CapitalFarmCredit.com 877-944-5500

Dear Stockholder: It has been said of Capital Farm Credit that we have roots as deep as . With the recent state of the economy, those roots have served us well and have been vital to our success. Because of the worldwide financial crisis and volatile ag markets last year, Capital Farm Credit, along with its member- borrowers, faced many challenges. Following a long period in a positive lending environment marked by steady growth and consistent earnings, we faced deteriorating credit conditions, negatively pressuring our earnings. Fortunately, we’ve had experience in weathering the ups and downs in the economy. We held steady, thanks in large part to our strong capital base and solid, conservative lending decisions made by our board and management. The cooperative business model upon which Capital Farm Credit was founded also proved to be resilient during tough times. As a result, Capital Farm Credit continued its long tradition of paying a significant patronage distribution to our stockholders. Thankfully, several months into 2010, parts of the economy are showing signs of im- provement. Industries such as livestock feeding operations, dairies and ethanol, whose profits can vary widely depending on grain prices, suffered from a tight financial squeeze caused by extremely volatile input prices over the past two years. Now, input costs have stabilized at manageable levels, and market prices have increased, bring- ing some much-needed relief for many producers. The outlook for pork, cattle and poultry is looking up right now. Unfortunately, much of this relief may come at the expense of grain producers; however, we hope commodity prices will remain at profit- able levels for all. Abundant moisture throughout most of Texas has increased optimism in the farming and ranching community. This optimism, along with the projected improvement in the overall economy, has bolstered our expectations for a successful 2010. At Capital Farm Credit, we also look forward to better days ahead. As always, we thank you for your business, and we will continue to be here to meet all of your rural financ- ing needs. Capital Farm Credit — “We’re the answer.” Sincerely,

Ben R. Novosad Chief Executive Officer

ASSOCIATION SUPPLEMENT – SUMMER 2010 If you’ve ever watched Texas

Jason Anderson Country Reporter, you’ll Stories understand why Tanya Bishop, Capital Farm Credit advertising director, calls the show’s host, From the , “the poster boy for rural Texas.” Every week, for 38 years, Phil- Back lips has taken viewers to places around the state, introducing them to people from all walks of life who have interesting Roads talents and hobbies. From the quirky to the heartfelt, he has covered all kinds of stories, each one featuring ordinary, everyday individuals. Many, perhaps most, of the stories are found in rural areas. “We do stories all over Texas, in the big city and the inner city, but most of the stories are on the back roads,” Phillips says. Bob Phillips “We’ve thought about why that is, and the best reason we can come up with is that people who want to do unique things don’t want to gather together with other people. They want their own space.” His evident appreciation for rural people and communities was the main reason Bishop considered him as a possible Farm Credit spokesperson in 2003. “It seemed like a good fit,” Bishop says. “He has a great follow- ing. Plus, his demographic keeps getting younger. We thought he would be a good spokesman for us.” Phillips agrees that the partnership was a natural fit. He has been the star of Capital Farm Credit television commercials for almost seven years now. “When they first approached us about a sponsorship, we did a little research,” Phillips recalls. “What we found was that their customers are our viewers, and many of our viewers are their customers. They are one and the same.” City Roots, Country Roots With his easygoing storytelling style and his affinity for what he calls the “back roads,” Phillips could easily be mistaken for a country kid. That’s not the full picture, though. He actually grew up in the big city of , but spent many holidays, weekends and summers outside of the city on a family farm. He did not own rural land of his own, however, until the late 1990s, when he purchased a ranch in the Texas Hill Country. A

CAPITAL FARM CREDIT, ACA few years later, after he became the Farm “They [RFD-TV] air our recent shows and Reporter, and stories had to come from Credit spokesperson, he realized where he also TCR Classics with shows that are 20 within 100 miles of Dallas. As the show should go for financing. years old, sometimes even older. That’s grew, so did the geographic area. When where you’ll see skinny Bob with dark it became syndicated in 1986, he and his “I really didn’t know about the organiza- hair,” he says. “I don’t even recognize him production team started covering the tion until the sponsorship,” Phillips says anymore,” he says with a laugh. entire state. His audience broadened again of First Ag Credit, which later merged to in 2000 with the introduction of the new become Capital Farm Credit. “I did some Although his style has matured, much of satellite/cable network RFD-TV, which research on them and realized that these what he does has been constant through Phillips Productions helped to launch. are the people we should be going to, and the years. I’ve been a customer since then.” Given the show’s huge territory, it takes a “We’re just doing stories on real people, talented team of hardworking people to and telling their stories in an entertaining A Unique Hill Country Getaway produce the show. Fortunately, Phillips has way,” Phillips says. “Charles [Kuralt] pio- Phillips bought the ranch primarily as an a core team of longtime employees who neered that, and I was lucky enough that investment, but frequent requests from have each worked with him for more than he shared it with me early in my career. I other people to go and stay there prompt- 20 years. Together, they rack up a lot of wanted to do something similar in Texas.” ed him to see it as a business opportunity. driving time. In 2006, he opened Escondida, a beauti- Now, with almost four decades of success “Texas is a big place. We’re on the road a ful hacienda-style boutique hotel with a and more than 2,000 episodes under his lot. I bought two new vehicles on June 1, world-class spa. belt, Phillips is not even close to slowing 2009, and they both already have more down. A national version, called On the Visitors to Escondida come from across than 30,000 miles on them,” Phillips says. Road with Bob Phillips, will soon air on the country. About half of the guests find RFD-TV. It will be in addition to Texas With so much area to cover and so many out about the getaway from watching Country Reporter. people to talk to, he never worries about , either on a local running out of stories. channel from one of the 22 Texas media “What I found was that people have dif- markets that pick up the show in syndica- ferent accents and cultures, but people are “As long as people keep having babies in tion or on the nationwide RFD-TV satel- people everywhere we go,” Phillips says. Texas, we won’t run out of stories,” he says. lite/cable network. The other half find the “We were going to interview a 21-year-old, destination through other means, particu- Miles and Miles of Texas and I realized that he was born since we’ve larly the Internet, and are not aware of the When Phillips first started the show in started the show. New and interesting well-known owner. 1972, it was a package of stories for a lo- people are being born all the time. We just cal affiliate, KDFW Channel 4 in Dallas. have to wait for them to get old enough to Guests enjoy luxurious amenities and the At that time, it was known as 4 Country talk to them.” most scenic and restful activities the Texas Hill Country has to offer. No matter how they find out about Escondida, as Phillips says in his advertisements, “The hard part isn’t getting here. It’s leaving.” Growing Up on Television Jason Anderson For Phillips, owning a ranch and a hotel was unplanned and unexpected; it was just one of life’s curious twists and turns. Making a career in television was less of a surprise. Once he got started, at the age of 18, he was hooked. “I’ve been doing this since 1970,” Phillips says. “I don’t know what else I’d do if I had to find a real job.” People have literally seen him grow up on television, a fact he remembers when he sees old episodes. Courtyard at Escondida

CAPITAL FARM CREDIT, ACA A Farm Credit Success Story 62 Years in the Making In 1948, Truman was president, transistor radios were invented, a gallon of gas cost 16 Jason Fuchs cents, and Calvin Cobb became a member of the Production Credit Association. Even though times have changed, some things just keep going. This year, Cobb is planting his 65th crop, and he has been a member of Capital Farm Credit for 62 of those years. “It is not really a success story, but more of a perseverance story,” quips Cobb, as he recalls the many changes over the years. “It wasn’t always easy. In the ’60s, I requested funds for anhydrous ammonia. The loan officer at the time told me that chemical fertilizers were never going to catch on and that I should plant snow peas in the winter.” While Cobb did not take that advice, he did manage to build an operation that today consists of more than 3,000 acres of row crops and more than 500 acres in pasture in and around Calvin Maysfield, Texas. Cobb “Calvin told me he wanted to farm one more year about five years ago, so I guess he changed his mind, and I am glad that he did, because he is a top-tier producer and has been wonderful to work with,” says Cobb’s loan officer, Jason Fuchs. Cobb and his wife, Bonnie, reside in Bryan, Texas. We wish them much success in the years to come. Jason Fuchs

Capital Farm Credit Teams Up With When you want a Gillespie County Board of Realtors lender with principles, We’re the Answer. As a cooperative, Capital Farm Credit abides by seven cooperative principles. One of them is members’ economic participation, which basically means that as a stockholder of a cooperative, you share in the co-op’s earnings. Capital Farm Credit stands by this principle through our patronage program. Every year, the board of directors evaluates our financial results, capital strength and current economic environment before deciding how much of our earnings can be distributed as a patronage refund. This year, based on our 2009 earnings, the board approved a $57 million patronage. Several Capital employees pitched in to serve those at- It was paid as a combination of 30 percent cash and tending the Gillespie County Board of Realtors Annual Picnic last fall. Pictured here are Will Slaughter, loan 70 percent allocated equities. officer in Mason, left; Sarah Cortese, loan officer in Ker- We are pleased to be able to offer this payment for a rville, second from left; and Trae Ottmers, vice president/ lending in Fredericksburg, far right, with his wife, Erin, year when many other financial institutions did not pay and daughter, August Rae. dividends. This priority on paying patronage demonstrates our commitment to our stockholders and to our cooperative principles.

CAPITAL FARM CREDIT, ACA Mark Williams Wins 2009 Cotton Grower Achievement Award Two Members Appointed Since 1970, Cotton Grower maga- to Texas Farm Service

zine has recognized and honored Grower Courtesy of Cotton outstanding leadership in the cotton Agency State Committee industry through the Cotton Grower In January, the Obama administra- Achievement Award. Mark Williams of tion announced the individuals who Farwell, Texas, was honored with this will serve on the Texas Farm Service award during the 2010 Beltwide Cot- Agency (FSA) State Committee. The ton Conference. committee members will oversee the activities of the agency, including Williams has served on numerous carrying out the state agricultural con- committees and cotton-related boards servation programs, resolving appeals and is active on local and state levels. from the agriculture community and He attributes his success to the help helping to keep producers informed and support of his wife, Joyce, and about FSA programs. three sons, Ryan, Reagan and Russell. The award was presented to Williams Two appointees, Jerry D. Glover of for his outstanding and tireless contri- Muleshoe and Glen A. Rod of El Mark Williams butions to the U.S. cotton industry. Campo, are also members of Capital Farm Credit. The Williams family farms 1,650 acres of cotton, 2,600 acres of corn, 300 acres of green beans and the rest in wheat, for a total of 10,000 acres. They also have a 3,000- Glover is a third-generation farmer head stocker-calf operation and lease grazing land for another 2,000 head. with more than 45 years of experience in agriculture policy. He is very active Williams is a Capital Farm Credit customer of the Muleshoe credit office. with the Parmer County FSA, Texas Corn Producers Board and the Bailey Capital Board Member Wins Corn Yield Contest County Farm Bureau. The National Corn Rod owns and operates Rod Grass Growers Association Farm, LLC and Jones Creek Farm JV (NCGA) recently cel- and has served on many boards, in- ebrated the 45th anni- cluding the Rice Council, Rice Farmers versary of its members’ Courtesy of NCGA Co-op, Turfgrass Producers of Texas most popular program and El Campo PCA. — the National Corn USDA’s Farm Service Agency works Yield Contest. Last to increase economic opportunity year alone, the NCGA and improve quality of life for rural processed nearly 7,000 Americans. “These individuals will entries, despite chal- work with USDA to help farmers and lenging weather condi- ranchers build and maintain success- tions that plagued the ful operations that produce the safe, Corn Belt in 2009. nutritious food supply that America The 24 winners in needs, while spurring economic devel- eight production From left, are Bob Dickey, chairman of the NCGA Corn Board; opment in our nation’s rural commu- categories had verified Shirley and Roy Carlson; and Bart Schotte, first vice president nities,” said Agriculture Secretary Tom yields averaging more of the NCGA Corn Board. Vilsack. “They bring the experience than 300 bushels per and passion necessary to help continue acre, compared to the projected national average of 162.9 bushels per acre. the Obama administration’s efforts to rebuild and revitalize rural America.” Capital Farm Credit board member Roy Carlson from Hereford won the No Till/ Strip Till Irrigated category. He and his wife, Shirley, and sons, Jeffrey, Michael and Other committee members in- Brent, make up Carlson Farms, which has been in business for more than 40 years. clude Debra Barrett of Edroy, Texas; He currently serves as a representative for the Texas Farm Credit District’s Stock- Armando Mandujano of Coyanosa, holder Advisory Committee and as a member of the Executive/Planning Committee Texas; and Wesley Ratcliff of Oak- for Capital Farm Credit. wood, Texas. Carlson was honored in March at the 2010 Commodity Classic in Anaheim, Calif. In addition, he will be featured in a special edition of Farm Journal magazine.

CAPITAL FARM CREDIT, ACA Capital Farm Credit Helps Support Wounded Soldiers On a routine reconnaissance mission in Iraq one day in 2007, Staff Sgt. Shilo Harris and his squad were ambushed on a desolate desert road. The explosion rocked the convoy, killing three platoon members. Staff Sgt. Harris, burned over more than 30 percent of his body, drifted in and out of con- sciousness. His uniform and body armor melted to his skin. Harris ultimately lost three fingers and both of his ears, spent 48 days in a coma in Germany and many more months recovering and undergoing surgeries at the Brooke Army Medical Center in . He even underwent a groundbreak- Left to right: Retired Master Sergeant Paul Clarke, Retired Staff Sergeant ing procedure as the first human to be treated with Shilo Harris, Capital Farm Credit Marketing Director Matt Seymour. Both Clarke and Harris are recipients of the Purple Heart. “Pixie Dust,” a powder made from pig tissue that triggers human stem cells to re-grow body parts. Throughout the ordeal, the dedicated soldier, husband and father of four never lost his faith or A Night Out for Deserving Military Personnel courage. His story is an inspiration to many, and Capital Farm Credit, along with the San Antonio Stock Show and Ro- it is wounded soldiers like Harris who prompted deo, the Texas Wildlife Association and numerous cattle producers, recently provided a VIP night out at the San Antonio Rodeo to more individuals and organizations, including Capital than 50 military personnel and their families. Farm Credit, to donate to the wounded soldier pro- gram at the San Antonio Stock Show and Rodeo. The Wounded Service Member Project recognizes active duty Purple Heart recipients and wounded and injured active duty military This is the second year that Capital Farm Credit personnel in San Antonio and Fort Hood, and treats them to a free has been a sponsor; this year, Capital Farm Credit evening of entertainment as part of the “Rodeo Star Experience.” and Farm Credit Bank of Texas joined together to This event gives program supporters and volunteers an opportunity raise more than $12,000 for this cause. to show appreciation to the military men and women for their ser- vice and provide them a chance to get their minds off their trials and Thanks to the numerous donations, the Rodeo tribulations for a while. Ticket Committee raised $98,423 in donations To learn more about the Wounded Service Member Project, please go for wounded service members from Brooke Army online to www.sarodeo.com/sarodeo/tickets/special_ticket_programs Medical Center and Fort Hood. The money al- or mail a donation to: lowed more than 2,800 military members and their S.A.L.E. (Wounded Service Member Project) families to be guests at the San Antonio Stock Show Attn: Rodeo Ticket Committee and Rodeo. Guests were treated to a special dinner P.O. Box 200230 and show tickets. San Antonio, Texas 78220

CAPITAL FARM CREDIT, ACA Congratulations, Priddy! Priddy ag mechanics students won the Grand Champion prize at the Livestock Show and Rodeo. Their vocational agriculture teacher, Barry Randolph, is a Capital Farm Credit customer, as are many of the team members’ parents.

By Lisa Hood On March 21, the dream of a lifetime came true for Priddy ag teacher, Barry Randolph. His students won the Grand Champion- ship at the Houston Livestock Show and Rodeo for their project, a gigantic buffalo squeeze chute. The chute is equipped with several hydraulic controls to move the large beasts easily so that they can be vac- cinated, medicated, tagged or castrated. It even has a floor that drops out to allow the animals’ feet to be worked on if necessary. The chute was ordered and custom-made for a rancher who had to pay for the mate- rials only, a bargain at $12,000. The project took a little more than three months to build. Although it was supervised by Randolph, the majority of the work was done by the ag students themselves, includ- 2010 Agricultural Mechanics Project Show - Grand ing Randolph’s two sons, Blake, a senior, Champion Project - Priddy FFA - Back Row: David and his brother Logan, a freshman. Other Boothe, Colt Cagle, Blake Randolph, Logan Kinkade, team members who worked on this colos- Logan Randolph, Johnathan McFarland, Barry sal project were Colt Cagle, Cody Seider, Randolph, Larry Walters - Front Row: Landon Jonna Dodd, Logan Kinkade, Johnathan Hood, Cody Seider, Walker Peters, Lena Hood McFarland and Tye Battreal, all seniors, and Weston Embry, Cole Partin, Ari Reyes, “There’s so much competition with this Landon Hood and Lynis Goodman. The up- (Houston) show,” Randolph said. “We perclassmen were assisted by eighth-graders: made some big changes in our design Walker Peters, Lena Hood, Caitlyn Cagle, this year to try to beat out the rest of the Buffalo squeeze chute Allison Jacks, Bryan Goodman, Samuel competition.” He has had nine years to Sanchez, Jesse Gustavvson, Jaycie del Bosque In addition to welding, sanding, wiring, work out all those details and finally came and James Clubb. painting and labeling all three projects up with a winning project. He enjoyed the with all the appropriate safety stickers, Priddy School, with fewer than 100 stu- added satisfaction of having two of his the students composed a large manual for dents in K-12, competed with more than sons on the championship team. each project that detailed the construc- 445 projects from much larger schools — “Having your dad as the teacher puts a lot tion and explained the mechanisms. Each up to a 5A size — that had bigger project of pressure on you,” Blake said, “but he’s project manual also contained a pictorial budgets. The contest judges were industry such a great teacher. He puts in a lot of history of the students’ construction work, leaders, retired high school ag teachers hard work with us.” a detailed diagram and building plan, a and college ag mechanics professors from material safety data sheet, and a detailed major universities. Priddy’s ag department Besides winning the Grand Championship, cost-estimate of each project’s materi- won more than $30,000 worth of welders, Priddy’s ag mechanics team also won first als. During the three-day Ag Mechanics plasma cutters, welding wire, tool chests in their class and third in their division for Exhibition, the students had to keep each and other modern shop equipment as part their 16-foot laser land leveler. Their other project sparkling clean and explain its of their award. This same project won the project, a 30-foot gooseneck flatbed trailer, function and construction to the hundreds Reserve Grand Championship a few weeks was fourth in its class. Both of these proj- of visitors. earlier in San Antonio and San Angelo, and ects were also ordered and custom-built to several of the team members won large customer specifications. One senior, Cody Lisa Hood works for Priddy ISD and is the scholarships that will be applied to the col- Seider, was honored with first place at the wife of Larkin Hood, regional credit officer leges of their choice. Job Fair during the Houston show. in Capital Farm Credit’s San Saba office.

CAPITAL FARM CREDIT, ACA Two Offices Relocate

The Hondo Credit Office moved its location to 237 19th Street, Hondo, in late March.

The Fredericksburg Office moved in late May. The new address is: 150 E. Main Street, Suite 310 Hondo Office Fredericksburg, Texas 78624

Nichols Participates in Farm Credit Young Leaders Program

Landon Nichols of Muleshoe recently heard firsthand about how well the Farm Credit System is faring, despite this year’s volatility in the financial markets. He was among 23 young agricultural producers selected to attend the 2009 Farm Credit Young Leaders Program. As a member-borrow- er of the Farm Credit System, and specifically Capital Farm Credit, Nichols was given an opportunity to interact with decision-makers and Farm Credit System leaders and get a behind-the-scenes look at how the System operates. During the four-day event, sponsored by the Tenth District Landon Nichols, left, and Mike Garnett, Farm Credit Council, participants traveled to Washington, Farm Credit Bank of Texas board member D.C., and New York City for tours, special briefings and meetings with government, System and financial leaders. Each lending co-op in the district was invited to select an individual or couple to participate in the program. Nichols farms cotton, sunflowers, grain sorghum and wheat. The trip included meetings with agriculture industry representatives, officials of the Farm Credit Council and congressional leaders in Washington, D.C. The group also had a briefing at the Federal Farm Credit Banks Funding Corporation and toured the financial district in New York City. The Tenth District Farm Credit Council is the trade association that represents the legisla- tive and regulatory interests of the Farm Credit Bank of Texas and its affiliated institutions throughout Alabama, , Mississippi, New Mexico and Texas.

CAPITAL FARM CREDIT, ACA