2013 Farm Credit East Annual Report

WE ARE

YOU.

Farm Credit east lives and breathes agriculture, forest products, commercial fishing and related service businesses. we work with you. we work for you. we pay patronage dividends. when you succeed, we succeed.

we are you. “we are you” expresses our single-minded focus on building our organization with the capacity, expertise and service necessary to meet your credit and financial services needs today and throughout every economic cycle that your industry will face in the coming years.

William J. Lipinski CEO

Andrew J. Gilbert Chairman of the Board

Farm Credit East had a successful 2013 with record earnings of $116.6 million. We continued our long-standing commitment to a strong patronage program, paying a record $40 million in cash. Since 1996, we have paid $425 million in patronage. Loan volume increased by 6.2 percent to $5 billion. Our financial services, which are focused on improving your profitability and helping you manage risk, grew by 8 percent to more than $20 million. We finished 2013 with a risk-funds ratio of 17.5 percent or $872 million�— a very strong financial cooperative that can meet customer needs and stay with its customers through economic cycles.

We are very pleased about your recent approval of our merger with Farm Credit of Maine, which was overwhelmingly approved by stockholders of both associations in November. This merger has real value as additional strong forest products, farm and fishing businesses become owners and customers of Farm Credit East, and an experienced-and-dedicated staff joins our team. We are excited that, with the merger, three very experienced and knowledgeable directors from Maine join our Board. This merger will enhance stockholder value and create a stronger and more diverse cooperative for the future.

Your cooperative’s Board of Directors thinks “out of the box” as it challenges management to develop new approaches.

Annually, the Board studies benchmarks in comparison to other Farm Credit associations and like-sized commercial banks to ensure that we are operating in the most efficient, effective manner.

2013 Highlights • We reenergized our focus on proactive customer service based on long-term relationships and an in-depth understanding of your business. For example, based on a customer survey conducted in the fall of 2012, we developed action plans for each branch office to better serve you, our customer-owners, in the future.

• Over the past two years, we expanded our efforts to better inform customers about our full menu of financial services. Our goal is always to assist your business in becoming more profitable, successfully transitioning to the next generation and better managing risk. We also produced 20 videos about our services and programs and now have a Farm Credit East YouTube channel.

• We expanded our enterprise risk management approach to Board reporting. The Board reviews risk and performance with a holistic perspective. This approach helps the Board monitor all significant metrics, while allowing more time to focus on specific areas of concern.

• We expanded our marketing and communications effort with a campaign emphasizing our long history of standing by agriculture through all economic cycles. This campaign notes that while other lenders come and go in serving Northeast agriculture, Farm Credit has always been there for nearly 100 years.

• As part of our Knowledge Exchange program, we shared information on emerging issues, including industry outlooks and webinar sessions on the Affordable Care Act compliance, farm labor and OSHA regulations. On February 7, 2014, President Obama signed a new Farm Bill into law providing some certainty for American producers as to farm programs for the next few years. Throughout 2013, we continued to urge Congress for passage of a good Farm Bill and action to address the farm labor issue — no other lender surpasses our efforts to support key issues facing Northeast agriculture.

• Our commitment to staff training and development has never been greater. We strive to maintain a stable workforce, because we know that our members prefer long-term working relationships with our staff. The fact is that we have an excellent staff with an unsurpassed commitment to do the right thing for you.

We are pleased to report that nationwide, the Farm Credit System is strong and continues to grow. Over the past 20 years, the System has built a solid capital base and earnings engine. Strong Farm Credit cooperatives with a commitment to member service are the result of System growth and value. Farm Credit East plays an active role in System leadership organizations. We are proud to be part of a Farm Credit System that will celebrate its 100th year of service in 2016.

To be successful, all businesses must change and constantly improve their service and products. We understand that we must embrace change to strengthen our cooperative for future generations, and that what we did in the past is simply not good enough for tomorrow. We also appreciate that we are owned by you, our customer-owners. We value what you do and how you do it, and we look forward to continuing to work hard to help build your success.

grassroots governance

“as ag business owners, we understand agriCulture. that’s what diFFerentiates our organiZation FroM a CoMMerCial bank. we want a proFitable bank that also serves us well as CustoMers by providing Credit at a Fair priCe.” henry l. huntington pleasant view gardens, inc. loudon, n.h.

FCe board member since 2011

e

2013 Farm Credit East Board of Directors Front row, seated Richard P. Janiga R + D Janiga Enterprises, LLC East Aurora, N.Y. Ann P. Hudson, CPA Outside director Suffield, Conn.

Andrew J. Gilbert Chairman Adon Farms Potsdam, N.Y.

Back row, standing Matthew W. Beaton Vice Chairman Sure-Cran Services, Inc. and Beaton’s, Inc. East Sandwich, Mass.

June W. Hoeflich Outside Director Retired, HSBC Bank, USA Williamsville, N.Y.

Robert R. Brown II Orchard Dale Fruit Farms, Inc. and Brown’s Berry Patch Waterport, N.Y. Christine E. Fesko Fesko Farms, Inc. and Chris Fesko Enterprises Skaneateles, N.Y. Douglas W. Shelmidine Sheland Farms Adams, N.Y.

Laurie K. Griffen Saratoga Sod Farm, Inc. Stillwater, N.Y.

Samuel G. Conard S.R. Conard & Sons Hillsborough, N.J.

Henry L. Huntington Pleasant View Gardens, Inc. Loudon, N.H.

Peggy Jo Jones Outside Director Albertsons, LLC Boise, Idaho

Lisa P. Sellew Prides Corner Farms Lebanon, Conn.

John P. Knopf Fa-Ba Farms, LLC Canandaigua, N.Y.

Benjamin J. Freund Freund’s Farm, Inc. East Canaan, Conn.

for our customers, by our customers

Denise and John Dickinson operate a 3,000-acre dairy farm with three junior partners.

In addition to milk production, the family also merchandises cattle genetics around the world.

Ideal Dairy Farm houses 1,200-Registered Holsteins and approximately 1,100-replacement heifers, producing 85,000 pounds of milk per day.

Our Leadership Comes from You To find a Farm Credit East customer, you need look no further than our Board of Directors. As a customer-owned organization, the majority of our Board is elected by, and largely chosen from, the very ag owners and operators we serve. That means that balancing what is right for our customers and what is right for Farm Credit East is one and the same.

As a financial cooperative, we understand industry trends, such as a downturn in a commodity cycle, and work with you in an informed way for your success. For us, the health of your business is directly linked to our collective well-being and profitability.

“ Member ownership drives Farm Credit East to offer programs and opportunities, like business consulting and financial benchmarking, which are not common in commercial lending institutions. Also, by working with a member-owned cooperative, we get the value of working with a professional management team that is overseen by a Board of talented and successful farmers.”

— Denise Dickinson, Ideal Dairy Farm, Hudson Falls, N.Y.

the leading edge

Expert Lending for Ag Industries When it comes to financial services, one size does not fit all: What works for many industries will not work for agriculture, to be sure. Farm Credit East understands the needs of ag business owners negotiating the inevitable cycles of our industry. And because our primary concern is our customers’ long-term profitability, we work to provide them the resources they need to be succesful and well-positioned for future growth.

In fact, Farm Credit East representatives work with our customers so they can take advantage of opportunities during every economic cycle — and that is expertise that few lenders can offer.

Jamie Militello is a fifth-generation farmer who cultivates three types of grapes on more than 200-acres.

He and his father market their Concord and Niagara grapes through National Grape Cooperative/Welch Foods. Their farm spans three locations, each with its own microclimate and some of the best soils for growing high-quality juice grapes.

“FarM Credit east doesn’t Just see a loan with nuMbers attaChed to it. they see Me as a hardworking person and understand that not all years will be the saMe. soMe will be buMper Crops and soMe won’t, and they help us work through the tough tiMes so that our business is healthy enough to grow in the good tiMes.” — James “Jamie” Militello, Militello Farms, llC, Fredonia, n.y.

always there

Dan Corey owns and manages a 1,000-acre seed potato farm operation and a vertically-integrated seed farm and greenhouses. He is the first private U.S. grower to export seed potatoes to Brazil. In addition, Dan and his family operate a 200,000-bushel grain elevator and grow and market 1,500 acres of oats, wheat and barley.

A Proven Commitment to Value and Service At Farm Credit East, we don’t measure our relationships with our customers in terms of transactions, but in years and even generations. By focusing on long-term relationships with each customer, our representatives are able to deliver informed and customized financial solutions to increase your profitability as you build your business over time.

On the farm or on the phone, our customers have come to expect highly personalized service from our representatives: We remember our clients by name and treat each customer like family. That level of customer service, along with an unsurpassed knowledge of your industry, is a Farm Credit East advantage.

“ After working with Farm Credit for 25 years in the cyclic, volatile market of perishable commodities, I know that they will always be there for our industry. Also, business is about relationships, and I can call any Farm Credit staff member and they will lead me to the expertise that I need.”

— Dan Corey Dan Corey Farms Nu-Seed Corp.

Seed Pro, Inc. Corey Equipment, Inc. Monticello, Maine

Patronage Puts Profits Where They Belong Among the many differences between Farm Credit East and other lenders, our patronage dividend program stands out as truly unique. At the end of every fiscal year, lending institutions determine income and expenses and may periodically distribute a portion of their profit to investors. However, as a cooperative, our customers are our owners, which means that we return our profits to you. In 2013 alone, we delivered more than $40 million dollars in patronage dividends. As a result, our patronage program significantly reduces the cost of borrowing money for ag owners, which means a considerable value for your business.

“our interest rates with FarM Credit east are CoMpetitive to begin with, but the patronage prograM brings our rates even lower. our patronage CheCk goes right baCk into our business, helping us to likewise be CoMpetitive.”

— ed and gail overdevest, overdevest nurseries, inc., bridgeton, n.J.

TOTAL PATRONAGE REFUNDS (in millions) $50

$42

million 40

30

20

TOTAL PATRONAGE REFUNDS OVER 18 YEARS: $467

20 14

20 13

20 12

20 11

20 10

20 09

20 08

20 07

20 06

20 05

20 04

20 03

20 02

20 01

20 00

19 99

19 98

YEAR PAID

19 97

10

MILLION

PERCENTAGE OF INTEREST REFUNDED

26.25%

20 14

20 13

20 12

20 11

20 10

20 09

20 08

20 07

20 06

20 05

20 04

20 03

20 02

20 01

20 00

19 99

YEAR PAID

19 98

25

19 97

farm credit east patronage refund history

sharing the harvest

Ed and Gail Overdevest own and operate a 290-acre wholesale nursery with 2.7 million square feet of covered growing space and more than 1,700 varieties of shrubs, vines and perennials. The family excels in recycling and conservation practices and has successfully trademarked two lines of high-quality branded plants.

advocates for agriculture Supporting the Ag Industry with Meaningful Action Bolstering the future of the ag industry and the livelihood of farming families is fundamental to who we are. From Albany to Washington, D.C., Farm Credit East champions policies that will serve our customers’ interests.

We are also committed to supporting the industry by investing in tomorrow’s Northeast farmers through education and grants. In 2013, Farm Credit East joined two partners in donating $600,000 to Cornell’s College of Agriculture and Life Science.

Additionally, our AgEnhancement program provided $130,000 in grants to Northeast organizations that have made a significant difference in the lives of those in the ag industry. Since 1996, this program has distributed more than $1.6 million dollars in support of advancing the future of our industry.

Through these and many other initiatives, Farm Credit East ensures that agriculture — and those who rely on it for their livelihood — will thrive in the Northeast for years to come.

“as FarMers inCreasingly Cope with unantiCipated Challenges and new opportunities … sustainability will be a growing FaCtor in the suCCess oF their enterprises. by helping Cornell Continue to provide the very best researCh and eduCation … this generous giFt represents an iMportant investMent in the Future oF the region’s agriCulture seCtor.”

— kathryn J. boor, ronald p. lynch dean of the College of agriculture and life science at Cornell university, on the joint $600,000 contribution from Farm Credit east, Cobank and dairy farmer sheldon brown.

READY TO HELP YOU — ON THE FARM, IN THE OFFICE, OVER THE TELEPHONE OR ON THE INTERNET,

FarMCrediteast.CoM

The merger of Farm Credit East and Farm Credit of Maine was overwhelmingly approved by our customer-owners, effective January 1, 2014.

auburn, Me Matthew Senter, Manager 615 Minot Avenue, Auburn, ME 04210 800.831.4320 / 207.784.0193 batavia, ny Edward Urbanik, Manager 4363 Federal Drive, Batavia, NY 14020-4105 800.929.1350 / 585.815.1900

Middleboro, Ma Cynthia Stiglitz, Manager 67 Bedford Street, Middleboro, MA 02346-0720 800.946.0506 / 508.946.4455

bedFord, nh David Bishop, Manager 2 Constitution Drive, Bedford, NH 03110-6010 800.825.3252 / 603.472.3554 bridgeton, nJ Scott Andersen, Manager 29 Landis Avenue, Bridgeton, NJ 08302-4396 800.219.9179 / 856.451.0933 burrville, ny Kathryn Canzonier, Manager 25417 NYS Route 12 Watertown, NY 13601-5730 800.626.3276 / 315.782.6050 ClaveraCk, ny Blane Allen, Manager 190 State Route 9H, Hudson, NY 12534-3819 800.362.4404 / 518.851.3313 Cobleskill, ny Robert Yurkewecz, Manager 2668 State Route 7, Suite 21 Cobleskill, NY 12043-9707 800.327.6588 / 518.296.8188

Cortland, ny Janice Bitter, Manager One Technology Place, Suite 2 Homer, NY 13077-1526 800.392.3276 / 607.749.7177 Country living David Pugh, Director 2668 State Route 7, Suite 36 Cobleskill, NY 12043-9707 800.327.6588 / 518.296.8188 dayville, Ct Lynn Weaver, Manager 785 Hartford Pike, Dayville, CT 06241-1739 800.327.6785 / 860.774.0717 enField, Ct Keith Stechschulte, Manager 240 South Road, Enfield, CT 06082-4451 800.562.2235 / 860.741.4380

FleMington, nJ Stephen Makarevich, Manager 9 County Road 618, Lebanon, NJ 08833-3028 800.787.3276 / 908.782.5215

Middletown, ny Blane Allen, Manager 669 East Main Street Middletown, NY 10940-2640 888.792.3276 / 845.343.1802

geneva, ny Dale Foley, Manager 1450 Route 14, Phelps, NY 14532-9542 800.929.7102 / 315.781.7100

potsdaM, ny Michael Haycook, Manager One Pioneer Drive, Potsdam, NY 13676-3273 800.295.8431 / 315.265.8452

greenwiCh, ny Christopher Truso, Manager 394 State Route 29, Greenwich, NY 12834-2650 800.234.0269 / 518.692.0269

presQue isle, Me Peter Hallowell, Manager 24 Rice Street, Suite 1, Presque Isle, ME 04769 800.831.4640 / 207.764.6431

hornell, ny David Van Lieshout, Manager 1155 Airport Road, Hornell, NY 14843-9144 800.929.2025 / 607.324.2020

riverhead, ny Stephen Weir, Manager 1281 Route 58, Riverhead, NY 11901-2097 800.890.3028 / 631.727.2188

Mayville, ny James Warner, Manager 28 E. Chautauqua Street Mayville, NY 14757-0163 800.929.2144 / 716.753.2144

sangerField, ny Craig Pollock, Manager 995 State Route 12 Sangerfield, NY 13455-0060 800.762.3276 / 315.841.3398

PRSRT-STD U.S. Postage

PAID

Farm Credit East, ACA 240 South Road Enfield, CT 06082-4451

Permit No. 1225 Hartford, CT

“MeMber ownership drives FarM Credit east to oFFer prograMs and opportunities, like business Consulting and FinanCial benChMarking, whiCh are not CoMMon in CoMMerCial lending institutions. also, by working with a MeMber-owned Cooperative, we get the value oF working with a proFessional ManageMent teaM that is overseen by a board oF talented and suCCessFul FarMers.”

— denise dickinson, ideal dairy Farm, hudson Falls, n.y.

“FarM Credit east doesn’t Just see a loan with nuMbers attaChed to it. they see Me as a hardworking person and understand that not all years will be the saMe. soMe will be buMper Crops and soMe won’t, and they help us work through the tough tiMes so that our business is healthy enough to grow in the good tiMes.” — Jamie Militello, Militello Farms, llC, Fredonia, n.y.

WE ARE

YOU.

“our interest rates with FarM Credit east are CoMpetitive to begin with, but the patronage prograM brings rates even lower. our patronage CheCk goes right baCk into our business, helping us to likewise be CoMpetitive.”

— ed and gail overdevest, overdevest nurseries, inc., bridgeton, n.J.