FCW Spotlight Winter 2022

Mission Statement

Farm Credit West will ensure the customer comes first by providing superior service at competitive rates in a timely, professional and ethical manner, and by delivering a meaningful return on equity through our patronage program.

Who We Are

One of the West’s leading agricultural lenders, Farm Credit West and its wholly owned subsidiaries are cooperatively owned lending institutions providing financial services to farmers, ranchers and agribusinesses. Our offices are located in Arizona and California’s Central Coast, Imperial Valley, South San Joaquin Valley and Sacramento Valley.

Board of Directors

Chair of the Board

Douglas C. Filipponi Creston, CA

Vice Chair of the Board

Mark A. Cook Willcox, AZ

Joey Airoso Pixley, CA

Robert Amarel, Jr Yuba City, CA

Teresa Castanias Ivins, UT

Catherine Fanucchi Bakersfield, CA

Craig C. Gnos Davis, CA

Robert N. Hansen Hanford, CA

Blake Harlan Woodland, CA

Tom Ikeda Arroyo Grande, CA

Colin Mellon Yuma, AZ

Mark Osterkamp Brawley, CA

Barry Powell Sacramento, CA

Brian Talley Arroyo Grande, CA

Sureena S. Bains Thiara Yuba City, CA

President’s Message

MARK LITTLEFIELD, CEO

A Bright Future Ahead

A S WE CLOSE 2022 , it is with great pleasure and excitement for the future that I can report Farm Credit West stockholders recently voted to approve the proposed merger with Northwest Farm Credit Services, our sister association serving agriculture, fishery and forestry operations in Alaska, Idaho, Montana, Oregon and Washington. This strategic and forward-thinking decision will ensure our viability and expand the value we offer to you, our customer-owners.

To recap the past year, your Association has once again exceeded expectations, delivering excellent service and highquality products along with strong financial results. The new and long-established relationships with our customers will continue to inspire and guide us as we begin a new chapter as AgWest Farm Credit.

On January 1 we will begin operations as AgWest, governed by a board that provides equitable representation across the expanded chartered territory and a single operating committee, comprised of individuals from both legacy institutions. This is a merger of equals and as such we will spend the next few years carefully evaluating each entity’s business processes to identify the best solutions to allow for focused integration efforts that provide business synergies and continuity while addressing the growing needs of our customers.

It is important to note that this merger would not have been possible without the strong leadership and guidance of a dedicated group of individuals who have selflessly given their time and expertise to serve on the Farm Credit West Board of Directors. Furthermore, the Management Executive Committee, among the most talented in the Farm Credit System, have shown resolve and professionalism throughout this process. To each of these individuals, and to our entire staff, I give a heartfelt thank you for your dedication.

While the structure and makeup of our Association has fluctuated over our 106-year history, our deep commitment to agriculture and the communities we serve has not. We are no strangers to mergers, and I can confidently say that with each transition, your Association has grown stronger, added value and become better positioned for future success. I fully expect this merger will be no different and am ready to get to work.

It has been the Association’s honor to serve you for 20 years as Farm Credit West, and we look forward to the next adventure as we continue to provide you with increased value as AgWest Farm Credit. Wishing you a very happy holiday season. ■

Farm Credit West reported net income of $266.2 million for the first nine months of 2022. These year-to-date earnings are ahead of our business plan target for the third quarter. Also, during the first nine months of 2022 our average loan volume increased, and we strengthened our allowance for loan losses.

Average loan volume increased $939 million, or 8%, during the first nine months of the year. Farm Credit West has been experiencing modest levels of loan growth during 2022. At the end of the third quarter, average loan volume exceeded the third quarter business plan target.

In the first nine months of 2022 , total members’ equity decreased $37.9 million, due primarily to a reduction in preferred stock of $253.8 million, as the preferred stock program was discontinued, and all outstanding shares were called (retired) during the first half of 2022. This decrease was partially offset by year-to-date net income of $266.2 million.

Nonearning assets (nonaccrual loans plus other property owned) decreased by $6.8 million from December 31, 2021, or 9.5% to $64.6 million at September 30, 2022. The decrease was the result of a $16.8 million reduction in nonaccrual loan volume due primarily to $14.9 million in net repayments and $11.9 million in net transfers to acquired property during the first nine months of 2022. These decreases in nonaccrual volume were partially offset by $12.6 million in net transfers to nonaccrual during the first nine months of the year. The other property owned balance increased $10 million due to the acquisition of a property during the year.

Our allowance for loan losses totaled $78 million. This was 0.6% of loan principal and interest at September 30, 2022, compared with 0.56% of loan principal and interest at December 31, 2021. The allowance is our best estimate of the amount of probable losses existing in our loan portfolio as of each balance sheet date. We determine the allowance based on a regular assessment of the loan portfolio, which generally considers recent historic charge-off experience, collateral evaluations and adjustments for other relevant economic factors.

2022 Interest Payments

To help you achieve your tax-planning objectives, we would like to remind you of your Association’s year-end procedures regarding interest paid on IRS Form 1098. For payments, the date received is the determining factor.

♦ Payments received by the Association on or before 2:00 p.m. on December 30, 2022, will be reported as 2022 interest paid.

♦ Payments received after that date and time, whether or not they were mailed in 2022, will not be reported as 2022 interest paid.

♦ Payments received after 2:00 p.m. on December 30, 2022, will be processed on the following business day.

Consult your tax advisor regarding the deductibility of payments in transit. For payments made from your Future Payment Funds account, the date applied is the determining factor. If your tax-planning objectives are better met by having the interest portion of your January 1, 2023, installment reported as 2022 interest paid, you must register an early transfer of Future Payment Funds to pay your installment in 2022.

Written requests for early transfer must be received by the Association by Wednesday, December 28, 2022.

Farm Credit West is committed to supporting the role of education in agriculture’s future.

Since 1994, Farm Credit West has provided scholarships to 262 scholars and committed $1,136,500 to this program. Recipients are awarded $1,500, and scholarships can be renewed three times for a total of $6,000 in scholarships from Farm Credit West.

Scholarship applications are due February 15, 2023.

Applicants must be an entering or current college student enrolled in agricultural programs and maintain a GPA of 2.7 or higher. They must also be a customer of Farm Credit West or the spouse or dependent of a Farm Credit West customer.

The application and guidelines can be found in the Scholarships section of the website. For those who have previously received a Farm Credit West scholarship, renewal applications will be posted in March and are due to Farm Credit West by July 1, 2023, along with final college transcripts.

If you have any questions about the scholarship program, please email: scholarships@farmcreditwest.com

PIVOTING FOR SUCCESS

Central Arizona Farmers Practice Patience, Perseverance and Creativity Amid Severe Water Shortages

BY SARAH KEARBEY | PHOTOGRAPHY BY NATE CASTILLO

All around the 65,000 acres of farmland within the Maricopa-Stanfield Irrigation and Drainage District (MSIDD) in Pinal County, central Arizona, freshly drilled wells are tapping into the district’s most valuable resource: its underground reservoir.

In the last year, nine new wells have been drilled and brought online, each adding to the district’s capacity to supply water to its customers — a capacity recently threatened by low-priority water rights and a long-term, widespread drought.

While farmers there are grateful for the new supplies, the district’s water supply is still in jeopardy, and customers are having to get creative in making their supplies stretch further.

In 2019, when it became apparent that falling lake levels would likely result in drastically reduced or zero surface water supplies from the Central Arizona Project (CAP), the district negotiated for state money to drill new wells and repair or upgrade old ones.

The district’s low priority position within the CAP, coupled with the ongoing drought along the Colorado River, meant little to no water would likely be available in coming years. In a preemptive move to mitigate against future shortages, district leaders worked with federal and state agencies and other water users to reach the agreement as part of the state’s Drought Contingency Plan.

MSIDD President Bryan Hartman explains that despite ongoing water shortages, the agreement was the best option available to them.

“Because our right to low-cost excess water was expiring in 2030, we knew we needed a plan to begin weaning ourselves off of surface water supplies,” Bryan said. “We were in a difficult negotiating position, but we made good use of the money allotted to us and are looking for ways to build and repair more wells to increase our groundwater supply.”

The stakes are high for MSIDD, and the implications reach beyond the local region.

According to a 2016 University of Arizona white paper, Pinal County ranks in the top 2% of all U.S. counties for the total value of agricultural sales, and the top 1% in cotton and cottonseed sales, milk sales and cattle numbers. The county accounts for nearly half of Arizona’s cattle and calf sales, and around 40% of its cotton, cottonseed and milk sales.

According to a 2016 University of Arizona white paper, Pinal County ranks in the top 2% of all U.S. counties for the total value of agricultural sales, and the top 1% in cotton and cottonseed sales, milk sales and cattle numbers.

To help fill the gap in water supplies, in 2022 the district received 30,000 acre-feet of surface water in accordance with the state’s drought

MSIDD President Bryan Hartman has had to fallow much of his land due to water shortages, so he is investing time and energy in maximizing efficiency in his highest yielding fields. The tractor in the background is using a laser leveling system to improve the irrigation and drainage of the field.

plan. But no CAP water will be available for purchase in 2023; the level of Lake Mead, the local reservoir, has dipped below the drought threshold of 1,075 feet.

With no other state or local surface water supply, the district faces a tough next year as its customers, including Bryan and MSIDD Vice President Dan Thelander, will be almost entirely reliant on groundwater.

Bryan, whose family has farmed in the area for generations, fallowed 50% of his lands this year, growing just 300 acres of cotton and 700 of alfalfa on his 2,000 acres.

“The alfalfa market is good right now because of the drought — most of the cattle operations

in the West need it,” he said. “If the district gets us a little more water, maybe we’ll grow a little more corn and cotton.”

In accordance with state and local groundwater regulations, the district is legally allowed to pump up to 250,000 acre-feet of water each year. With the new wells recently brought online, next year they are hoping to pump 180,000 acre-feet, and eventually increase that to 200,000 acre-feet.

In addition, the district is always looking for other supplies, and has leased and purchased surface water from the Arizona Water Company and Freeport Mine, among other entities.

The MSIDD is building pipelines to deliver groundwater to farmers operating in Pinal County, representing a significant shift from historical practices.

NEW WAYS OF DOING BUSINESS

The reduction in water supply has changed the way farmers are operating in Pinal County. Once accustomed to receiving a fixed amount of water — four acre-feet per acre — irrigation district customers now receive water based on their proximity to groundwater wells. Growers downstream from a well will have access to it; those upstream from one won’t.

To remedy the situation, the irrigation district is working to build pipelines to get groundwater to those who don’t have access to it. But the cost of oil and PVC piping has been very high, and labor issues and supply chain problems have slowed their progress.

“Water allotments vary from farm to farm,” Bryan said. “The growers are learning what we can grow and can’t grow. Some may fallow up to 40% of their farms this year.”

With 60,000–70,000 dairy cows in the area, farmers in Central Arizona typically grow feed crops like corn, alfalfa and sorghum, with wheat or cotton grown as a rotation crop. To maximize efficiency, farmers have begun growing oats for feed in the winter, because they need less water and the dairies are willing to pay more for them.

Local growers are also continuing to improve their smart tactics with water use, and more are investing in pivot sprinkler systems as a way

BRYAN

“We are getting more creative with how we use and invest in our water.”

HARTMAN MSIDD PRESIDENT

“As farmers, we are planning for the worst and hoping for the best. We’re not making any plans to have surface water in the future; it could happen, but we don’t plan on it.”

DAN THELANDER | MSIDD VICE PRESIDENT

to save water. Incentive programs through the federal Natural Resource Conservation Service are helpful and can contribute up to 75% of the cost, according to Bryan.

“We are getting more creative with how we use and invest in our water,” he said.

LOOKING AHEAD

On Dan’s farm, which he operates in partnership with his nephew, son and brother, they lease 6,500 acres and usually farm between 5,000 and 6,000 acres. Next year, they’ll plant just 2,000: in December, the forage crop triticale, and in March, corn.

“As farmers, we are planning for the worst and hoping for the best,” he said. “We’re not making any plans to have surface water in the future; it could happen, but we don’t plan on it. We’re hoping the district and individual farmers on a case-by-case basis will continue to develop more groundwater supplies.”

While water shortages have pushed the price of feed crops higher, which helps crop growers in the short run, the price spikes have an adverse effect on dairy farmers, who are already struggling to grow their own feed. The silver lining may be that dairy farmers are more interested in buying winter crops than

they used to be, which can incentivize crop farmers to grow year-round.

As they work to attain more state and federal money to expand their groundwater infrastructure, Dan and Bryan and their colleagues also remain realistic. They are preparing for a future with less water, getting creative about how to use what they have efficiently, and looking at farming in new ways.

“Arizona is trying to come up with additional water supplies, including desalination, to help reduce the strain on the Colorado River system,” Dan said. “The state has a billion dollars to look at solving the water crisis, including pipelines from other tributaries.”

“We are definitely the short end of the stick when it comes to water issues, so continuing

to develop our groundwater pumping capacity will be what we focus on,” he said.

For Bryan, the key is remaining patient and staying united as a community through their shared challenges.

“The wheels of progress grind very slowly,” he said. “COVID hit, and things have not moved as quickly as we’d hoped.”

“But as president, I answer a lot of phone calls and questions,” he said. “And at the end of the day, we’re going to get through this together.”  ■

Reducing reliance on the Colorado River system is a key priority for Arizona as they look to build water infrastructure that will last well into the future.

Farm Credit West Gives Over $50,000 to Local Food Banks

EACH YEAR, FARM CREDIT WEST IDENTIFIES remarkable food banks to receive a monetary donation, helping fight food insecurity throughout the communities where our staff and customers live and work. This year was no different, as over $50,000 was given to 18 food banks throughout California and Arizona. These contributions are aimed at connecting individuals and families struggling to make ends meet to the nutritious and quality foods our customers produce. Supporting those in need is important to the future of our communities, and Farm Credit West is proud to play a small part.

Norton

Senior Vice President and Portfolio Manager of Farm Credit West’s Tempe branch; Cassie Wilkins, Executive Director, All Faith Community Services; Pat Menegay, Office Administrator, All Faith Community Services; Ben Spratling, Vice President Farm Credit West Tempe branch.

AT LEFT

Moore, Senior Vice President and Portfolio Manager of Farm Credit West Woodland branch; Joy Cohan, Yolo County Food Bank Director of Philanthropic Engagement; Nicole Swanson, Assistant Vice President, Farm Credit West Woodland branch.

PICTURED ABOVE (left to right): Doug

,

PICTURED

(left to right): Chuck

Farm Credit West Sponsors California Youth Ag Expo

The 3rd Annual California Youth Ag Expo (CYAE) was held August 3–7 at the International AgriCenter in Tulare, California. This year, Farm Credit West was proud to sponsor this event, attended by over 500 exhibitors who showcased their livestock projects. Participants traveled from all over California to show their youth cattle, swine, sheep and goats. This year’s event also featured the CYAE Skillathon competition and first ever CYAE Speaking Contest. This expo provides the unique opportunity for students to showcase their talents and cultivate their agricultural and leadership skills. CYAE participants are an important part of the future of California agriculture.

Solar Comes to Yuba City Branch

PICTURED AT RIGHT: CYAE exhibitors prepare their goats for show under the sponsorship sign.

This summer, Farm Credit West installed solar panels on the roof of the Yuba City branch office. This project is part of a companywide effort to bring cost efficient energy solutions to all of our locations.

Navigating Uncharted Territory in Today’s Economic Climate: A New Adventure

By Dr. David M. Kohl

The current economic environment is analogous to Lewis and Clark’s quest to find the Northwest Passage. Others would say it is like a roller coaster ride at a theme park with a thrill around every corner and bend.

Fast-forward to the realities of the decade of the 2020s. First, we endured a global pandemic, the Russo-Ukrainian War, and then a quick switch of energy policy from fossil fuels to green energy. Add uncertain trade policy and challenges securing productive labor to the mix. To further complicate matters, inflation rates in the double-digits with the Federal Reserve’s response to kill inflation, despite fiscal policy fueling the fire, have certainly made for a new adventure!

THREE-HEADED, FIRE BREATHING DRAGON

This new adventure is an unusual one with challenges on three fronts. Prices received for commodities are subject to increased volatility. Geopolitics, changes in trade and consumer trends, and major shifts from globalization to decoupling, that is bringing supply chains closer to home into a friendly nation, can change commodity prices very quickly.

Inflation is being felt on the expense side of the ledger. The prices of products using energy components, such as fertilizer, fuel and chemicals, are set to be quite challenging for 2023. Approximately 60% of the world’s fertilizer production is in authoritarian regimes including Russia, China and countries with close proximity such as Belarus. These supplies will most likely go to Brazil, Argentina and other nations that have been courted in China’s Belt and Road Initiative. Since 2013, China has invested over

$1 trillion in 68 countries to gain influence. Now, they will be implementing a full-court press if geopolitical tensions increase with Western nations such as the United States. Finally, rising interest rates are challenging many businesses and individuals. Whether it is for home mortgages or operating funds, who could have imagined interest rates, doubling in the past year? How high will interest rates go and how long will higher interest rates last is anyone’s guess.

NAVIGATING

A challenging environment has been presented. The three-headed, fire breathing dragon can quickly burn through profits, then financial liquidity, and eventually equity or wealth. While mowing hay recently, I thought critically about how my family’s hay and beef cattle operation, along with our dairy creamery, will navigate this new adventure.

Priority number one is to step back and take a deep breath, then embark on planning. This objective exercise gets one to focus on the controllables and manage around the uncontrollable variables.

To assist in planning, draw upon your team of advisors. A break in the hay making business led to a discussion with another agricultural economist who was raking hay.

We discussed the development of monthly cash flows with a wide range of price, cost and interest rate scenarios, particularly if debt is structured on a variable rate.

Later that day, an agronomist stopped by the hayfield. We discussed soil testing, precision application, and possibly using poultry compost with biologicals in the planning for next year. The veterinarian was also in the neighborhood, and we discussed how proactive practices including culling, breeding and continuing to sell genetically tested animals to local consumers may still be a trend.

After we finished making hay, our lender was in the area attending a Virginia Tech football game. We concluded the day with a discussion that producers must focus on their financials and particularly the top half of the balance sheet. Financial liquidity and cash will be imperative over the next couple of years.

It was amazing how a day in the hayfield was transformed into an exercise navigating uncharted times in American agriculture. Remember, if you are proactive, you may be able to tame the three components of the fire breathing dragon, resulting in a positive outcome. Planning using cash flows, breakeven points and financial sensitivity analysis with the help of an advisory team can put the odds of success in your favor in the financial journey of farming and ranching. ■

Planning using cash flows, breakeven points and financial sensitivity analysis with the help of an advisory team can put the odds of success in your favor in the financial journey of farming and ranching.

Dr. David Kohl energizes agricultural lenders, producers and business professionals with his keen insight into the agricultural industry through extensive travel, research and networking around the globe. He is a Professor Emeritus of Agricultural Finance and Small Business Management and Entrepreneurship at Virginia Tech, Blacksburg, VA.

Dr. Kohl has traveled nearly 10 million miles in his career and conducted over 7,000 workshops and seminars for a variety of agricultural audiences. Dr. Kohl’s personal involvement with agriculture provides a unique perspective into the future trends of the agricultural industry and economy.

WINTER 2022

California & Arizona State of the Water Supply

Allocation Reductions from the Colorado River

Overview

To summarize updates to the water situation in California and Arizona during the coming months:

• 2023 Colorado River water supplies for Arizona have been reduced and some districts in California are voluntarily reducing their allocation.

• California updated its long-term water plan and a bill for a California groundwater extraction permit failed in the Senate.

• In Arizona, funding from multiple sources gives Arizona’s water supply some relief and a Water Advisory Council shines a hopeful light on the state

Although California has the most secure water rights on the Colorado River and has never faced a reduced allocation, the four water districts that receive California’s Colorado River water supply — Imperial Irrigation District, Metropolitan Water District of Southern California, the Coachella Valley Water District and the Palo Verde Irrigation District — decided to voluntarily reduce their 2023 allocation by 9%, or 400,000 acre-feet, through a deal with the United States Bureau of Reclamation (USBR). This will ultimately help increase reservoir levels at Lake Mead, increasing their chances of there being enough water available to them in the future and easing the burden on other states that receive water from the Colorado River.

Additionally, Arizona’s 2023 Colorado River supply allocation was reduced to 79% due to the Tier 2a shortage, recently announced by USBR. Farmers that rely on Central Arizona Project (CAP) water will see significant supply cuts next year, especially farmers in Pinal County, who may not receive any CAP water.

In Arizona — a state that gets 36% of its water from the Colorado River — these cuts have led to an increase in funding for water supply projects and drought resiliency, collaboration across many groups of stakeholders, and an understanding that a permanent change in the way the state uses water is needed.

California

California’s updated water plan balances projects that will increase the state’s water storage capacity with conservation measures that will help the state’s water sustainability.

Furthermore, a bill died in the Senate that would have required property owners to submit an engineer report with all well permit applications and would have required GSAs to investigate and review all new well permits within their boundaries.

Arizona

New funding was recently made available by the government after the passage of SB-1740 in June, which provides $1.2B over three years to fund projects that will increase Arizona’s water supply and improve conservation.

Other recent funding includes $4B from the Inflation Reduction Act, administered by USBR. These funds are dedicated to all Colorado River water users and will be used in three ways: providing funding to pay users to give up their water allocation; incentivizing conservation and efficiency programs and technologies; and supporting the restoration of riparian ecosystems impacted by drought.

The new funding has spurred the creation of a Water Advisory Council, which will bring together a diverse group of Arizona stakeholders that will work together to find solutions to Arizona’s water shortage.

Next Steps

While drought conditions persist, funding helps push toward relief. In 2023, it will be crucial for farmers and agricultural lenders to share strong connections, transparent information, and work together to improve the water resilience of agricultural land. Together, these two groups of stakeholders can create financial success and a sustainable future. ■

AQUAOSO is a climate fintech company that provides data, climate, mapping and analytic tools to ag lenders. Agricultural lenders use AQUAOSO to help their borrowers identify, understand and mitigate climate risks on their farms, including water, wildfires and more. For more information, please visit aquaoso.com

Sources

1. ABC 15 Arizona: abc15.com/weather/ impact-earth/cap-not-sure-how-muchcolorado-river-water-cities-will-get-in-2023

2. AZ Central: azcentral.com/story/news/local/ arizona-environment/2022/06/27/arizonalawmakers-bank-billion-dollars-augmentand-save-water/7736861001

3. AZ Central: azcentral.com/story/news/local/ arizona-environment/2022/08/09/sinemawater-managers-discuss-colorado-riverdrought-aid/10271410002

4. AZ Family Digital News: azfamily.com/ 2022/08/16/colorado-river-cuts-expectedarizona-other-area-states

5. CalMatters: calmatters.org/environment/2022/ 08/newsom-strategy-california-water-supply

6. CalMatters: calmatters.org/environment/ 2022/09/california-legislation-water-drought

7. The Colorado Sun: coloradosun.com/ 2022/10/06/upper-basin-california-proposalconserve-colorado-river-water

8. Maven’s Notebook: mavensnotebook.com/ 2022/08/16/this-just-in-interior-departmentannounces-actions-to-protect-colorado-riversystem-sets-2023-operating-conditions-forlake-powell-and-lake-mead

9. Office of the Governor: azgovernor.gov/ governor/news/2022/09/what-know-new-lawseducation-public-safety-and-water-securitygo-effect-today

10. The Press: thepress.net/news/newsom-plotsstates-water-drought-strategy-in-antiochincrease-supply-adapt-to-extreme-weather/ article_9984e216-1ed1-11ed-aa186b4b70b0f0fa.html

A MINDSET FOR CHANGE

By Tess Cox, Principal, Tess Cox & Associates

CHANGE.

The very mention of the word “change” will delight those who look for new possibilities, which will feel exciting on behalf of creating greater potential for the future. Others will think of change as difficult and challenging, as they get lost in all of the details that are required to make change happen. They may be thinking or asking, “Why do we need to change; everything has been working fine?”

What is interesting and may be surprising is — we actually need both mindsets in organizational change management. An organization needs new possibilities for the future that are exciting and support greater growth and potential on behalf of the vision and goals of the company. And, an organization needs the details, plans and systems in order to make change happen for the future. True transformation for an organization begins when both mindsets work collectively. Yet, how do we embrace change and stay aligned with one another?

As we coach our clients, we offer the following learning of a Growth Mindset vs. a Fixed Mindset. It is a helpful tool and resource to build our client’s self-awareness and ask, “Why might I be struggling with change?” Or, “What is holding me back from embracing change?” When we reflect on what the Growth Mindset creates within us — typically, we will choose to grow as the outcomes expand our opportunities. When we realize what a Fixed Mindset creates within us — typically, we want to change, as this mindset tends to limit the outcomes for us. (See graphic at the top of the next page.)

GROWTH MINDSET CREATES

Courage

FIXED MINDSET CREATES

You

You tend to master a new path or way of doing things as you make greater effort towards change

You tend to learn from constructive criticism

You tend to find key learning lessons and inspiration from your successes

Resilience

Potential

Hope

Respect

Disrespect

When embracing change management, here are mindsets and behaviors we can choose to implement:

• Have the COURAGE to stay engaged and embrace CHANGE.

• Learn to be RESILIENT and RESET your mindset around CHANGE.

• Formulate POSITIVE plans around the POTENTIAL of CHANGE.

• Accept that CHANGE can IMPACT a greater HOPE for all.

• Stay RESPECTFUL of yourself and others while experiencing CHANGE.

As we support our clients, there is a common theme: change is constant on many different levels within organizations. Whether the company is changing locations; experiencing attrition or new leadership; merging with another company; becoming a public company; or experiencing employee personal/ professional challenges — the need for a plan remains consistent. Here are four helpful practices in support of managing change:

1. Identify what is needed to address and accept the change.

2. Stay focused on the commonsense aspects of the change.

3. Communicate with best intentions when speaking about change.

4. Give people/employees time to process the pending change.

Encouraging a Growth Mindset and a set of behaviors by having a plan will support greater success for managing your organizational needs around change. ■

We always want the best for you as you experience A Mindset for Change in your workplace.

Tess’ methodology in coaching, consulting and training guides clients through a process of learning, reflection and consideration for growth and development. The essential tools and resources create a strategy and a blueprint for deliverables and desired outcomes for their lives and work.

Visit tesscoxandassociates.com to learn more, or email Tess at tess@tesscoxandassociates.com.

You tend to embrace the reality of your challenges

tend to persist in the aspect of setbacks or disappointments

You tend to avoid challenges Fear

You may get frustrated or choose to give up too early / soon Lack of coping skills

You may think your potential is predetermined Feeling success is impossible

You may take criticism personally Feeling uninspired

You may feel threatened by your lack of success and the success of others

Farm Credit West Merger Road Map

At this exciting intersection in our Association’s history, we look back on the significant milestones that have led us to this point in time. Follow the map to learn about the journey your Association has traveled over the past few decades.

Farm Credit Services Southwest is formed from the merge of Arizona Farm Credit, El Centro FLBA, and Imperial-Yuma PCA.

Arizona Farmers PCA, Arizona FLBA, and Arizona Livestock PCA merge to form Arizona Farm Credit .

Federal Land Bank of Sacramento Valley is formed from Yuba City FLBA, Woodland FLBA, and Sacramento FLBA.

Woodland PCA and Feather River PCA merge to form Sacramento Valley Production Credit Association

1989

Central Coast Farm Credit is formed from the merge of Ventura FLBA, Ventura PCA and San Luis Obispo PCA.

1990

1994

1993 1992

Valley AgCredit is established from the merge of Bakersfield PCA & FLBA and Visalia PCA & FLBA.

Farm Credit West merges with Sacramento Valley Farm Credit.

2002

2023 marks the beginning of AgWest Farm Credit through the merge of Farm Credit West and Northwest Farm Credit Services.

Farm Credit West is established from the merge of Central Coast Farm Credit and Valley AgCredit.

2015 2008

Farm Credit West merges with Farm Credit Services Southwest.

OUR DEEPEST APPRECIATION

This issue marks the final issue of Spotlight . For years this magazine has highlighted the inspiring stories of Farm Credit West’s customer-owners, and the dedication and grit found in farmers and ranchers across California and Arizona.

As we close this chapter, we want to extend our sincere appreciation to all contributors. It has been a privilege to learn from experts in economics, technology, legislative and regulatory policy, leadership, and more. With help from these trusted professionals throughout agriculture, Spotlight has brought meaningful and timely information to each of you.

For all Farm Credit West employees — You have brought profound insight to each issue of Spotlight through Candid Conversations articles and customer stories. Your dedication to the communities you serve and this Association brings these pages to life and is truly remarkable — thank you.

To our Board of Directors — thank you for your ongoing leadership and dedication to the Farm Credit mission. Your expertise, engagement and partnership have guided so much of the content in these pages.

Finally, thank you to you — our customer-owners — who have made this newsletter possible. Your stories have filled this magazine and provided new perspectives to tackling some of the challenges of the industry.

Next year, you will be receiving a new newsletter from our merged entity, AgWest Farm Credit. While our name will have changed, the same relevant information, exceptional articles and inspiring stories will be delivered straight to your mailbox.

Carrot Cake Cookies with Cream Cheese Frosting

INGREDIENTS

Cookies

1 cup softened butter

1 cup granulated sugar

½ cup brown sugar

2 eggs

1 tsp vanilla

3 cups all-purpose flour

2 ¼ tsp cinnamon

1 tsp baking powder

1 tsp baking soda

½ teaspoon salt

2 cups grated carrots

Frosting

½ cup softened butter

8 oz softened cream cheese

1 tsp vanilla extract

3 – 4 cups powdered sugar

DIRECTIONS

Cookies

In a large bowl, cream butter and sugars until light and fluffy. Beat in eggs and vanilla. Mix in cinnamon, baking powder, baking soda and salt, and mix well. Add flour and mix until combined. Add in 2 cups of carrots. Bake the cookies in a 375 degree oven for 15 –18 minutes or until golden brown.

Frosting

Beat the butter and cream cheese together until completely smooth. Beat in vanilla and powdered sugar. Keep adding more powdered sugar to the frosting until you get your desired level of sweetness and thickness. Frost cookies with the cream cheese frosting and apply chopped pecans around the edges of cookies.

2022 – 2023

Holiday Calendar

(Offices are closed)

Christmas Day Observance

Monday, December 26, 2022

New Year’s Day Observance

Monday, January 2, 2023

Martin Luther King Jr. Day Monday, January 16, 2023

Presidents Day

Monday, February 20, 2023

Memorial Day Monday, May 29, 2023

Juneteenth National Independence Day Monday, June 19, 2023

Independence Day Tuesday, July 4, 2023

Labor Day

Monday, September 4, 2023

Columbus Day Monday, October 9, 2023

Thanksgiving Day Thursday, November 23, 2023

Christmas Day

Monday, December 25, 2023

Sandy Ranson joined the Farm Credit West team in 2018 and is a Senior Credit Support Specialist at the Imperial Valley branch. She loves exchanging recipes with her six sisters and competing in Holtville’s annual Carrot Festival Cook-Off. Sandy has two children and two grandkids.

Recipe by Farm Credit West employee Sandy Ranson

Getting Into the CREATE Mindset

By

Whether looking to buy new property, expand your operation, transition ground to enhance diversification or invest in a new technology to improve efficiencies, doing proper research is essential before committing to a new endeavor. By conducting a cost-benefit analysis and following the CREATE framework, you can enter a new project with full confidence and ensure the project is right for your operation and your balance sheet.

A cost-benefit analysis is the process of adding all the anticipated costs of a project and subtracting them from the total projected revenues or benefits. A favorable project will have benefits outweigh the costs.

To get started on your own cost-benefit analysis, list all tangible and intangible costs of the project. Factor in potential interest rate increases, additional overhead, training for staff or possible delays in production while the new project is implemented. Then compile all the direct and indirect benefits, which include everything from increased revenue and efficiencies to greater opportunity for expansion. Then compare the two lists.

The cost-benefit analysis is only a piece of the larger puzzle. Follow the CREATE framework to fully understand if now is the right time to invest in the new endeavor. By taking the time to answer these questions honestly, you can have clarity prior to taking your next steps.

Lauren Evangelo, VP– Credit

How to know if now is the right time to invest in the next endeavor at your operation.

Have I discussed the opportunity with all trusted and necessary parties?

Involve your lender early in the process. At Farm Credit West, we want to understand the opportunities you see and can provide an outside perspective that may help you make the best decision. In addition, have a conversation with the next generation on the opportunities available and make sure they are interested to carry out the planned project later on down the line.

Does this opportunity provide a positive ROI?

ROI is calculated by dividing the anticipated profit, by the cost. If ROI is positive, that means the project is likely to generate a positive cash flow. Consider the time frame of this ROI.

Is this project necessary to protect my current assets?

Consider if a new project will be key in helping achieve the overall goals and profitability of your operation. Is this where you want to spend your capital? Will this new project make you more efficient or help secure necessary resources (feed, water, land, etc.) for the future? If the answer to these questions is yes, then the project is likely worth consideration.

What are the results of my cost-benefit analysis?

Spend ample time analyzing the results of the cost-benefit analysis. If the project is favorable, there will be a long-term positive cash flow that supports your overall financial strength. Lean on your lender in this step. We can provide a comparison against similar operations, point out inefficiencies or provide information on trends we are seeing in the market.

Do I have time to make this investment a success?

All good things take time. If your schedule is spread too thin, it is likely you won’t have the ability to cultivate the new project. Look to hire an additional manager, or someone else to help you take on the project just be sure to build it into the costs of the cost-benefit analysis.

Am I passionate and excited about this investment?

If you are not all in, the project probably won’t pan out. If you are excited about the possibilities in the long run, you are likely to ride it out, even if there are unexpected ups and downs. Positive cash flow will not show itself overnight, so the ability to be patient and keep an eye on the long-term goal is key for long-term success.

If the answers to the CREATE framework are favorable, it is likely that this investment is right for your operation and it is time to get started.

Remember not every opportunity you look at is going to be a “Yes.” However, even if the answer is “No,” spending the time to go through a cost-benefit analysis and the CREATE framework can be just as meaningful to your operation’s success. ■

Building Security Preparedness Through Cyber Drills Pulling the (Cyber) Fire Alarm

By David Guilmette

Farm Credit West Chief Information Security Officer

We all remember conducting fire drills when we were in elementary school. The fire alarm would go off, the teacher would line all the students up, and then everyone would exit the building and gather at a meeting spot. Sometimes the fire department would be outside observing how our drill was conducted. As a child, I always enjoyed these drills because it took time away from class and I got to see the fire trucks. As an adult, I realize that these were important exercises to give students an opportunity to practice how to properly exit the building and give administrators an opportunity to see where things might go wrong in the event of an actual fire.

Conducting cyber drills at your operation are just as important as conducting elementary school fire drills. A cyber drill is a planned event that simulates a cyberattack and tests the business’ cyber response. It is an opportunity for everyone involved in the process to practice an emergency scenario and evaluate how well the process goes.

Practicing cyber drills frequently can greatly enhance the security of your operation. Here are some steps to keep in mind when preparing your own cyber drill.

1Develop a written plan. Before conducting a cyber drill, develop plans for each cyber security scenario that may occur, like a phishing attempt or malware data breach. These plans should detail who is responsible for what in the event of an incident, including a timeline of events.

2

Practice the scenarios. Run through each scenario and test whether the written plan is going to play out as expected. This will help identify any issues that may come up, should the event happen to your operation.

3

Include the right people in the drill. The exercise isn’t just for IT staff or the management team. Having all levels of the operation involved helps to give everyone an understanding of what will happen during the response to a particular situation. This also provides opportunities for staff to ask questions and challenge the methods of response — which is not something you want happening during an actual incident.

Many times, people look to IT for guidance when a breach occurs. While IT will be an importance part of the recovery, it is really the entire operation that creates a successful response.

4

Reflect on how the drill was conducted through after-action reports. It is important to gather feedback after you’ve completed a test. This helps improve the written plan by filling in the gaps identified during the exercise.

Cyber drills give you and others a chance to work through high-risk scenarios in a low-risk environment and helps everyone involved build confidence in their abilities. Preparing for these what-if scenarios ensures that your organization will be able to extinguish the fire if a cyberattack occurs. ■

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940 W. El Monte Way Dinuba, CA 93618 559.591.9378

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Territory and Office Locations

KERN COUNTY

19628 Industry Parkway Drive Bakersfield, CA 93308 661.399.7360

RURAL ARIZONA / SAFFORD

1120 S. 20th Avenue Safford, AZ 85546 928.348.9571

SANTA MARIA

1178 Tama Lane Santa Maria, CA 93455 805.922.7991

TEMPE

3003 S. Fair Lane Tempe, AZ 85282 602.431.4100

TEMPLETON

175 Cow Meadow Place Paso Robles, CA 93446 805.434.3665

TULARE

200 E. Cartmill Avenue Tulare, CA 93274 559.684.1478

VENTURA

2031 Knoll Drive Ventura, CA 93003 805.477.1020

WOODLAND

440 Pioneer Avenue Woodland, CA 95776 530.666.3333

YUBA CITY

1800 Lassen Boulevard Yuba City, CA 95993 530.671.1420

YUMA 2490 S. 5th Avenue Yuma, AZ 85364 928.344.3200

Merry Christmas