By Carl Weiler, Chairman of the Board & Gary Dyer, President and CEO

We are pleased to present to the Stockholders of Farm Credit Services Southwest, the annual report for the twelve months ending December 31, 2007. This year’s annual report is for the three entities on a consolidated basis.

As you will see in this year’s report, the Association continued to perform at a very high level in 2007.

• Loans and investment securities increased to $907 million on December 31, 2007, a 9% increase and our highest level of earning assets to date.
• Credit quality remained near its highest level ever with nearly 99% of loans having no serious financial weaknesses.
• Nonaccrual loans, loans to borrowers experiencing the most serious financial problems, totaled only $1.1 million, which was approximately 0.1% of loans outstanding.
• Net earnings increased to $12.6 million in 2007 from $12.1 million in 2006.

Overall, as this year’s report shows, your Association is in excellent financial health.

One of the most important goals of your Board of Directors is to return a portion of the Association’s earnings to its members through a patronage refund program. The Board has established certain financial goals that the Association must achieve in order to pay refunds. We are pleased to report that the Association achieved these financial goals in 2007 and will pay over $4.2 million in refunds out of 2007 earnings. On average, the refund will reduce your effective interest rate ½% for 2007. We expect to pay these refunds in April 2008. This year’s refund increases the total cash patronage paid since we began our program in 2001 to $20.5 million.

Be assured, we are not resting on our past accomplishments. We are continuing to look for ways to better serve our members. In so doing we will continue to focus on our strategy for long-term success, which is to:

• Provide outstanding customer service with a staff that is knowledgeable and committed to agriculture.
• Offer competitive interest rates and flexible loan products.
• Charge no fees or points for approved programs
• When our financial goals are maintained, return a portion of our earnings via cash patronage refunds to our members.

By fully implementing this strategy we will deliver value to our members and build a successful Association that will be positioned to continue serving agriculture for many years. Thank you very much for helping us achieve our success in 2007.

Equal Housing Lender - Equal Credit Opportunity Lender - Equal Opportunity Employer.

© 2000-2008 Farm Credit Services Southwest, ACA, PCA, and FLCA. All rights reserved.