Jill Long Thompson, Board Chair and Chief Executive Officer Kenneth A. Spearman, Board Member Leland A. Strom, Board Member

MINUTES OF THE REGULAR MEETING OF THE

FARM CREDIT ADMINISTRATION BOARD April 11, 2013

These minutes reflect the business transacted at the April 11, 2013, Regular Meeting of the Farm Credit Administration Board (FCA Board) pursuant to the Government in the Sunshine Act (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 10:17 a.m. Members of the Board present were:

Jill Long Thompson, Board Chair and Chief Executive Officer Kenneth A. Spearman, Member

Leland A. Strom, Member The above named constitute the full Board. 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 four 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. The Board Chair reviewed the published Agenda. (A copy of the Public Announcement publishing the Agenda for the meeting is attached as Exhibit B.) Mr. Spearman moved to adopt the Agenda as published. Mr. Strom seconded the motion.

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There being no further discussion, Board Chair Long Thompson called the question. The Secretary polled the Board Members and the motion carried unanimously. Mr. Strom 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. Mr. Spearman seconded the motion. There being no further discussion, Board Chair Long Thompson called the question. The Secretary polled the Board Members and the motion carried unanimously.

OPEN SESSION

Approval of Minutes

Minutes for March 14, 2013 (BM-11-APR-13-01)

Mr. Spearman moved to approve the minutes for March 14, 2013. Mr. Strom seconded the motion. There being no further discussion, Board Chair Long Thompson called the question. The Secretary polled the Board Members and the motion carried unanimously. (BM-11-APR-13-01) (A copy of the official “Board Action Item” is attached as Exhibit C.)

New Business

Adjusting Civil Money Penalties for Inflation – Final Rule (BM-11-APR-13-02)

Mike Wilson of the Office of Regulatory Policy and Nancy Tunis of the Office of General Counsel presented the Adjusting Civil Money Penalties for Inflation – Final Rule. Board Chair Long Thompson opened the discussion for questions by the Board. Board Chair Long Thompson asked if there was any further discussion and asked staff to provide their recommendation. Staff provided their recommendation. Board Chair Long Thompson called for a motion on the staff’s recommendation regarding the Adjusting Civil Money Penalties for Inflation – Final Rule.

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Mr. Strom moved that the Board approve staff’s recommendation to approve the Adjusting Civil Money Penalties for Inflation – Final Rule. Mr. Spearman seconded the motion. Board Chair Long Thompson asked if there was any further discussion. There being no further discussion, the Board Chair called the question. The Secretary polled the Members and the motion carried unanimously. (BM-11-APR-13-02) (A copy of the official “Board Action Item” is attached as Exhibit D.)

REPORTS

OE and ORP Quarterly Report on Economic Conditions and Farm Credit System 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 Farm Credit System Conditions. In regards to slide 19 of the presentation, Board Member Strom requested that staff provide, at a subsequent time, additional information on Hog Sector nonaccrual loans as a percent of loans outstanding, similar to what was shown for six other loan sectors. Board Chair Long Thompson 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.)

Farm Credit System Building Association Auditor’s Report Rick Albrecht, President of the FCSBA and auditor Frank Spasoff of Cherry, Bekaert LLP provided the Farm Credit System Building Association 2012 Financial Audit Report. Board Chair Long Thompson 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.)

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EXECUTIVE SESSION The Board Chair announced that the next topics on the Agenda were topics for Executive Session and Closed Session pursuant to previous Board action and 5 U.S.C. § 552b(c) (2), (8), and (9) of the Government in the Sunshine Act. The Board Chair indicated that following the Executive Session, the Board would reconvene in Closed Session. The Board Chair instructed all to exit except for Board Members, Executive Assistants, the General Counsel, and the Secretary to the Board so that the Board could meet with Auditor Frank Spasoff in Executive Session as approved by the Board. The Board Chair convened the Executive Session of the meeting at 9:45 a.m., and instructed the Secretary to activate the electronic recording device so the proceedings of the session could be properly recorded, as required by the Government in the Sunshine Act The Board Chair then instructed the General Counsel to furnish a certification, pursuant to 5 U.S.C. § 552b(f), that the portions of the meeting held in Executive Session and Closed Session were properly closed to the public. (A copy of the Certification is attached hereto as Exhibit G.) Members of the Board present were: Jill Long Thompson, Board Chair and Chief Executive Officer Kenneth A. Spearman, Member Leland A. Strom, Member The above named constitute the full Board. Others present included Dale Aultman, Secretary to the Board; Charles Rawls, General Counsel; Inga Smulkstys, Executive Assistant to the Board Chair and CEO; Howard Rubin, Executive Assistant to Board Member Spearman; and Russell Middleton, Executive Assistant to Board Member Strom. (A list of staff attendees is attached hereto as Exhibit A).

Executive Session with FCSBA Auditor The FCA Board held an Executive Session with Frank Spasoff, auditor from Cherry, Bekaert LLP regarding the FCSBA 2012 Financial Audit Report. At the conclusion of the Executive Session, the Board Chair thanked the auditor. The Board Chair then asked the Secretary to request the FCA staff waiting in the lobby to return to the Board Room.

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CLOSED SESSION The Board Chair 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 staff in Closed Session. The Board Chair reconvened the closed session of the meeting at 9:55 a.m. and instructed the Secretary to activate the electronic recording device so the proceedings of the Closed Session could be properly recorded, as required by the Government in the Sunshine Act. Members of the Board present were: Jill Long Thompson, Board Chair and Chief Executive Officer Kenneth A. Spearman, Member Leland A. Strom, Member The above named constitute a quorum of the Board. Others present included Dale Aultman, Secretary to the Board; Charles Rawls, General Counsel; Inga Smulkstys, Executive Assistant to the Board Chair and CEO; Howard Rubin, Executive Assistant to Board Member Spearman; and Russell Middleton, Executive Assistant to Board Member Strom. (A list of staff attendees is attached hereto as Exhibit A).

OE Quarterly Report The Board Chair asked to Secretary to ensure that recording continued for this portion of the meeting. Robert Coleman and Roger Paulsen of the Office of Examination presented the update on OE Supervisory and Oversight Activities. The Board Chair thanked the OE staff at the conclusion of their report.

ADJOURNMENT There being no further business to come before the Board, Board Chair Long Thompson indicated she would entertain a motion to adjourn the meeting. Mr. Spearman moved that the meeting be adjourned. Mr. Strom seconded the motion. Board Chair Long Thompson called the question. The Secretary polled the Board Members and the motion carried unanimously. The meeting adjourned at 10:17 a.m.

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NOTATIONAL VOTE ACTIONS

There were no notational vote actions approved by the FCA Board from March 14, 2013, through April 10, 2013. The undersigned hereby certify that the foregoing minutes are the official minutes of the Regular Meeting of the Farm Credit Administration Board held on April 11, 2013. _________/s/_________________ _________/s/_________________ Jill Long Thompson Dale L. Aultman Board Chair and Chief Executive Officer Secretary to the Board Approved: ___May 9, 2013_______

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Exhibit A Page 1 of 2

STAFF PRESENT AT THE FCA REGULAR BOARD MEETING

April 11, 2013 JILL LONG THOMPSON, Board Chair and Chief Executive Officer KENNETH A. SPEARMAN, Board Member LELAND A. STROM, Board Member

OFFICE

OPEN SESSION

EXECUTIVE SESSION

CLOSED SESSION

Office of the Board Aultman, Dale X X X Corey, Kathryn X Smulkstys, Inga X X X Calhoun, Gaye X Middleton, Russell X X X Buccolo, Deb X Rubin, Howard X X X

COO Hoffman, William X X

OCPA Stokke, Mike X X

OSMO Rea, Laurie X X

OGC Rawls, Charles X X X Strickland, Joy X X Tunis, Nancy X

7

Exhibit A Page 2 of 2

OFFICE OPEN SESSION

EXECUTIVE SESSION

CLOSED SESSION

OE Coleman, Robert X X Paulsen, Roger X X Johnson, Hal X X Fennewald, Dan X X

OIG Dean, Elizabeth X X

ORP Van Meter, Gary X X Mardock, Barry X X Gabriel, Steve X X Wilson, Debbie X Wilson, Mike X

OMS Smith, Stephen X X Valcour, Doug X

FCSIC Glenn, Alan X X Morris, Jim X X

FCSBA Albrecht, Rick X

Cherry, Bekaert LLP (Auditor) Spasoff, Frank X X

GENERAL PUBLIC 4

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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 April 11, 2013

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 April 11, 2013. 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. 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. In order to increase the accessibility to Board meetings, persons requiring assistance should make arrangements in advance by contacting 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 March 14, 2013 New Business

2 Adjusting Civil Money Penalties for Inflation – Final Rule Reports

3 Quarterly Report on Farm Credit System Condition 4 Farm Credit System Building Association Auditor’s Report on 2012 Financial Audit

EXECUTIVE SESSION 5 Executive Session Meeting with Auditors1

CLOSED SESSION

6 Office of Examination Supervisory and Oversight Activities Report2

_ _March 29, 2013_______ _____________/s/___________________

Date Dale L. Aultman Secretary to the Board

_________________________ 1Session Closed-Exempt pursuant to 5 U.S.C. Section 552b(c)(2). 2Session Closed-Exempt pursuant to 5 U.S.C. Section 552b(c)(8) and (9).

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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 March 14, 2013 Board Meeting

BM-11-APR-13-01

Effective Date: April 11, 2013 Effect on Previous Action: None THE FCA BOARD HEREBY: Approves the minutes for March 14, 2013, as submitted. DATED THIS 11th DAY OF APRIL 2013 BY ORDER OF THE BOARD _____________/s/___________________ Dale L. Aultman Secretary to the Board

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Exhibit D Farm Credit Administration 1501 Farm Credit Drive McLean, Virginia 22102-5090 (703) 883-4000 BOARD ACTION ITEM

FCA BOARD ACTION ON Adjusting Civil Money Penalties for Inflation – Final Rule

BM-11-APR-13-02

Effective Date: April 11, 2013 THE FCA BOARD: Hereby approves the final rule revising 12 CFR 622.61 to make required statutory adjustments to FCA civil money penalties issued pursuant to:

1) Section 5.32 of the Farm Credit Act of 1971, as amended (Farm Credit Act), for violation of the terms of any order that has become final and was issued under section 5.25 or 5.26 of the Farm Credit Act to the maximum amount of $2,100 per day for each violation, on or after the effective date of the final rule, and

2) The National Flood Insurance Reform Act of 1994, as amended by the Biggert-Waters Flood Insurance Reform Act of 2012, to $2,000 per violation with no maximum or cap for the total CMPs that may be assessed against any single institution during any calendar year for violations of the National Flood Insurance Program, on or after the effective date of the final rule.

Finds good cause to adopt this final rule without public notice and comment because these adjustments are required by statute and revisions are ministerial, technical and noncontroversial. As such, the FCA Board has determined that public notice and an opportunity to comment are impracticable, unnecessary and contrary to the public interest pursuant to the Administrative Procedure Act. Authorizes staff to make any technical or grammatical changes prior to publication in the Federal Register. DATED THIS 11th DAY OF APRIL 2013 BY ORDER OF THE BOARD _____________/s/___________________ Dale L. Aultman Secretary to the Board

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FCA Board Meeting April 2013

Quarterly Report on FCS Condition

April 11, 2013

Stephen Gabriel Hal Johnson

12

Topics for Open Session

Economic Conditions Affecting the FCS

FCS Condition and Performance

13

Economic Conditions Affecting the Farm Credit System

Stephen Gabriel Chief Economist

Office of Regulatory Policy

14

Slow, but steady progress in economic recovery Household balance sheets strengthening Job creation continuing, but the job market still

fragile Economic growth still slow Global risks abound Europe – financial crisis Geopolitical (Mideast, N. Korea, Iran, Syria) Trades disputes – China, Russia

15

Another strong year expected for farm sector income in 2013 Net farm income is forecast to increase by

nearly 14% to a record $128.2 billion Net cash income is forecast to decline 9% to

$123.5 billion Both measures of farm income are at

historically high levels even after adjusting for inflation

16

USDA projects sharply lower feed grain prices – expects bumper crop Projections factor in favorable weather this

growing season Large crops in South America will also boost

global supplies Hog and broiler producers are counting on

lower feed costs going forward Lower corn and soybean prices could put a

damper on farmland market’s enthusiasm

17

A large corn crop would bring corn prices down substantially

7.10

4.80

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

0%

10%

20%

30%

40%

50%

60%

70%

Ending U.S. Corn Stocks/Use Ratio (left axis)Average Farm Corn Price - dollars/bu (right axis)Source: USDA

18

Soybean prices will also fall if the weather is favorable

14.30

10.50

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

0%

5%

10%

15%

20%

25%

30%

Ending U.S. Soybeans Stocks/Use Ratio (left axis)Average Farm Soybeans Price - dollars/bu (right axis)Source: USDA

19

Ample supplies of wheat despite drought will lead to lower prices

7.80

7.00

0.001.002.003.004.005.006.007.008.009.00

0%10%20%30%40%50%60%70%80%90%

100%

Ending U.S. Wheat Stocks/Use Ratio (left axis)Average Farm Wheat Price - dollars/bu (right axis)

Source: USDA

20

Corn producers’ margins are set to decline with rebound in production

0.31 0.38 0.33 0.68

1.63 0.96

-0.10

1.64 2.23 1.78

1.30

0.33

-1.000.001.002.003.004.005.006.007.008.00

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012FWASDE

2013FRMAIns.

Price

2013F5-YrAvg.Price

Dol

lars

per

Bus

hel

Marketing Year

Iowa Season-average Corn Profit Margin Estimates

Iowa State University Cost Production Estimates

Margin Including Gov. Payments Iowa Farm Price Total Cost per Bushel

21

Soybean margins will fall with good weather and lower prices

-0.82

0.09 0.01 0.28

4.20

1.98

0.06

2.85 3.55 2.38 1.70

-0.36 -2.000.002.004.006.008.00

10.0012.0014.0016.00

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012FWASDE

2013FRMAIns.

Price

2013F5-YrAvg.Price

Dol

lars

per

Bus

hel

Marketing Year

Iowa Season-average Soybean Profit Margin Estimates

Iowa State University Cost of Production Estimates

Margin Including Gov. Payments Iowa Farm Price Total Cost per Bushel

22

Potential hog profitability varies widely depending on feed costs

19.97

0.82

(49.75)

-$60-$50-$40-$30-$20-$10

$0$10$20$30$40$50

$ pe

r Hea

d Farrow-to-Finish Net Returns: Monthly, Feb 2008 - Dec 2013

InformaFutures: March 6, 2013High Feed Costs Scenario*

• Based on Aug. 21, 2012 futures contracts for corn and soybean meal applied to the Sep-Dec 2013 forecast period, and current futures (March 6, 2013) for hogs.

Source: FCA-ORP based on Chicago Board of Trade and Informa Economics data.

23

Economic watch list for 2013

Meaningful resolution to budget impasse Farm Bill U.S. economic growth and job market Weather developments Vulnerability of protein and dairy sectors Farmland market European economic/financial crisis

24

Farm Credit System Condition and Performance

as of December 31, 2012

Hal Johnson Office of Examination

25

Topics

Growth

Earnings

Capital

Credit Quality

FIRS

26

System assets up on strong loan growth

124.9 139.9

162.9

186.5

214.4 215.5 230.0 230.4

246.7

6.8%

12.0% 16.4% 14.5% 15.0%

0.5%

6.7%

0.2%

7.1%

Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12

Total FCS Assets ($B)

% change year-over-year

Source: FCS Annual Information Statements

27

Loan growth rebounds; up 9.9% in 2012

Source: FCS Annual Information Statements

-3.3%

9.2%

8.0%

-0.8%

6.4%

0.0%

-4.5%

5.1%

-2.4%

-0.4%

8.0%

8.8%

12.8%

2.0%

9.9%

-8% -4% 0% 4% 8% 12% 16%

Texas District(9%)

CoBank District(40%)

AgriBank District(39%)

AgFirst District(12%)

Total FCS

2012 2011 2010

Loan Growth by District (% change year-over-year)

106.3

123.4

142.9

161.4 164.8 175.4 174.7

191.9

10.3%

16.2% 15.8% 13.0%

2.1% 6.4%

-0.4%

9.9%

Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12

System Gross Loans ($B)

% changeyear-over-year

28

Strong earnings drive increase in System capital

Source: FCS Annual Information Statements

81 408

925 667

430 313

2,703 2,916 2,850

3,495

3,940 4,118

Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12

System Net Income ($M)

Provision for Loan Losses ($M) 23.8 24.2

26.7

30.0 32.5

35.3

2.6 2.9 3.3

3.2 3.4

3.3

26.4 27.1 30.0

33.3 35.9

38.6

14.2%

12.7% 13.9% 14.5%

15.6% 15.7%

Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12

Total System Capital less Restricted Restricted Capital

- Restricted capital represents capital associated with the Insurance Fund -

Capital-to-Assets Ratio

System Capital ($B)

29

Overall trend for credit quality is positive – risk elevated for some sectors

Source: FCS Annual Information Statements

7.4%

6.3%

1.8%

4.2%

4.7%

2.0%

3.7%

1.8%

3.5%

8.8%

1.4%

3.0%

3.2%

1.8%

2.9%

1.6%

5.7%

10.5%

1.3%

1.9%

2.4%

1.4%

2.4%

1.2%

Biofuels(0.9%)

Horticulture(1.4%)

Poultry/Eggs(2.8%)

Forestry(5.3%)

Dairy(7.7%)

Cattle(9.2%)

6 SectorsCombined

(27%)

Total FCS($191,904) Dec-12

Dec-11Dec-10

Nonaccruals as a % of Loans Outstanding

0.50% 0.43%

1.50% 2.14% 1.93%

1.72% 1.36%

Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12

Nonaccrual Loans Other nonperforming Loans ($M)

615 621

2,416

3,535 3,386 2,997

2,608

% of Nonperforming Loans-to-Total Loans

30

Credit risk ratings – total System loans outstanding

OAEM refers to Other Assets Especially Mentioned Source: FCS Annual Information Statements

29%

20%

23%

12%

8%

4% 4%

30%

22% 22%

13%

7%

2% 3%

1 - 5 6 7 8 9 10 11 & 122011 2012

Acceptable 2012 - 94.2% 2011 - 92.2%

OAEM 2012 - 2.4% 2011 - 3.9%

Substandard 2012 - 3.3% 2011 - 3.8%

Risk Rating

31

System FIRS ratings

57

26 29 30 35 37

31

50 46 44 40 38

6 14 12 12 10 10

1 3 2 1 1 1

Dec-08 Dec-09 Dec-10 Dec-11 Sep-12 Dec-12

1 Rated 2 Rated 3 Rated 4 Rated

Composite FIRS Ratings – System Banks & Associations

Source: FCA's FIRS ratings database

Qtr-over-Qtr comparison

Ratings Trend

32

Summary and final points U.S economic recovery continues to be slow, but steady;

considerable uncertainty remains Outlook for agriculture is favorable but weather will be a

key factor. Protein, dairy & ethanol sectors at risk if feed costs remain high.

The System remains fundamentally safe and sound Well-positioned for the challenges facing agriculture Portfolio credit quality steadily improving System is well-capitalized and continues to generate

strong earnings

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Discussion

THANK YOU

34

Cherry Bekaert LLP

FCS Building Association Report Regarding Financial Statement Audit for the Year Ended December 31, 2012 Audit Team Frank Spasoff, Partner

Exhibit F of April 11, 2013 FCA Meeting Minutes

35

FCS Building Association

Overview of Audit Results We have completed our audit procedures related to the FCS Building

Association’s year ended December 31, 2012 financial statements. Our procedures and scope were substantially consistent with our planned

audit strategy and we did not experience any significant problems during the audit process.

We issued an unqualified (clean) opinion on the Company’s financial statements (note new required format)

We received excellent cooperation from the Company’s personnel.

36

General Financial Statement Comments

Strong Balance Sheet as of December 31, 2012 Cash reserve balance of $1.4 million Current Ratio of 7 to 1 Total Liabilities to Equity Ratio 1 to 30

Operating Income for the year ended December 31, 2012

No new or unusual transactions noted for fiscal year 2012 No significant new disclosures noted for fiscal year 2012

37

Areas of Focus for the 2012 Audit

Procedures with respect to internal control

Leasing activities

Capital expenditures and repairs and maintenance

Related party transactions (FCSBA and FCA)

We identified no significant deficiencies or material weaknesses

38

Required Communications

The auditor’s responsibility under generally accepted auditing standards – reasonable assurance that financial statements are materially correct

Significant accounting policies are disclosed in Note 2 of the F/S’s

We have considered management judgments and accounting estimates

included in the financial statements and believe them to be reasonable

There were no disagreements with management during the engagement There were no major issues discussed with management prior to our being

retained

No irregularities or fraud identified as part of our audit

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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 April 11, 2013, was

properly closed to the public on the basis of the exemption set forth below:

• Information related solely to the internal practices of an Agency – 5 U.S.C. §552b(c)(2), and

• Supervisory and Oversight Activities of FCS Institution(s) – 5 U.S.C. § 552b(c)(8) and (9).

_____________/s/___________________ Date: April 11, 2013 Charles R. Rawls General Counsel

40