CoBank Update

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CoBank Update
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Overview

• State of our Business
• Energy Banking Group Structure
• 2008 Capital Plan Changes
• Interest Rate Outlook
• Closing Remarks

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FCS and CoBank

• Farm Credit System
• Four Farm Credit Banks and CoBank 95 ACAs
• Private banks with GSE status
• Cooperative based fundamental strength of the
  system
• 32 of all U.S. agriculture lending (Dec 2006)
• Regulated by the FCA
• CoBank
• Headquartered in Denver
• Commercial and Industrial loans, leases, and
  financial solutions
• 2,300 customers
• 47 Billion in assets and 4 Billion in capital
  (Sep 2007)

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Net Income
5
Patronage Growth
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CoBank Energy Divisions
Electric Distribution
Power Supply
Energy Services

• Lines of credit
• Secured and unsecured term loans
• Flexible pricing (Fixed and Variable)
• RUS Supplemental Loans
• RUS Co-Loans
• Participations and syndications
• Letters of credit
• Leasing and cash management

• Project advisory
• Project finance
• Corporate loans
• Non-Recourse loans
• Corporate banking experience
• Renewables project expertise

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Electric Distribution Trends
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Power Supply Trends
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Energy Services Trends
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Primary Sources of Capital

• Sources of Capital
• Retained Earnings (most expensive)
• Core Surplus Treatment
• Preferred Stock
• Recent request for approval of one or more
  additional 250 million issuances in 2008 or 2009
• Core Surplus Treatment
• Farm Credit Securities (least expensive)
• Primary Source of Debt Capital not core surplus

Equity
COST
Debt
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2008 Capital Plan Changes

• Last Change made in 2006
• Objectives of Capital Plan
• Provide an adequate equity base
• Equitability among stockholders
• Increase earnings to CoBank and its customers
• Provide for principal risk exposures
• Comply with regulatory standards

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New Patronage Plan

• Initial Investment of 1,000 (one-time)
• Patronage paid is calculated as 100 bps of the
  previous years Average Daily Loan Balance
• Paid as 65 cash and 35 equity
• Target capital level of 9 with 10-year average
  loan base

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Patronage Program and Effective Loan Rate

• Patronage Parameters

• Net Effective Rate

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Interest Rate Outlook

• Historical turmoil in the banking system and
  housing sectors
• CoBanks Treasury Department View
• Continue to be bearish on interest rates and the
  economy
• Short-term rates could get down to the 2 range
  before the business cycle turns
• Long-term rates should drop further but at some
  point will begin to anticipate a recovery or
  inflation
• This is a good time to lock in long-term funding

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CoBanks Commitment to the Electric Industry

• CoBanks Chairman of the Board Everett
  Dobrinski with Verendrye Electric
• NRECA - Voting Service Member
• Touchstone Energy Member
• Targeting 100 ACRE Membership
• Strong working relationship with RUS
• Support electric cooperative issues in D.C.

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Up Coming Meetings

• Energy Customer Meetings in 2008
• Directors Conference, March 18-20, Arizona
  Biltmore (Scottsdale)
• Executive Forum, August 11-13, Park Hyatt Beaver
  Creek Resort, CO

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Why Do Business with CoBank?

• Access to Competitive Rates
• Diversifies Borrowing Sources
• A Means to Compare Lenders
• High Return on Invested Capital
• We Bring Experience and Value To You and Your
  Members

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Thank You!
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Energy Services and Electric Distribution
Division Structure
Bob Engel President and CEO
Mary McBride Executive Vice President
Jake Udris SVP, Power Supply and Energy Services
Jennifer Goss SVP, Electric Distribution
Allison Dunn VP, East Reg. Manager
Jim Stutzman VP, West Reg. Manager
Tim Green Credit Manager
Brett Challenger VP, Mgr. Energy Services
Dan Key VP, Mgr. Power Supply
Jeff Liggett Credit Manager
7 Employees
6 Employees
7 Employees
4 Employees
4 Employees
3 Employees