earnings, and favorable portfolio credit quality\nSystem institutions are well-positioned for the current\nrisk environment\n35\n25\nGREDE ESTABLE ISHED STATE\nQuestions\nTHANK YOU\n36\nCHEDE ESTABLE\nFCA Board Meeting\nDecember 2014\nSemi-Annual Report on\nOffice of Examination\nOperations\nDecember 11, 2014\nHal Johnson\nOffice of Examination\nExhibit F of FCA December 12, 2014 Board Meeting Minutes\n37\nHighlights of OE Operations\nOperating Plan Objectives\nOE Budget Performance\nStaffing Update\nSummary\n38\n2\n2014 Operating Plan Objectives\nRisk Supervision & Examination Activities\nOnsite at 94% of associations, all banks, 7 other\nSystem entities, National Cooperative Bank, and\nFarmer Mac\nIssued 67 Reports of Examination and 54 Interim\nActivity Letters\n3 institutions under Enforcement and 3 institutions\nunder Special Supervision\n39\n3\n2014 Operating Plan Objectives\nRisk Supervision & Examination Activities (cont.)\nIssued Loan Underwriting Standards examination\nguidance (System communication is under development)\nIssued Standards of Conduct examination guidance and\nSystem communications summarizing findings from\nStandards of Conduct examination activity\nExamination guidance on Board Governance including\nthe nominating committee process is under development\n40\n4\nINSUED\n2014 Operating Plan Objectives\nFarm Credit System - Public Mission as GSE\nCompleted Business Planning Diversity and Inclusion\nexamination activities\nIssued System communication and developed\nFrequently Asked Questions on Diversity and Inclusion\nin business planning\nIssued Business Planning examination guidance which\nincorporated expectations on Diversity and Inclusion in\nthe planning process\n41\n5\n2014 Operating Plan Objectives\nHuman Capital\nImplemented new assessment questionnaire and\nonline tests for Associate Examiner applicants\nCompleted OE human capital analysis and examiner\njob survey analysis\nOperational Efficiency & Effectiveness\nOngoing enhancements to Loan Database, EDGe, and\nExamination Manual content. Continue to leverage\ntechnology\n42\n6\nANDYLINIST\nOE Budget Performance (Fiscal 2014)\nCARST\nFiscal Year 2014\nTravel\n($ millions)\nFY 2014 Travel Budget Used\n90%\n$30.5\n$28.9\nFY 2014 Travel Days Used\n92%\nActual funds\nused were 5%\nbelow budget\nFTEs\nBudgeted Full Year FTE's\n176.5\nActual Full Year FTE's\n166.9\n(Over)/Under Budget\n9.6\nBudget\nActual\nExpenditures\n43\n7\nStaffing remains a challenge\nBLISHED\nTotal Staff\nPlanned\nActual\nVariance\nBeginning FY 2014\n173\n168\n(5)\nAttrition\n(12)\n(15)\n(3)\nHirings\n19\n11\n(8)\nEnding FY 2014\n180\n164\n(16)\nCommissioned Examiners\nBeginning FY 2014\n100\n97\n(3)\nAttrition\n(6)\n(8)\n(2)\nHirings\n2\n0\n(2)\nNewly Commissioned\n9\n8\n(1)\nEnding FY 2014\n105\n97\n(8)\n44\n8\nSummary\nOn-site presence at institutions maintained\nA small number of institutions remain under a\nhigher level of supervision\nAchieved OE Operating Plan objectives\nActual spending was below budget\nRecruiting challenges and attrition resulted in\nstaffing below planned 45 levels\n9\nDiscussion\nTHANK YOU\n46\nExhibit G\nFarm Credit Administration\n1501 Farm Credit Drive\nMcLean, Virginia 22102-5090\n(703) 883-4000\nFCA\nFARM CREDIT ADMINISTRATION\nCERTIFICATE OF CLOSED MEETING\nThe General Counsel, in accordance with the Government in the Sunshine Act, 5 U.S.C. § 552b(f)(1),\nhereby certifies that the Farm Credit Administration Board regular meeting of December 11, 2014,\nwas properly closed to the public on the basis of the exemption set forth below:\nSupervisory and Oversight Activities of FCS Institution(s) - 5 U.S.C. § 552b(c)(8) and (9).\n/s/\nDate: December 11, 2014\nCharles R. Rawls\nGeneral Counsel\n47"
}