Credit and Risk Management Corny Gallagher Agribusiness Executive Bank of America Cal-Med Workshop Sonoma, California October 26, 2007

FARM ASSETS / DEBT U.S. ($billions) Real Estate1,5211,6351,858 Non RE Total Assets1,8051,9202,169 RE Debt Non RE Debt Total Debt EQUITY$1,612$1,724$1,955 ROE 4.7% 3.9% 4.4%

FARM INCOME U.S. ($billions) Crops Livestock Cash Receipts Cash Expenses Gov’t. Payments Net Farm Income $77 $68 $87 USDA

FOCUS ON CASH FLOW The primary source of repayment of short term production loans is from the cash flow of the current years crops and livestock sales. The primary source of repayment of long term RE loans is the net income from the property pledged. Acres farmed times expected yields times forecasted prices determines income forecast. Less expected cost to produce the revenue determines the net income available to service debt.

BUSINESS SUCCESS CHARACTERISTICS NEEDED TO MANAGE RISK Financial Management Equity Capital Diversification Vertical Integration Productivity and Technology Marketing Succession plan - Sustainabliity

SUSTAINABILITY The Code is conceived around the three “E”’s

Driving Economic Forces in California Agriculture People Land Air Water Global Competitiveness

California at Night

We’re not the only ones growing... competing for natural resources 36 million ( ,000/year) 55 million by 2050 Need: 7 million homes; 10 million jobs; 12 million more motor vehicles FARMING IN AN URBAN STATE

 Almonds: 100%  Pistachios: 100%  Walnuts: 100%  Processing Tomatoes: 95%  Figs, Dates, Olives, Kiwi: 100%  Apricots: 95%  Plums/Prunes: 97%  Grapes: 87%  Vegetables: Very high percentage CALIFORNIA DOMINATES U.S. PRODUCTION OF SPECIALTY CROPS

FARMER MAC Farmer Mac is America's secondary market for first mortgage agricultural real estate loans. Farmer Mac was created by Congress to improve the availability of long-term credit at stable interest rates to America's farmers, ranchers and rural homeowners, businesses and communities. Farmer Mac accomplishes its public policy mission primarily by purchasing, or committing to purchase, qualified loans from agricultural mortgage lenders, thereby replenishing their source of funds to make new loans.

FARMER MAC CREDIT STANDARDS AND GUIDELINES The borrower’s pro forma debt-to-asset ratio should be 50% or less, on a market-value basis. Debt coverage ratio on the loan from pledged assets must be 1 to 1 or better. The borrower’s pro forma overall total debt service coverage ratio should not be less than 1.25 to 1, including net income from farm and non-farm sources; Pro forma current ratio should not be less than 1 to 1.

FARMER MAC CREDIT STANDARDS AND GUIDELINES The loan-to-appraised value (“LTV”) shall not exceed 70%, although Farmer Mac has established a maximum LTV of 75% in the case of qualified facility loans.

UNIVERSITY OF CALIFORNIA COOPERATIVE EXTENSION 2006 SAMPLE COSTS TO ESTABLISH AN ORCHARD AND PRODUCE ALMONDS SAN JOAQUIN VALLEY NORTH MICRO SPRINKLER IRRIGATION

COST TO ESTABLISH ALMONDS PER ACRE 3 YEAR INPUTS$4,400 $6,000 LAND$7,000$15,000 TOTAL $11,400$21, SALES $10,000 $25,000 CURRENT NON AG$30,000+

FORECASTED CASH FLOW DRIVERSLOWHIGHAVE YIELD1,7003,5002,160 PRICE (10 YR) $0.86$2.48$1.52 INCOME$1,462$8,680$3,283 OP COSTS$1,791$3,673$2,000 NET INCNEG$5,000$1,283

FORECASTED DEBT SERVICE PER ACRE- RATE 8 % -20 YEARS DRIVERS LOW HIGH AVE COST $10,000$30,000$15,000 DEBT$5,000$15,000$10,500 NET INC NEG$5,000$1,283 PAYMENT $509$1,527$ 1,070 COVERAGE RATIO1.2 TO 1 MAX LOAN AT 1 TO 1 $12,500 PAY $1273

SMALL AMOUNT OF CAL-MED LAND IN THE WORLD

HIGH DENSITY OF PEOPLE IN CAL-MED REGIONS

More than $15 billion in commitments to the industry sector. Clients value our industry knowledge and expertise as well as our ability to provide a complete range of financial products and services. We provide long term RE loans with flexible terms. Bank of America is one of the largest commercial bank providers of financial services to the food products industries in the United States.