1. Discussion Topics  Where have we been? Where are we going?  Production Ag Financing Update  Capital Markets update for cooperatives  Credit Union and Bank conditions  Questions & answers

2. Economic Summary and Outlook Brian Legried President, Cofina Financial

3. Agriculture  Demand increase – World wealth increasing  Weather impacts – low stocks  Energy, Bio-fuels – increasing demand  High commodity prices – demand and $$  Grain based balance sheets stressed  Financial markets and economic meltdown  Inventory valuation impacts  What’s next?

4. U.S. Economy  World demand increase – China, India, U.S.  Housing slowdown / sub-prime mortgage mess  Financial meltdown  Monetary policy recovery steps  Governmental action / stimulus  Recovery? If so, what kind – U, V, L or W?

5. Housing Starts

6. 3-Month Treasury Bill Yield

7. Interest Rates

8. Corporate Bonds – Moody’s Seasoned

9. Dow Jones Industrial Average

10. Considerations  US / World economic conditions  Financial markets  Agriculture Production and consumption Globalization Innovation

11. Trade Policy Strength of $ US Commodity Prices Investor Confidence Consumer Spending China Growth US Growth Government Spending Inflation US Deficit Interest Rates World Food Demand Unemployment Rate Planting Decisions Weather Innovation Energy Consumption World Economic Growth

12. Summary  Volatility is constant  Financial position Liquidity – working capital needs Reserves – balance sheet management Margins – compressed  Demand driven markets are good, but…  What if?

13. Agricultural Outlook Ross B. Anderson Sr. Vice President and Chief Credit Officer 12

14. Farm Income Statement

15. 20002006200720082009 2009 Adjusted Assets Real estate9461,6251,7511,6921,626946 NonReal estate257298304313309 Total1,2031,9232,0552,0051,935 1,255 Liabilities Debt164203214240234 Equity1,0391,7201,8411,7651,7011,021 Total1,2031,9232,0552,0051,9351,255 Debt/equity15.811.711.6%13.6%13.8%22.9% Debt/assets13.610.510.4%12.0%12.1%18.6%

16. Avg. U.S. Cropland Value in $/Acre, Jan. 1, 1999 - 2009

18. Credit Conditions – Credit Quality by Commodity Volume as% of YE 2009 Commodityof 6/30/09Portfolio % Adverse Projection Hogs$3,428 5.8% 11.7% 15.7% Dairy$4,581 7.8% 8.1% 10.7% Poultry$2,128 3.6% 6.5% 7.5% Cow / Calf $4,015 6.8% 1.8% 3.3% Feedlots$1,448 2.5% 3.2% 4.0% Corn & Soybeans$11,535 19.7% 0.7% 0.9% Other Crops$16,801 28.6% 1.3% 2.3% Ethanol$1,632 2.9% 27.5% 34.2% Other Commodities$13,113 22.3% 3.9% 5.0% Total$58,682100.0% 4.1% 5.0% $ in millions 17

19. Dairy  Futures strip:; Dec. ‘09 - $14.82; March ‘10 - $15.19; June ‘10 - $15.58; Dec. ‘10 - $15.72  Cost of production $15/cwt.  Weak domestic and foreign demand, Strong dollar, High feed cost $19 to $12 price  Kielkopf – “Need to slaughter 225K cows to reduce excess NFDM”  Two industries – traditional and “factory” dairies Factory dairies are losing equity at a rapid rate – high volatility in feed markets Traditional - less debt, some profits from crop production, less affected by market volatility for feed costs Expect to finance negative cash flows through mid 2010 Many factory dairies do not have the liquidity and solvency to reach breakeven next summer

20. Per Capita Consumption of Meat in Pounds PorkBeefChickenTurkeyTotal 200649668718220 200751658518219 200850638418215 200949638017209 201048608117206

21. Livestock Overview

22. Pork  Oversupply due to increased productivity of herd due to effective circo virus vaccine and genetic improvement  Exports have been strong, 20% of production  Vulnerable to global slow down/swine flu scare  Banes- spring 2008 --- need 10% reduction in sow number; actual only 3%  Futures strip –Dec. ‘09 - $56.20; Live$41.58 Feb. ‘10 - $61.90; $45.80 June ‘10 - $72.35$56.42  Estimated cost of live production $50-51/cwt.  Expect to finance negative cash flows through Mid 2010 Many operations have burned liquidity and solvency and do not have the ability to get to mid-year 2010

23. Beef  Feedlots were losing $100-200 per head  Lower placements put pressure to move from hotel to “owner” role. Financial capacity to accept risk is often not present.  Beef is a high price source of protein What will financially pressured consumers buy? Beef to chicken issue.  South Korean agreement - how fast will it ramp up?  Limited movement of feedlots to western corn belt (NE) due to DDGs What will feedlots be worth? 65 for sale  Lower calf prices for cow/calf producer after 5-8 years of good income will lead to lower profitability

24. Broilers  Production - USDA ‘0735,739MM#+1.0% ‘0836,511+2.1 ‘0935,095 -3.9 ’1035,541+1.2  Value subtraction issue (whole birds vs. further processed)  World trade/Russian exports  Cash positive in 2nd quarter, positive net income in 3rd quarter  Industry will build equity if they do not crank up production

25. Ethanol  Mandate = 10.5 BGY in 2009  Current production capacity = 12.5 BGY  Current production =9.8 BGY 78% of capacity  Forecast is to operate at 10-15 cents per gallon EBITDA (assumes labor is fixed expense)  New industry driven by government policy  Problems caused by market volatility/high feedstock cost (corn)  Expect several plants to turn more than once

26. Crops  Crop producers USDA forecasts $20 billion less revenue in 2009 vs. 2008 Overseas production response to high prices in 2008 Domestic and foreign demand reduced due to economic recession and reduced livestock use Flattening of demand pressure from ethanol Less income, not losses Credit concerns in this segment are unlikely to show until 2011 or 2012 A drought in the world can change credit outlook in 90 days  Crops - two different risk profiles Cash renter/operator Land owner with low debt load

27. World Grain Stocks Stocks MM Metric Tons Percent Carry to Use 04/0540820 05/0638919 06/0734217 07/0836017 08/0944021 09/1044320

28. World Oilseed Stocks Stocks MM Metric Tons Percent Carry to Use 04/055619 05/065417 06/077322 07/086319 08/095516 09/106218

29. US Coarse Grain & Oilseed Stocks Coarse Grain Stocks MM Metric Tons Percent Carry to Use Oilseed Stocks MM Metric Tons 04/055919%2516% 05/065417%2248% 06/073622%1532% 07/084519%1613% 08/094516%1610% 09/103218%1114%

30. Capital Markets Update and Keys for Cooperative Financing Bob Doane Vice President, CoBank

31. Total Bank Debt and High-Yield Bond Volume in the Leveraged Finance Market Source: S&P/LCD and Merrill Lynch Global High Yield Strategy

32. Percent of Outstanding Leveraged Loans in Payment Default or Bankruptcy

33. High Yield Bond and Lev. Loan Maturities ($billions)

34. Loan Spreads Over LIBOR for BB/BB- Average New-Issue Pro Rata & Weighted Average First-Lien Institutional Spread of BB/BB- Loans

35. Loan Spreads Over LIBOR for B+/B Average New-Issue Pro Rata & Weighted Average First-Lien Institutional Spread of B+/B Loans

36. Middle Market Spreads (Cash Flow < $50MM) Institutional Pro Rata

37. Secondary Market Trading Spreads By Rating B Loans All BB/B Loans BB Loans

38. Deal Structure Trends  Lower leverage, higher equity levels required  Tighter covenants and security packages More asset-based financing Borrowing bases  Shorter maturity loans  Very few dividend recapitalization deals  Original-issue discounts, higher up-front fees  Libor floors often set at 2 to 2.5%  More rigorous excess cash flow sweeps

39. Commercial Lenders  Recapitalization process has begun although some commercial banks are likely to remain under pressure into 2010.  Banks remain unpredictable (deal by deal for some) Capital issues Credit concerns evident in 3Q results (depth/breath of recession remains an issue) Reformed business strategies Different personnel, layoffs, restructurings Market down to a handful of dependable Ag lenders Focus on: Credit quality and risk Conservative structures (shorter tenors, tighter covenants, Libor floors, borrowing bases, and collateral packages — back to old school backing) Higher loan spreads and fees  Relationships Count Relationship banks continue to support their core accounts Ancillary business remains very important

40. Farm Credit System  Greater capital conservation Focus on pricing (minimum spread thresholds) and structure (term, collateral and covenants) Interested in funded assets that achieve market yields Selective with lower hold levels Reserving capital for core relationship borrowers  Ethanol, Dairy, Forest Products and Livestock segments experiencing credit deterioration Farm Credit entered downturn with strong balance sheets and solid credit quality ratios  Continued interest in quality credits (all the FCS investors are back, some not yet at full strength)

41. Credit Market Outlook  Global Unwinding of Leverage Banks, hedge funds, private equity, and consumers, all in process of unwinding leverage Rapid unwinding of leverage associated with the structured finance (securitization) industry Government sector taking on new debt, risk of crowding-out of private sector Derivative exposure concentrations still unknown  Commercial/investment banks likely to remain under extreme pressure through 2009 and likely into 2010 Higher minimum capital requirements for all financial institutions likely Need to raise more capital, who will provide it? Rethinking risk management models Substantial internal restructuring and deleveraging How will regulatory environment change?

42. Credit Market Outlook  Fundamentals of real estate and consumer credit problems likely to have a long tail and tied to unemployment dynamics and deleveraging  Lender perspective that the economy is poised for recovery. But will it be a jobless recovery?  Expectation of higher credit losses in many segments  Credit spreads likely to tighten from current levels as economy continues to recover but refinancing calendar likely to put floor on spreads  Multiple levels of uncertainty: global economy, role of government (ownership), credit availability, dollar value, financial strength of institutions/counterparties, derivative exposure concentrations, risk management (model) risks, regulatory changes, etc.

43.  Management  Board governance  Balance sheet strength  Appropriate risk management competencies and tools  Capacity People Capacity Time 1.Key items that lenders typically consider

44.  Working Capital (Liquidity) Current assets - Current liabilities Factors to Consider: Accounts receivable management Inventory management Types of business lines Grain merchandising practices Prepayment activity Peak seasonal borrowing needs Working Capital to Sales Percentage is one component of Risk Rating 2.Ratios

45.  Local Leverage Long Term Debt minus Current Portion Due Net Worth minus investments in Cooperatives and Other Entities  Reasonable Local Leverage 50%  Minimum Acceptable Level< 80% 2.Ratios

46.  Debt Service Coverage Ratio Net Cash Available for Debt Service Current Portion of Long Term Debt  Minimum Acceptable Level > 1.5 : 1  Optimum Level > 2.75 : 1 2.Ratios

47. 3.Procedures/Policy  Counter-party risk Assessment, due diligence, mitigating factors, contracts, limits  Contracts Procedures on contract execution and fulfillment (enforcement) Forward contracting limitations Pre-pay versus booking contracts

48. Wrap-up: Rapidly Changing Conditions  Prepare to manage greater risk associated with increasing volatility in all markets. input risk – availability, price, prepaids, etc. production risk – weather, technology, etc. marketing risk –hedging, pricing, consumer investment risk – realistic assumptions Regulatory risk – farm programs, regulation  Develop strategies to secure working capital and remember it will be resource challenged in the future!

49. Credit Union and Bank Financial Update Bill Raker President, Federal Employees Credit Union

50. Credit Unions  Financial cooperatives One vote per member Volunteer boards  State or federal charter & supervision  Full-service financial providers  Defined field of membership Single employer Multiple employer groups Organizational Community (geographic) Trade, Industry, Profession (TIP)

51. Minnesota’s Credit Unions  62 Federal (NCUA); 94 State (Dept. Commerce)  All Federally insured to $250K  $12.83 B total deposits; ~6.0% of MN market  $9.86 B total loans; 865,668 total credits  $14.96 B total assets; 1.5 M members  10.19% Net Worth; 0.28% ROA [0.93%]

52. Minnesota’s Credit Unions  Business loans ~ 8.5% of CUs’ total portfolio  8 credit unions doing Ag lending 2,921 credits $285 M total Ag credits $168 M largest Ag portfolio; 1,497 credits  Money to lend – all loan types  Well-capitalized

53. Wisconsin’s Credit Unions  2 Federal (NCUA); 245 State (Dept. of Financial Institutions)  All Federally insured to $250K  $17.18 B total deposits; ~14.8% of WI market  $15.52 B total loans; 1,304,260 total credits  $20.06 B total assets; 2.2 M members  10.01% Net Worth; 0.46% ROA [1.35%]

54. Wisconsin’s Credit Unions  Business loans ~ 15.5% of CUs’ total portfolio  16 credit unions doing Ag lending 1,741 credits $130 M total Ag credits $48 M largest Ag portfolio; 571 credits  Money to lend – all loan types  Well-capitalized

55. Minnesota’s “Watch List”*  CAMEL (Examination) Ratings: 1 – 5  4 or 5 CAMEL rating is a “watch”  71 banks – 22% of state’s total banks Six failures  3 credit unions (all are CAMEL 4) Two mergers *Source: Minnesota Department of Commerce

56. Wisconsin’s “Watch List”*  17 Banks & 5 S&Ls are on the “Problem” list  7 Credit Unions are on the “Problem” list 3 are still “Adequately Capitalized” (> 6%) 2 are “Under Capitalized” (5% – 6%) 2 are “Critically Undercapitalized” (<2%)  1 bank failure since 2007  1 credit union failure since 2007 *Source: IDC Financial Publishing “Corporate Report” magazine and NCUA

57. National Picture: Banks  416 (5.1% of total) institutions on FDIC “watch” list – $300 B in assets -- 15 year high  120 closures/mergers YTD -- $25+ B cost to FDIC  40% of net income going into provisions for potential losses  Stressed insurance fund 12/071.22% 6/090.22%

58. FDIC Quarterly Bank Report

63. National Picture: Credit Unions  ~326 (4.26% of total) CUs on NCUA’s “watch” list – CAMEL 4 or 5  3,500 (45% of total) CUs with net operating loss through 6/09  ~135 mergers YTD (includes 21 “failures”) -- $95 M cost to NCUSIF  Concentrations: CA, FL, AZ, TX, NE, UT  NCUSIF fund at 1.30%

64. Regional/Community Institutions (Credit unions and banks)  Financial landscape has changed  Some institutions still doing relatively well  Most are experiencing challenges Slower loan growth Higher than normal delinquencies and losses Higher loss provisions – negative earnings Falling net worth (capital) ratios NCUSIF and FDIC assessments

65. Loss Mitigation (What’s changed)  Refined underwriting guidelines  Quarterly updates to credit scores  Reviewing & updating collateral values  Reducing credit lines on credit cards and HELOC loans  Re-writes  Counseling

67. Current Concerns (Lingering?)  Employment Lags recovery 10%: how long?  Real estate values Bubble has burst Residential first, now commercial Time to recovery?  Consumer confidence Uncertainty, confusion, lack of trust  Interest margin

68. Consumer Behaviors (Applies to small businesses, too)  Saving more  Paying down existing debt faster  Reluctant to take on new debt  Refinancing at lower rates  Cautionary spending  Consumption (GDP) down; business investment/expansion down

69. Getting Credit Today  Somewhat harder to borrow – tighter standards  Rates are low – for now  Credit unions are making loans  Credit score & BNI score  Ability to repay  Higher down payment  Lower LTV ratios

70. 2010 Outlook?  Freefall ends  Modest growth resumes  Unemployment remains higher than usual  Little change in short-term rates  Economy remains fragile  More regulation  Government looking to help small businesses  All eyes on leading indicators

71. 2010 and beyond  Cost of clean up: the consumer will pay! Insurance fund assessments FDIC – 3 years prepaid premium; 7 years to rebuild NCUSIF – up to 7 years to payback Treasury loan Capital restitution; need to pump up earnings Additional provisions for future losses & write-downs  Regulation Consumer “protection” and “safety & soundness” Financial industry oversight  Long-term to full recovery

72. What to do now  After the rain, comes the rainbow!  Protect your good credit  Deal with volatility  Have a post-recovery plan