2014 Annual Report by Farm Credit Financial Partners, Inc.

Celebrating 20 Years ~ With an Eye Toward the Future Financial Partners, Inc. 2014 Annual Report

From the Board Chair the President and CEO

Twenty Years on the Marquee Each spring, the FPI annual report looks back on a year of growth and forward to a coming year of opportunity. It has become an FPI tradition to look forward to the theme of each year’s annual report … and the cover on which it’s announced. Sure, the cover art for our first few annual reports may have been a bit dry, but we’ve certainly made up for it in the years to follow! Enjoy this retrospective of our annual reports from yesteryear.

Welcome to the 20th Anniversary Annual Report for Farm Credit Financial Partners, Inc. Our 20-year history has been all about setting the stage for great performance within the Farm Credit System. Our goal from the start was to showcase the star quality of our Farm Credit partners by providing the technical expertise and innovative software that will enhance their success and shine a light on their performance. As we mark the start of our third decade, we celebrate not only the creative technical capability we’ve built internally, but also the outstanding talent of our Farm Credit partners. What we have established through continuous improvement, lessons learned — and yes, even battle scars — makes the FPI experience a microcosm of things to come within the Farm Credit System as our institutions learn to work better together and build relationships that last. We are big believers in “built to last,” and much of what you will read in our 20th anniversary annual report draws heavily from that theme as we consider FPI today, FPI past and FPI future. As we pay tribute to the past, we are thankful to those who pioneered this organization, those who stuck with it through good times and tough times and those with the fortitude to invest in technology as a strategic weapon. We had the opportunity to blend great leaders, staff and technology into a highly effective delivery mechanism. And as we look to the future, we can’t help but have unbridled enthusiasm in preparing for new opportunities within our partnerships and the System.

Bob Bahl

Tom Moran

Chair of the Board

President and CEO

FPI Employee Spotlight

The FPI of Today Marie Meiers “ I have been with FPI since its inception because of the people — both the employees here at FPI and our customers in the associations. Many of these people are like family to me. “ I stay here because I feel that the company really supports me by providing training as needed and allowing me to move to different areas when I need a new challenge. “ Because of farming’s special challenges, Farm Credit associations must provide a higher level of support to their borrowers than most lenders. The technology required can’t be purchased and implemented ‘out of the box.’ FPI provides top quality support, both with our innovative technology and superb customer support. “ FPI provides ‘one-stop shopping’ for our customers. Our staff regularly goes above and beyond to provide quality service.”

Since the day our “script” was first green lighted more than 20 years ago, FPI has grown from a nascent idea to a model that has been replicated throughout the Farm Credit System. What was once revolutionary and untested is now the norm — and the FPI journey tells much of that story.

Our organization was founded on several fundamental concepts that made us an anomaly in the Farm Credit System. Imagine a dedicated technology/services unit that:

• Is owned and controlled by Agricultural Credit Associations (ACAs)

• Is entrepreneurial in nature

• Is focused first on delivery systems and loan officers

• Has adopted the practice of standardizing commodities and differentiating for products that provide distinct benefits in the marketplace

• Fundamentally believes in the power of technology in the marketplace

• Is dedicated to nurturing close, productive relationships among the owners

• Makes perpetual reinvestment in technology and services

That’s exactly what the initial owners of FPI sought to create, and owner/leaders in the FPI family have stayed true to that vision. Our confidence in our model has never wavered, and the tenets we established at our founding have become central to success throughout the Farm Credit System. As we look back on the past two decades and look forward to many following, we know that the key lessons we have learned will prove to be invaluable as we forge ahead.

FPI Employee Spotlight

Leveraging Technology in the Marketplace When it comes to the big screen, innovation has been a driving force in bringing fantasy worlds to life. Technology is just as important in bringing our work to the next level for the Farm Credit community. In fact, a key goal of technology services is to perfect the delivery model and reinvest in the future so that we are able to position the operational side of an ACA in the marketplace. That concept of technology as a strategic weapon takes leadership, dedication and funding — that’s where critical mass is imperative.

FPI Family Loan Footings

$$Billions Billions

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FPI staff and management are proud of what we have achieved … a critical mass of $27 billion, with growth that generally outpaces the cost of our services and internal ability to fund $5-to-$7 million in fresh technology projects annually from our core budget. Even more crucial to our success is the dedication of our owners who remain committed to reinvesting profits back into FPI, providing strong capitalization, recognizing key inflection points and funding those opportunities. In other words: wisely investing with the goal of making money through the strategic use of technology.

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1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

And with critical mass comes more technological capability for the money, as reflected by this chart of a representative ACA that has had a 20-year history with FPI.

Cost of Technology of a Representative Association Cost Costin inBasis BasisPoints Points per per$100 $100of ofLoan LoanVolume Volume

Does that equate to a growth-at-all-cost strategy? Not at all. But it does reflect the absolute need for reinvestment of capital plant, a fact of which the Farm Credit lending community is keenly aware. “What is your capital reinvestment strategy, and how does it position you?” is a key discussion that should always surround technology.

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1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

“ Farm Credit East is proud to be a founding association of FPI. We know that change is immutable and I’m particularly pleased to have watched and helped shape FPI’s growth and change over the years. Critical mass is a major component for any successful technology shop, critical mass with the right partners is even more important. We believed then, and still do, that ACA ownership and control of the technology provider is pivotal as it leads to the best product for the best value.”

Bill Lipinski, CEO

Farm Credit East

Karen Weiner “ I am at FPI because there is no better place to be than in a growing company with a group of enthusiastic, dedicated coworkers. As far as employers go, FPI is a rare find. “ What FPI brings to the table is innovation and vision. The company is always looking toward the future and wants to be on the leading edge. There is no status quo or following the crowd.”

Ken Kerr “ I came to FPI from the military, without a degree. The interview was the best I have had In my life, and I could tell this is a family that really cares about their employees. FPI gave me a chance. I’m now a degreed, SharePoint developer, working in business intelligence.”

FPI Employee Spotlight

A Technology Company Driven by a Culture of Service Monique Tate “ FPI’s innovative software utilizes today’s latest technologies. That fact combined with its focused work ethic and active, fun atmosphere makes an FPI career highly engaging and the environment very supportive. Life here feels more like a community than work.”

Everybody talks about products. The newest of the new or the most innovative is a badge of honor around the technology world. But at its core, FPI is a services company that bundles technology for its users. Our product lineup may be second to none, but we’re not all about products. Today’s successful technology/services company focuses on people and relationships — making teams work, nurturing them and ensuring they withstand change. This company is not simply a byproduct of the historical Farm Credit district line with associations overseen by a district bank. The lead customer comittee that was appointed by the board best exemplifies the time, energy and focus on people and relationships. Their work as Enhancement Prioritization Committee (EPC) leaders focuses on strategy and operational feedback. Strategic feedback comes from the committee members themselves; the operational feedback is generated by subcommittees at the product level that flow up their key ideas, initiatives and issues.

Karen Walker “ FPI is an oddity. A dynamic, vibrant place to work surrounded by salt-ofthe-earth people who all have the same goal: Do great work. Every day holds new challenges, collaboration with coworkers and our customers, fun and reward. “ Our customers choose FPI because it is the place to be — cutting-edge solutions, motivated staff that go beyond the extra mile, and a customer base that brings nationwide Farm Credit knowledge to economies of scale.”

We are all too aware of the popular sentiment of “death by committee” and, for that reason, we have evolved a focused structure where a key leader from each association is empowered to make decisions for their organization and interface with FPI leadership. The FPI board relies heavily on EPC leaders vetting and making recommendations. Much of the syncing of the organization happens at this level.

The EPC Leaders The EPC leaders are: David Barbieri, Northwest Farm Credit Services; Becky Thibert, AgCountry Farm Credit Services; Bill Bathel, Farm Credit East; James Neeley, Farm Credit West and chair of EPC

“ The EPC leadership group has matured significantly over the last year and is focused on the right balance of strategy and operations. Our strategic planning pillars reflect that change, setting a solid base for the future. The relationships we’ve built continue to get stronger as we invest in understanding each other’s business strategies. We’re excited about the future!” James Neeley, senior vice president and chief strategy officer Farm Credit West

“ I’m pleased with the structure and discipline that we’ve collectively put into our strategic product planning. As an EPC team, we’ve moved quickly through the “storming” and “norming” phases and are now hitting our stride. We’re a small group of diverse, dedicated decision makers who aren’t afraid to tackle tough issues and drive consensus.” Becky Thibert, vice president strategic technology AgCountry Farm Credit Services

FPI relationship manager Jeff Marshall working with Farm Credit West’s EPC lead James Neeley

“ Our products as well as the processes we built around them are a strategic weapon for us in the marketplace. They allow us to consistently beat our competition in efficiently delivering sophisticated credit products and closing loans weeks and sometimes months faster than the competition. Yet we recognize that’s not enough. We need to continually improve and create more advantages. That’s why our investment in the next generation of systems, EmPOWER™ web, is so important to Farm Credit West.” FPI relationship manager Charles Branche working with AgCountry’s EPC lead Becky Thibert

Mark Littlefield, president and CEO

Farm Credit West

FPI Employee Spotlight

The People of FPI Leo Morrissey “ I stay at FPI because of the privilege to work with FPI people. Plus there is always something new and different here. “ The people of FPI are extraordinary because of their intellect, their work ethic, their ability to think outside the box, their ability to collaborate and problem solve. They also have a keen interest in exceeding our customers’ needs. “ Customers choose FPI because of the quality and scope of our products and the level of integration across all systems. “ They like the ability to directly influence the menu of products and feature sets that they can choose from or have developed. “ Customers appreciate our ability to problem solve as well as our ongoing communication and openness about what we are working on and when they can expect delivery.”

Central to building relationships is investing in the right people with the right focus. Nothing speaks more clearly to this than the time and effort invested in FPI’s human capital strategies and staff development.

“ As a newcomer to Northwest FCS and the FPI relationship, two things stand out for me. First is the commitment to the collaborative strategic planning effort that drives innovation in FPI products and services. And second is the depth and diversity of knowledge and experience in the FPI team that creates the capacity to execute on the FPI strategy. Through the efforts of our dedicated relationship team, in many ways FPI has become a natural extension of Northwest’s capabilities. We recognize and appreciate the efforts that Jason Hilzendeger, LeeAnne Nikolao and the balance of the team make every day on our behalf.”

David Barbieri, senior vice president

and chief information officer

Northwest Farm Credit Services

Ownership has invested heavily in building a multi-tier human capital strategy that focuses on depth at all levels for the long game rather than investing solely in short-term transient skills. This process takes patience and funding, but the results are evident through the depth we build at the millennial level, throughout middle management and at the shoulders of FPI. The FPI of today is a much deeper and stronger company than five years ago. Our commitment to continue this trend extends far into the future.

Northwest’s EPC lead David Barbieri with FPI relationship manager Jason Hilzendeger and LeeAnne Nikolao, FPI assistant relationship manager

“ As FPI matures, we look for it to grow in sophistication, delivery capabilities and talent. We want the company to be more agile, capable of responding to adversity and less reliant on a single threading of key employees. Board and management entered 2014 with a plan to further develop FPI at the leadership levels by adding significant depth and leadership succession capabilities to the team. We are well on our way to that goal and will continue to build human capital as the center of our strategies.”

Phil DiPofi, president and CEO

Northwest Farm Credit Services

8. BO BI. Recognizing the power of mining data, FPI chose to invest heavily in Business Objects Business Intelligence Suite putting our ACAs at the head of the class.

Looking Back on 20 Years FPI has had a lot to celebrate throughout our history — so it was quite a challenge to identify the 20 things we are most proud of from our first two decades! With all due apologies to all stakeholders, this list represents the moments that stand out in our history.

9. EmPOWER. The reinvestment in the EmPOWER front-end system as a successor to BASIS and Northwest Farm Credit Services’ ILO allowed us to expand the functionality and integration of the front-end system. We were also able to introduce the capacity to configure the systems for each ACA’s delivery system needs. 10. Electronic classroom. FPI pioneered electronic classrooms in the Farm Credit System allowing onthe-spot training and reinforcement. 11. Consulting sweeps. FPI pioneered the concept of efficiency consulting sweeps, which had the dual purpose of promoting the interface of our staff with ACA branches and identifying areas where training or problem solving needed to be brought to the table.

The FPI Founders. Employees who have been with FPI from the start together with some 20-year employees who moved to FPI from an association.

1. Start-up – a New Model. A 4.25 service entity … with a national charter … owned by ACAs … in a System dominated by the wholesale banks. 2. Investing in BASIS. The concept of BASIS, our firstgeneration front-end system, was revolutionary. It made the loanofficer-delivery point the center of the technology world. 3. The 1995-1996 Best in MicroBanking Award for BASIS. The BASIS Loan Origination and Customer Management System was awarded the Best in Micro-Banking Award for its unique design concepts and integration.

4. Loan Accounting as a black box. FPI was a true pioneer when we questioned the idea that core financial systems (loan accounting & general ledger) should be the central heartbeat of lending. This favored a data warehouse and systems of record close to the loan officer and customer delivery. 5. Vanilla loan accounting. Farm Credit has unique accounting treatments that require customized loan accounting systems. The decision to “stay vanilla” with loan accounting systems and position anomalies in FPI-controlled front-end systems has been a major boon to agility and efficiency.

6. Choosing Microsoft. Being a Microsoft shop may seem like the norm today, but it was quite a reach when FPI first made that choice in 1995. At the time, it meant positioning FPI on the “bleeding edge.” Two decades later, this niche has become the status quo. 7. Westward Ho! FPI seized the opportunity to move west to the Western Farm Credit District when the bank no longer provided technology services. This marked the first multi-district technology provider in the Farm Credit System, and moved FPI’s footings to $7.5 billion.

12. Strategic Online Banking (OLB) partnership with NWFCS. FPI opted to join with Northwest Farm Credit Services (NWFCS) pioneering efforts on OLB, forming a strategic partnership that would pay major dividends. 13. NWFCS joins FPI; NWFCS tech shop merges with FPI. As an outcropping of the strategic alliance on OLB, NWFCS chose to allow its technology group to be absorbed by FPI. As a result, FPI’s footings approximately doubled. 14. AgCountry. AgCountry chose to enter FPI, expanding the reach into the AgriBank Farm Credit District and marking the third wholesale bank in FPI. Both NWFCS and AgCountry brought tremendous diversity to FPI. 15. Farmer-Borrower portals. FPI was the first in the System to pioneer dedicated farmer-borrower portals for transacting business electronically with an ACA.

16. CoBank, a valued partner. FPI and CoBank technology teams have worked together, both strategically and tactically, such as on CoBank’s CoLink, allowing synchronization of OLB transactions with EmPOWER, and on eReview, a credit and appraisal review product. 17. Mobility. FPI brought loan officer mobility to the Farm Credit System, allowing not only “look up” but transaction processing remotely on iDevices.

Through every step along our 20-year journey, this tenet has remained constant: association-direct control of the FPI organization. 18. EmPOWER web & Credit Pro.™ Representing the next generation of systems with a major premium placed on usability and flexibility. In addition, both were destined to be best-of-class loan origination and credit analysis systems. 19. Merger engine. In a bold move, FPI eschewed the traditional process for loan accounting mergers. We built a merger engine, which eliminated dependency on a core loan accounting company and provided a tremendous boost to quality. 20. Employer of choice. Perhaps one of our most gratifying achievements was being named the Employer of Choice for the State of Massachusetts in 2013.

FPI@20 Shout Out!

Former Board Members Who Helped Make FPI a Reality

Jim Pierson First Board Chairman Bob Egerton Founding Board Member Bob Kester Founding Board Member Dean Moreau Founding Board Member Ray Nowak Founding Board Member Ken Graff Western Advocate & Former Board Chairman Gary Dyer Western Advocate & Former Board Member Bob Engel Strong National Supporter & Former Board Member Mike Gerber Former Board Member Scott Herring Former Board Member Ernie Hodges Western Advocate & Former Board Member Mary McBride Former Board Member Jay Penick Northwest Advocate & Former Board Member George Putnam Former Board Member Gene Smestad AgCountry Advocate & Former Board Member … and others too numerous to mention!

FPI Employee Spotlight

1410

FPI’s planning efforts systematically examined our products and future trends in five key areas, which prioritized product spending according to the weight that we assigned each pillar. Those areas are:

The FPI of Tomorrow It may be a little premature to announce “happily ever after,” but as we contemplate the future of FPI, the sun continues to shine into the horizon. We anticipate that FPI will be shaped even further by the strategic focus on smart spending for technology as a competitive weapon. In 2014, we witnessed this in action as management and EPC leaders engaged in a comprehensive strategic product analysis. That analysis, which measured our products against five major value pillars, identified key inflection points in FPI strategic products and spending, significantly shaping our plans for 2015 and beyond. The Five Pillars

Customer & Marketing

Risk Management & Mitigation

Product Innovation (R&D)

Operations Excellence

Jim Gosselin

5 Pillars: 2015-to-2017 FPI’s focus is on digital strategy and EmPOWER web, with significant attention paid to risk management. Key trends include:

Scott Rackliffe, FPI relationship manager, with Farm Credit East’s EPC lead Bill Bathel and former relationship manager Dick Baldwin

High Performance Culture

“ We’re pleased with FPI’s direction of building depth and discipline while maintaining a close relationship that we built over 20 years. As a credit officer who became the tech lead for our ACA, I wondered how things would look from this side of the fence. In a word: Awesome. I enjoy fashioning the strategic direction based on the dollars we spend on technology. Add in the consultative nature of our FPI relationship along with our partners’ skills and knowledge and it’s a ‘home run’ partnership.”

Bill Bathel, executive vice president

and chief risk officer Farm Credit East

• The major role that a vibrant digital strategy plays as a permanent adjunct delivery system • Significant opportunities to create value in usability, simplification and efficiency in EmPOWER web

• The power of data in advanced data mining, Enterprise Risk Management (ERM), predictive analysis and data governance

• The rapidly changing world of cybersecurity

FPI owners recognize the opportunities associated with these trends. Consequently, investment in products and human capital continues to expand, underscoring a solid desire to avoid financial rationing pitfalls and spend money in order to achieve strong technology-based returns.

“ Having worked in several large companies, I was intrigued by FPI’s lack of bureaucracy and team-first culture. “ I stay at FPI because I enjoy the people I work with and because I have greater control over my organization, my success and my career. “ Our customers stay with FPI because we know Farm Credit. “ It is a unique industry with a rich history and strong purpose that touches every aspect of our customers’ business processes. Understanding and appreciating that uniqueness results in better products and customer service. “ Aside from an understanding of the unique aspects of Farm Credit, FPI also brings a strong history of technological innovation and vision. “ We are true leaders in the Farm Credit System and we are pushing the envelope on concepts like mobility, security and digital marketing. “ Farm Credit associations recognize the strategic advantage of FPI as a partner in driving change.”

The future’s so bright,

Some of FPI’s Millennials

we’re wearing our shades. What’s next for FPI?

• A focus on agility and the ability to expand the organization beyond its current capabilities by augmenting insourcing and outsourcing.

• Further perfecting the model with deeper relationship building, predictability and communications.

• Dreaming in color. The FPI family has always been an innovation leader. Our customers should expect no less of us in the future.

19 Results of operations As noted above, FPI’s net income for 2014 was in line with 2013 net income. Changes in the significant components affecting net income are summarized on the following table ($ in millions):

Management’s Discussion and Analysis

2014 versus 2013: Increase/ Effect on Change in Net Income (Decrease)

Overview

Change in Total Operating Income Increase in research and development (R&D) revenue Increase in custom project income Decrease in core income

The following comments address the operations and financial position of Farm Credit Financial Partners, Inc. (FPI). These comments should be read in conjunction with the accompanying financial statements and notes to the financial statements. During 2014, FPI realized financial results favorable to plan in all key areas, including net income, capital levels, and liquidity. Carefully managed operating expenses, capital spending and project spending led to FPI’s financial performance exceeding earnings targets. FPI ended the year with a continuing strong balance sheet. FPI’s total operating income for 2014 was $35.4 million. This amount represents an increase of $2.8 million over 2013. Operating expenses for 2014 were $35.2 million, an increase of $2.7 million over 2013. Net income after other income and expenses, including provision for income taxes, was $0.1 million for the year, the same as in 2013.

Funding sources FPI operates with three primary sources of funding:

1. Operating income for “core” services provided. 2. R esearch and development (R&D) contributions from owners for specifically-identified activity. 3. Capital funding from owners.

In addition, FPI maintains a $3.75 million open-ended line of credit with CoBank. There were no borrowings on this line-of-credit as of December 31, 2014. Operating income and R&D contributions are established and approved annually during the budget planning cycle. Capital funding is planned over a five-year cycle and reviewed annually. The current capital plan focuses on building capital funds appropriate to continue FPI’s vision to be a leading edge provider of technology solutions. The capital plan identifies key strategic projects that require up-front investment. Completion of these projects and others is setting FPI on a strong course for effectively meeting demands related to systems, the marketplace, and governance.

Subtotal change in total operating income Change in Total Expense Increase in project labor (funded by R&D revenue) Decrease in operational labor expense Increase in infrastructure expense Increase in other operating expenses Increase in non-operating expenses (primarily income tax provision) Subtotal change in total expenses Total change in net income

$2.7 1.0 (0.9) 2.8

2.7 (0.2) 0.1 0.1 0.1 2.8 $0.0

During 2014, FPI’s operating income totaled $35.4 million and was comprised of core and extended core billing to customers of $27.5 million, R&D funding of $4.9 million, custom project income of $2.0 million, and other operating income of $1.0 million. As noted in the overview section, this represents an increase of $2.8 million, or 8.7 percent over 2013. This increase is primarily due to increases in R&D revenue recognition and custom project income partially offset by lower extended core fees. Operating expenses totaled $35.2 million during 2014, an increase of $2.7 million, or 8.3% over 2013. The primary areas of change as compared to 2013 are in planned project related labor costs. Project related staff and contract labor costs, which are offset by increased R&D revenue, increased by $2.7 million over 2013. Operational staff labor costs increased by $0.5M during the year, while operational contract labor costs decreased by $0.7M. Remaining operating expenses increased by $0.2M, primarily driven by investments in infrastructure, reflecting targeted expenditures in the technology and security areas. Non-operating expenses (primarily income tax provisions) increased by $0.1M as well. FPI ended 2014 with cash and cash equivalent balances of $7.4 million. This balance is driven by the impact of additional stock investments by FPI’s owners and strong cash flow from operations offset by net planned 2014 project spending. FPI follows the discipline of prefunding project work. As such, $3.7 million of these funds have been “locked” in the R&D liability for specific future projects.

21 FPI met its financial targets during 2014 and positioned itself for future success. We completed a full work plan which was focused on continued development of our EmPOWER Web products, the completion of development on our Credit Pro product, numerous security enhancements, and upgrades in the EmPOWER, Business Intelligence, Loan Accounting and Technology Infrastructure areas. In addition to new product rollouts, FPI continued to reduce outstanding production support case volumes and improved quality metrics, all while maintaining budget discipline.

Future FPI enters 2015 with strong financial resources, well positioned products and solid, high-quality and increasingly efficient operations. As a result, FPI’s financial plan for the years through 2019 was developed with the following themes in mind:

• Complete the development of next generation credit and lending systems, then plan strategic growth. The goal over the five-year plan period is to drive for modernization through the development of next generation systems, increase value to current customers and then pursue growth opportunities that are consistent with FPI’s strategic vision.

• The FPI capital plan has the expressed goal of generating capital replacement funds for major projects from two sources: R&D contributions and capital contributions. Available funds are used to complete targeted and planned projects as approved annually by the board. As required by GAAP, FPI capitalizes and depreciates appropriate projects. FPI will continue the discipline of prefunding projects by “locking” capital as projects are approved.

• FPI invests in targeted strategic areas designed to continue to modernize our systems and provide value to our owner-customers. In doing so, FPI delivers value-added products and will continue to do so in the years to come.

By year-end 2014 FPI had successfully completed its work plan, delivered strong operational performance, and was positioned to continue to deliver value added solutions in the future.

Ownership and capital As of December 31, 2014, FPI had four owners with stock investments totaling $10.0 million. Changes to FPI’s ownership and capital which occurred during 2014 are discussed below. On January 1, 2014 two FPI owners – Farm Credit East and Farm Credit of Maine merged with the combined entity continuing as Farm Credit East. Additionally, as part of a comprehensive recapitalization plan executed during the year, three owners: CoBank, Yankee Farm Credit and Farm Credit Services Southwest exited the ownership group. FPI continues to enjoy strong relationships with these organizations and continues to provide similar services to them as it has in the past. FPI’s remaining owners: Farm Credit East, AgCountry Farm Credit, Northwest Farm Credit Services and Farm Credit West increased their stock investments in FPI as part of this plan. The net impact in stock investment in FPI was an increase of $1.2M as compared to January 1, 2014. Total equity at December 31, 2014 equaled $6.4 million, down $0.9 million from 2013. The decrease in equity reflects the combined impact of the above $1.2M in additional stock investment in FPI and an increase in accumulated other comprehensive loss of $2.1 million. The increase in accumulated other comprehensive loss is primarily due to a combination of changes in the assumptions used in valuing FPI’s defined benefit retirement plan. The impact of these changes is a more conservative valuation of the net liability and a corresponding reduction in owner’s equity accounts. FPI’s capital plan provides for a five-year build-out and implementation schedule for strategic projects with capital spending and implementation dates being reviewed and adjusted annually to reflect the needs of the FPI customer base. Capital remains adequate for continued operations and approved projects. The CEO of each owner-association serves as a member of the FPI Board of Directors. FPI’s board operates under a committee structure. The committees are:

• Executive compensation committee. This committee is an advisory group dealing with CEO compensation and FPI’s overall human capital strategy. • Audit committee. This committee is an oversight committee working with FPI on enterprise risk management processes and financial controls.

In 2014 FPI continued its focus on delivering tangible value to associations, while maintaining the quality, consistency, and predictability that have been key areas of focus over the last several years. In addition, we delivered new browser based applications – including the Credit Pro mid-market credit analysis application, made significant progress in the development of next generation systems by delivering EmPOWER Web Collateral and continued to fortify and upgrade existing products and related infrastructure. During 2015 and beyond, FPI will continue to focus on planning and strong financial and project management discipline. Associations will continue to be very active partners, shaping products as they are developed and implemented. With $27 billion in footings, combined loan volume of FPI’s owner-associations, and excellent additional growth opportunities, FPI remains very well positioned to achieve our long-term strategic objective of:

Building FPI into a highly sought-after business partner by achieving superior empowerment of association operations and an unparalleled value proposition.

22 Background Organized in 1995, FPI is a dedicated service entity providing a full realm of “backroom services” to its customers. It is the first successful, dedicated backroom shop in the Farm Credit System, effectively breaking the mold of bank-owned and bank-controlled service centers in favor of an association-controlled model. It is a leading advocate of employing cutting-edge, fully-integrated technology in a perpetual quest to drive value into the association delivery process. The FPI tool set and service delivery process are unparalleled in the Farm Credit System and provide a distinct advantage to the owner-customers. FPI is based on an ideology of associations with a common vision banding together and standardizing to create superior products and efficiency. It is dedicated to one-stop shopping for its customers. But, in its simplest form, FPI was started — and has prospered — based on one fundamental, unshakeable principle:

FPI is a customer-controlled and customer-driven organization. Based in Agawam, Massachusetts and Spokane, Washington, FPI operates with approximately 195 employees at these locations. Additional remote staff members are distributed in key areas across the United States working successfully out of offices in their homes. The staff and management of FPI bring a strong sense of customer-driven problem-solving to the table. There is a strong blend of association lending experience, Farm Credit Bank technology and operations experience, and newly-added talent, all bringing a wide range of corporate experience to the table. FPI prides itself on adherence to the following key principles as fundamental to our operations and customer relationships: • A complete customer focus • A strong focus on consensus building and best practice sharing among customers • A dedication to employing heavily-integrated, empowering technology and staying abreast of developments in technology that can be implemented to the distinct advantage of the customer base • A partnership, not a vendor relationship, with our owners. This requires extensive give and take on the part of both parties and a heavy problem-solving atmosphere • Striving toward a “no-surprises-to-the-customer” credo • Continually testing and reinventing the services model to meet the changing demands and challenges of the marketplace • An open, empowered environment within which employees grow and develop FPI’s delivery strategy is closely focused on one-stop shopping for our customers. This, by necessity, does not mean that FPI will build all the systems or products that our customers require. Rather, we often become “procurers” of products and services for our customers, looking for the best value at all times. If it is a common need for our associations, FPI helps provide the service or we coordinate service through outside vendors. FPI’s ultimate goal is to:

Allow our customers to focus on what they do best. FPI is a seasoned technology company capable of continually reinventing and reenergizing itself to be a market leader. We always look forward to our next major opportunity or challenge. FPI proudly reflects on our accomplishments and remains committed to continual development in the future.

Balance Sheet

Statement of Income

December 31, 2014 2013 2012 Assets Cash and cash equivalents $ 7,366,703 $ 9,490,681 $ 10,061,543 Accounts receivable 281,604 260,779 220,969 Fixed assets, net 13,595,342 12,191,765 9,603,470 Net deferred tax asset 2,673,789 1,961,056 2,809,717 Other assets 2,666,702 1,593,133 2,203,796 Total assets $ 26,584,140 $ 25,497,414 $ 24,899,495 Liabilities Accrued expenses and other liabilities $ 4,125,987 $ 3,492,866 $ 2,145,845 Research and development liability 6,021,123 8,457,774 8,395,222 Accrued employee benefits 9,994,636 6,180,801 9,300,254 Total liabilities 20,141,746 18,131,441 19,841,321 Equity Class A preferred stock 10,000,000 4,640,909 4,640,909 Class B preferred stock 0 4,150,000 4,150,000 Accumulated other comprehensive loss (4,434,903) (2,313,893) (4,520,968) Accumulated earnings 877,297 888,957 788,233 Total equity 6,442,394 7,365,973 5,058,174 Total liabilities and equity $ 26,584,140 $ 25,497,414 $ 24,899,495 The accompanying notes are an integral part of these statements.

Year Ended December 31, 2014 2013 2012 Operating Income Core and custom services $ 30,507,954 $ 30,372,633 $ 29,617,088 Research and development 4,922,812 2,223,189 2,148,817 Total operating income 35,430,766 32,595,822 31,765,905 Operating Expenses Salaries and employee benefits 19,198,746 17,406,963 17,264,339 Purchased services 4,659,066 3,926,423 3,661,897 Occupancy and equipment 7,249,134 6,906,208 6,364,610 Other operating expenses 4,085,807 4,254,215 4,120,296 Total operating expenses 35,192,753 32,493,809 31,411,142 Net income from operations 238,013 102,013 354,763 Other Income (Expenses) Interest income 25,141 25,766 33,004 Interest expense (10,235) 0 0 Other gains/(losses) 4,866 874 (14,203) Total other income 19,772 26,640 18,801 Income before income taxes 257,785 128,653 373,564 Provisions for income taxes 124,471 27,929 171,956 Net income $ 133,314 $ 100,724 $ 201,608 The accompanying notes are an integral part of these statements.

Statement of Cash Flows

Statement of Changes in Equity

Year Ended December 31, 2014 2013 2012 Cash Flows from Operating Activities Net income $ 133,314 $ 100,724 $ 201,608 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 4,652,186 3,680,354 3,333,479 (Increase) decrease in accounts receivable (20,825) (39,810) 108,753 (Increase) decrease in deferred tax asset, net (712,733) 848,661 (514,348) (Increase) decrease in other assets (1,073,570) 610,663 (148,814) Increase in accrued interest payable 2,317 0 0 (Decrease) increase in accrued expenses and other liabilities (2,731,064) 3,088,856 (546,940) Increase (decrease) in accrued employee benefits 3,813,835 (3,119,453) 977,567 Increase (decrease) in deferred income 1,240,857 465,240 (172,233) Gain from sales of fixed assets 504 0 14,374 Total adjustments 5,171,507 5,534,511 3,051,838 Net cash provided by operating activities 5,304,821 5,635,235 3,253,446 Cash Flows from Investing Activities Expenditures for fixed assets (6,056,267) (6,270,672) (4,650,988) Proceeds from sales of furniture and equipment 0 2,023 40,959 Net cash used in investing activities (6,056,267) (6,268,649) (4,610,029) Cash Flows from Financing Activities Advances on notes payable with CoBank, ACB 5,217,830 3,162,002 2,673,518 Repayment of notes payable to CoBank, ACB (5,217,830) (3,162,002) (2,673,518) (Decrease) increase in research and development (2,436,650) 62,552 137,655 Preferred stock issued 8,022,727 0 0 Preferred stock retired (6,813,636) 0 0 Decrease in retained earnings (144,973) 0 0 Net cash (used in) provided by financing activities (1,372,532) 62,552 137,655 Net decrease in cash and cash equivalents (2,123,978) (570,862) (1,218,928) Cash and cash equivalents at beginning of year 9,490,681 10,061,543 11,280,471 Cash and cash equivalents at end of year $ 7,366,703 $ 9,490,681 $ 10,061,543

Year Ended December 31, 2014 2013 2012 Class A Preferred Stock Balance at January 1 $ 4,640,909 $ 4,640,909 $ 4,640,909 Issued 8,022,727 0 0 Retired (2,663,636) 0 0 Balance at end of year 10,000,000 4,640,909 4,640,909 Class B Preferred Stock Balance at January 1 4,150,000 4,150,000 4,150,000 Issued 0 0 0 Retired (4,150,000) 0 0 Balance at end of year 0 4,150,000 4,150,000 Accumulated Earnings Balance at January 1 888,957 788,233 586,625 Retired (144,974) 0 0 Net income 133,314 100,724 201,608 Balance at end of year 877,297 888,957 788,233 Accumulated Other Comprehensive Loss Balance at January 1 (2,313,893) (4,520,968) (3,877,895) (Increase) decrease in miminum pension liability (2,121,010) 2,207,075 (643,073) Balance at end of year (4,434,903) (2,313,893) (4,520,968) Total equity $ 6,442,394 $ 7,365,973 $ 5,058,174 The accompanying notes are an integral part of these statements.

The accompanying notes are an integral part of these statements.

Statement of Comprehensive Income

Notes to Financial Statements NOTE 1 - Organization and Operations

Year Ended December 31, 2014 2013 2012 Net Income $ 133,314 $ 100,724 $ 201,608 Other comprehensive loss, net of tax: (Increase) decrease in miminum pension liability (2,121,010) 2,207,075 (643,073) Comprehensive (loss) income $ (1,987,696) $ 2,307,799 $ (441,465) The accompanying notes are an integral part of these statements.

Farm Credit Financial Partners, Inc. (“FPI” or “the Company”) is engaged principally in providing information technology, financial services support, and other services to associations in the Farm Credit System on a fee basis. Currently, FPI services associations funded through CoBank, ACB (CoBank), an agricultural credit bank in the Farm Credit System, as well as association customers of AgriBank, FCB a farm credit bank in the Farm Credit System. During 1997, Farm Credit regulations were revised to allow associations to own service organizations. Ownership was previously limited to System banks. At December 31, 2014, FPI is owned by four Farm Credit ACAs: AgCountry Farm Credit Services, ACA, Farm Credit East, ACA, Farm Credit West, ACA and Northwest Farm Credit Services, ACA. The Farm Credit Administration (FCA) chartered FPI as a service corporation under Section 4.25 of the Farm Credit Act of 1971, as amended (the Act). The FCA has authority under the Act to charter and regulate Farm Credit System banks, associations and service corporations. The activities of FPI are examined by FCA and certain actions by FPI are subject to the prior approval of FCA and FPI owner associations.

NOTE 2 - Summary of Significant Accounting Policies The accounting and reporting policies of FPI conform to accounting principles generally accepted in the United States of America (GAAP). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant estimates are discussed in these footnotes, as applicable. Actual results may differ from those estimates. A. Recently Issued or Adopted Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (FASB) issued guidance entitled, “Revenue from Contracts with Customers.” The guidance governs revenue recognition from contracts with customers and requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Financial instruments and other contractual rights within the scope of other guidance issued by the FASB are excluded from the scope of this new revenue recognition guidance. In this regard, a majority of our contracts would be excluded from the scope of this new guidance. The guidance becomes effective for the first interim reporting period within the annual reporting periods after December 15, 2016. FPI is in the process of reviewing contracts to determine the effect, if any, on their financial condition or results of operations. B. Cash and Cash Equivalents Cash, as included in the financial statements, represents cash on hand and on deposit at banks. Cash equivalents are FPI’s investments in a short-term, highly-liquid money market fund. The fund invests in high-quality U.S. dollar-denominated short-term debt obligations including: securities issued by the U.S. Government or its agencies, bankers’ acceptances, certificates of deposit, time deposits from U.S. or foreign banks, repurchase agreements, commercial paper, municipal securities and master notes.

31 C. Accounts Receivable Accounts receivable are recorded when services are performed at the fair market value of services performed. FPI evaluates the collectability of its receivables based on its prior experience and assessment of potential future losses, and does so through ongoing reviews of its aging analysis. D. Fixed Assets Fixed assets are carried at cost less accumulated depreciation. Depreciation is computed principally using the straight line method over the estimated useful lives of five to ten years for furniture and fixtures, and three to five years for computer equipment and software. Gains and losses on dispositions are reflected in current operations. Maintenance and repairs are charged to operating expense and improvements are capitalized. Included in fixed assets are certain computer software costs. FPI capitalizes the costs of computer software developed or obtained for internal use in accordance with FASB accounting guidance. Capitalized computer software costs consist of purchased software licenses, implementation costs, consulting costs and payroll related costs for certain projects that qualify for capitalization. These costs are amortized over their estimated useful lives, typically five years. Other computer software development costs that are directly funded by FPI customers are not capitalized as fixed assets (see Note 6 for more details). E. Employee Benefit Plans FPI employees hired prior to January 1, 2005 participate in a non-contributory defined-benefit retirement plan. Employees hired January 1, 2005 and later participate in a non-contributory defined-contribution plan. FPI employees are also eligible to participate in the CoBank Employee Savings Plan (Employee Savings Plan). A certain percentage of employee contributions are matched by FPI. Savings plan costs are expensed as funded. FPI provides certain health care and life insurance benefits to employees if they reach normal retirement age while working for FPI. The authoritative accounting guidance requires the accrual of the expected cost of providing postretirement benefits other than pensions (primarily healthcare benefits) to an employee and an employee’s beneficiaries and covered dependents during the years that the employee renders service necessary to become eligible for these benefits. These accrued (benefits)/expenses of ($10,750) ($11,772), and ($15,429) were classified as salaries and employee benefits on FPI’s financial statements during 2014, 2013 and 2012, respectively. F. Income Taxes FPI provides for federal and state income taxes. Deferred tax assets and liabilities are established for the expected future tax consequences of temporary differences between the carrying amount and tax basis of assets and liabilities. Temporary differences are transactions reported for tax purposes in periods different from the periods when such transactions are reported in FPI’s financial statements. Deferred tax assets represent the tax benefit of future deductible temporary differences. G. Income Recognition Income is recognized on an accrual basis when services are provided.

NOTE 3 - Fixed Assets Fixed Assets consisted of the following: 2014

December 31, 2013

Computer equipment $ 12,236,758 $ 10,803,160 $ Computer software 33,663,030 27,411,182 Furniture and fixtures 1,836,302 1,754,781 Software development in progress 7,679 1,882,079 47,743,769 41,851,202 Less: Accumulated depreciation and amortization 34,148,427 29,659,437 Total $ 13,595,342 $ 12,191,765 $

2012 10,524,959 21,945,241 1,568,076 1,787,124 35,825,400 26,221,930 9,603,470

FPI has an agreement with Pine Creek Management, Agawam, Massachusetts, to lease the general office space, warehouse storage, loft space and garage space at 67 Hunt Street, Agawam, Massachusetts. FPI also has an agreement with Northwest Farm Credit Services to lease space at 1700 South Assembly Street, Spokane, Washington. Rent expense for these leases was approximately $624,210, $695,484, and $759,674 for the years ended December 31, 2014, 2013, and 2012, respectively. Northwest Farm Credit Services is an FPI owner customer. At December 31, 2014 future minimum lease payments were: December 31, Year Amount 2015 $ 553,906 2016 543,795 2017 541,282 2018 533,742 2019 533,742 thereafter 667,178 Total $ 3,373,645

NOTE 4 - Notes Payable to CoBank, ACB Notes payable to CoBank, ACB represent borrowings by FPI to fund normal operations and capital expenditures. Under terms of the financing agreement with CoBank, which provides FPI with a $3.75 million openended, revolving line of credit, substantially all FPI’s assets are assigned to CoBank as primary collateral for funds advanced. There were no borrowings from CoBank outstanding as of December 31, 2014, 2013 or 2012. Interest paid to CoBank for the year ended December 31, 2014 was $10,235. During 2013 and 2012 there were no borrowings from CoBank. The line of credit was used to settle amounts due between FPI and CoBank. Advances on the line were repaid at the time of the transactions. No interest was paid to CoBank in 2013 or 2012.

33 NOTE 5 - Income Taxes

FPI recorded a deferred tax asset/(deferred tax liability) on changes in the minimum pension liability of $1,323,512 in 2014, ($1,358,808) in 2013, and $409,661 in 2012.

The provision for income taxes consisted of the following: December 31, 2014 2013 2012 Current: Federal $ (493,326) $ 462,294 $ 227,370 State 7,017 75,782 49,273 Total (486,309) 538,076 276,643 Deferred: Federal 598,182 (439,948) (82,661) State 12,598 (70,199) (22,026) Total 610,780 (510,147) (104,687) Total provision for income taxes $ 124,471 $ 27,929 $ 171,956

FPI has a deferred tax asset recorded for federal and state operating loss carryovers of $292,468 ($858,622 before tax effect) that begins to expire in 2033. FPI is confident that the operating loss carryovers will be fully utilized before they expire. FPI adopted the FASB guidance on uncertain tax positions on January 1, 2007. FPI had no unrecognized tax benefits for which liabilities would have been established at December 31, 2014, 2013, and 2012. FPI recognizes interest and penalties related to unrecognized tax benefits as an adjustment to income tax expense. There were no interest or penalties recognized for 2014, 2013, or 2012. The tax years that remain open for federal and major state income tax jurisdictions are 2011 through 2014. The Company is currently under exam for the 2010 – 2013 tax years. See Note 8 – Commitments and Contingencies for additional disclosures and information.

NOTE 6 - Research and Development FPI made tax payments of $102,300 in 2014, $60,800 in 2013, and $89,652 in 2012 related to state income taxes. FPI paid $423,000 in 2014, $201,000 in 2013, and $306,935 in 2012 related to federal income taxes. The provision for income tax differs from the amount of income tax determined by applying the U.S. statutory federal tax rate to pretax income as follows: December 31, 2014 2013 Federal tax at statutory rate $ 87,647 $ 43,742 $ State tax, net 12,750 11,113 Permanent differences 18,281 15,489 Other 5,793 (42,415) Provision for income taxes $ 124,471 $ 27,929 $

2012 127,012 17,982 12,275 14,687 171,956

Deferred tax assets and (liabilities) resulted from the following: December 31, 2014 2013 2012 Annual leave $ 353,182 $ 330,743 $ 314,080 Pension 3,035,755 1,620,227 2,786,388 Operating loss carryforward 292,468 707 5,115 Postretirement 151,412 127,455 180,380 Health Reserve 262,554 253,964 235,230 Deferred Income 190,458 269,251 0 Charitable contributions 30 28 29 Gross deferred tax assets 4,285,859 2,602,375 3,521,222 Federal tax on state-deferred taxes 0 0 0 Depreciation (1,612,070) (641,319) (711,505) Gross deferred tax liabilities (1,612,070) (641,319) (711,505) Net deferred tax asset $ 2,673,789 $ 1,961,056 $ 2,809,717

The Research and Development liability reflects contributions received from association customers (collectively “association”) to support forward-looking projects that will set the stage for migration of FPI and its users to new technology and/or business practices. Annually, each FPI association contributes one basis point on their association loan volume. Total association contributions were $2,486,160 in 2014; $2,285,741 in 2013; and $2,286,472 in 2012. FPI uses these funds to offset software research and development expenditures as these expenditures are incurred. The impact of transactions through this account is reflected in the Statement of Income. Total expenditures were $4,922,812 in 2014, $2,223,189 in 2013 and $2,148,817 in 2012. The balance in the Research and Development fund was $6,021,123 as of December 31, 2014; $8,457,774 as of December 31, 2013; and $8,395,222 as of December 31, 2012. As of December 31, 2014, $3,674,188 of the total fund balance is comprised of contributions made by CoBank in periods prior to 2011 to fund planned technology and operational projects. These funds are reserved in the Research and Development liability account and held specifically for these CoBank directed projects that benefit CoBank and FPI’s owner-customer associations. CoBank may, at its sole discretion, cancel these projects and require FPI to return any unspent contributions. The Company revised its financial statements for the years ended December 31, 2013 and 2012. The Company has previously reported research and development revenue and related expenses net in its statement of income, and previously disclosed the gross amounts in footnotes to the financial statements. The Company has elected to reclassify these items in its December 31, 2014 income statement. This revision has the effect of increasing revenue by $2,223,189 and $2,148,817, of increasing salaries and employee benefits by $1,185,739 and $1,129,894, and increasing purchased services by $1,037,450 and $1,018,923 for the years ended December 31, 2013, and 2012, respectively. There is no impact on net income or on any other financial statements. Management considers this revision to be immaterial, quantitatively and qualitatively, to the previously issued financial statements. A summary of the financial statement effect is as follows ($ in thousands):

35 Previously Year ended December 31, 2013 Reported

Adjustment

Revised

Revenues $ 30,373 $ 2,223 $ Cost of Revenues 30,272 2,223 Net Income $ 101 $ 0 $ Previously Year ended December 31, 2012 Reported Adjustment Revenues Cost of Revenues Net Income

$ $

29,617 29,415 202

$ $

2,149 2,149 0

$ $

32,596 32,495 101

Revised 31,766 31,564 202

NOTE 7 - Employee Benefit Plans Employee Savings Plan

FPI participates in the CoBank Employee Savings Plan (Employee Savings Plan), a deferred-compensation plan in which FPI matches a certain percentage of employee contributions. The Employee Savings Plan requires FPI to match 100 percent of employee contributions up to a maximum employee contribution of six percent of base salary. Employer contributions charged to expense were $788,032 in 2014; $763,438 in 2013 and $681,578 in 2012. Defined Contribution Retirement Plan

FPI participates in the CoBank defined contribution qualified retirement plan, a noncontributory, multipleemployer plan (defined contribution plan). Under this plan for employees hired January 1, 2005 and later, the employer contributes a percentage of each employee’s salary, based on years of service, to an account maintained for the employee. Employer contributions charged to expenses were $319,440 in 2014; $267,824 in 2013 and $281,112 for the year-ended December 31, 2012. Defined Benefit Retirement Plan

FPI participates in the CoBank defined benefit qualified retirement plan (defined benefit plan). This plan covers FPI employees hired before January 1, 2005. Benefits are based on years of service and compensation levels during the years of employment. It is the policy of the participating employers to fund at least the minimum required by the Employee Retirement Income Security Act (ERISA). FPI’s contributions during 2014, 2013 and 2012 were consistent with this policy. Plan assets are stated at fair value and are primarily invested in publicly traded stocks and bonds, real estate and contracts with insurance companies. Supplemental Executive Retirement Plan

Beginning in 2010 FPI entered into a noncontributory, nonqualified supplemental executive retirement plan (SERP). The plan currently covers one employee. The Company holds assets in a trust fund related to the SERP; however, such funds remain Company assets and are not included as plan assets in accompanying disclosures.

The funding status and the amounts recognized in the statement of condition of FPI’s defined benefit plan and SERP are as follows ($ in thousands): 2014

December 31, 2013

2012

Change in projected benefit obligation Benefit obligation at beginning of year $ 22,101 $ 22,364 $ 18,889 Service cost 755 815 703 Interest cost 1,052 891 886 Plan amendments 0 0 0 Actuarial loss (gain), net 3,875 (1,838) 2,011 Transfers 0 0 0 Benefits paid (133) (131) (125) Benefit obligation at end of year $ 27,650 $ 22,101 $ 22,364 Change in plan assets Fair value of plan assets at beginning of year $ 17,807 $ 15,015 $ 12,507 Actual return on plan assets 1,470 2,114 1,633 Employer contributions 531 809 1,000 Transfers 0 0 0 Benefits paid 0 0 0 Other (133) (131) (125) Fair value of plan assets at end of year $ 19,675 $ 17,807 $ 15,015 Funded status of the plan Net amount recognized in the balance sheet in accrued employee benefits $ (7,975) $ (4,294) $ (7,349) Amounts recognized in accumulated other comprehensive income consist of: Unrecognized prior service credit $ 617 $ 677 $ 716 Unrecognized net actuarial loss 6,067 2,633 6,033 $ 6,684 $ 3,310 $ 6,749

The accumulated benefit obligation for FPI’s defined benefit plan and SERP is presented in the following table ($ in thousands): 2014

December 31, 2013

Accumulated benefit obligation

21,936

17,375

2012 $

16,978

37 The accumulated benefit obligation is the actuarial present value of the benefits accrued for service rendered to that date based on current salary levels. The projected benefit obligation is the actuarial present value of the benefits accrued for service rendered to that date based on estimated future salary levels. Components of net periodic benefit cost and other amounts recognized in other comprehensive income are as follows ($ in thousands): December 31, 2014 2013 2012 Periodic benefit cost Service cost $ 755 $ 815 $ 703 Interest cost 1,052 891 886 Expected return on plan assets (1,200) (1,037) (959) Amortization of unrecognized: Prior service cost 60 40 40 Net actuarial loss 171 485 312 $ 838 $ 1,194 $ 982 Changes in plan assets and benefit obligations recognized in other comprehensive income Net actuarial loss (gain), net $ 3,605 $ (2,915) $ 1,338 Prior service cost/(credit) 0 0 0 Amortization of: Prior service cost/(credit) (60) (40) (40) Net actuarial (gain)/loss (171) (485) (312) $ 3,374 $ (3,440) $ 986

The discount rates are calculated using a spot yield curve method developed by an independent actuary. The approach maps a high-quality bond yield curve to the duration of the plansâ&#x20AC;&#x2122; liabilities, thus approximating each cash flow of the liability stream to be discounted at an interest rate specifically applicable to its respective period in time. The expected rate of return on plan assets are established based on a review of past and expected future anticipated returns on plan assets. The expected rate of return on plan assets assumption also matches the pension plansâ&#x20AC;&#x2122; long-term interest rate assumption used for funding purposes. Plan Assets

The asset allocation target ranges for the pension plans follow the investment policy adopted by our retirement trust committee. This policy provides for a certain level of trustee flexibility in selecting target allocation percentages. The actual asset allocations at December 31, 2014, 2013, and 2012 are shown in the following table, along with the adopted range for target allocation percentages by asset class. The actual allocation percentages reflect the quoted market values at year-end and may vary during the course of the year. Plan assets are generally rebalanced to a level within the target range each year at the direction of the trustees. Total Percentage of Plan Allocation Assets at December 31, Range 2014 2013 2012 Asset Category Domestic Equity 40-50 % 48 % 50 % 43 % Domestic Fixed Income 35-50 33 31 37 International Equity 0-10 10 11 10 Emerging Markets Equity and Fixed Income 0-10 4 5 5 Real Assets: Gold Fund 0-5 5 3 5 Total 100 % 100 % 100 % 100 %

The weighted average rate assumptions used to determine benefit obligations: 2014 Discount rate 4.10% Expected return on plan assets 7.25% Rate of compensation increase 4.75%

December 31, 2013 4.85% 7.25% 4.75%

2012 4.05% 7.25% 4.75%

The weighted average rate assumptions used to determine net periodic benefit cost: 2014 Discount rate 4.85% Expected return on plan assets 7.25% Rate of compensation increase 4.75%

December 31, 2013 4.05% 7.25% 4.75%

2012 4.80% 7.25% 4.75%

The assets of the pension plans consist primarily of investments in various domestic equity, international equity and bond funds. These funds do not contain any significant investments in a single entity, industry, country or commodity, thereby mitigating concentration risk. No CoBank stock or debt, or that of any other System institution, is included in these investments. The following tables present major categories of defined benefit pension plan assets that are measured at fair value at December 31, 2014, December 31, 2013 and December 31, 2012 for each of the fair value hierarchy levels as defined below ($ in thousands):

39 As of December 31, 2014 Total Level 1 Level 2 Level 3 Asset Category Cash $ 22 $ 22 $ 0 $ 0 Domestic Equity: Large-cap Growth Funds 4,477 4,477 0 0 Large-cap Equity Funds 4,105 0 4,105 0 Small-cap Growth Funds 890 0 890 0 International Equity: International fund 1,908 1,908 0 0 Fixed Income: Bond Fund 6,538 4,133 2,405 0 Emerging Markets: Equity and Fixed Income Fund 830 0 830 0 Real Assets: Hedge Funds 905 0 0 905 Total $ 19,675 $ 10,540 $ 8,230 $ 905 As of December 31, 2013 Total Level 1 Level 2 Level 3 Asset Category Cash $ 78 $ 78 $ 0 $ 0 Domestic Equity: Large-cap Growth Funds 3,902 3,902 0 0 Large-cap Equity Funds 3,384 0 3,384 0 Small-cap Growth Funds 1,185 0 1,185 0 International Equity: International fund 1,864 1,864 0 0 Fixed Income: Bond Fund 5,233 5,233 0 0 Emerging Markets: Equity and Fixed Income Fund 807 0 807 0 Real Assets: Gold Fund 534 534 0 0 Hedge Funds 820 820 Total $ 17,807 $ 11,611 $ 5,376 $ 820 As of December 31, 2012 Total Level 1 Level 2 Level 3 Asset Category Cash $ 46 $ 46 $ 0 $ 0 Domestic Equity: Large-cap Growth Funds 3,124 3,124 0 0 Large-cap Equity Funds 2,545 0 2,545 0 Small-cap Growth Funds 745 0 745 0 International Equity: International fund 1,550 1,550 0 0 Fixed Income: Bond Fund 5,480 5,480 0 0 Emerging Markets: Equity and Fixed Income Fund 803 0 803 0 Real Assets: Gold Fund 722 722 0 0 Total $ 15,015 $ 10,922 $ 4,093 $ 0

Level 1 plan assets are funds with quoted daily net asset values that are directly observable by market participants. The fair value of these funds is the net asset value at close of business on the reporting date. Level 2 plan assets are funds with quoted net asset values that are not directly observable by market participants. A significant portion of the underlying investments in these funds have individually observable market prices, which are utilized by the plan’s trustee to determine a net asset value at close of business on the reporting date. Level 3 plan assets include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. Investment strategy and objectives are described in the pension plans’ formal investment policy documents. The basic strategy and objectives as adopted in the investment policy are: • Manage portfolio assets with a long-term time horizon appropriate for the participant demographics and cash flow requirements; • Optimize long-term funding requirements by generating rates of return sufficient to fund liabilities and exceed the long-term rate of inflation; and • Provide competitive investment returns and reasonable risk levels when measured against appropriate benchmarks. Post Retirement Health Care Benefit Plan

The following table sets forth the funding status and weighted average assumptions used to determine post retirement health care benefit obligations ($ in thousands): December 31, 2014 2013 Accumulated benefit obligation $ 79 $ 68 $ Net liability recognized in the balance sheet $ 398 $ 338 $ Net periodic (income) expense $ (11) $ (12) $ Discount rate 4.10% 4.85%

2012 57 476 (15) 4.05%

For measurement purposes, a 7.5 percent annual rate of increase in the per capita cost of covered health care benefits was assumed for 2014. The rate was assumed to decrease gradually to 5.0 percent for 2018, and remain at that level thereafter.

NOTE 8 - Commitments and Contingencies The Internal Revenue Service (IRS) commenced an audit during 2013 of the U.S. federal income tax returns for the taxable years ending December 31, 2010 through 2013. In October and December of 2014, the IRS issued Notices of Proposed Adjustment to FPI. The total amount of exposure equals $3,445,464. FPI disagrees with the IRS finding and filed an appeal in January 2015. It is expected that the appeals process will continue through the next six to twelve months. Additionally, FPI has made a deposit of $2,968,523, the gross amount of the proposed 2010 adjustment excluding offsetting credits, with the IRS to stop additional interest from accruing on the potential tax liability. This deposit does not constitute acquiescence or agreement with the IRS position, nor does it indicate an expectation that the IRS position will ultimately prevail.

FPI’s decision to make this deposit is based on the Company’s cash position and the current interest rate environment. FPI invests its cash in very conservative, low yield instruments. The IRS pays a comparable rate on deposited funds. Conversely, the current IRS rate on outstanding taxes is equal to the federal short term rate plus 5%. FPI views this deposit as a risk management strategy which carries minimal opportunity cost.

FPI Directory

FPI has evaluated its tax position in accordance with ASC 740-10 and has concluded that no additional tax liabilities should be recorded at this time. FPI Executive Management Team

NOTE 9 - Equity Effective June 30, 2006, FPI has been authorized to issue 2,000,000 shares each of Class A preferred stock voting; Class B preferred stock - non-voting; and Class C common stock - non-voting at a par value of $5 per share. At December 31, 2014, FPI had 2,000,000 shares of Class A preferred stock outstanding at a par value of $5 per share and no outstanding shares of Class B preferred stock or Class C common stock. Each owner of Class A preferred stock is entitled to a single vote regardless of the number of shares owned, while Class B preferred stock and Class C common stock provide no voting rights to their owners. A description of equities is as follows: • Class A preferred stock (voting stock) is the second of the three stock classes to be impaired and the second of the three classes to be restored after impairment. This class of stock may be issued only to the bank serving the Northeast Region, the affiliated associations and non-affiliated customers using core services. • Class B preferred stock (nonvoting stock) is the last class to be impaired and the first class to be restored after impairment. This class of stock may be issued to Farm Credit System banks and associations under a program approved by the board. • Class C common stock (nonvoting stock) is the first class to be impaired and the third class to be restored after impairment. This class of stock may be issued to the bank serving the Northeast Region, the affiliated associations and nonaffiliated customers under a program approved by the board.

BOARD OF DIRECTORS

Left to right: Keith Raymond, Tom Moran, Dan Carey, Karen Rossi and Steve Holcomb

Bob Bahl, chair, president and CEO, AgCountry Farm Credit Services, Fargo, ND Phil DiPofi, vice chair, president and CEO, Northwest Farm Credit Services, Spokane, WA Bill Lipinski, CEO, Farm Credit East, Enfield, CT Mark Littlefield, president and CEO, Farm Credit West, Roseville, CA

PHONE

413.271.8600 (direct dial 413.271.extension)

EXECUTIVE MANAGEMENT Tom Moran

President and CEO

Dan Carey

Executive vice president, chief administrative officer

Ext. 8710 8700

Steve Holcomb

Executive vice president, chief customer officer

8639

Keith Raymond

Executive vice president, chief information officer

8833

Karen Rossi

Executive vice president, chief operating officer

8713

SENIOR MANAGEMENT Dan Caron

Senior vice president, e-business

8895

Bob Hoffman

Senior vice president, chief architect

8902

Scott Rousseau

Senior vice president, chief financial officer

8704

Claude Waterman

Senior vice president, human resources

8701

Michael Bowler

Vice president, business intelligence & production services

8782

Note 10 - Subsequent Events

David Notarangelo

Vice president, infrastructure services

8664

Karen Walker

Vice president, senior project mananger

8644

The Company has evaluated subsequent events through March 31, 2015, which is the date the financial statements were issued or were available to be issued. There are no such events to disclose.

Steven McWilliams

Director, information security

8696

• Other classes and issues of stock shall be approved by the stockholders.

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