2024 Q1 Shareholder Report by Farm Credit of Southern Colorado

Q1 SHAREHOLDER REPORT 2024

NOTICE TO STOCKHOLDERS

The shareholders’ investment in Farm Credit of Southern Colorado, ACA is materially affected by the financial condition and results of operations of CoBank, ACB (CoBank). The 2023 CoBank Annual Report to Shareholders, and the CoBank quarterly shareholders’ reports are available free of charge by accessing CoBank’s website, www.cobank.com, or may be obtained at no charge by contacting us at:

Farm Credit of Southern Colorado, ACA

5110 Edison Avenue, PO Box 75640

Colorado Springs, Colorado 80970-5640

Phone Number: 800-815-8559

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Unaudited)

The following discussion summarizes the financial position and results of operations of Farm Credit of Southern Colorado, ACA (the Association) for the three months ended March 31, 2024, with comparisons to prior periods. You should read these comments along with the accompanying financial statements and footnotes and the 2023 Annual Report to Shareholders. The accompanying financial statements were prepared under the oversight of our Audit Committee.

During the first quarter of 2024, economic conditions in our territory have shown mixed results. Since year end, prices at the farm gate have declined across grain and potato industries while hay prices remained steady. Prices for various classes of cattle have improved over the same time period. As a result, overall conditions in our territory are steady to improving for the livestock sector and declining for the crop sectors of our portfolio.

Moisture conditions throughout our territory improved during the first quarter of 2024. This improvement is largely driven by increased snowpack in the Wet Mountain Valley and the San Luis Valley in the southwestern counties of our territory. The majority of our territory on the eastern and southeastern plains have improved to a U.S. Drought Monitor (USDM) classification of “None”. The San Luis Valley and the southern front range have improved to USDM classifications ranging from D0 (Abnormally Dry) to D1 (Moderate Drought).

Beef producers in our territory continue to experience strong markets for all classes of cattle. Farm prices for calves, stocker, feeders, and fat cattle have all improved during the first quarter of 2024. Pasture conditions remain in good to excellent condition and cow feed is abundant throughout our territory. Markets also maintained a strong demand for quality bred heifers and cows.

The winter wheat in our territory was planted into adequate soil moisture and emerged in good condition. The crop condition declined slightly during the first quarter. The USDA National Agricultural Statistics Service reports that the Colorado wheat crop was in 58% Good to Excellent Condition at quarter end.

Potatoes are primarily grown in the San Luis Valley. Increased production across the nation drove prices down at year end 2023. Prices have continued to decline in the first quarter of 2024. Current price levels for potatoes in the San Luis Valley will likely stress profitability in this sector.

Real estate prices remain steady; however, transactions have picked up in the first quarter of 2024. The market maintains strong demand for properties and buyers have acclimated to higher interest rates. Cash continues to be a strong competitor.

Although the outlook for the U.S. economy continues to remain strong in 2024, economic growth is anticipated to slow down compared to 2023 due to high interest rates, slower GDP growth, decreased consumer spending, continued global supply chain pressures, and geopolitical risks. Labor shortages normalized by the end of 2023 and unemployment remains generally low in historical context. After recording strong growth for the past two years, the farm economy is anticipated to soften in the coming year. This is primarily a result of high farming expenses partially offsetting strong agricultural commodity prices. Additionally, global conflicts have continued to put pressures on commodity prices, creating volatility and uncertainty in the markets. As a result of a tighter monetary policy contributing to a stronger dollar, inflation is projected to decline in 2024. After several increases in Fed Funds rates in 2023, the Fed kept rates steady in the first quarter of 2024, and is expected to lower rates later this year.

LOAN PORTFOLIO

Loans outstanding at March 31, 2024, totaled $1.53 billion, a decrease of $7.3 million, or 0.5%, from loans of $1.54 billion at December 31, 2023. The decrease was primarily due to decreases in our purchased participations portfolio. The decrease in the purchased participations portfolio is primarily due to decreases in production and intermediate and real estate loans, partially offset by increases in energy and processing and marketing loans.

RESULTS OF OPERATIONS

Net income for the three months ended March 31, 2024, was $5.1 million, an increase of $539 thousand, or 11.7%, from the same period ended one year ago. The increase is primarily due to an increase in net interest income and a decrease in the provision for credit losses, partially offset by an increase in noninterest expense.

For the three months ended March 31, 2024, net interest income was $10.6 million, an increase of $426 thousand, or 4.2%, compared with the three months ended March 31, 2023. Net interest income increased as a result of an

increase in average accrual loan volume as well as increased return on our loanable funds, partially offset by a decrease in our average loan spread

The provision for credit losses for the three months ended March 31, 2024, was $280 thousand, a decrease of $1.1 million or 79.62%, from the provision for credit losses for the same period ended one year ago. The provision for credit losses for the first quarter of 2024 was primarily driven by a capital market loan complex being charged off, partially offset by the decline in our general reserve. The provision for credit losses for the first quarter of 2023 was primarily driven by a capital market loan complex moving to nonaccrual requiring a specific reserve for anticipated future losses.

Noninterest income increased $31 thousand during the first three months of 2024 compared with the first three months of 2023 primarily due to increases in patronage distributions from Farm Credit institutions and other noninterest income, partially offset by decreases in financially related services income and mineral income. Patronage distribution from Farm Credit institutions increased in the first three months ended March 31, 2024, compared with the first three months in 2023 primarily due to increased patronage from CoBank resulting from an increase in our average net note payable with them.

We received mineral income of $206 thousand during the first three months of 2024, which is distributed to us quarterly by CoBank. The decrease for the three months ended March 31, 2024, compared with first three months of 2023 is due to lower oil and gas commodity prices paid on production.

During the first three months of 2024, noninterest expense increased $1.0 million to $7.1 million, primarily due to increases in salaries and employee benefits, purchased services from AgVantis, and other noninterest expense, partially offset by decreases in occupancy and equipment and Farm Credit Insurance Fund premiums. Salaries and employee benefits increased $301 thousand primarily due to an increase in staffing levels. Purchased services from AgVantis increased $149 thousand as a result of a change in their pricing allocation methodology and an increase in cost drivers, projected loan growth, and loan count. Other noninterest expense increased $793 thousand primarily due to an increase in purchased services driven by our technology transition. Farm Credit System Insurance Corporation (FCSIC) premiums decreased $208 thousand for the three months ended March 31, 2024 compared with the same period in 2023 due to a decrease in the insurance premium accrual assessment rate on Systemwide adjusted insured debt from 18 basis points to 10 basis points

CAPITAL RESOURCES

Our shareholders’ equity at March 31, 2024, was $319.4 million, an increase from $313.0 million at December 31, 2023. This increase is primarily due to net income of $5.1 million and a $1.3 million increase in preferred stock.

OTHER MATTERS

On April 25, 2024 Ryan Britten resigned from the Board of Directors.

The undersigned certify they have reviewed this report, this report has been prepared in accordance with all applicable statutory or regulatory requirements, and the information contained herein is true, accurate, and complete to the best of his or her knowledge and belief.

//signature on file//

Whitney Hansen

//signature on file//

Jeremy M. Anderson Board Chair President and Chief Executive Officer

May 7, 2024

//signature on file//

Shawna R. Neppl Chief Financial Officer

May 7, 2024

____________________________________

_________________________________

Consolidated Statement of Condition

Commitments and Contingencies

Farm Credit Southern Colorado, ACA

March 31 December 31 2024 2023 UNAUDITED AUDITED ASSETS Loans 1,529,578 $ 1,536,917 $ Less allowance for loan losses 2,808 3,080 Net loans 1,526,770 1,533,837 Cash 2,881 6,731 Accrued interest receivable 24,724 27,623 Investment in CoBank, ACB 36,971 36,876 Investment in AgDirect 1,976 1,811 Premises and equipment, net 11,780 11,775 Prepaid benefit expense 6,942 7,026 Other assets 4,241 9,917 Total assets 1,616,285 $ 1,635,596 $ LIABILITIES Note payable to CoBank, ACB 1,252,311 $ 1,282,022 $ Advance conditional payments 25,873 18,141 Accrued interest payable 3,908 4,064 Patronage distributions payable 8,994 10,000 Accrued benefits liability 138 139 Reserve for unfunded commitments 410 356 Other liabilities 5,268 7,856 Total liabilities 1,296,902 $ 1,322,578 $

(Dollars in Thousands)

SHAREHOLDERS' EQUITY Preferred stock 8,226 6,900 Capital stock 1,857 1,846 Unallocated retained earnings 309,300 304,272 Total shareholders' equity 319,383 313,018 Total liabilities and shareholders' equity 1,616,285 $ 1,635,596 $

part of these consolidated financial statements.

The accompanying notes are an integral

Consolidated

Statement of Comprehensive Income For the three months

The accompanying notes are an integral part of these consolidated financial statements.

Farm Credit Southern Colorado, ACA (Dollars in Thousands) UNAUDITED 2024 2023 INTEREST INCOME Loans 23,516 $ 20,367 $ Total interest income23,516 20,367 INTEREST EXPENSE Note payable to CoBank, ACB 12,715 10,068 Other 248 172 Total interest expense12,963 10,240 Net interest income 10,553 10,127 Provision for credit losses 280 1,374 Net interest income after provision for credit losses 10,273 8,753 NONINTEREST INCOME Financially related services income 11 53 Loan fees 169 160 Patronage distribution from Farm Credit institutions 1,519 1,446 Mineral income 206 246 Other noninterest income 96 65 Total noninterest income 2,001 1,970 NONINTEREST EXPENSE Salaries and employee benefits 3,639 3,338 Occupancy and equipment 291 331 Purchased services from AgVantis, Inc. 941 792 Farm Credit Insurance Fund premium 307 515 Supervisory and examination costs 133 118 Other noninterest expense 1,830 1,037 Total noninterest expense 7,141 6,131 Income before income taxes 5,133 4,592 Provision for income taxes 3 1 Net income/Comprehensive income 5,130$ 4,591$

ended March 31

Consolidated Statement of Changes in Shareholders' Equity

(Dollars in Thousands)

The accompanying notes are an integral part of these consolidated financial statements.

Farm Credit Southern Colorado, ACA

UnallocatedTotal PreferredCapitalRetainedShareholders' UNAUDITED StockStockEarningsEquity Balance at December 31, 2022 778$ 1,816 $ 288,247$ 290,841 $ Comprehensive income 4,591 4,591 Stock issued 3,248 43 3,291 Stock retired (100) (43) (143) Preferred stock dividends 6 (34) (28) Cumulative effect of CECL adoption 2,243 2,243 Balance at March 31, 2023 3,932 $ 1,816$ 295,047$ 300,795 $ Balance at December 31, 2023 6,900 $ 1,846$ 304,272$ 313,018 $ Comprehensive income 5,130 5,130 Stock issued 3,356 38 3,394 Stock retired (2,117) (27) (2,144) Preferred stock dividends 87 (102) (15) Balance at March 31, 2024 8,226 $ 1,857$ 309,300$ 319,383 $

NOTES TO FINANCIAL STATEMENTS (Unaudited)

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

A description of the organization and operations of Farm Credit of Southern Colorado, ACA (the Association), the significant accounting policies followed, and the financial condition and results of operations as of and for the year ended December 31, 2023, are contained in the 2023 Annual Report to Shareholders. These unaudited first quarter 2024 financial statements should be read in conjunction with the 2023 Annual Report to Shareholders.

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (GAAP) for interim financial information. Accordingly, they do not include all of the disclosures required by GAAP for annual financial statements and should be read in conjunction with the audited financial statements as of and for the year ended December 31, 2023, as contained in the 2023 Annual Report to Shareholders.

In the opinion of management, all adjustments, consisting of normal recurring adjustments necessary for a fair statement of results for the interim periods, have been made. The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year ending December 31, 2024. Descriptions of the significant accounting policies are included in the 2023 Annual Report to Shareholders. In the opinion of management, these policies and the presentation of the interim financial condition and results of operations conform with GAAP and prevailing practices within the banking industry.

Recently Adopted or Issued Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-09 – Income Taxes: Improvements to Income Tax Disclosures. The amendments in this standard require more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The amendments require qualitative disclosure about specific categories of reconciling items and individual jurisdictions that result in a significant difference between the statutory tax rate and the effective tax rate. The amendments are effective for annual periods beginning after December 15, 2024. The adoption of this guidance is not expected to have a material impact on the Association’s financial condition, results of operations, or cash flows.

NOTE 2 - LOANS AND ALLOWANCE FOR CREDIT LOSSES

A summary of loans follows.

(dollars in thousands) March 31, 2024 December 31, 2023

Real estate mortgage $ 938,646 $ 946,707 Production and intermediate-term 260,075 276,035 Agribusiness 213,437 201,600 Rural infrastructure 105,586 100,725 Agricultural export finance 11,113 11,108 Rural residential real estate 12 14 Mission-related 709 728 Total loans $ 1,529,578 $ 1,536,917 7

The Association purchases and sells participation interests with other parties in order to diversify risk, manage loan volume, and comply with Farm Credit Administration regulations. The following table presents information regarding the balances of participations purchased and sold at March 31, 2024:

Credit Quality

Credit risk arises from the potential inability of an obligor to meet its payment obligation and exists in our outstanding loans, letters of credit, and unfunded loan commitments. The Association manages credit risk associated with the retail lending activities through an analysis of the credit risk profile of an individual borrower using its own set of underwriting standards and lending policies, approved by its board of directors, which provides direction to its loan officers. The retail credit risk management process begins with an analysis of the borrower’s credit history, repayment capacity, financial position, and collateral, which includes an analysis of credit scores for smaller loans. Repayment capacity focuses on the borrower’s ability to repay the loan based on cash flows from operations or other sources of income, including off-farm income. Real estate mortgage loans must be secured by first liens on the real estate (collateral). As required by Farm Credit Administration regulations, each institution that makes loans on a secured basis must have collateral evaluation policies and procedures. Real estate mortgage loans may be made only in amounts up to 85% of the original appraised value of the property taken as security or up to 97% of the appraised value if guaranteed by a state, federal, or other governmental agency. The actual loan to appraised value when loans are made is generally lower than the statutory maximum percentage. Loans other than real estate mortgage may be made on a secured or unsecured basis.

The Association uses a two-dimensional risk rating model based on an internally generated combined System risk rating guidance that incorporates a 14-point probability of default rating scale to identify and track the probability of borrower default and a separate scale addressing loss given default. Probability of default is the probability that a borrower will experience a default during the life of the loan. The loss given default is management’s estimate as to the anticipated principal loss on a specific loan assuming default occurs during the remaining life of the loan. A default is considered to have occurred if the lender believes the borrower will not be able to pay its obligation in full or the borrower or the loan is classified nonaccrual. This credit risk rating process incorporates objective and subjective criteria to identify inherent strengths, weaknesses, and risks in a particular relationship. The institution reviews, at least on an annual basis, or when a credit action is taken, the probability of default category.

Each of the probability of default categories carries a distinct percentage of default probability. The probability of default rate between one and nine of the acceptable categories is very narrow and would reflect almost no default to a minimal default percentage. The probability of default rate grows more rapidly as a loan moves from acceptable to other assets especially mentioned and grows significantly as a loan moves to a substandard (viable) level. A substandard (non-viable) rating indicates that the probability of default is almost certain. These categories are defined as follows:

 Acceptable – assets are expected to be fully collectible and represent the highest quality.

 Other assets especially mentioned (OAEM) – assets are currently collectible but exhibit some potential weakness.

 Substandard – assets exhibit some serious weakness in repayment capacity, equity, and/or collateral pledged on the loan.

 Doubtful – assets exhibit similar weaknesses to substandard assets; however, doubtful assets have additional weaknesses in existing factors, conditions, and values that make collection in full highly questionable.

 Loss – assets are considered uncollectible.

Other Farm Credit Institutions Non-Farm Credit Institutions Total (dollars in thousands) Purchased Sold Purchased Sold Purchased Sold Real estate mortgage $ 39,545 $ 61,224 $ – $ 6,513 $ 39,545 $ 67,737 Production and intermediate-term 40,751 – – – 40,751 –Agribusiness 206,213 – – – 206,213 –Rural infrastructure 105,586 – – – 105,586 –Agricultural export finance 11,113 – – – 11,113 –Total $ 403,208 $ 61,224 $ – $ 6,513 $ 403,208 $ 67,737

The following table shows loans under the Farm Credit Administration Uniform Loan Classification System as a percentage of total loans by loan type as of:

Accrued interest receivable on loans of $24.7 million at March 31, 2024 and $27.6 million at December 31, 2023 has been excluded from the amortized cost of loans and reported separately in the Consolidated Statement of Condition. The Association wrote off accrued interest receivable of $26 thousand during the first three months of 2024 and $93 thousand during the first three months of 2023.

December

Real estate mortgage Acceptable 96.73% 96.33% OAEM 0.23% 0.23% Substandard 3.04% 3.44% Total 100.00% 100.00% Production and intermediate-term Acceptable 96.61% 93.79% OAEM 0.28% 0.33% Substandard 3.11% 5.88% Total 100.00% 100.00% Agribusiness Acceptable 95.82% 95.80% OAEM 1.10% 1.06% Substandard 3.08% 3.14% Total 100.00% 100.00% Rural infrastructure Acceptable 95.08% 93.77% OAEM 4.92% 6.23% Total 100.00% 100.00% Agricultural export finance Acceptable 100.00% 100.00% Total 100.00% 100.00% Rural residential real estate Acceptable 100.00% 100.00% Total 100.00% 100.00% Mission-related OAEM 100.00% 100.00% Total 100.00% 100.00% Total Loans Acceptable 96.45% 95.62% OAEM 0.73% 0.80% Substandard 2.82% 3.58% Total 100.00% 100.00%

March 31, 2024

31, 2023

Nonperforming assets consist of nonaccrual loans, accruing loans 90 days or more past due, and other property owned. The following table shows these nonperforming assets and related credit quality statistics as follows:

(dollars in thousands)

March 31, 2024 December 31, 2023

The Association had no other property owned for the periods presented.

The following tables provide the amortized cost for nonaccrual loans with and without a related allowance for loan losses: (dollars in thousands)

There was no interest income recognized on nonaccrual loans during the first three months of 2024 and 2023.

The following tables provide an age analysis of past due loans at amortized cost.

March 31, 2024

Nonaccrual loans Real estate mortgage $ 2,553 $ 388 Production and intermediate-term 5,063 4,836 Total nonaccrual loans $ 7,616 $ 5,224 Accruing loans 90 days past due Real estate mortgage $ – $ 103 Production and intermediate-term 850 –Total accruing loans 90 days past due $ 850 $ 103 Total nonperforming assets $ 8,466 $ 5,327 Nonaccrual loans to total loans 0.50% 0.34% Nonperforming assets to total loans 0.55% 0.35% Nonperforming assets to total shareholders’ equity 2.65% 1.70%

March 31,

Amortized Cost with Allowance Amortized Cost without Allowance Total Real estate mortgage $ 2,196 $ 357 $ 2,553 Production and intermediate-term 4,796 267 5,063 Total $ 6,992 $ 624 $ 7,616 (dollars in thousands) December 31, 2023 Amortized Cost with Allowance Amortized Cost without Allowance Total Real estate mortgage $ – $ 388 $ 388 Production and intermediate-term 4,734 102 4,836 Total $ 4,734 $ 490 $ 5,224

2024

30-89 Days Past Due 90 Days or More Past Due Total Past Due Not Past Due or less than 30 Days Past Due Total Loans Recorded Investment > 90 Days and Accruing Real estate mortgage $ 2,433 $ 2,196 $ 4,629 $ 934,017 $ 938,646 $ –Production and intermediate-term 3,944 1,775 5,719 254,356 260,075 850 Agribusiness – – – 213,437 213,437 –Rural infrastructure 2,519 – 2,519 103,067 105,586 –Agricultural export finance – – – 11,113 11,113 –Rural residential real estate – – – 12 12 –Mission-related – – – 709 709 –Total $ 8,896 $ 3,971 $ 12,867 $ 1,516,711 $ 1,529,578 $ 850 10

(dollars in thousands)

December 31, 2023

A loan is considered collateral dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. The collateral dependent loans are real estate mortgage and production and intermediate loans. Certain collateral-dependent loans are secured by collateral whose fair value is insufficient to satisfy the outstanding principal of these loans. Such shortfalls are reflected in our allowance.

Loan Modifications to Borrowers Experiencing Financial Difficulty

The following tables show the amortized cost basis at the end of the respective reporting period for loan modifications granted to borrowers experiencing financial difficulty, disaggregated by loan type and type of modification granted.

Term Extension

(dollars in thousands)

For the Three Months Ended March 31, 2024

$ 2,504

Payment Deferral

For the Three Months Ended March 31, 2024

$ 2,196

Term Extension

For the Three Months Ended March 31, 2023 % of Portfolio Loan Type

$ 2,043

Accrued interest receivable related to loan modifications granted to borrowers experiencing financial difficulty was $26 thousand as of the three months ended March 31, 2024 and none as of the three months ended March 31, 2023.

The following tables describe the financial effect of the modifications made to borrowers experiencing financial difficulty during the three months ended March 31, 2024:

Weighted-Average Term Extension (in Months) For the Three Months Ended March 31, 2024

(dollars in thousands) 30-89 Days Past Due 90 Days or More Past Due Total Past Due Not Past Due or less than 30 Days Past Due Total Loans Recorded Investment > 90 Days and Accruing Real estate mortgage $ 3,172 $ 103 $ 3,275 $ 943,432 $ 946,707 $ 103 Production and intermediate-term 4,050 700 4,750 271,285 276,035 –Agribusiness – – – 201,600 201,600 –Rural infrastructure – – – 100,725 100,725 –Agricultural export finance – – – 11,108 11,108 –Rural residential real estate – – – 14 14 –Mission-related – – – 728 728 –Total $ 7,222 $ 803 $ 8,025 $ 1,528,892 $ 1,536,917 $ 103

% of Loan Type Production and intermediate-term $ 296 0.11% Agribusiness 2,208 1.03% Total

of Loan Type Real estate mortgage $ 2,196 0.23% Total

Production and intermediate-term $ 85 0.01% Agribusiness 1,958 0.13% Total

Production and intermediate-term 10.8 Agribusiness 9.6 11

Weighted-Average Payment Deferral (in Months) For the Three Months Ended March 31, 2024

The following table describes the financial effect of the modifications made to borrowers experiencing financial difficulty during the three months ended March 31, 2023:

Weighted-Average Term Extension (in Months) For the Three Months Ended March 31, 2023

The following table sets forth the amortized cost of loans to borrowers experiencing financial difficulty that defaulted during the three months ended March 31, 2024 and received a modification in the twelve months before default:

Modified Loans that Subsequently Defaulted For the Three Months Ended March 31, 2024

(dollars in thousands)

and intermediate-term $ 598

There were no loans to borrowers experiencing financial difficulty that defaulted during the three months ended March 31, 2023 which were modified during the twelve months prior to those periods.

The following table sets forth an aging analysis of loans to borrowers experiencing financial difficulty that were modified during the twelve months prior to March 31, 2024:

Payment Status of Modified Loans

During the Past Twelve Months Ended March 31, 2024

(dollars in thousands)

The following table sets forth an aging analysis of loans to borrowers experiencing financial difficulty that were modified on or after January 1, 2023, the date of adoption of CECL, through March 31, 2023:

Payment Status of Modified Loans

During the Three Months Ended March 31, 2023

(dollars in thousands) Current 30-89 Days Past Due 90 Days or More Past Due

Additional commitments to lend to borrowers experiencing financial difficulty whose loans have been modified during the three months ended March 31, 2024 were $2.4 million and during the year ended December 31, 2023 were $2.8 million.

The Association had no loans held for sale at March 31, 2024 and December 31, 2023.

Allowance for Credit Losses

The allowance for credit losses (ACL) represents the estimated current expected credit losses over the remaining contractual life of the loans measured at amortized cost and certain off-balance sheet credit exposures. The ACL

Real

estate mortgage 13.0

Production

intermediate-term

Agribusiness 30.0

and

9.2

Production

Term Extension

Current 30-89

Past Due 90 Days

More Past Due Real estate mortgage $ – $ – $ 2,196 Production and intermediate-term 379 – 598 Agribusiness 2,751 – –Total loans $ 3,130 $ – $ 2,794

Days

Production and intermediate-term $

Agribusiness 1,958 – –Total loans $ 2,043 $ – $ –

85 $ – $ –

takes into consideration relevant information about past events, current conditions, and reasonable and supportable macroeconomic forecasts of future conditions. The contractual term excludes expected extensions, renewals, and modifications. The Association uses a single economic scenario over a reasonable and supportable forecast period of 12 months. Subsequent to the forecast period, the Association explicitly reverts to long run historical loss experience beyond the 12 months to inform the estimate of losses for the remaining contractual life of the loan portfolio. The economic forecasts are updated on a quarterly basis and incorporate macroeconomic variables such as agricultural commodity prices, unemployment rates, Gross Domestic Product (GDP) annual growth rates, government spending to GDP, real consumer spending, United States exports, inflation, and Fed Funds rates.

The credit risk rating methodology is a key component of the Association’s allowance for credit losses evaluation and is generally incorporated into the Association’s loan underwriting standards and internal lending limits. In addition, borrower and commodity concentration lending and leasing limits have been established by the Association to manage credit exposure. The regulatory limit to a single borrower or lessee is 15% of the Association’s lending and leasing limit base but the Association’s board of directors has generally established more restrictive lending limits. This limit applies to Associations with long-term and short- and intermediate-term lending authorities.

A summary of changes in the allowance for loan losses is as follows:

(dollars

(dollars in thousands)

Balance at December 31, 2022 Cumulative Effect of CECL Adoption Balance at January

The Association maintains a separate reserve for unfunded commitments, which is included in Liabilities on the Association’s Consolidated Statement of Condition. The related provision for the reserve for unfunded commitments is included as part of the provision for credit losses on the Consolidated Statement of Comprehensive Income, along with the provision for loan losses. A summary of changes in the reserve for unfunded commitments follows:

(dollars in thousands)

For the Three Months Ended March 31, 2024

Balance at December 31, 2023 $ 356 Provision for reserve for unfunded commitments

(dollars in thousands)

For the Three Months Ended March 31, 2023

Balance at December 31, 2022 $ 576

Cumulative Effect of CECL Adoption (172) Balance at January 1

Reversal of reserve for unfunded commitments (9) Total $ 395

thousands) Balance at December 31, 2023 Charge-offs Recoveries Provision for Loan Losses/ (Loan Loss Reversals) Balance at March 31, 2024 Real estate mortgage $ 283 $ – $ – $ 12 $ 295 Production and intermediate-term 1,920 500 – 349 1,769 Agribusiness 50 – 2 111 163 Rural infrastructure 827 – – (246) 581 Total $ 3,080 $ 500 $ 2 $ 226 $ 2,808

1, 2023 Charge-offs Recoveries Provision for Loan Losses/ (Loan Loss Reversals) Balance at March 31, 2023 Real estate mortgage $ 1,416 $ (1,116) $ 300 $ – $ – $ (3) $ 297 Production and intermediate-term 645 (172) 473 – – 1,339 1,812 Agribusiness 1,112 (501) 611 – – (18) 593 Rural infrastructure 506 (168) 338 – – 65 403 Agricultural export finance 7 (7) – – – – –Mission-related 107 (107) – – – – –Total $ 3,793 $ (2,071) $ 1,722 $ – $ – $ 1,383 $ 3,105

Total $ 410

404

NOTE 3 – CAPITAL

A summary of select capital ratios based on a three-month average and minimums set by the Farm Credit Administration follows.

If capital ratios fall below the regulatory minimum plus buffer amounts, capital distributions (equity redemptions, cash dividend payments, and cash patronage payments) and discretionary senior executive bonuses are restricted or prohibited without prior FCA approval.

NOTE 4 - FAIR VALUE MEASUREMENTS

Accounting guidance defines fair value as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability. See Note 2 of the 2023 Annual Report to Shareholders for a more complete description.

Assets measured at fair value on a recurring basis are summarized below:

(dollars in thousands)

Assets held in nonqualified benefits

The Association had no liabilities measured at fair value on a recurring basis at March 31, 2024 or December 31, 2023.

Assets measured at fair value on a non-recurring basis for each of the fair value hierarchy values are summarized below:

With regard to impaired loans it is not practicable to provide specific information on inputs as each collateral property is unique. System institutions utilize appraisals to value these loans and takes into account unobservable inputs such as income and expense, comparable sales, replacement cost, and comparability adjustments.

The Association had no liabilities measured at fair value on a non-recurring basis at March 31, 2024 or December 31, 2023.

Valuation Techniques

As more fully discussed in Note 2 of the 2023 Annual Report to Shareholders, accounting guidance establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The following presents a brief summary of the valuation techniques used by the Association for assets and liabilities, subject to fair value measurement.

2024

of December

2023 Regulatory Minimums Capital Conservation Buffer Total Risk Adjusted: Common equity tier 1 ratio 16.36% 16.67% 4.5% 2.5% 7.0% Tier 1 capital ratio 16.36% 16.67% 6.0% 2.5% 8.5% Total capital ratio 16.55% 16.90% 8.0% 2.5% 10.5% Permanent capital ratio 16.88% 17.13% 7.0% – 7.0% Non-Risk

Tier 1 leverage ratio 17.12% 17.49% 4.0% 1.0% 5.0% Unallocated retained earnings and equivalents leverage ratio 17.01% 17.38% 1.5% – 1.5%

of March 31,

31,

Adjusted:

Fair Value Measurement Using Total Fair Value

Level 1 Level 2 Level 3

trusts March 31, 2024 $ 199 $ – $ – $ 199 December 31, 2023 $ 187 $ – $ – $ 187

Fair Value Measurement Using Total Fair Value

Level 1 Level 2 Level 3

March 31, 2024 $ – $ – $ 5,680 $ 5,680 December 31, 2023 $ – $ – $ 3,445 $ 3,445

(dollars in thousands)

Loans

Assets Held in Non-Qualified Benefits Trusts

Assets held in trust funds related to deferred compensation and supplemental retirement plans are classified within Level 1. The trust funds include investments that are actively traded and have quoted net asset values that are observable in the marketplace.

Loans Evaluated for Impairment

For impaired loans measured on a non-recurring basis, the fair value is based upon the underlying collateral since the loans are collateral dependent loans. The fair value measurement process uses independent appraisals and other market-based information, but in many cases, it also requires significant input based on management’s knowledge of and judgment about current market conditions, specific issues relating to the collateral, and other matters. As a result, these fair value measurements fall within Level 3 of the hierarchy. When the value of the collateral, less estimated costs to sell, is less than the principal balance of the loan, a specific reserve is established.

NOTE 5 - SUBSEQUENT EVENTS

The Association has evaluated subsequent events through May 7, 2024, which is the date the financial statements were issued, and no material subsequent events were identified.