2021 Annual Report by Farm Credit Financial Partners, Inc.

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Delivering the trusted technology solutions our customers use to help American agriculture thrive.

CONTENTS Letter from the President and Chair of the Board

Board of Directors

Senior Leadership Team

Management’s Discussion and Analysis

Report of Management 10 Report of Audit Committee 11 Report of Independent Auditors 12 Financial Statements 14 Notes to Financial Statements 20

Letter from the President and Chair of the Board While the beginning of the COVID-19 pandemic was filled with uncertainty and unpredictability, 2021 was a year characterized by change, evolution, and adapting to a new normal. The pandemic was a major disruptor, upending not only the way we work but also the workforce itself. It accelerated retirements and led to droves of Americans leaving their jobs, a phenomenon that has been dubbed the “great resignation.” As a result of this trend, which could also be described as the “great renegotiation,” businesses are being challenged by workers and customers alike to reevaluate how they operate. Like many others, Farm Credit Financial Partners, Inc. (FPI) wasn’t insulated from the impacts of the great resignation. And while this abrupt shift presented challenges, it also allowed us to rethink how and where our employees get work done. To deliver an excellent customer experience, the employee experience must also be excellent—and that’s now being defined as increased flexibility, balance, and meaningful work. Last year, FPI piloted a successful hybrid work environment. We balanced working from home with in-office collaboration—all while continuing to successfully deliver on promises to our customers. We also increased fully remote work opportunities, allowing us to attract and recruit talent from across the country with skills to support strategic initiatives. In addition to impacting the workforce, the pandemic has amplified trends such as accelerated digital adoption by consumers—Farm Credit customer-members included—and rising IT budgets. In today’s competitive landscape, these trends have put increased pressure on the need for agility, speed, and efficient delivery. Throughout 2021, FPI leadership and the Board of Directors worked closely together to evaluate our long-term service delivery and systems integration strategy. We continued to lay the foundation to support our customer-owners’ need for acceleration and nimbleness through technology solutions. As we completed several key initiatives in 2021—our final implementation of AgWorx Lending (our new loan origination solution leveraging nCino®), the initial implementation of a new legal document solution, and the implementation of a modern, secure online banking system for all

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customer-owners—we kicked off several multi-year foundational technology initiatives. These initiatives include: •

Deploying a commercial integration platform to provide reliable, faster, and seamless integrations, improve agility, and provide connected staff and customer experiences.

•

Creating a data system that enables future reporting capabilities.

•

Modernizing legacy platforms by migrating remaining business functionality to new platforms.

•

Developing a holistic document management program to meet the maintenance, preservation, and accessibility of electronic document records critical to our customer-owners business operations.

These new initiatives will continue to position FPI to accelerate and improve service delivery and systems integration for our customer-owners. In 2021, FPI also supported two separate technological mergers. Each of these mergers involved an FPI customer-owner merging with an agricultural credit association that was not part of the FPI cooperative. For FPI, these large-scale projects include merging core business applications and infrastructure for each respective merged entity, which also increased loan volume and users managed within FPI systems. Despite the disruptions that have accompanied 2021, we astutely pivoted. We embraced the continued evolution and transformation necessary to meet the needs of our employees, customers-owners, and Farm Credit. As we look to the year ahead, we remain focused on providing value to our customerowners while continuing to fulfill our mission of delivering the trusted technology solutions our customers use to help American agriculture thrive. BOB PASSINI President and Chief Executive Officer Farm Credit Financial Partners

MICHAEL J. REYNOLDS Chair of the Board Chief Executive Officer Farm Credit East

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Board of Directors

MICHAEL J. REYNOLDS

JESSICA FYRE

Chair of the Board Chief Executive Officer Farm Credit East

Vice Chair of the Board General Counsel and Chief Operations Officer AgCountry Farm Credit Services

DAVID BARBIERI

JOHN BARCELOS

BRIANA BEEBE

RYAN BERG

Senior Vice President and Chief Information Officer Northwest Farm Credit Services

Chief Risk Officer Farm Credit West

Executive Vice President of Human Resources Farm Credit East

Senior Vice President and Chief Administrative Officer Farm Credit Illinois

AARON S. JOHNSON

MARCUS L. KNISELY

MARK D. LITTLEFIELD

TOM NAKANO

President and Chief Executive Officer Farm Credit Illinois

President and Chief Executive Officer AgCountry Farm Credit Services

President and Chief Executive Officer Farm Credit West

Executive Vice President, Chief Administrative Officer, and Chief Financial Officer Northwest Farm Credit Services

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Senior Leadership Team BOB PASSINI President and Chief Executive Officer

SCOTT BERARD

MARY MAZZA

JIM MCCORMACK

Executive Vice President Chief Customer Officer Secretary of the Board

Senior Vice President Human Resources

Senior Vice President Engineering and Architecture

PAUL NESLUSAN

SCOTT ROUSSEAU

JOHN STABILO

Executive Vice President Chief Risk Officer

Executive Vice President Chief Financial Officer and Treasurer

Executive Vice President Infrastructure and Application Delivery

FA R M C R E D I T F I NA N C I A L PA R T N E R S

Management’s Discussion and Analysis INTRODUCTION

BUSINESS OVERVIEW

The following discussion summarizes the financial position and results of operations of Farm Credit Financial Partners, Inc. (FPI, or the Company) as of and for the year ended December 31, 2021. Comparisons with prior years are included. The discussion and analysis should be read in conjunction with the accompanying financial statements, footnotes, and other sections of this report. The accompanying financial statements were prepared under the oversight of our Audit Committee. The Management’s Discussion and Analysis includes the following sections:

Farm Credit System Structure and Mission

• Business Overview • Year in Review

FPI operates as part of the Farm Credit System (the System or Farm Credit), which was created by Congress in 1916 and has served agricultural producers for over 100 years. The System’s mission is to provide sound and dependable credit to American farmers, ranchers, and other agricultural producers and farm-related businesses through a member-owned cooperative system. FPI serves System association lenders in providing a comprehensive technology platform, support, and related services. The Farm Credit Administration (FCA) is the System’s independent safety and soundness federal regulator and was established to supervise, examine, and regulate System institutions.

• Results of Operations • Liquidity and Funding Sources

Our Structure and Focus

• Ownership and Capital

For over 25 years, FPI has supported the Farm Credit mission and agricultural credit associations (ACAs) through technology delivery. FPI’s investments in its technology and services portfolio have yielded a suite of technology solutions and services tailored for Farm Credit. Our vision is to equip its customers-owners

• Governance • Forward-Looking Information

with tools that enable them to succeed in a competitive landscape. Consistent with other Farm Credit institutions, FPI is organized as a cooperative, with ownership comprised 100% of Farm Credit ACAs. This cooperative model facilitates alignment between customer needs and owner governance and direction. YEAR IN REVIEW

Farm Credit has a rich, missionbased history of supporting rural communities and American agriculture. To support this mission and address increased pressures the financial services industry and our customerowners face—including new regulatory requirements, a changing credit environment, shifting customer demands in the digital space, and risk and security threats—FPI’s strategy has shifted in recent years. Instead of providing in-house software development, FPI is transforming to become a service delivery organization and value-added systems integrator. This strategic shift has led to FPI’s next generation of products and services: AgWorx by FPI. AgWorx by FPI leverages market leading commercial software from industry leaders such as Salesforce®, nCino® and Fiserv® to offer a set of technology solutions: AgWorx Customer, AgWorx Lending, AgWorx Financials and AgWorx Insights. These technology solutions support capabilities for our customerowners such as customer relationship management, lending, online banking, loan servicing, financial, security, data, and productivity tools. In 2021, key implementations included the final implementation of AgWorx Lending—our loan origination solution

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leveraging nCino®—for our customerowners, the initial implementation of a new legal document solution, and the implementation of a modern, secure online banking system for all customerowners. Additional implementations and upgrades were completed in the infrastructure, security, and disaster recovery spaces. FPI also supported two separate technological mergers for customerowners. Each of these mergers involved an FPI customer-owner merging with an ACA that was not part of the FPI cooperative. For FPI, these large-scale projects include merging core business applications and infrastructure for each respective merged entity, which also increases loan volume and users managed within FPI systems. In addition, FPI kicked off new multiyear initiatives in 2021 to address and lay the groundwork for integration services, data modernization, legacy platform modernization and a holistic document management strategy. As we continue to execute on current initiatives and plan upcoming implementations with our customerowners, we are excited and optimistic for the future. We continue to work closely with our Board of Directors to ensure our strategic direction provides the integrated and flexible technology solutions needed to support our customer-owners’ staff, customermembers, and the Farm Credit mission.

R E S U LT S O F O P E R AT I O N S

During 2021, FPI achieved revenues in excess of plan and net income materially in line with our breakeven target. Carefully managed operating expenses, capital spending, and project spending supported FPI’s successful operational and financial performance for the year. Based on our Board-approved financial plan, liquidity is projected to remain sufficient to complete future initiatives related to product implementations and the modernization of legacy systems, while continuing to provide the top-level customer and production support our customer-owners rely on. Revenue 2021 revenues were $63,422k. Revenues increased by $149k, or 0.2% from 2020 levels. Core service fees comprise 81.4% of total revenues with other cloud and custom services revenues making up the remainder.

and benefit expenses increased by $2,457k over 2020, primarily due to a 10 employee increase in average year over year headcount as well as increased labor costs in the current competitive hiring environment. The increased headcount primarily supported the two merger projects undertaken during the year. The primary offset to this increase is a reduction in network and communications costs reflected in the Other operating expenses line item. The total reduction in this line item of $1,623k is driven by the move from an MPLS to Direct Internet Access (DIA) network strategy. Purchased services costs decreased by $609k due to the net impact of reduced contract labor costs and increased cloud services costs. Cloud services costs experienced a planned increase as FPI transitions away from large, on-premise solutions and toward a cloud-based environment. The reduction of $250k occupancy and equipment charges reflects reduced maintenance costs on the shrinking on-premises footprint.

Operating Expenses Total operating expenses were $63,125k in 2021 from $63,151k in 2020, a decrease of $26k. Although operating expenses were materially unchanged in total as compared to 2020, differences in individual line items exist. Salary

FPI targets breakeven results from operations (revenue less operating expenses). During 2021 revenues slightly exceeded operating expenses resulting in net income from operations of $297k. By comparison, 2020 net

FA R M C R E D I T F I NA N C I A L PA R T N E R S

income from operations was $122k.

LIQUIDITY AND FUNDING SOURCES

Other Income and Expense

FPI operates with the following primary sources of funding:

FPI is reporting net other, non-operating expense of $303k for the year. This expense is driven by the Company’s reflection of ASU 2017-07 and the reporting of other components of net periodic pension cost in this section of the statement. While service costs, which are reported in the salaries and employee benefits line of the statement of operations, represent the value of expected pension benefits to be earned during the year, the other components of net periodic pension cost include the annual interest cost on the projected benefit obligation less the expected return on plan assets plus the amortization of any prior service costs and actuarial gains and losses. Additional details are available in footnote 13 – Employee Benefit Plans. Our income tax benefit for the year of $13k is due to a difference between our 2020 income tax provision and actual taxes as filed during 2021. Net Income The 2021 net income is $8k as compared to a prior year net loss of ($265k).

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1. 2. 3.

Revenue for core services. Revenue from custom and other projects. Capital funding from owners.

In addition, FPI maintains a $3.75 million line of credit with CoBank. This line renews annually on July 31. Funding levels are established and approved annually during the budget planning cycle. Capital funding is planned over a five-year cycle and reviewed annually. The capital plan identifies key strategic projects and related funding sources. Completion of these projects is positioning FPI to effectively meet technology demands and creating business value for our customer-owners.

in equity is due to a reduction in the accumulated other comprehensive loss line item of $2,194k and current year net income of $8k. The accumulated other comprehensive loss reduction is due to a reduction in FPI’s defined benefit pension plan liability during the year. FPI’s Board approved capital plan provides for continued investment in FPI’s strategic initiatives and ongoing investments in operations, controls, and information security over the 2022-2024 periods. GOVERNANCE

Board of Directors FPI’s Board of Directors is comprised of two senior executives of each customer-owner, including the CEO or CEO-designee. FPI’s Board operates under a committee structure. The committees includes: Audit Committee

O W N E R S H I P A N D C A P I TA L

As of December 31, 2021, FPI had five customer-owners with stock investments totaling $27.8 million. •

Total equity on December 31, 2021 equaled $25.7 million, an increase of $2.2M from 2020. The increase

The Audit Committee is composed of one Board member from each customer-owner with one Committee member elected as the Chair and one elected as Vice Chair. The Audit Committee responsibilities include, but are not limited to:

•

Oversight of the financial reporting risk and the accuracy of the annual shareholder reports.

•

Oversight of the internal controls related to the preparation of annual shareholder reports.

•

Review and assessment of the impact of accounting and auditing developments on the consolidated financial statements.

•

Establishment and maintenance of procedures for the receipt, retention, and treatment of confidential and anonymous submission of concerns, regarding accounting, internal accounting controls or auditing matters.

•

Oversight of the Company’s internal audit program, the independence of the outside auditors, the adequacy of the Company’s system of internal controls and procedures, and the adequacy of management’s action with respect to recommendations arising from those auditing activities.

Human Capital Committee The Human Capital Committee is responsible for the oversight of employee compensation. The Human Capital Committee is composed of one Board member from each owner ACA with one Committee member elected as the Chair and one elected as Vice Chair.

The Committee reviews, evaluates and approves the compensation policies, programs and plans for senior officers and employees including benefits programs. F O R W A R D - L O O K I N G I N F O R M AT I O N

Our discussion contains forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Words such as “anticipates,” “believes,” “could,” “estimates,” “may,” “should,” and “will,” or other variations of these terms are intended to identify forward-looking statements. These statements are based on assumptions and analyses made in light of experience and other historical trends, current conditions, and expected future developments. However, actual results and developments may differ materially from our expectations and predictions due to a number of risks and uncertainties, many of which are beyond our control. These risks and uncertainties include, but are not limited to fluctuations in the economy, the relative strengths and weaknesses in the agricultural credit sectors and in the real estate market, and the actions taken by the Federal Reserve in implementing monetary policy.

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FARM CREDIT FINANCIAL PARTNERS

REPORT OF MANAGEMENT The financial statements of Farm Credit Financial Partners, Inc. (the Company) are prepared by management, who is responsible for their integrity and objectivity, including amounts that must necessarily be based on judgments and estimates. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. The financial statements, in our opinion, fairly present the financial condition of the Company. Other financial information included in this 2021 annual report is consistent with that in the financial statements. To meet our responsibility for reliable financial information, management depends on accounting and internal control systems designed to provide reasonable, but not absolute assurance that assets are safeguarded and transactions are properly authorized and recorded. Costs must be reasonable in relation to the benefits derived when designing accounting and internal control systems. To monitor compliance, the Company’s internal auditors perform audits of accounting records, review accounting systems and internal controls, and recommend improvements as appropriate. The financial statements are audited by RSM US LLP, our independent auditors, in accordance with auditing standards generally accepted in the United States of America. The Company is also examined by the Farm Credit Administration. The chief executive officer, as delegated by the Board of Directors, has overall responsibility for the Company’s system of internal controls and financial reporting, subject to the review of the Audit Committee of the Board of Directors. The Audit Committee consults regularly with management and meets periodically with the independent auditors and internal auditors to review the scope and results of their examinations. The Audit Committee reports regularly to the Board of Directors. Both the independent auditors and the internal auditors have direct access to the Audit Committee. The undersigned certify that the 2021 Annual Report to Shareholders and information contained herein is true, accurate and complete to the best of our knowledge and belief.

BOB PASSINI President and Chief Executive Officer Farm Credit Financial Partners March 14, 2022

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SCOTT ROUSSEAU Chief Financial Officer Farm Credit Financial Partners March 14, 2022

MICHAEL J. REYNOLDS Chair of the Board Farm Credit East March 14, 2022

FARM CREDIT FINANCIAL PARTNERS

REPORT OF AUDIT COMMITTEE The consolidated financial statements were prepared under the oversight of the Audit Committee (Committee). The Committee is composed of a subset of the Board of Directors of Farm Credit Financial Partners, Inc. (FPI). The Committee oversees the scope of FPI’s internal audit program, the approval, and independence of RSM as external auditors, the adequacy of FPI’s system of internal controls and procedures, and the adequacy of management’s action with respect to recommendations arising from those auditing activities. The Committee’s responsibilities are described more fully in the FPI’s Internal Control Policy and the Audit Committee Charter. Management is responsible for the FPI’s internal controls and the preparation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America. RSM is responsible for performing an independent audit of the FPI’s consolidated financial statements in accordance with generally accepted auditing standards in the United States of America and to issue a report thereon. The Committee’s responsibilities include monitoring and overseeing these processes. In this context, the Committee reviewed and discussed the audited consolidated financial statements for the year ended December 31, 2021, with management. The Committee also receives from RSM the matters required to be discussed by Statements on Auditing Standards. Both RSM and FPI’s internal auditors directly provide reports on significant matters to the Committee. The Committee approves all non-audit services provided by RSM, if any. In 2021, RSM was not engaged for non-audit services. Based on the foregoing review and discussions, and relying thereon, the Committee recommended that the Board of Directors include the audited consolidated financial statements in the Annual Report for the year ended December 31, 2021 and for filing with the FCA.

TOM NAKANO Chairperson of the Audit Committee Northwest Farm Credit Services March 14, 2022 Members of the Audit Committee: Aaron Johnson, Vice Chair John Barcelos Jessica Fyre Michael Reynolds March 14, 2022

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FA R M C R E D I T F I NA N C I A L PA R T N E R S

FARM CREDIT FINANCIAL PARTNERS, INC.

Balance Sheets

AS OF DECEMBER 31, 2021, 2020, AND 2019

2021 Assets Current assets: Cash and cash equivalents Accounts receivable Prepaid and other assets Total current assets

Long-term assets: Fixed assets, net Intangible assets, net Deferred tax asset, net Prepaid assets, long-term Captive investment Total long term-assets Total assets Liabilities Current liabilities: Accrued expenses and other liabilities Accrued employee benefits Deferred revenue Line of credit Total current liabilities

2020

7,247,272 640,593 7,985,470 15,873,335

2,130,977 18,761,985 1,076,602 205,491 683,876 22,858,931

6,968,224 434,347 6,032,250 13,434,821

2019

3,947,420 16,799,020 1,667,454 507,767 623,401 23,545,061

8,096,049 356,951 6,706,751 15,159,751

4,874,733 11,546,796 1,774,359 609,939 575,730 19,381,557

38,732,266

36,979,883

34,541,308

4,650,349 1,514,777 1,944,335 8,109,461

3,397,293 1,545,882 1,426,173 109,146 6,478,494

3,101,985 1,334,705 595,451 5,032,141

Long-term liabilities: Accrued expenses and other liabilities, long-term Accrued employee benefits, long-term Deferred revenue, long-term Total long-term liabilities

418,959 3,137,015 1,361,409 4,917,383

409,765 5,531,489 1,055,838 6,997,092

545,548 5,553,293 207,175 6,306,016

13,026,844

13,475,586

11,338,157

Equity Class A preferred stock, $5.00 par value, 5,000,000 shares authorized, 2,500,000 shares issued and outstanding as of December 31, 2021, 2020 and 2019

12,500,000

Class B preferred stock, $5.00 par value, 5,000,000 shares authorized, 1,950,000 shares issued and outstanding as of December 31, 2021, 2020 and 2019

9,750,000

Class C common stock, $5.00 par value, 5,000,000 shares authorized, 1,110,000 shares issued and outstanding as of December 31, 2021, 2020 and 2019 Accumulated other comprehensive loss Accumulated earnings Total equity Total liabilities and equity

5,550,000 (3,463,380) 1,368,802 25,705,422 38,732,266

5,550,000 (5,656,996) 1,361,293 23,504,297 36,979,883

5,550,000 (6,223,574) 1,626,726 23,203,151 34,541,308

Total liabilities Commitments and contingencies (Note 15)

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The accompanying notes are an integral part of these financial statements

FARM CREDIT FINANCIAL PARTNERS, INC.

Statements of Operations

YEARS ENDED DECEMBER 31, 2021, 2020, AND 2019

2021

2020

2019

Revenue Core and custom services

$ 63,422,476

Total revenue Operating Expenses Salaries and employee benefits Purchased services Occupancy and equipment Other operating expenses Total operating expenses Net income (loss) from operations Other (Expense)/Income Interest income Interest expense Other components of net periodic pension cost Other gains Total other (expense) income (Loss) income before income taxes Income tax (benefit) provision Net income (loss)

The accompanying notes are an integral part of these financial statements

63,273,375

59,137,375

63,422,476

63,273,375

59,137,375

31,707,946 16,349,979 11,162,925 3,904,409 63,125,259

29,251,423 16,959,204 11,412,721 5,527,724 63,151,072

28,450,277 14,199,259 10,586,717 5,989,348 59,225,601

297,217

122,303

(88,225)

21,163 (324,000) (302,837)

32,157 (498,000) 1,031 (464,812)

243,097 (561) (106,000) 136,536

(5,620) (13,129) 7,509

(342,509) (77,076) (265,433)

48,310 24,662 23,649

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FARM CREDIT FINANCIAL PARTNERS, INC.

Statements of Comprehensive Income (Loss) YEARS ENDED DECEMBER 31, 2021, 2020, AND 2019

2021

2020

2019

Net income (loss)

7,509

(265,433)

Other comprehensive income (loss): Net change in retirement plan liabilities Comprehensive income (loss)

2,193,616 2,201,125

566,579 301,146

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23,649

(2,078,736) (2,055,087)

The accompanying notes are an integral part of these financial statements

FARM CREDIT FINANCIAL PARTNERS, INC.

Statements of Cash Flows

YEARS ENDED DECEMBER 31, 2021, 2020, AND 2019

2021

Cash Flows from Operating Activities Net income (loss) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization Loss on disposal of fixed assets Decrease (increase) in deferred tax asset, net Changes in operating assets and liabilities: (Increase) decrease in accounts receivable (Increase) decrease in prepaid and other assets Increase (decrease) in deferred revenue Increase (decrease)in accrued expenses and other liabilities (Decrease) increase in accrued employee benefits Net cash provided by operating activities

7,509

2020

(265,433)

2019

23,649

7,030,938 131,166 590,852

6,691,087 138 106,905

6,563,452 1,240 (587,618)

(206,246) (1,711,418) 823,734 1,262,251 (231,964) 7,696,821

(77,396) 729,002 1,679,384 159,525 755,953 9,779,165

261,962 (1,458,734) (595,893) (629,752) (2,590,244) 988,062

Cash Flows from Investing Activities Purchase of fixed assets Proceeds from sale of fixed assets Capitalized software development costs Net cash used in investing activities

(667,136) 9,903 (6,651,394) (7,308,627)

(2,348,218) (8,667,918) (11,016,136)

(2,024,446) (5,760,622) (7,785,068)

Cash Flows from Financing Activities Advances on line of credit with CoBank, ACB Repayment of line of credit to CoBank, ACB Net cash (used) provided by financing activities

3,584,603 (3,693,749) (109,146)

3,429,228 (3,320,082) 109,146

5,484,871 (5,484,871) -

(1,127,825) 8,096,049 6,968,224

(6,797,006) 14,893,055 8,096,049

$ $ $

561 33,800 (2,078,736)

Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year

279,048 6,968,224 7,247,272

Supplemental Cash Information: Cash paid during the year for: Interest Income taxes Net change in retirement plan liabilities

$ $ $

68,350 2,193,616

The accompanying notes are an integral part of these financial statements

42,000 566,579

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FARM CREDIT FINANCIAL PARTNERS, INC.

Statements of Changes in Equity YEARS ENDED DECEMBER 31, 2021, 2020, AND 2019

Balance as of January 1, 2019

Class A Preferred Stock Shares Amount

Class B Preferred Stock Shares Amount

Class C Common Stock Shares Amount

Accumulated Other Comprehensive Loss

Accumulated Earnings

2,500,000

1,950,000

1,110,000

$ 12,500,000

9,750,000

5,550,000

Net income

Other comprehensive loss

Balance as of December 31, 2019

2,500,000

12,500,000

1,950,000

9,750,000

1,110,000

Other comprehensive income

Balance as of December 31, 2020

2,500,000

12,500,000

1,950,000

9,750,000

1,110,000

Other comprehensive income

2,500,000

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$ 12,500,000

1,950,000

9,750,000

1,110,000

5,550,000

(2,078,736)

23,203,151

(265,433)

566,579

(265,433)

(5,656,996) 2,193,616

566,579

1,361,293

23,504,297

7,509

25,258,238 23,649

1,626,726

(3,463,380)

(6,223,575)

1,603,077 23,649

(2,078,736)

5,550,000

Net income

Balance as of December 31, 2021

5,550,000

Net loss

(4,144,839)

Total

1,368,802

2,193,616

25,705,422

The accompanying notes are an integral part of these financial statements

FARM CREDIT FINANCIAL PARTNERS, INC.

Accumulated Other Comprehensive Loss YEARS ENDED DECEMBER 31, 2021, 2020, AND 2019

Balance as of January 1, 2019 Change in period Tax effect of change in period

Minimum Pension Liability

(3,722,137) (2,841,412) 654,232

Postretirement Liability

(422,702) 150,607 (42,163)

Total

(4,144,839) (2,690,805) 612,069

Balance as of December 31, 2019 Change in period Tax effect of change in period

(5,909,317) 673,751 (165,113)

(314,258) 76,808 (18,867)

(6,223,575) 750,559 (183,980)

Balance as of December 31, 2020 Change in period Tax effect of change in period

(5,400,679) 2,897,113 (700,924)

(256,317) (4,724) 2,151

(5,656,996) 2,892,389 (698,773)

Balance as of December 31, 2021

The accompanying notes are an integral part of these financial statements

(3,204,490)

(258,890)

(3,463,380)

FA R M C R E D I T F I NA N C I A L PA R T N E R S

Notes to Financial Statements NOTE 1 — ORGANIZATION AND OPERATIONS 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 (the System). Currently, FPI services associations that are 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. 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. On January 30, 2020, the World Health Organization declared the coronavirus outbreak a “Public Health Emergency of International Concern” and on March 11, 2020, declared it to be a pandemic. While it is unknown how long these conditions will last and what the complete financial effect will be to the Company, it is reasonably possible that estimates made in the financial statements may be materially and adversely impacted in the near term as a result of these conditions.

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A.

Basis of Presentation The accompanying financial statements have been prepared in accordance with accounting standards set by the Financial Accounting Standards Board (FASB). The FASB sets generally accepted accounting principles in the United States (GAAP) that the Company follows to ensure its financial condition, results of operations and cash flows are consistently reported. References to GAAP issued by the FASB in these notes to the financial statements are to the FASB Accounting Standards Codification (ASC).

Use of Estimates 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 include the valuation of deferred tax assets and liabilities, assets and liabilities associated with employee benefit plans, revenue recognition, and software development costs, and are discussed in these footnotes, as applicable. Actual results may differ from those estimates.

Cash and Cash Equivalents Cash includes cash on hand and on deposit at banks. Cash equivalents are FPI’s investments in a short-term money market fund with a maturity of three months or less. The fund invests in 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.

Accounts Receivable Accounts receivable are stated at amounts management expects to collect on outstanding balances. 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. The allowance for doubtful accounts balance at December 31, 2021, 2020, and 2019 was $0. Bad debt expense was $0 for the years ended December 31, 2021, 2020, and 2019.

Unbilled Revenue At times, FPI performs services for customers in advance of invoicing for such services. These amounts are recorded as unbilled revenue, are included in prepaid and other assets in the accompanying balance sheets, and amount to $865,008, $373,108, and $251,208, at December 31, 2021, 2020, and 2019, respectively.

Fixed Assets Fixed assets are carried at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of five to ten years for furniture and fixtures, and three to seven years for computer equipment and software. Gains and losses on dispositions are reflected in other operating expenses on the statements of operation. Maintenance and repairs are charged to operating expense and improvements are capitalized.

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Software Development Costs The Company is developing new products which the Company intends to offer as part of its core services and is developing significant upgrades and enhancements to its existing software as-a-service (“SaaS”) platform. The Company follows the guidance of ASC 350-40, Intangibles – Goodwill and Other – Internal-Use Software, for development costs related to these new products. Costs incurred in the planning stage are expensed as incurred while costs incurred in the application development stage are capitalized, assuming such costs are deemed to be recoverable. Costs incurred in the operating stage are generally expensed as incurred except for significant upgrades and enhancements. Software development costs are amortized over the software’s estimated useful life, which management has determined to be three to seven years. Software development costs are included in intangible assets, net in the accompanying balance sheets and disclosed in more detail in Note 5.

Employee Benefit Plans The funded status of pension and other post-retirement benefit plans is recognized in the balance sheets in long-term accrued employee benefits. Gains and losses, prior service costs and credits that have not yet been recognized through pension expense will be recognized in accumulated other comprehensive income (loss), net of tax, until they are amortized as a component of net periodic pension/post-retirement benefits expense. Pension expense is based on an actuarial computation of future benefits using estimates for expected return on assets, expected compensation increases and applicable discount rates. Expected compensation increases are estimated based on historical and expected increases in the future. Increases in estimated compensation would result in higher pension expense while decreases would lower pension expense. Discount rates are selected based upon rates of return on fixed income investments currently available and expected to be available during the period to maturity of the pension benefit. Detailed rate assumptions are included in Note 13. Effective January 1, 2005, the Company closed the existing defined benefit pension plan to new participants. All employees hired on or after January 1, 2005 are participants in a noncontributory defined contribution plan. Participants in this plan receive a fixed percentage of their eligible wages in an investment account maintained for the employee. Costs for these benefits are recorded in the period in which they are incurred in salaries and employee benefits on the statements of operations. Company employees are also eligible to participate in an employee savings plan. The Company matches a certain percentage of employee contributions with costs being expensed as funded. Costs for these benefits are recorded in the period in which they are incurred in salaries and employee benefits on the statements of operations. The Company also provides certain health care and life insurance benefits to employees. Costs for these benefits are recorded in the period in which they are incurred in salaries and employee benefits on the statements of operations.

Income Taxes The Company is organized as a C Corporation for Federal Income Tax purposes and files a Form 1120-C. The Company uses the asset and liability method of accounting for income taxes whereby deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company also reduces deferred tax assets by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the recorded deferred tax assets will not be realized in future periods. This methodology requires estimates and judgments in the determination of the recoverability of deferred tax assets and in the calculation of certain tax liabilities. Valuation allowances are recorded against the gross deferred tax assets that management believes, after considering all available positive and negative objective evidence, historical and prospective, with greater weight given to historical evidence, that it is more likely than not that these assets will not be realized. In addition, the Company is required to recognize in the financial statements, those tax positions determined to be more likely than not of being sustained upon examination, based on the technical merits of the positions as of the reporting date. If a tax position is not considered more likely than not to be sustained based solely on its technical merits, no benefits of the position are recognized. The Company recognizes interest and penalties as a component of the provision for income taxes in the accompanying statements of operations. The Company does not believe it has any material uncertain tax positions. Interest and penalties paid were $0 for the years ending December 31, 2021 and 2020 and $318 for the year ending December 31, 2019. The Company is no longer subject to federal, state, and local income tax examinations by tax authorities for years prior to 2017.

FA R M C R E D I T F I NA N C I A L PA R T N E R S

Revenue Recognition The Company derives revenue from core and custom services from its customers, all of which are lending associations in the Farm Credit System. Core and custom services include credit delivery and management systems, core infrastructure and security, financial accounting and loan accounting services, management reporting, electronic commerce, legal support, and custom solutions, which include a retained technology services team dedicated to any specific projects required by the customer over a period of time which is typically one year. Revenue recognition (FASB ASC 606): During the year ended December 31, 2019, the Company adopted ASU 2014-09, Revenue from Contracts with Customers (ASC 606). The Company adopted ASC 606 on January 1, 2019 utilizing the modified retrospective method. In connection with the adoption of ASC 606, the Company also adopted Subtopic 340-40, Other Assets and Deferred Costs – Contracts with Customers (ASC 34040) related to contract acquisition and fulfillment costs. The Company recognizes revenue in accordance with ASC 606, which provides a five-step model for recognizing revenue from contracts with customers as follows: • Identify the contract with a customer • Identify the performance obligation(s) in the contract • Determine the transaction price • Allocate the transaction price to the performance obligation(s) in the contract • Recognize revenue when or as performance obligation(s) are satisfied The Company assesses the contract term as the period in which the parties to the contract have presently enforceable rights and obligations. Contracts are generally standardized and non-cancellable for the duration of the stated contract term. FPI has determined that its core services represent a series of promises which represent a single performance obligation. When FPI sells custom services, such services are generally negotiated separately from the core services. As a result, the Company has determined that it does not have contracts with multiple performance obligations. Such services are recognized over the period of performance under the input method. All revenues for the years ended December 31, 2021, 2020 and 2019, as reported within the statements of operations, are recognized over time. The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring goods and services to the customer. Revenue from sales is recorded based on the transaction price, which includes estimates of variable consideration. The amount of variable consideration included in the transaction price is constrained and is included only to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. At the inception of a contract, the Company expects the period between when it satisfies its performance obligations, and when the customer pays for the services, will be one year or less. As such, the Company has elected to apply the practical expedient which allows the Company to not adjust the promised amount of consideration for the effects of a significant financing component, when a financing component is present. Payment terms on invoiced amounts are typically 30 days. The Company does not offer rights of return for its services in the normal course of business, and contracts generally do not include customer acceptance clauses. The Company also excludes from revenue governmentassessed and imposed taxes on revenue-generating activities that are invoiced to customers. The timing of revenue recognition may not align with the right to invoice the customer. The Company records accounts receivable when it has the unconditional right to issue an invoice and receive payment regardless of whether revenue has been recognized. If revenue has not yet been recognized, a contract liability (deferred revenue) also is recorded. If revenue is recognized in advance of the right to invoice, unbilled revenue is recorded. Balances as of December 31, were as follows: 2021

2020

2019

Accounts Receivable

$640,593

$434,347

$356,951

Unbilled Revenue

$865,008

$ 373,108

$251,208

$3,305,744

$2,482,011

$802,626

Contract Liabilities: Deferred Revenue

Costs to obtain and fulfill a contract: In accordance with ASC 340-40, the Company has elected to apply the practical expedient and recognize the incremental costs of obtaining contracts as an expense when incurred if the amortization period for the assets that the Company otherwise would have recognized is one year or less. Therefore, the Company would capitalize the incremental costs of obtaining a contract with a customer, if the Company expects the benefit of those costs to be longer than one year and amortize such costs over the expected benefit period. The Company considered the relevant guidance under ASC 340-40 and did not identify any incremental costs of obtaining a contract which would require capitalization for the years ended December 31, 2021, 2020 and 2019. The Company does not pay commissions in connection

2 0 2 1 A N N UA L R E P O RT

with its contracts which would require capitalization under the provisions of ASC 340-40. Further, the Company did not identify other material contract acquisition and fulfillment costs where ASC 340-40 results in capitalization. K.

Concentrations of Credit Risk Financial instruments which potentially subject the Company to credit risk consist primarily of cash, cash equivalents, accounts receivable and unbilled revenue. The Company maintains its cash and cash equivalents with high credit quality financial institutions, and monitors credit risk with individual financial institutions and issuers. At December 31, 2021, 2020, and 2019, the Company had cash balances at certain financial institutions in excess of federally insured limits; however, it has not experienced any losses in such accounts. See Note 16 for concentrations of revenue and accounts receivable.

Accumulated Other Comprehensive (Loss) Income The Company reports comprehensive income for all changes in equity during a period from non-owner sources, including the related net income (loss). The accumulated other comprehensive loss represents adjustments to the minimum pension liability, net of tax.

Captive Insurance Company FPI accounts for its investment in the captive insurance company (Note 8) under the equity method of accounting. The carrying value of the investment is recorded based on FPI’s initial investment and adjusted for FPI’s share of the earnings.

Impairment of Long-Lived Assets The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. As of December 31, 2021, 2020, and 2019 there were no impairment losses recognized for long-lived assets.

Recently Issued or Adopted Accounting Pronouncements In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The guidance in this ASU supersedes the leasing guidance in Topic 840, Leases. Under the new guidance, lessees are required to recognize lease assets and lease liabilities on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. Topic 842 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into, after the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. FPI is currently evaluating the impact of adoption of the Topic 842 on the financial statements. In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326). Measurement of Credit Losses on Financial Instruments and issued subsequent amendments to the initial guidance in November 2018 within ASU 2018-19 and in April 2019 within ASU 2019-04 (ASU 2016-13, ASU 2018-19 and ASU 2019-04 collectively, Topic 326). Topic 326 requires an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Topic 326 is effective for non-public entities for fiscal years beginning after December 15, 2022. The Company is currently evaluating the impact of the pending adoption of Topic 326 on its financial statements. In August 2018, the FASB issued ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Cost (Subtopic 350-40). The guidance aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internaluse software (and hosting arrangements that include an internal-use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by this guidance. This guidance becomes effective for interim and annual periods beginning after December 15, 2020. The guidance also requires an entity (customer) to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement. It further specifies where to present expense and payments in the financial statements. Early adoption is permitted. The guidance is to be applied on a retrospective or prospective basis to all implementation costs incurred after the date of adoption. The Company adopted the guidance effective January 1, 2021 and determined no material impact from the adoption. In August 2018, the FASB issued ASU 2018-14, Disclosure Framework — Changes to the Disclosure Requirements for Defined Benefit Plans (Subtopic 715-20). The guidance modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. This guidance becomes effective for fiscal years ending after December 15, 2020. Early adoption is permitted. The guidance is to be applied on a retrospective basis for all periods. The Company adopted the guidance effective January 1, 2021 and determined no material impact from the adoption.

FA R M C R E D I T F I NA N C I A L PA R T N E R S

NOTE 3 — PREPAID AND OTHER ASSETS Prepaid and other assets consist of the following (as of December 31):

Current assets: Prepaid vendor invoices Unbilled revenue

2021

2020

2019

$ 7,067,347

$ 5,607,751

$ 6,408,073

865,008

373,108

251,208

Federal and state taxes

11,715

9,991

4,990

Other

41,400

42,480

$ 7,985,470

$ 6,032,250

$ 6,706,751

Long-term assets: Prepaid vendor invoices

205,491

507,767

609,939

$ 8,190,961

$ 6,540,017

$ 7,316,690

NOTE 4 — FIXED ASSETS, NET Fixed assets, net, consisted of the following (as of December 31):

Computer equipment Computer software Furniture and fixtures Less: Accumulated depreciation

2021

2020

2019

$ 16,976,616

$ 17,909,356

$ 17,019,429

12,237,265

12,278,609

11,839,385

77,647

1,936,847

1,906,102

29,291,528

32,124,812

30,764,916

(27,160,551)

(28,177,392)

(25,890,183)

$ 2,130,977

$ 3,947,420

$ 4,874,733

For the year ended December 31, 2021, there were disposals of $3,500,419 with a realized loss of $131,166 and proceeds of $9,903. For the year ended December 31, 2020, there were disposals of $988,322 with a realized loss of $138. For the year ended December 31, 2019 there were disposals of $1,032,754 with a realized loss of $1,240. Depreciation expense related to the Company’s fixed assets was $2,342,510, $3,275,393, and $3,490,274 for the years ended December 31, 2021, 2020, and 2019, respectively.

NOTE 5 — INTANGIBLE ASSETS, NET Intangible assets, net consisted of software development costs, as follows (as of December 31):

Software development costs Less: Accumulated amortization

2021

2020

2019

$ 42,010,403

$ 35,359,010

$ 26,691,091

(23,248,418)

(18,559,990)

(15,144,295)

$ 18,761,985

$ 16,799,020

$ 11,546,796

Software development costs are typically amortized over a useful life of three – seven years. Amortization expense associated with these assets totaled $4,688,428, $3,415,694, and $3,073,178 for the years ended December 31, 2021, 2020, and 2019, respectively. As of December 31, 2021, 2020 and 2019, there was $1,532,683, $4,895,133, and $2,207,628, respectively, capitalized that the Company was not amortizing, as these products were in the application development stage and not yet placed in service.

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Based on the current amount of intangible assets subject to amortization, including those not yet placed in service based on anticipated placed in service date, amortization expense is expected to be as follows for each of the years ending December 31: 2022

$ 5,963,401

2023

5,050,687

2024

4,762,888

2025

2,258,357

2026

726,652

Total

$ 18,761,985

NOTE 6 — ACCRUED EXPENSES AND OTHER LIABILITIES Accrued expenses and other liabilities consist of the following (as of December 31): 2021

2020

2019

$ 2,969,472

$ 2,269,133

$ 2,230 584

Accrued expenses

733,331

692,019

665,756

Trade payables

835,299

405,498

185,811

Current liabilities: Bonus

Taxes payable

112,247

30,643

19,834

$ 4,650,349

$ 3,397,293

$ 3,101,985

Long-term liabilities: Bonus

418,959

409,765

545,548

$ 5,069,308

$ 3,807,058

$ 3,647,533

2021

2020

2019

$ 1,320,420

$ 1,336,334

$ 1,116,552

185,848

208,911

188,495

8,509

637

29,658

$ 1,514,777

$ 1,545,882

$ 1,334,705

3,017,396

5,391,185

5,398,678

119,619

140,305

154,615

$ 3,137,015

$ 5,531,490

$ 5,553,293

$ 4,651,792

$ 7,077,372

$ 6,887,998

NOTE 7 — ACCRUED EMPLOYEE BENEFITS Accrued employee benefits consist of the following (as of December 31):

Current liabilities: Annual leave Self-insurance reserve Payroll taxes Long-term liabilities: Pension Post-retirement benefits

NOTE 8 — CAPTIVE INVESTMENT In conjunction with other System entities, the Company jointly owns the Farm Credit System Association Captive Insurance Company (the Captive). The Captive is an insurer that provides insurance services such as directors’ and officers’ liability, fiduciary liability, bankers bond and other property and liability insurance for member associations. The carrying value of the investment totaled $683,876, $623,401, and $575,730 at December 31, 2021, 2020, and 2019, respectively. Premiums paid in those respective years to the Captive totaled $329,988, $270,538, and $248,580, respectively, and are included in salaries and employee benefits on the accompanying statements of operations. If FPI should terminate its interest in the captive, any contributed surplus will be returned within six months of the termination, subject to approval by the Board of Governors of the Captive.

FA R M C R E D I T F I NA N C I A L PA R T N E R S

NOTE 9 — LINE OF CREDIT The Company has a line of credit with CoBank, ACB to fund normal operations and capital expenditures. Under terms of the financing agreement with CoBank, which provides FPI with a $3,750,000 revolving line of credit, substantially all FPI’s assets are assigned to CoBank as primary collateral for funds advanced. During the normal course of business, the line of credit is used to settle transactions between FPI and CoBank. Borrowings from CoBank outstanding as of December 31, 2021, 2020, 2019 were $0, $109,146, and $0, respectively. During the year ended December 31, 2021, borrowings were $3,584,603 and repayments were $3,693,749. During the year ended December 31, 2020, borrowings were $3,429,228 and repayments were $3,320,082. Borrowings made and repaid during the year as part of the settlement process were $5,484,871 for the year ended December 31, 2019. Interest expense incurred to CoBank for the years ended December 31, 2021, 2020 and 2019 was $0, $0, and $561, respectively. At each draw, FPI may choose between the interest rate that is 1.85% above the one-month LIBOR index rate in effect at the time of the draw, or a fixed rate quoted by CoBank at its sole discretion. The variable rate in effect at December 31, 2021 was 1.96%. The line of credit matures on July 31, 2022.

NOTE 10 — INCOME TAXES The (benefit) provision for income taxes consisted of the following (as of December 31): 2021

2020

2019

Current: Federal

92,167

–

67,079

State

2,626

–

211

Total

94,793

–

211

(113,159)

(62,963)

30,400

State

5,237

(14,113)

(5,949)

Total

(107,922)

(77,076)

24,451

$ (13,129)

$ (77,076)

Deferred: Federal

Total provision (benefit) for income taxes

24,662

The provision (benefit) 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 (as of December 31):

Federal tax at statutory rate State tax, net Permanent difference Accrual to return Other

2 0 2 1 A N N UA L R E P O RT

2021

2020

(1,731)

$ (71,927)

4,137

(11,149)

(4,700)

5,579

18,875

–

(15,576)

421

342

$ (13,129)

$ (77,076)

2019 $

10,145

24,662

Deferred tax assets and (liabilities) resulted from the following (as of December 31): 2021 Annual leave

Pension

391,835

2020 $

328,969

2019 $

274,822

750,926

1,327,076

1,328,270

1,052,505

492,327

1,484,776

Post-retirement

29,788

34,535

38,028

Health reserve

46,281

51,430

46,395

823,220

611,004

197,554

130

3,094,685

2,845,471

3,369,975

Depreciation

(2,018,083)

(1,178,017)

(1,595,616)

Gross deferred tax liabilities

(2,018,083)

(1,178,017)

(1,595,616)

$ 1,076,602

$ 1,667,454

$ 1,774,359

Operating loss carryforward

Deferred revenue Charitable contributions Gross deferred tax assets

Net deferred tax asset

Under the provisions of the Internal Revenue Code, certain substantial changes in the Company’s ownership may limit in the future a significant portion of the amount of net operating loss carryforwards which could be utilized annually to offset future taxable income and income tax liabilities. The amount of any annual limitation is determined based on the Company’s value and certain other factors on the date of ownership change. Management has determined that it is more likely than not that the Company will recognize the benefits of federal and state deferred tax assets within the allowable time period and, as a result, has determined that no valuation allowance related to deferred tax assets is necessary as of December 31, 2021, 2020 and 2019. At December 31, 2021, FPI has federal net operating loss carryforwards of $4,191,435 and state net operating loss carry forwards of $2,699,438. Federal net operating losses of $2,667,865, $448,748 and $1,074,822 that were earned in 2020, 2019 and 2018 respectively, will be available to offset 80% of taxable income for an indefinite period of time, until fully utilized. The effective tax rates were 32.90%, 22.50%, and 51.05% for the years ended December 31, 2021, 2020 and 2019.

NOTE 11 — FAIR VALUE MEASUREMENTS The Company follows the guidance in FASB ASC 820, Fair Value Measurements and Disclosures (ASC 820), which defines fair value, and establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below: Level 1: Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2: Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly. Level 3:

Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, the Company’s own assumptions are set to reflect those that market participants would use in pricing the asset or liability at the measurement date. The Company uses prices and inputs that are current as of the measurement date, including during periods of market dislocation. In periods of market dislocation, the observability of prices and inputs may be reduced for many instruments. This condition could cause an instrument to be reclassified between levels. Assets and liabilities measured at fair value on a nonrecurring basis are recognized at fair value subsequent to initial recognition when they are deemed to be other-than-temporarily impaired. As of December 31, 2021, 2020 and 2019, the Company does not have any assets or liabilities subject to measurement at fair value on a nonrecurring basis.

FA R M C R E D I T F I NA N C I A L PA R T N E R S

As of December 31, the Company’s fair value hierarchy for its financial assets that are carried at fair value was as follows:

Assets at Fair Value as of December 31, 2021

Money market accounts

Total

Level 1

$ 4,655,232

Level 2 $

–

Level 3 $

–

Assets at Fair Value as of December 31, 2020

Money market accounts

Total

Level 1

$ 3,822,174

Level 2 $

–

Level 3 $

–

Assets at Fair Value as of December 31, 2019

Money market accounts

Total

Level 1

$ 5,724,292

Level 2 $

–

Level 3 $

–

Money market accounts are included in cash and cash equivalents in the balance sheets, are classified within Level 1 and are valued based on quoted prices in active markets for identical securities. The fair value of investments in the Company’s employee benefit plans are included in Note 13.

NOTE 12 — SELF-INSURED HEALTH CARE PLAN FPI provides health care benefits to its employees through a multiple-employer insurance plan with CoBank, ACB (the plan administrator), Farm Credit East, ACA, the Federal Farm Credit Banks Funding Corporation and Yankee Farm Credit, ACA. The plan is responsible for the first $200,000 in claims per person per year, with stop loss and group reinsurance to protect against catastrophic claims. For the years ended December 31, 2021, 2020, and 2019 the Company has recorded expense, net of employee withholdings or contributions, of $2,127,343, $2,118,553, and $1,937,809, respectively which are included in salaries and employee benefits on the accompanying statements of operations. Included in accrued expenses and other liabilities in the balance sheets as of December 31, 2021, 2020, and 2019 are self-insurance reserves totaling $185,848, $208,911, and $188,495, respectively.

NOTE 13 — 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 6% of base salary. During the years ended December 31, 2021, 2020 and 2019, employer contributions charged to salaries and employee benefits were $1,185,466, $1,147,130, and $1,169,198, respectively. Defined Contribution Retirement Plan FPI participates in the CoBank defined contribution qualified retirement plan, a noncontributory, multiple-employer plan (Defined Contribution Plan). Under the Defined Contribution 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. During the years ended December 31, 2021, 2020 and 2019, employer contributions charged to salaries and employee benefits were $652,030, $639,845, and $614,663, respectively. Defined Benefit Retirement Plan FPI participates in the CoBank defined benefit qualified retirement plan (Defined Benefit Plan). The Defined Benefit 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 the years ended December 31, 2021, 2020 and 2019 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. Post-Retirement Health Care Benefit Plan FPI provides certain health care and life insurance benefits to employees if they reach normal retirement age while working for FPI (Post-Retirement Health Care Benefit Plan). The authoritative accounting guidance requires the accrual of the expected cost of providing post-retirement 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 $(25,410), $62,497, and

2 0 2 1 A N N UA L R E P O RT

$77,808, were classified as salaries and employee benefits on the accompanying statements of operations during the years ended December 31, 2021, 2020 and 2019, respectively. The funding status and the amounts recognized in the balance sheets of FPI’s Defined Benefit Retirement Plan and Post-Retirement Health Care Benefit Plan benefits are as follows (as of December 31; $ in thousands):

Defined Benefit Retirement Plan

2021

2020

2019

Change in projected benefit obligation: Benefit obligation at beginning of year

39,113

35,154

30,230

Service cost

542

530

529

Interest cost

998

1,133

1,313

(348)

3,220

5,433

(1,783)

(924)

(2,351)

Actuarial loss (gain), net Benefits paid Benefit obligation at end of year

38,522

Defined Benefit Retirement Plan

39,113

2021

35,154

2020

2019

Change in plan assets: Fair value of plan assets at beginning of year

33,722

Actual return on plan assets

Fair value of plan assets at end of year

29,755

24,348

3,222

4,529

3,798

343

363

3,960

(1,783)

(925)

(2,351)

Employer contributions Benefits paid

35,504

33,722

29,755

(3,017)

(5,391)

(5,399)

Funded status of the plan: Net amount recognized in the balance sheet in accrued employee benefits, long-term

Post-Retirement Health Care Benefit Plan

2021

2020

2019

Change in projected benefit obligation: Benefit obligation at beginning of year

140

155

227

Service cost

Interest cost

Actuarial loss (gain), net

(41)

(105)

Plan participant contributions

(118)

(63)

(59)

Benefits paid Benefit obligation at end of year

120

140

155

–

Change in plan assets: Fair value of plan assets at beginning of year Employer contributions

(18)

(16)

Plan participant contributions

(118)

(63)

(59)

Benefits paid Fair value of plan assets at end of year

–

FA R M C R E D I T F I NA N C I A L PA R T N E R S

Funded status of the plan: Net amount recognized in the balance sheet in accrued employee benefits, long-term

$ (120)

$ (140)

$ (155)

The accumulated benefit obligation for FPI’s Defined Benefit Retirement Plan and Post-Retirement Health Care Benefit Plan are presented in the following table (as of December 31; $ in thousands): Defined Benefit Retirement Plans

Post-Retirement Health Care Benefit Plan

2021

2020

2019

2021

2020

2019

$ 35,836

$35,930

$32,192

$120

$140

$155

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 (as of December 31; $ in thousands):

Components of Net Periodic Benefit Cost Defined Benefit Retirement Plan

2021

2020

2019

Periodic benefit cost: Service cost

Interest cost

542

530

529

998

1,133

1,313

(1,789)

(1,651)

(1,529)

Prior service cost

123

187

213

Net actuarial loss

993

829

109

867

$ 1,028

Expected return on plan assets Amortization of unrecognized:

635

Changes in plan assets and benefit obligations recognized in other comprehensive income Net actuarial (gain)/loss

(1,781)

342

$ 3,164

Amortization of: Prior service cost/(credit)

(123)

(187)

(214)

Net actuarial (gain)/loss

(993)

(829)

(109)

(674)

$ 2,841

(2,897)

The weighted average rate assumptions used to determine benefit obligations for FPI’s Defined Benefit Retirement Plan are presented as follows (as of December 31):

2 0 2 1 A N N UA L R E P O RT

2021

2020

2019

Discount rate

2.95%

2.60%

3.30%

Expected return on plan assets

6.00%

Rate of compensation increase

3.40%

3.60%

The weighted average rate assumptions used to determine net periodic benefit cost for the Defined Benefit Retirement Plan are as follows (as of December 31): 2021

2020

2019

Discount rate

2.60%

3.30%

4.45%

Expected return on plan assets

6.00%

Rate of compensation increase

3.40%

3.60%

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 plans’ 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. Plan Assets The asset allocation target ranges for the Defined Benefit Plan follows the investment policy adopted by the 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, 2021, 2020, and 2019 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. We establish the expected rate of return on plan assets based on a review of past and anticipated future returns on plan assets. The expected rate of return on plan assets assumption also matches the pension plans’ long-term interest rate assumption used for funding purposes.

Percentage of Plan Assets at December 31, Total Allocation Range

2021

2020

2019

Domestic equity

29.3 -33.3%

32%

40%

Domestic fixed income

43.0 – 47%

44%

39%

41%

21.7 – 25.7%

24%

14%

–

100%

Asset category:

International equity, Emerging markets equity and Fixed income Real assets

The assets of the Defined Benefit Plan consist primarily of investments in various domestic equity, international equity and fixed income. 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. 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.

FA R M C R E D I T F I NA N C I A L PA R T N E R S

The following tables present major categories of Defined Benefit Retirement Plan assets that are measured at fair value at December 31, 2021, 2020 and 2019 for each of the fair value hierarchy levels as defined in Note 11 ($ in thousands): As of December 31, 2021

Level 1

Level 2

NAV

Total

Asset category: Cash

–

Domestic equity: Large-cap growth funds (1)

5,021

–

5,021

Large-cap equity funds (1)

–

4,962

Small-cap growth funds (1)

–

1,487

4,572

–

1,490

6,062

–

15,445

–

15,445

2,497

–

2,498

–

$ 12,098

$ 15,445

$ 7,961

$ 35,504

Level 1

Level 2

NAV

Total

International equity: International fund (2) Fixed income Bond fund (3)(4) Emerging markets: Equity and fixed income fund (5) Real assets Hedge funds (6) Total

As of December 31, 2020 Asset category: Cash

–

Domestic equity: Large-cap growth funds (1)

4,566

–

4,566

Large-cap equity funds (1)

–

4,565

Small-cap growth funds (1)

–

1,597

3,850

–

1,983

5,833

6,976

6,322

–

13,298

2,300

–

2,301

–

1,525

$ 17,729

$ 6,322

$ 9,671

$ 33,722

International equity: International fund (2) Fixed income Bond fund (3)(4) Emerging markets: Equity and fixed income fund (5) Real assets Hedge funds (6) Total

2 0 2 1 A N N UA L R E P O RT

As of December 31, 2019

Level 1

Level 2

NAV

Total

Asset category: Cash

–

Domestic equity: Large-cap growth funds (1)

5,303

–

5,303

Large-cap equity funds (1)

–

4,882

Small-cap growth funds (1)

–

1,604

2,673

–

886

3,559

6,632

5,715

–

12,347

574

–

575

–

1,422

$ 15,245

$ 5,715

$ 8,795

$ 29,755

International equity: International fund (2) Fixed income Bond fund (3)(4) Emerging markets: Equity and fixed income fund (5) Real assets Hedge funds (6) Total

(1)

Fund invests primarily in diversified portfolios of common stocks of U.S. companies in various industries, including consumer goods and services, information technology, healthcare, industrial materials, financial services and energy.

(2)

Fund invests primarily in a diversified portfolio of equities of non-U.S. companies in various industries, including information technology, financial services, healthcare, consumer goods and services, energy and telecommunications.

(3)

Fund invests primarily in a diversified portfolio of investment grade debt securities and cash instruments.

(4)

Fund invests primarily in U.S. Treasury debt securities and corporate bonds of U.S. companies primarily in the financial services industry.

(5)

Fund invests in equities and corporate debt securities of companies located in emerging international markets. Industries include energy, consumer goods and services, industrial materials, financial services and information technology. Fund also invests in the sovereign debt of various countries.

(6)

Fund invests in diversified portfolios of stocks, bonds and various other financial instruments in a variety of industries including financial services, telecommunications, information technology, consumer goods and services, and healthcare.

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. NAV plan assets are funds with unobservable net asset values and supported by limited or no market activity. Expected Contributions FPI expects to contribute $319,069 to the funded, qualified Defined Benefit Plan in 2022. Actual 2022 contributions could differ from the estimates noted above.

FA R M C R E D I T F I NA N C I A L PA R T N E R S

Estimated Future Benefits Payments FPI expects future benefit payments, which reflect expected future service, as appropriate, are as follows ($ in thousands).

Year

Expected Benefit Payments (Pension)

2022

1,616

2023

1,839

2024

2,180

2025

1,883

2026

1,977

2027–2031

10,930

The following table sets forth the funding status and weighted average assumptions used to determine post-retirement health care benefit obligations (as of December 31; $ in thousands). 2021

2020

2019

Accumulated benefit obligation

$ 225

$ 200

$ 262

Net liability recognized in the balance sheet

$ 120

$ 140

$ 155

Net periodic expense

Discount rate

2.60%

3.30%

NOTE 14 — EQUITY FPI is authorized to issue 5,000,000 shares each of Class A preferred stock - voting; Class B preferred stock - non-voting; and Class C common stock - non-voting all at a par value of $5 per share. 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 holders. A description of equities is as follows: • Class A preferred stock (voting stock) is the last of the three stock classes to be impaired and the first 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 second class to be impaired and the second 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, the affiliated associations and nonaffiliated customers under a program approved by the board. • Other classes and issues of stock shall be approved by the stockholders. The preferred and common shares are not convertible. All shares are non-assessable and no further capital contributions are required. Dividends or patronage distributions may be declared by the Board at its discretion provided no class of stock shall be impaired. There were no dividends or patronage distributions declared during the years ended December 31, 2021, 2020 and 2019. In the event of liquidation or dissolution of the Company, any assets remaining after payment or retirement of all liabilities shall be distributed first to the holders of the Class B preferred stock, second to the holders of Class A preferred stock and third to the holders of the Class C Common Stock.

2 0 2 1 A N N UA L R E P O RT

NOTE 15 — COMMITMENTS AND CONTINGENCIES FPI had an agreement to lease general office space, warehouse storage, loft and garage space which expired in February 2021. In August 2020, FPI signed a new agreement for general office and garage space which expires in July 2030. FPI also had an agreement with Northwest Farm Credit Services, an FPI owner, to lease office space in Spokane, Washington which expired on December 31, 2021. FPI terminated this agreement on July 31, 2021. Rent expense for these leases was $726,869, $856,873, and $689,914, for the years ended December 31, 2021, 2020, and 2019, respectively. At December 31, 2021 future minimum lease payments were:

Year

Amount

2022

$ 612,101

2023

612,101

2024

612,101

2025

612,101

2026

612,101

Thereafter

2,193,360

Total

$5,253,865

NOTE 16 — RELATED PARTY TRANSACTIONS At December 31, 2021, FPI is owned by five Farm Credit Agricultural Credit Associations (ACA): AgCountry Farm Credit Services, ACA, Farm Credit East, ACA, Farm Credit Illinois, ACA, Farm Credit West, ACA, and Northwest Farm Credit Services, ACA. For the years ended December 31, 2021, 2020, and 2019, the Company recognized revenue of $59,769,469, $59,880,699, and $56,037,809, representing 94.2%, 94.5% and 94.8 %, respectively, from transactions with its ACA owners. At December 31, 2021, 2020, and 2019, accounts receivable from such customers totaled $638,526, $417,844, and $336,358, representing 99.8%, 96.2%, and 94.2% of total accounts receivable outstanding at such dates. The Company’s business and industry preclude it from applying the FASB guidance for farm cooperatives, however the Company’s revenue contracts with its major customers reflect a structure similar to that of a cooperative, whereby excess earnings are expected to be distributed to the customers, and excess losses are expected to be funded by the customers. No such distributions were made, or additional funding received for the years ended December 31, 2021, 2020, or 2019.

NOTE 17 — SUBSEQUENT EVENTS The Company has evaluated subsequent events through March 14, 2022, which is the date the financial statements were issued or were available to be issued. There are no such events to disclose.

FA R M C R E D I T F I NA N C I A L PA R T N E R S

Notes

1500 Main Street, Suite 600 PO Box 15247 Springfield , MA 01115 413.271.8600

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