Some statements made in this report, and in particular in the "Management's Discussion & Analysis of Financial Condition and Results of Operations" section, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 pertaining to management's current expectations as to Farmer Mac's future financial results, business prospects, and business developments. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate, or imply future results, performance, or achievements. These statements typically are accompanied by, and identified with, terms such as "anticipates," "believes," "expects," "intends," "plans," "potential," "may," "should," and similar phrases. This report includes forward-looking statements addressing Farmer Mac's:

Management's expectations for Farmer Mac's future necessarily involve a number of assumptions and estimates and the evaluation of risks and uncertainties. Various factors or events, both known and unknown, could cause Farmer Mac's actual results to differ materially from the expectations as expressed or implied by the forward-looking statements, including the factors discussed under "Risk Factors" in Part I, Item 1A of this Annual Report on Form 10-K for the fiscal period ended December 31, ~~2015~~2016, and uncertainties regarding:

In light of these potential risks and uncertainties, no undue reliance should be placed on any forward-looking statements expressed in this report. Furthermore, Farmer Mac undertakes no obligation to release publicly the results of revisions to any forward-looking statements that may be made to reflect new information or any future events or circumstances, except as otherwise mandated by the SEC. The information contained in this report is not necessarily indicative of future results.

The Federal Agricultural Mortgage Corporation ("Farmer Mac") is a stockholder-owned, federally chartered corporation that combines private capital and public sponsorship to serve a public purpose. Congress has charged Farmer Mac with the mission of providing a secondary market for a variety of loans made to borrowers in rural America. A secondary market is an economic arrangement in which the owners of financial assets, such as the originators of loans, may sell all or part of those assets or pay a fee to otherwise offset some or all of the inherent risks of holding the assets. Farmer Mac's main secondary market activities are:

Securities guaranteed by Farmer Mac may be retained by the seller of the underlying eligible loans, retained by Farmer Mac, or sold to ~~third party~~third-party investors.

Farmer Mac was established under federal legislation first enacted in 1988 and amended most recently in 2008 – Title VIII of the Farm Credit Act of 1971 (12 U.S.C. §§ 2279aa et seq.), which is sometimes referred to as Farmer Mac's charter. Farmer Mac is ~~known as~~ a government-sponsored enterprise ("GSE") by virtue of the status conferred by its charter. The charter provides that Farmer Mac has the power to establish, acquire, and maintain affiliates ~~(as defined in the charter)~~ under applicable state law to carry out any activities that otherwise would be performed directly by Farmer Mac. Farmer Mac established its three existing subsidiaries – Farmer Mac II LLC, Farmer Mac Mortgage Securities Corporation, and Contour Valuation Services, LLC (which does business as AgVisory) – under that power.

Farmer Mac is an institution of the Farm Credit System (the "FCS"), which is composed of the banks, associations, and related entities, including Farmer Mac and its subsidiaries, regulated by the Farm Credit Administration ("FCA"), an independent agency in the executive branch of the United States government. Although Farmer Mac ~~(including its subsidiaries)~~ is an institution of the FCS, it is not liable for any debt or obligation of any other institution of the FCS. None of FCA, the FCS, or any other individual institution of the FCS is liable for any debt or obligation of Farmer Mac or its subsidiaries. The debts and obligations of Farmer Mac and its subsidiaries are not guaranteed by the full faith and credit of the United States.

Farmer Mac's two principal sources of revenue are:

Farmer Mac funds its purchases of eligible loans (including participation interests in eligible loans) and guaranteed securities primarily by issuing debt obligations of various maturities in the public capital

markets. The proceeds of debt issuance are also used to fund liquidity investments that must comply with policies adopted by Farmer Mac's board of directors and with FCA regulations, which establish limitations on dollar amount, issuer concentration, and credit quality. Those regulations can be found at 12 C.F.R. §§ 652.1-652.45 (the "Liquidity and Investment Regulations"). Farmer Mac's regular debt issuance supports its access to the capital markets, and Farmer Mac's liquidity investment assets provide an alternative source of funds should market conditions bebecome unfavorable. As of December 31, ~~2015,~~2016, Farmer Mac had ~~$6.6~~$3.8 billion of discount notes and ~~$7.4~~$9.9 billion of medium-term notes outstanding. For more information about Farmer Mac's eligible loan assets and liquidity investment assets, as well as its financial performance and sources of capital and liquidity, see "Management's Discussion and Analysis of Financial Condition and Results of Operations."

Farmer Mac's activities are intended to provide lenders with an efficient and competitive secondary market that enhances these lenders' ability to offer competitively-priced financing to rural borrowers. This secondary market is designed to increase the availability of ~~long-term~~ credit at stable interest rates to America's rural communities and to provide rural borrowers with the benefits of capital markets pricing and product innovation. The secondary market provided by Farmer Mac functions as a bridge between the national capital markets and the agricultural and rural credit markets by attracting new capital for financing rural borrowers.

Farmer Mac's purchases of both eligible loans and obligations secured by eligible loans, as well as Farmer Mac's guaranteed securities sold to third party investors, increase lenders' liquidity and lending capacity and provide a continuous source of funding for lenders that extend credit to borrowers in rural America. Farmer Mac's issuance of LTSPCs for eligible loans held by lenders, as well as ~~Farmer Mac's~~its issuance of guaranteed securities retained by lenders in exchange for the related securitized loans, result in lower regulatory capital requirements for the lenders and reduced borrower or commodity concentration exposure for some lenders, thereby expanding their lending capacity. By increasing the efficiency and competitiveness of rural finance, the secondary market provided by Farmer Mac has the potential to lower the interest rates paid on loans by rural borrowers.

The current economic and regulatory environment presents Farmer Mac with opportunities to market a mix of products to rural lenders in need of capital, liquidity, portfolio diversification, and access to a wide variety of loan products including those with long-term fixed ~~rate products, and portfolio diversification.~~rates. As part of its outreach strategy, Farmer Mac listens to current and prospective rural lenders to identify their specific needs, with an emphasis on individual lender meetings, lender road shows, and face-to-face contact at state and national banking conferences. Farmer Mac seeks to maximize the use of technology to support these business development efforts.

Farmer Mac conducts its secondary market activities through four lines of business – Farm & Ranch, USDA Guarantees, Rural Utilities, and Institutional Credit. The loans eligible for the secondary market provided by Farmer Mac include:

Under the Farm & Ranch line of business, Farmer Mac purchases eligible mortgage loans secured by first liens on agricultural real estate, which includes part-time farms and rural housing ("Farm & Ranch loans"). Farmer Mac also guarantees securities representing interests in pools of ~~mortgage loans~~ eligible ~~for the~~ Farm & Ranch ~~line of business~~loans ("Farm & Ranch Guaranteed Securities"). Additionally, Farmer Mac commits to purchase, subject to the terms of the applicable LTSPC agreement, eligible Farm & Ranch ~~mortgage~~ loans. To be eligible, loans must meet Farmer Mac's credit underwriting, collateral valuation, documentation, and other specified standards ~~that are discussed~~described in "Business—Farmer ~~Mac~~Mac's Lines of Business—Farm & Ranch." As of December 31, ~~2015,~~2016, outstanding Farm & Ranch loans held by Farmer Mac and loans that either backed off-balance sheet Farm & Ranch Guaranteed Securities or were subject to LTSPCs totaled ~~$5.7~~$6.1 billion.

Under the USDA Guarantees line of business, Farmer Mac II LLC, a subsidiary of Farmer Mac, purchases the portions of certain agricultural, rural development, business and industry, and community facilities loans guaranteed by the USDA under the Consolidated Farm and Rural Development Act (7 U.S.C. §§ 1921 et seq.). Farmer Mac refers to these USDA-guaranteed portions of loans as "USDA Securities." Farmer Mac II LLC also purchases USDA Securities in exchange for issuing securities to third parties backed by those USDA Securities, which are then also guaranteed by Farmer Mac ("Farmer Mac Guaranteed USDA Securities"). As of December 31, ~~2015,~~2016, outstanding USDA Securities and Farmer Mac Guaranteed USDA Securities totaled ~~$1.9~~$2.1 billion, of which ~~$41.8~~$139.6 million were Farmer Mac Guaranteed USDA Securities.

Under the Rural Utilities line of business, Farmer Mac's authorized activities are similar to those conducted under the Farm & Ranch line of business – purchases of, and guarantees of securities backed

Under the Institutional Credit line of business, Farmer Mac guarantees and purchases ~~or guarantees~~ general obligations

of lenders that are secured by pools of the types of loans eligible for purchase under Farmer Mac's Farm & Ranch, USDA Guarantees, or Rural Utilities lines of business. AgVantage^® is a registered trademark of Farmer Mac used to designate Farmer Mac's guarantees of securities related to these general obligations of lenders that are secured by pools of eligible loans and that comprise the Institutional Credit line of business. Farm & Ranch Guaranteed Securities, Farmer Mac Guaranteed USDA Securities, and AgVantage Securities are sometimes collectively referred to as "Farmer Mac Guaranteed Securities." For more information on the products currently offered under Farmer Mac's Institutional Credit line of business, see "Business—Farmer ~~Mac~~Mac's Lines of Business—Institutional Credit." As of December 31, ~~2015,~~2016, outstanding securities held or guaranteed by Farmer Mac in its Institutional Credit line of business totaled ~~$6.7~~$7.3 billion.

Farmer Mac is the only Congressionally-chartered corporation established to provide a secondary market for agricultural mortgage loans, rural utilities loans, and USDA Securities. However, Farmer Mac does face indirect competition from a variety of sources. These sources include other financial institutions and other types of financial entities that purchase, retain, securitize, or provide financing for the types of assets eligible for Farmer Mac's secondary market activities, including commercial and investment banks, insurance companies, other FCS institutions, and financial funds. Farmer Mac also competes indirectly with originators of eligible loans who would prefer to retain the loans they originate rather than sell them into the secondary market. Farmer Mac is able to compete to acquire eligible loans due to the variety of products it offers and its ability to offer low-cost funding to its customers. This enables Farmer Mac to offer flexible financing options and products designed to meet the variety of needs faced by lending institutions related to capital requirements, liquidity, credit risk, and management of sector and geographic concentrations and borrower exposures. However, the relative competitiveness of the loan rates offered by Farmer Mac is affected by the ability of other lending institutions to subsidize their rates on the loan products with which Farmer Mac competes by price averaging with other types of loans or by accepting a lower return on equity. Farmer Mac's ability to develop business with lending institutions is also affected by changes in the levels of available capital and liquidity of those institutions, the existence of alternative sources of funding and credit enhancement for those institutions, the rate of growth in the market for eligible loans, and demand for Farmer Mac's products.

Farmer Mac's competitive position is also affected by the willingness of originators to offer eligible loans for sale in the secondary market, as well as the types and variety of products offered by Farmer Mac's competitors to meet the needs of Farmer Mac's customer base. Farmer Mac's limits on borrower exposure and loan size, as well as the types of loans that are eligible for Farmer Mac's lines of business, also affect Farmer Mac's competitive position. Farmer Mac's ability to obtain low-cost funding in the debt markets is essential to its ability to maintain its competitive position with its customers. As a result, competition for debt investors with other debt-issuing institutions, such as the FCS, Federal Home Loan Banks, Fannie

The following table presents the outstanding balances of Farm & Ranch loans held and loans underlying Farm & Ranch Guaranteed Securities and LTSPCs as of the dates indicated:

Farmer Mac offers loan products designed to increase the secondary market liquidity of agricultural real estate mortgage loans and the lending capacity of financial institutions that originate those loans. Farmer Mac enters into mandatory delivery commitments to purchase loans and offers rates for those commitments daily. Farmer Mac also purchases portfolios of newly originated and seasoned loans that are current in payment on a negotiated basis. Farmer Mac purchases both fixed and adjustable rate loans that have a variety of maturities and often include balloon payments. ~~Loans~~Of the $966.0 million of loans purchased ~~may sometimes include provisions that require a yield maintenance payment or some other form of prepayment penalty~~ in the ~~event a borrower prepays a loan (depending upon the level~~Farm & Ranch line of ~~interest rates at the time~~business during 2016, 60 percentincluded balloon payments. By

comparison, of the $748.4 million of loans purchased in the Farm & Ranch line of business during 2015, 61 percent included balloon payments.

Under the USDA Guarantees line of business, Farmer Mac ~~offers two credit enhancement alternatives~~II LLC, a subsidiary of Farmer Mac, purchases the portions of certain agricultural, rural development, business and industry, and community facilities loans guaranteed by the USDA under the Consolidated Farm and Rural Development Act (7 U.S.C. §§ 1921 et seq.). Farmer Mac refers to ~~direct loan~~these USDA-guaranteed portions of loans as "USDA Securities." Farmer Mac II LLC also purchases ~~through~~USDA Securities in exchange for issuing securities to third parties backed by those USDA Securities, which are then also guaranteed by Farmer Mac ("Farmer Mac Guaranteed USDA Securities"). As of December 31, 2016, outstanding USDA Securities and Farmer Mac Guaranteed USDA Securities totaled $2.1 billion, of which $139.6 million were Farmer Mac Guaranteed USDA Securities.

Under the Rural Utilities line of business, Farmer Mac's authorized activities are similar to those conducted under the Farm & Ranch line of business ~~that allow approved lenders the ability to retain the cash flow benefits~~– purchases of, ~~their~~and guarantees of securities backed by, eligible rural utilities loans and increase their liquidity and lending capacity: (1) LTSPCs and (2) Farm & Ranch Guaranteed Securities. LTSPCs and securitization trusts where Farmer Mac is not the primary beneficiary result in the creation of off-balance sheet obligations for Farmer Mac. Historically, the only securitization trusts where Farmer Mac has not determined itself to("Rural Utilities loans"). To be ~~the primary beneficiary have been trusts containing 100 percent participation interests in~~eligible, Rural Utilities loans ~~that comprised an LTSPC pool prior to securitization, and in which the participating institution is not a related party to Farmer Mac. In performing~~must meet Farmer Mac's ~~purchase~~credit underwriting and guarantee obligations related to LTSPCs and Farm & Ranch Guaranteed Securities, payments made on the underlying loans or participation interests and liquidation of the related collateral (in the event of default under the terms of those assets) are intended to protect Farmer Mac against losses.

Under the Institutional Credit line of business, Farmer Mac guarantees and ~~2014, approximately 7.8 percent and 8.2 percent, respectively, of~~purchases general obligations

~~total LTSPCs~~of lenders that are secured by pools of the types of loans eligible for purchase under Farmer Mac's Farm & Ranch, USDA Guarantees, or Rural Utilities lines of business. AgVantage^® is a registered trademark of Farmer Mac used to designate Farmer Mac's guarantees of securities related to these general obligations of lenders that are secured by pools of eligible loans and that comprise the Institutional Credit line of business. Farm & Ranch Guaranteed Securities, Farmer Mac Guaranteed USDA Securities, and AgVantage Securities are sometimes collectively referred to as "Farmer Mac Guaranteed Securities." For more information on the products currently offered under Farmer Mac's Institutional Credit line of business, see "Business—Farmer Mac's Lines of Business—Institutional Credit." As of December 31, 2016, outstanding securities held or guaranteed by Farmer Mac in its Institutional Credit line of business totaled $7.3 billion.

Farmer Mac is the only Congressionally-chartered corporation established to provide a secondary market for agricultural mortgage loans, rural utilities loans, and USDA Securities. However, Farmer Mac does face indirect competition from a variety of sources. These sources include other financial institutions and other types of financial entities that purchase, retain, securitize, or provide financing for the types of assets eligible for Farmer Mac's secondary market activities, including commercial and investment banks, insurance companies, other FCS institutions, and financial funds. Farmer Mac also competes indirectly with originators of eligible loans who would prefer to retain the loans they originate rather than sell them into the secondary market. Farmer Mac is able to compete to acquire eligible loans due to the variety of products it offers and its ability to offer low-cost funding to its customers. This enables Farmer Mac to offer flexible financing options and products designed to meet the variety of needs faced by lending institutions related to capital requirements, liquidity, credit risk, and management of sector and geographic concentrations and borrower exposures. However, the relative competitiveness of the loan rates offered by Farmer Mac is affected by the ability of other lending institutions to subsidize their rates on the loan products with which Farmer Mac competes by price averaging with other types of loans or by accepting a lower return on equity. Farmer Mac's ability to develop business with lending institutions is also affected by changes in the levels of available capital and liquidity of those ~~consolidated~~institutions, the existence of alternative sources of funding and credit enhancement for those institutions, the rate of growth in the market for eligible loans, and demand for Farmer Mac's products.

Farmer Mac's competitive position is also affected by the willingness of originators to offer eligible loans for sale in the secondary market, as well as the types and variety of products offered by Farmer Mac's competitors to meet the needs of Farmer Mac's customer base. Farmer Mac's limits on borrower exposure and loan size, as well as the types of loans that are eligible for Farmer Mac's lines of business, also affect Farmer Mac's competitive position. Farmer Mac's ability to obtain low-cost funding in the debt markets is essential to its ability to maintain its competitive position with its customers. As a result, competition for debt investors with other debt-issuing institutions, such as the FCS, Federal Home Loan Banks, Fannie Mae, Freddie Mac, and highly-rated financial institutions, can impact the price and volume at which Farmer Mac issues debt and, consequently, its ability to offer savings to its customers in the form of competitive products.

Farmer Mac's basic capital and corporate governance structure is prescribed in its charter. The charter authorizes Farmer Mac to issue two classes of voting common stock, each of which elects one-third of Farmer Mac's 15-person board of directors. The charter also authorizes Farmer Mac to issue non-voting

common stock. The classes of Farmer Mac's common stock that are currently outstanding and their relation to Farmer Mac's board of directors are described below.

The ownership of Farmer Mac's two classes of voting common stock is currently concentrated in a ~~lender's request,~~small number of institutions. Approximately 44 percent of the Class A voting common stock is held by three financial institutions, with 31 percent held by one institution. Approximately 97 percent of the Class B voting common stock is held by five FCS institutions (two of which are related to each other through a parent-subsidiary relationship). Farmer Mac ~~purchases loans~~believes that the concentration in the Class A voting common stock is a by-product of trading activity in the stock over time and is not by design under the charter or any regulatory mandate. Farmer Mac believes that the concentration in such a small number of holders of Class B voting common stock is a by-product of the limited number of eligible holders of that stock and the structure of the FCS, the number of institutions of which has decreased over time as a result of mergers and consolidations.

The dividend and liquidation rights of all three classes of Farmer Mac's common stock are the same. Dividends may be paid on Farmer Mac's common stock only when, as, and if declared by Farmer Mac's board of directors in its sole discretion, subject to ~~an LTSPC at:~~compliance with applicable capital requirements and the payment of dividends on any outstanding preferred stock issued by Farmer Mac. Upon liquidation, dissolution, or winding up of the business of Farmer Mac, after payment and provision for payment of outstanding debt of Farmer Mac, the holders of shares of Farmer Mac's currently outstanding 5.875% Non-Cumulative Preferred Stock, Series A ("Series A Preferred Stock"), 6.875% Non-Cumulative Preferred Stock, Series B ("Series B Preferred Stock"), 6.000% Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series C ("Series C Preferred Stock"), and any other preferred stock then outstanding, would be paid at par value out of assets available for distribution, plus all declared and unpaid dividends, before the holders of shares of common stock received any payment. See also "Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities" for more information regarding Farmer Mac's common stock, and "Business—Financing—Equity Issuance" for more information on Farmer Mac's common stock and preferred stock.

~~par if~~Unlike some other GSEs such as other FCS institutions and the ~~loans become delinquent for either 90 days or 120 days (depending~~Federal Home Loan Banks, Farmer Mac is not structured as a cooperative owned exclusively by member institutions and established to provide services exclusively to its members. Rather, Farmer Mac, as a publicly-traded corporation, has a broader base of stockholders, including those who do not directly participate in the secondary market provided by Farmer Mac. Therefore, Farmer Mac seeks to fulfill its mission of serving the financing needs of rural America in a manner that is consistent with providing a return on the ~~agreement) or are in material non-monetary default, with accrued and unpaid interest~~investment of its stockholders.

Farmer Mac's policy is to generally require financial institutions to own a requisite amount of Farmer Mac common stock, based on the ~~defaulted loans payable out~~size and type of ~~any future loan payments or liquidation proceeds; or~~

Farmer ~~Mac is obligated under its guarantee on~~Mac's charter assigns to FCA, acting through the ~~securities to make timely payments to investors~~separate Office of ~~principal (including balloon payments) and interest based on~~Secondary Market Oversight ("OSMO") within FCA, the ~~scheduled payments on~~responsibility for the ~~underlying loans, regardless~~examination of ~~whether~~ Farmer Mac orand the related trust has actually received those scheduled payments. Farmer Mac's guarantee fees typically are collected out of installment payments made on the underlying loans until those loans have been repaid, purchased outgeneral supervision of the ~~trust, or otherwise liquidated (generally as a result~~safe and sound performance of ~~default).~~the powers, functions, and duties vested in Farmer Mac by the charter. The ~~aggregate amount of guarantee fees received on Farm & Ranch Guaranteed Securities depends on the amount of those securities outstanding and on the applicable guarantee fee rate, which~~charter also authorizes FCA, acting through OSMO, to apply its general enforcement powers to Farmer Mac. Farmer Mac's charter ~~caps at 50 basis points (0.50 percent) per year. The amount~~requires an annual examination of ~~Farm & Ranch Guaranteed Securities outstanding is influenced by~~ the ~~repayment rates on the underlying loans and by the rate at which~~financial transactions of Farmer Mac ~~issues new Farm & Ranch Guaranteed Securities,~~and authorizes FCA to assess Farmer Mac for the cost of FCA's regulatory activities, including the cost of any examination. Farmer Mac is also required to file quarterly reports of condition with OSMO. In addition, as a ~~result~~publicly-traded corporation, Farmer Mac is required to comply with the periodic reporting requirements of ~~conversions from LTSPCs. In general, when~~ the SEC. For a more detailed discussion of Farmer Mac's regulatory and governmental relationships, see "Business—Government Regulation of Farmer Mac."

Farmer Mac's charter establishes three capital standards for Farmer Mac – minimum capital, critical capital, and risk-based capital. Farmer Mac is required to comply with the higher of the minimum capital requirement and the risk-based capital requirement. Also, in accordance with the FCA regulation on capital planning, Farmer Mac's board of directors maintains a policy for maintaining a sufficient level of ~~interest rates declines significantly~~Tier 1 capital and imposing restrictions on dividends and bonus payments in the event that Farmer Mac's Tier 1 capital falls below specified thresholds. For a discussion of Farmer Mac's capital requirements and its actual capital levels, as well as FCA's role in the ~~interest rates on loans underlying Farm & Ranch Guaranteed Securities, the rate~~establishment and monitoring of ~~prepayments is likely to increase. Conversely, when interest rates rise above the interest rates on the loans underlying Farm & Ranch Guaranteed Securities, the rate~~those requirements and levels, see "Business—Government Regulation of prepayments is likely to decrease. In addition to changes in interest rates, the timing of principal payments on Farm & Ranch Guaranteed Securities also is influenced by a variety of economic, demographic, and other considerations, such as yield maintenance provisions that may be associated with the underlying loans. For more information about yield maintenance provisions, seeFarmer Mac—Regulation—Capital Standards," "Management's Discussion and Analysis of Financial Condition and Results of Operations—~~Risk Management—Interest Rate Risk."~~

As of December 31, 2016, Farmer Mac employed 81 people, located primarily at its office at 1999 K Street, N.W., 4th Floor, Washington, D.C. 20006. Farmer Mac also maintains offices at (1) 5408 NW 88^th Street, Suite 120, Johnston, Iowa 50131, (2) 5200 N. Palm Avenue, Suite 306, Fresno, California 93704, and (3) 1065 E. Winding Creek, Suite 200, Eagle, Idaho 83616. Farmer Mac's main telephone number is (202) 872-7700.

Farmer Mac makes available free of charge, through the "Investors" section of its internet website at www.farmermac.com, copies of materials it files with, or furnishes to, the SEC, including its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements, and amendments, if any, to those filings, as soon as reasonably practicable after electronically filing those materials with, or furnishing those materials to, the SEC. Please note that all references to www.farmermac.com in this report are inactive textual references only. The information contained on Farmer Mac's website is not incorporated by reference into this report.

Under the Farm & Ranch line of ~~business:~~business, Farmer Mac provides a secondary market for mortgage loans secured by first liens on agricultural real estate (including part-time farms and rural housing) by (1) purchasing and retaining eligible mortgage loans, (2) securitizing eligible mortgage loans and guaranteeing the timely payment of principal and interest on the resulting securities that represent interests in, or obligations secured by, pools of those loans, or (3) issuing LTSPCs for designated eligible mortgage loans, subject to the terms of the applicable LTSPC agreement. Farmer Mac is compensated for these activities through net effective spread on loans and Farmer Mac Guaranteed Securities held on balance sheet, guarantee fees earned on Farmer Mac Guaranteed Securities, and commitment fees earned on loans in LTSPCs.

To be eligible for the Farm & Ranch line of business, a loan is required to:

Eligible agricultural real estate consists of one or more parcels of land, which may be ~~eligible;~~improved by permanently affixed buildings or other structures, that:

~~In addition~~Farmer Mac's charter authorizes a maximum loan size (adjusted annually for inflation) for an eligible Farm & Ranch loan secured by more than 1,000 acres of agricultural real estate. That maximum loan size was $12.6 million as of December 31, 2016 and will not be adjusted in 2017 due to ~~these minimum standards,~~the lack of inflation in farmland values during 2016. Although the charter does not prescribe a maximum loan size or a total borrower exposure for an eligible Farm & Ranch loan secured by 1,000 acres or less of agricultural ~~mortgage loans on which~~real estate, Farmer Mac ~~assumes~~currently limits the size of those loans to:

Farmer Mac includes its ~~facility~~part-time farm loans ~~such as dairy~~ and ~~processing facilities,~~rural housing loans in ~~its~~the Farm & Ranch line of business. Farmer Mac defines a ~~facility loan~~"part-time farm" as ~~a loan secured by~~ agricultural real estate meeting the eligibility requirements described above on which is located a primary residence whose value is at least 30 percent of the property's aggregate value at origination. When analyzing borrower repayment capacity for part-time farm loans, Farmer Mac typically considers off-farm income as a more important factor than for Farm & Ranch loans that are not part-time farm loans. Part-time farm loans do not represent a significant part of Farmer Mac's business, with ~~building improvements (other than~~ a ~~residence)~~total of $324.1 million of those loans in Farmer Mac's portfolio as of December 31, 2016.

For the rural housing portion of this line of business, an eligible loan must be secured by a mortgage on a one- to four-family, owner-occupied, moderately priced principal residence located in a community with a population of 2,500 or fewer. The maximum purchase price or current appraised value for a dwelling, excluding the land to which the dwelling is affixed, that ~~contribute~~secures a rural housing loan was $269,807 as of December 31, 2016. That limit is generally adjusted annually based on changes in home values during the previous year and was increased to $280,000 effective January 1, 2017. In addition to the dwelling itself, an eligible rural housing loan can be secured by land associated with the dwelling having an appraised value of no more than 6050 percent of the total appraised value of the combined property. ~~The credit underwriting standards for facility~~Rural housing loans ~~are the same~~do not represent a significant part of Farmer Mac's business, with a total of $4.1 million of those loans in Farmer Mac's portfolio as ~~for other~~of December 31, 2016.

Loans not exceeding $1 million that are secured by eligible collateral with original LTVs not greater than 55 percent made to borrowers with high credit scores and adequate financial resources may be accepted without further underwriting tests being applied.

Inrepayments on existing assets (principal paydowns and maturities) during the ~~case~~year, resulting in $6.1 billion of ~~a seasoned loan, Farmer Mac considers sustained historical performance to be a reliable alternative indicator of a borrower's ability to pay the loan according to its terms. In the Farm & Ranch~~total outstanding business volume in this line of business ~~a seasoned loan generally will be deemed an eligible loan if:~~

AsDuring 2016, Farmer Mac ~~develops new credit products, it establishes underwriting guidelines for them. Those guidelines result~~purchased eligible loans from 169 entities (the top ten institutions generated 59 percent of the purchase volume) and placed loans under LTSPCs with 25 entities in ~~industry-specific measures that meet or exceed~~ the ~~minimum underwriting standards contained in Farmer Mac's charter and provide~~Farm & Ranch line of business. During 2015, Farmer Mac ~~with the flexibility to deliver the benefits of a secondary market to farmers, ranchers, and rural homeowners in diverse sectors~~purchased eligible loans from 163 entities (the top ten institutions generated 55 percent of the ~~rural economy.~~purchase volume) and placed loans under LTSPCs with 28 entities. During 2014, Farmer Mac ~~does not require that each loan's compliance~~purchased eligible loans from 166 entities (the top ten institutions generated 61 percent of the purchase volume) and placed loans under LTSPCs with ~~the applicable underwriting standards be re-evaluated after Farmer Mac purchases the loan or approves it for inclusion in a pool that backs a guaranteed security or an LTSPC pool.~~32 entities.

~~Collateral Valuation Standards. Farmer Mac has adopted collateral valuation standards for newly originated~~The following table summarizes loans purchased or ~~underlying~~newly placed under LTSPCs under the Farm & Ranch ~~Guaranteed Securities or LTSPCs. Those standards require, among other things, that a current valuation be performed, or have been performed within the preceding 12 months, independently~~line of business for each of the credit decision-making process. Farmer Mac generally requires appraisals to conform to the Uniform Standards of Professional Appraisal Practice ("USPAP") promulgated by the Appraisal Standards Board.years ended December 31, 2016, 2015, and 2014:

The following table presents the outstanding balance of USDA Securities and Farmer Mac Guaranteed USDA Securities as of the dates indicated:

As of December 31, ~~2015,~~2016, Farmer Mac had experienced no other-than-temporary impairment on any of its Farmer Mac Guaranteed USDA Securities or USDA Securities.

The USDA, acting through its agencies, currently administers the federal rural credit programs first developed in the mid-1930s. The USDA makes direct loans and guarantees portions of loans made and serviced by USDA-qualified lenders for various purposes. The USDA's guarantee is supported by the full faith and credit of the United States. The USDA guarantees up to 95 percent of the principal amount of guaranteed loans. Through its USDA Guarantees line of business, Farmer Mac is one of several competing purchasers of USDA Securities representing the USDA-guaranteed portions of farm ownership

loans, farm operating loans, business and industry loans, community facilities loans, and other loans. The guaranteed portions of these loans are fully guaranteed as to principal and interest by the USDA.

USDA Guarantees. Each USDA guarantee is a full faith and credit obligation of the United States and becomes enforceable if a lender fails to repurchase the portion of the loan that is guaranteed by the USDA from its holder within 30 days after written demand from the holder when:

If the lender does not repurchase the USDA-guaranteed portion as provided above, the USDA is required to purchase the unpaid principal balance of the USDA-guaranteed portion together with accrued interest (including any loan subsidy) to the date of purchase, less the lender's servicing fee, within 60 days after written demand upon the USDA by the holder. While the USDA guarantee will not cover the note interest to the holder on USDA-guaranteed portions accruing after 90 days from the date of the original demand letter of the holder to the lender requesting repurchase, Farmer Mac has established procedures to require prompt demand on the USDA to purchase USDA-guaranteed portions that have not been repurchased by the lender.

If, in the opinion of the lender (with the concurrence of the USDA) or in the opinion of the USDA, repurchase of the USDA-guaranteed portion is necessary to service the related guaranteed loan adequately, the holder is required to sell the USDA-guaranteed portion to the lender or USDA for an amount equal to the unpaid principal balance and accrued interest on such USDA-guaranteed portion less the lender's servicing fee. Federal regulations prohibit the lender from repurchasing USDA-guaranteed portions for arbitrage purposes.

Lenders. Any lender authorized by the USDA to obtain a USDA guarantee on a loan may participate in Farmer Mac's USDA Guarantees line of business. During ~~2015, 209~~2016, 222 lenders, consisting mostly of community and regional banks, sold USDA Securities to Farmer Mac, compared to ~~185~~209 lenders that did so during ~~2014.~~2015.

Loan Servicing. The lender on each USDA guaranteed loan is required by regulation to retain the unguaranteed portion of the guaranteed loan, to service the entire underlying guaranteed loan, including the USDA-guaranteed portion, and to remain mortgagee and/or secured party of record. The USDA-guaranteed portion and the unguaranteed portion of the loan are to be secured by the same collateral with equal lien priority. The USDA-guaranteed portion of a loan cannot be paid later than, or in any way be subordinated to, the related unguaranteed portion.

Under the Farm & Ranch line of business, Farmer Mac provides a secondary market for mortgage loans secured by first liens on agricultural real estate (including part-time farms and rural housing) by (1) purchasing and retaining eligible mortgage loans, (2) securitizing eligible mortgage loans and guaranteeing the timely payment of principal and interest on the resulting securities that represent interests in, or obligations secured by, pools of those loans, or (3) issuing LTSPCs for designated eligible mortgage loans, subject to the terms of the applicable LTSPC agreement. Farmer Mac is compensated for these activities through net effective spread on loans and Farmer Mac Guaranteed Securities held on balance sheet, guarantee fees earned on Farmer Mac Guaranteed Securities, and commitment fees earned on loans in LTSPCs.

To be eligible for ~~Farmer Mac's Rural Utilities~~the Farm & Ranch line of business, a ~~rural utilities~~ loan ~~(or an interest in such a loan)~~ is required to:

Eligible agricultural real estate consists of one or more parcels of land, which may be ~~performing and not~~improved by permanently affixed buildings or other structures, that:

Farmer Mac's charter authorizes a maximum loan size (adjusted annually for inflation) for an eligible Farm & Ranch loan secured by more than 1,000 acres of agricultural real estate. That maximum loan size was $12.6 million as of December 31, 2016 and will not be adjusted in 2017 due to the lack of inflation in farmland values during 2016. Although the charter does not ~~specify minimum underwriting criteria~~prescribe a maximum loan size or a total borrower exposure for an eligible Farm & Ranch loan secured by 1,000 acres or less of agricultural real estate, Farmer Mac currently limits the size of those loans to:

Farmer Mac includes its part-time farm loans and rural ~~utilities~~housing loans ~~under~~in the ~~Rural Utilities~~Farm & Ranch line of business. Farmer Mac defines a "part-time farm" as agricultural real estate meeting the eligibility requirements described above on which is located a primary residence whose value is at least 30 percent of the property's aggregate value at origination. When analyzing borrower repayment capacity for part-time farm loans, Farmer Mac typically considers off-farm income as a more important factor than for Farm & Ranch loans that are not part-time farm loans. Part-time farm loans do not represent a significant part of Farmer Mac's business, with a total of $324.1 million of those loans in Farmer Mac's portfolio as of December 31, 2016.

For the rural housing portion of this line of business, an eligible loan must be secured by a mortgage on a one- to four-family, owner-occupied, moderately priced principal residence located in a community with a population of 2,500 or fewer. The maximum purchase price or current appraised value for a dwelling, excluding the land to which the dwelling is affixed, that secures a rural housing loan was $269,807 as of December 31, 2016. That limit is generally adjusted annually based on changes in home values during the previous year and was increased to $280,000 effective January 1, 2017. In addition to the dwelling itself, an eligible rural housing loan can be secured by land associated with the dwelling having an appraised value of no more than 50 percent of the total appraised value of the combined property. Rural housing loans do not represent a significant part of Farmer Mac's business, with a total of $4.1 million of those loans in Farmer Mac's portfolio as of December 31, 2016.

During the year ended December 31, 2016, Farmer Mac added a total of $1.4 billionof new business volume under the Farm & Ranch line of business. That new business volume was partially offset by

repayments on existing assets (principal paydowns and maturities) during the year, resulting in $6.1 billion of total outstanding business volume in this line of business as of December 31, 2016, compared to $5.7 billion as of December 31, 2015. As of December 31, 2016, Farmer Mac had direct credit exposure on 11,931 loans in the Farm & Ranch line of business across 48 states.

During 2016, Farmer Mac purchased eligible loans from 169 entities (the top ten institutions generated 59 percent of the purchase volume) and placed loans under LTSPCs with 25 entities in the Farm & Ranch line of business. During 2015, Farmer Mac purchased eligible loans from 163 entities (the top ten institutions generated 55 percent of the purchase volume) and placed loans under LTSPCs with 28 entities. During 2014, Farmer Mac purchased eligible loans from 166 entities (the top ten institutions generated 61 percent of the purchase volume) and placed loans under LTSPCs with 32 entities.

The following table summarizes loans purchased or newly placed under LTSPCs under the Farm & Ranch line of business for each of the years ended December 31, 2016, 2015, and 2014:

The following table presents the outstanding balances of Farm & Ranch loans held and loans underlying Farm & Ranch Guaranteed Securities and LTSPCs as of the dates indicated:

Farmer Mac offers loan products designed to increase the secondary market liquidity of agricultural real estate mortgage loans and the lending capacity of financial institutions that originate those loans. Farmer Mac enters into mandatory delivery commitments to purchase loans and offers rates for those commitments daily. Farmer Mac also purchases portfolios of newly originated and seasoned loans that are current in payment on a negotiated basis. Farmer Mac purchases both fixed and adjustable rate loans that have a variety of maturities and often include balloon payments. Of the $966.0 million of loans purchased in the Farm & Ranch line of business during 2016, 60 percentincluded balloon payments. By

comparison, of the $748.4 million of loans purchased in the Farm & Ranch line of business during 2015, 61 percent included balloon payments.

Farmer Mac offers two credit enhancement alternatives to direct loan purchases through the Farm & Ranch line of business that allow approved lenders the ability to retain the cash flow benefits of their loans and increase their liquidity and lending capacity: (1) LTSPCs and (2) Farm & Ranch Guaranteed Securities. LTSPCs and securitization trusts where Farmer Mac is not the primary beneficiary result in the creation of off-balance sheet obligations for Farmer Mac. Historically, the only securitization trusts where Farmer Mac has not determined itself to be the primary beneficiary have been trusts containing 100 percent participation interests in loans that comprised an LTSPC pool prior to securitization, and in which the participating institution is not a related party to Farmer Mac. In performing Farmer Mac's purchase and guarantee obligations related to LTSPCs and Farm & Ranch Guaranteed Securities, payments made on the underlying loans or participation interests and liquidation of the related collateral (in the event of default under the terms of those assets) are intended to protect Farmer Mac against losses.

Both LTSPC and Farm & Ranch Guaranteed Securities transactions permit a lender to nominate from its portfolio an identified pool of loans, subject to review by Farmer Mac for conformity with its eligibility standards for Farm & Ranch loans. In Farm & Ranch Guaranteed Securities and LTSPC transactions, the lender effectively transfers the credit risk on those eligible loans because, through Farmer Mac's guarantee or commitment to purchase, Farmer Mac assumes the ultimate credit risk of borrower defaults on the underlying loans. This type of risk transfer reduces a lender's credit and concentration risk exposures and, consequently, its regulatory capital requirements and loss reserve requirements. The loans and participation interests underlying LTSPCs and Farm & Ranch Guaranteed Securities may include those with payment, maturity, and interest rate characteristics that differ from the loan products that Farmer Mac offers for purchase on a daily basis, but all are subject to the applicable standards described in

"—Underwriting and Collateral Valuation (Appraisal) Standards." See also "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk – Loans and Guarantees."

LTSPCs. An LTSPC commits Farmer Mac, subject to the terms of the applicable LTSPC agreement, to a future purchase of one or more loans from an identified pool of eligible loans that met Farmer Mac's standards at the time the transaction was entered into and Farmer Mac assumed the credit risk on the loans. The LTSPC structure, which is not a guarantee of loans or securities, permits the lender to retain the loan pool in its portfolio until such time, if ever, as the lender elects to deliver some or all of the loans in the pool to Farmer Mac for purchase under the terms of the LTSPC agreement. As consideration for its assumption of the credit risk on loans underlying an LTSPC, Farmer Mac receives commitment fees payable monthly in arrears in an amount approximating what would have been the guarantee fees if the transaction were structured as a Farm & Ranch Guaranteed Securities transaction. Farmer Mac offers different options under LTSPC arrangements to meet the credit and liquidity needs of its counterparties. Some LTSPCs provide that the underlying loans can be converted into Farm & Ranch Guaranteed Securities at the option of the counterparty with no conversion fee paid to Farmer Mac. Some LTSPCs contain risk sharing arrangements that provide for the counterparty to absorb up to a specified amount (typically between one and five percent of the original principal balance of the loan pool) of any losses incurred on the loans in the pool. As of December 31, 2016 and 2015, approximately 9.3 percent and 7.8 percent, respectively, of total LTSPCs and Farm & Ranch Guaranteed Securities, including those consolidated as loans on Farmer Mac's balance sheet, contained risk sharing arrangements.

At a lender's request, Farmer Mac purchases loans subject to an LTSPC at:

In 2016, Farmer Mac entered into $399.1 million of LTSPCs, compared to $427.8 million in 2015, in the Farm & Ranch line of business. In 2016, LTSPCs remained the preferred credit enhancement alternative for new off-balance sheet transactions, and they continue to be a significant portion of the Farm & Ranch line of business. During 2016 and 2015, there were no conversions of LTSPCs into Farm & Ranch Guaranteed Securities. As of December 31, 2016, the aggregate principal balance of the loans underlying LTSPCs in Farmer Mac's Farm & Ranch line of business was $2.2 billion. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Business Volume."

Farm & Ranch Guaranteed Securities. In Farm & Ranch Guaranteed Securities transactions, Farmer Mac guarantees securities representing interests in eligible Farm & Ranch loans or participation interests in those loans held by a trust or other entity. Farmer Mac guarantees the timely payment of interest and principal on these securities, which are either retained by Farmer Mac or sold to third parties. For those securities sold to third parties, the eligible loans or participation interests are often acquired from lenders in exchange for the Farm & Ranch Guaranteed Securities backed by those assets. As consideration for its assumption of the credit risk on the assets underlying the Farm & Ranch Guaranteed Securities, Farmer Mac receives guarantee fees based on the outstanding principal balance of the related securities.

Farmer Mac is obligated under its guarantee on the securities to make timely payments to investors of principal (including balloon payments) and interest based on the scheduled payments on the underlying loans, regardless of whether Farmer Mac or the related trust has actually received those scheduled payments. Farmer Mac's guarantee fees typically are collected out of installment payments made on the underlying loans until those loans have been repaid, purchased out of the trust, or otherwise liquidated (generally as a result of default). The aggregate amount of guarantee fees received on Farm & Ranch Guaranteed Securities depends on the amount of those securities outstanding and on the applicable guarantee fee rate, which Farmer Mac's charter caps at 50 basis points (0.50 percent) per year. The amount of Farm & Ranch Guaranteed Securities outstanding is influenced by the repayment rates on the underlying loans and by the rate at which Farmer Mac issues new Farm & Ranch Guaranteed Securities, including as a result of conversions from LTSPCs. In general, when the level of interest rates declines significantly below the interest rates on loans underlying Farm & Ranch Guaranteed Securities, the rate of prepayments is likely to increase. Conversely, when interest rates rise above the interest rates on the loans underlying Farm & Ranch Guaranteed Securities, the rate of prepayments is likely to decrease. In addition to changes in interest rates, the timing of principal payments on Farm & Ranch Guaranteed Securities also is influenced by a variety of economic, demographic, and other considerations.

Of the $17.4 billion outstanding principal balance of assets included in Farmer Mac's four lines of business as of December 31, 2016, $1.5 billion were in the form of Farm & Ranch Guaranteed Securities created from the deposit of eligible loan assets into securitization trusts that issue "pass-through"

certificates representing interests in the underlying assets. This type of securitization structure may involve the deposit of either whole loans or loan participation interests into the trusts.

As of December 31, 2016, Farmer Mac had outstanding Farm & Ranch Guaranteed Securities of $1.1 billion that represent interests in whole loans and $415.4 million that represent interests in loan participations as a result of conversions from LTSPCs. Both types of transactions involve the deposit of eligible assets into securitization trusts along with all of the rights under related agreements that provide for, among other things, remedies for any breaches of representations and warranties made by the lender and the servicing of the underlying assets. In each of these transactions, the related trust has issued securities that represent interests in the assets of the trust and that Farmer Mac guarantees as to the timely payment of principal and interest.

For Farm & Ranch Guaranteed Securities that result from the conversion of LTSPCs, a 100 percent participation in the cash flows associated with each loan formerly subject to the LTSPC, rather than the whole loan, is deposited into the securitization trust. These transactions involve loan participations for reasons unique to the counterparties that have elected these conversions, all of whom are members of the FCS. Loans made by FCS institutions to farmers and ranchers have, by statute, specified loan and collateral actions to which borrowers are entitled, known as "borrower rights." Farmer Mac does not have the ability to offer all of the prescribed borrower rights without the involvement of another FCS counterparty. In recognition of this and Farmer Mac's desire not to disrupt the borrower's relationship with the originating FCS lender and expectations about how the loan will be serviced, Farmer Mac developed the participation interest securitization structure for FCS loans with borrower rights. The deposit of participation interests into securitization trusts permits the legal ownership of the related loan to remain with the FCS counterparty, together with the servicing and borrower rights related to the loan. Farmer Mac, in its role as trustee, generally has the right to give or withhold consent to the exercise of remedies as to each related loan. The FCS servicers in these transactions are also the holders of the related Farm & Ranch Guaranteed Securities, which have the same economic benefit to the holder from a cash flow perspective as a securitization of whole loans. See "—Servicing" for more information about the servicing of loans underlying Farm & Ranch Guaranteed Securities.

For the years ended December 31, 2016 and 2015, Farmer Mac sold Farm & Ranch Guaranteed Securities in the amounts of $511.4 million and $336.9 million, respectively. No gains or losses resulted from these sales in either 2016 or 2015. During 2016 and 2015, there were no conversions of LTSPCs into Farm & Ranch Guaranteed Securities. As of December 31, 2016, the aggregate principal balance of the loans that backed Farmer Mac's Farm & Ranch Guaranteed Securities, which may or may not be consolidated on-balance sheet depending on the primary beneficiary determination described above, was $1.5 billion. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Business Volume."

As required by Farmer Mac's charter, Farmer Mac has established underwriting, security appraisal, and repayment standards for eligible loans taking into account the nature, risk profile, and other differences between different categories of eligible loans. The charter prescribes that the following minimum standards must be applied to agricultural real estate mortgage loans in the Farm & Ranch line of business:

In addition to these minimum standards, agricultural mortgage loans on which Farmer Mac assumes direct credit exposure, such as loans purchased or underlying LTSPCs or Farm & Ranch Guaranteed Securities, are also typically required to meet more specific underwriting standards established by Farmer Mac, as described below.

Farmer Mac relies on the combined expertise of experienced internal agricultural credit underwriters and loan servicers, along with external agricultural loan servicing and collateral valuation contractors, to perform the necessary underwriting, servicing, and collateral valuation functions on Farm & Ranch loans.

Underwriting. To manage Farmer Mac's credit risk ~~to mitigate the risk of loss from borrower defaults,~~ and to provide guidance for the management, administration, and conduct of underwriting to ~~participants in the Rural Utilities line of business,~~all participating and potential Farm & Ranch lenders, Farmer Mac has adopted credit underwriting standards that vary by loan ~~product~~type and by loan ~~type, based on whether loans are made to electric distribution cooperatives or electric generation and transmission ("G&T") cooperatives. These~~product. Farmer Mac developed these standards ~~are~~ based on industry practices for similar ~~rural utilities~~mortgage loans and ~~are~~ designed them to assess the creditworthiness of the borrower, as well as the risk to Farmer ~~Mac. Farmer~~ Mac ~~reviews lenders'~~for having assumed the credit submissions and analyzes borrowers' audited financial statements and financial and operating reports filed with RUS and the Federal Energy Regulatory Commission to confirm that loans meet Farmer Mac's underwriting standards for rural utilitiesrisk on those loans. Furthermore, Farmer Mac requires ~~sellers of rural utilities loans~~Farm & Ranch lenders to make representations and warranties regarding the conformity of eligible mortgage loans to these standards and any other requirements that Farmer Mac may impose from time to time. Farmer Mac has the ability to require repurchase of the loan upon a material breach of these representations and warranties. The underwriting standards described in this section apply to Farmer Mac's Farm & Ranch loans other than part-time farm and rural housing loans, whose underwriting standards more closely resemble generally-accepted industry standards for residential lending, including fully verified repayment capacity and use of credit scores.

In addition to the loan eligibility criteria described above for rural utilities loans, Farmer Mac has developed different underwriting standards for rural utilities loans that depend on whether the borrower is an electric distribution cooperative or a G&T cooperative. Farmer Mac's credit underwriting standards for ~~all~~Farm & Ranch loans generally require that the original LTV of any loan not exceed 70 percent. Farmer Mac may require lower original LTV thresholds for some categories of loans, such as loans secured by property located in certain geographic regions, unseasoned loans, single purpose facility loans, and loans exceeding certain dollar thresholds. Farmer Mac, from time to time, allows higher LTV thresholds for loans secured by swine and poultry facilities that are supported by a strong production contract with a reputable processor (up to 75 percent original LTV) and rural ~~utilities~~housing and part-time farm loans ~~on which it assumes direct credit exposure (i.e., with no general obligation~~secured primarily by owner-occupied residences (up to 80 percent original LTV). The original LTV of a ~~lender involved~~loan is calculated by dividing the loan's principal balance at the time of guarantee, purchase, or commitment by the lower of the appraised value or the purchase price at the date of loan origination or, when available, updated appraised value at the time of guarantee, purchase, or commitment.

In the case of newly-originated Farm & Ranch loans, Farmer Mac's credit underwriting standards include:

Farmer Mac evaluates these standards on an ongoing basis based on current and anticipated market conditions, and adjusts these standards as Farmer Mac determines is necessary, while adhering closely to

its core underwriting standards for repayment capacity, working capital (current ratio), and leverage (debt-to-asset ratio). Farmer Mac also uses an interest rate shock test for adjustable rate Farm & Ranch loans with initial reset periods of less than five years.

Farmer Mac includes its facility loans, such as dairy and processing facilities, in its Farm & Ranch line of business. Farmer Mac defines a facility loan as a loan secured by agricultural real estate with building improvements (other than a residence) that contribute more than 60 percent of the appraised value of the property. The credit underwriting standards for facility loans are the same as for other Farm & Ranch loans except that certain facility loans are required to have a more stringent total debt service coverage ratio, including farm and non-farm income, of 1.35 or higher.

Loans not exceeding $1 million that are secured by eligible collateral with original LTVs not greater than 55 percent made to borrowers with high credit scores and adequate financial resources may be accepted without further underwriting tests being applied.

Farmer Mac's underwriting standards provide for the acceptance of a loan that, in the ~~transaction) require:~~judgment of the Farmer Mac underwriter, is a sound loan with a high probability of repayment in accordance with its terms even though the loan does not meet one or more of the underwriting ratios usually required for loans of that type. In those cases, Farmer Mac permits approval of a loan if it:

Although underwriting approvals may be ~~adequate~~made based on ~~industry standards.~~compensating strengths, no loan will be approved if it does not at least meet all of the minimum standards prescribed by Farmer Mac's charter.

Farmer Mac's use of compensating strengths is not intended to provide a basis for waiving or lessening the requirement that eligible mortgage loans under the Farm & Ranch line of business be of consistently high quality. Loans approved on the basis of compensating strengths are fully underwritten and have experienced lower cumulative rates of loss following default compared to loans that were approved on the basis of conformance with all applicable underwriting ratios.

In the case of a ~~newly-originated~~seasoned loan, ~~to a distribution cooperative on which~~ Farmer Mac ~~assumes direct credit exposure,~~considers sustained historical performance to be a reliable alternative indicator of a borrower's ability to pay the ~~borrower typically must, among other criteria set forth in Farmer Mac's credit underwriting standards, meet~~loan according to its terms. In the ~~following ratios (based on the average~~Farm & Ranch line of ~~the most recent three years):~~business, a seasoned loan generally will be deemed an eligible loan if:

A seasoned loan that has been outstanding for more than one year but less than five years must substantially comply with the ~~debt to EBITDA (earnings before interest, taxes, depreciation, and amortization) ratio does not exceed 12; and~~

~~The due diligence~~ Farmer Mac performs due diligence before purchasing, or guaranteeing securities backed by, ~~rural utilities~~or committing to purchase seasoned loans, ~~includes:~~including:

Farmer Mac performs these and other due diligence procedures using methods that consider the size, age, leverage, industry sector, and nature of the collateral for the loans.

Required documentation for all loans in the Farm & Ranch line of business includes a first lien mortgage or deed of trust, a written promissory note, and assurance of Farmer Mac's lien position through either a title insurance policy or title opinion from an experienced real estate attorney in any geographic area where title insurance is not the industry practice.

As Farmer Mac develops new credit products, it establishes underwriting guidelines for them. Those guidelines result in industry-specific measures that meet or exceed the minimum underwriting standards contained in Farmer Mac's charter and provide Farmer Mac with the flexibility to deliver the benefits of a secondary market to farmers, ranchers, and rural homeowners in diverse sectors of the rural economy. Farmer Mac does not require that each loan's compliance with the applicable underwriting standards be re-evaluated after Farmer Mac purchases the loan or approves it for inclusion in a pool that backs Farm & Ranch Guaranteed Securities or an LTSPC pool.

Collateral Valuation Standards. Farmer Mac has adopted collateral valuation standards for newly originated loans purchased or underlying Farm & Ranch Guaranteed Securities or LTSPCs. Those standards require, among other things, that a current valuation be performed, or have been performed within the preceding 12 months, independently of the credit decision-making process. Farmer Mac generally requires appraisals to conform to the Uniform Standards of Professional Appraisal Practice ("USPAP") promulgated by the Appraisal Standards Board.

Farmer Mac's collateral valuation standards require that the valuation function be conducted or administered by an individual who meets specific qualification and competence criteria and who:

Farmer Mac's collateral valuation standards require uniform reporting of reliable and credible opinions of the market value based on analyses of comparable property sales, including consideration of the property's income-producing capacity and, if relevant, the market's response to the cost of improvements, as well as information regarding market trends. For seasoned loans, Farmer Mac obtains collateral valuation updates as considered necessary in its assessment of collateral risk determined in the due diligence process. If a current or updated collateral valuation is required for a seasoned loan, the collateral valuation standards described above would apply.

It is Farmer Mac's policy to diversify its portfolio of loans held and loans underlying Farm & Ranch Guaranteed Securities and LTSPCs, both geographically and by agricultural commodity/product. Farmer Mac directs its marketing efforts toward agricultural lenders throughout the nation to achieve commodity/product and geographic diversification in its exposure to credit risk. Farmer Mac evaluates its credit exposure in particular geographic regions and commodities/products relative to the total principal amount of all outstanding loans held and loans underlying LTSPCs and Farm & Ranch Guaranteed Securities.

Farmer Mac is not obligated to assume credit risk on every ~~rural utilities~~ loan ~~submitted to Farmer Mac~~ that meets its underwriting and collateral valuation ~~standards.~~standards submitted by an eligible participant. Farmer Mac may consider other factors, such as its overall portfolio diversification, commodity and farming forecasts, and risk management objectives, in deciding whether or not to accept a loan as part of the ~~loans.~~

As of December 31, ~~2015, all~~2016, Farmer Mac had 638 approved lenders eligible to participate in Farmer Mac's Farm & Ranch line of business, ranging from single-office to multi-branch institutions, spanning community banks, FCS institutions, mortgage companies, commercial banks, and insurance companies, compared to 728 eligible approved lenders as of December 31, 2015. In addition to participating directly in the Farm & Ranch line of business, some of the ~~Rural Utilities~~approved lenders facilitate indirect participation by other lenders by managing correspondent networks of lenders from which the approved lenders purchase loans ~~held~~to sell to Farmer Mac. As of December 31, 2016, of the 638 approved lenders eligible to participate, 184 lenders had been active participants in the Farm & Ranch line of business during the previous 12 months by either selling at least one loan to Farmer Mac ~~consisted~~or entering into an LTSPC transaction with Farmer Mac, as compared to 179 out of ~~loans with a pledge~~728 approved lenders as of ~~all assets.~~December 31, 2015.

To be considered for approval as a participant in the Farm & Ranch line of business, a lender must meet criteria that Farmer Mac establishes. Those criteria include the following requirements:

Farmer Mac generally does not directly service the ~~Rural Utilities~~loans included in the Farm & Ranch line of business, although in some cases Farmer Mac may assume direct servicing for defaulted loans. Farmer Mac serves in the role of master servicer for Farm & Ranch loans held by Farmer Mac and for whole loans underlying Farm & Ranch Guaranteed Securities. In that capacity, Farmer Mac contracts with other institutions, known as central servicers, to undertake the majority of the servicing responsibilities for the loans in ~~its portfolio.~~accordance with Farmer Mac's specified servicing requirements. For these loans, the central servicer is typically not the same entity as the lender that sold the loans to Farmer Mac, and the originating lenders may retain some direct borrower contacts, referred to as "field servicing" functions. Field servicers may enter into contracts with Farmer Mac's central servicers that specify the retained servicing functions.

Loans related to the participation interests underlying Farm & Ranch Guaranteed Securities that result from the conversion of LTSPCs are serviced for the benefit of Farmer Mac, as trustee and guarantor, by the FCS institution that participated the loans to Farmer Mac. The servicer of those loans is usually also the holder of the related Farm & Ranch Guaranteed Securities. In those transactions, the FCS servicer is required to service the loans related to the securitized participation interests in a commercially reasonable manner and in substantial compliance with Farmer Mac's servicing requirements for Farm & Ranch loans. Those servicers are also required to give effect to all statutory borrower rights applicable to the loans and have shared power with Farmer Mac for some servicing actions to ensure this. The loans related to the Farm & Ranch Guaranteed Securities that result from the conversion of loans formerly subject to an

LTSPC are the only loans included in the Farm & Ranch line of business that are subject to a shared power servicing provision.

Loans underlying LTSPCs are serviced by ~~a servicer designated~~the holders of those loans in accordance with those lenders' servicing procedures, which are reviewed by Farmer ~~Mac. National~~Mac before entering into those transactions.

In summary, the substance of all servicing for loans in the Farm & Ranch line of business is performed in a manner consistent with Farmer Mac's servicing requirements, with some special servicing for the assets underlying Farm & Ranch Guaranteed Securities resulting from LTSPC conversions to accommodate the borrower rights regime unique to loans originated by FCS institutions.

Farmer Mac initiated its USDA Guarantees line of business in 1991 after Congress revised Farmer Mac's charter to provide that:

Since January 2010, nearly all purchases of USDA Securities have been made by Farmer Mac II LLC, a subsidiary of Farmer Mac that operates substantially all of the ~~Rural Utilities loans in Farmer Mac's portfolio. CFC is a~~business related ~~party~~ to the USDA Guarantees line of business. Farmer Mac operates only that part of the business that involves the issuance of Farmer Mac Guaranteed USDA Securities to investors other than Farmer Mac or Farmer Mac II LLC. Although Farmer Mac II LLC may issue securities in these transactions, Farmer Mac II LLC does not guarantee any USDA Securities it holds or any Farmer Mac Guaranteed USDA Securities issued by ~~virtue~~Farmer Mac or Farmer Mac II LLC.

Farmer Mac guarantees the timely payment of principal and interest on Farmer Mac Guaranteed USDA Securities backed by USDA Securities. Farmer Mac does not guarantee the repayment of the USDA Securities themselves. During the year ended December 31, 2016, Farmer Mac II LLC purchased approximately $481.3 million of USDA Securities, of which $383.3 million were retained on its balance sheet and $98.0 million were securitized and sold to lenders or other investors in the form of Farmer ~~Mac.~~ Mac Guaranteed USDA Securities. During the years ended December 31, 2015 and 2014, Farmer Mac II LLC purchased approximately $376.9 million and $343.0 million, respectively, of USDA Securities, all of which were retained on its balance sheet. Farmer Mac did not purchase any USDA Securities in 2016, 2015, or 2014. During 2016, 2015, and 2014, Farmer Mac and Farmer Mac II LLC conducted USDA Guarantees transactions with 222, 209, and 185 entities, respectively.

As of December 31, 2016 and 2015, ~~CFC held approximately 8~~$2.1 billion and $1.9 billion, respectively, of Farmer Mac Guaranteed USDA Securities and USDA Securities were outstanding. The following table presents activity in the USDA Guarantees line of business for each of the years indicated:

The following table presents the outstanding balance of USDA Securities and Farmer Mac Guaranteed USDA Securities as of the dates indicated:

As of December 31, 2016, Farmer Mac had experienced no other-than-temporary impairment on any of its Farmer Mac Guaranteed USDA Securities or USDA Securities.

The USDA, acting through its agencies, currently administers the federal rural credit programs first developed in the mid-1930s. The USDA makes direct loans and guarantees portions of loans made and serviced by USDA-qualified lenders for various purposes. The USDA's guarantee is supported by the full faith and credit of the United States. The USDA guarantees up to 95 percent of the principal amount of guaranteed loans. Through its USDA Guarantees line of business, Farmer Mac is one of several competing purchasers of USDA Securities representing the USDA-guaranteed portions of farm ownership

loans, farm operating loans, business and industry loans, community facilities loans, and other loans. The guaranteed portions of these loans are fully guaranteed as to principal and interest by the USDA.

USDA Guarantees. Each USDA guarantee is a full faith and credit obligation of the United States and becomes enforceable if a lender fails to repurchase the portion of the loan that is guaranteed by the USDA from its holder within 30 days after written demand from the holder when:

If the lender does not repurchase the USDA-guaranteed portion as provided above, the USDA is required to purchase the unpaid principal balance of the USDA-guaranteed portion together with accrued interest (including any loan subsidy) to the date of purchase, less the lender's servicing fee, within 60 days after written demand upon the USDA by the holder. While the USDA guarantee will not cover the note interest to the holder on USDA-guaranteed portions accruing after 90 days from the date of the original demand letter of the holder to the lender requesting repurchase, Farmer Mac has established procedures to require prompt demand on the USDA to purchase USDA-guaranteed portions that have not been repurchased by the lender.

If, in the opinion of the lender (with the concurrence of the USDA) or in the opinion of the USDA, repurchase of the USDA-guaranteed portion is necessary to service the related guaranteed loan adequately, the holder is required to sell the USDA-guaranteed portion to the lender or USDA for an amount equal to the unpaid principal balance and accrued interest on such USDA-guaranteed portion less the lender's servicing fee. Federal regulations prohibit the lender from repurchasing USDA-guaranteed portions for arbitrage purposes.

Lenders. Any lender authorized by the USDA to obtain a USDA guarantee on a loan may participate in Farmer Mac's USDA Guarantees line of business. During 2016, 222 lenders, consisting mostly of community and regional banks, sold USDA Securities to Farmer Mac, compared to 209 lenders that did so during 2015.

Loan Servicing. The lender on each USDA guaranteed loan is required by regulation to retain the unguaranteed portion of the guaranteed loan, to service the entire underlying guaranteed loan, including the USDA-guaranteed portion, and to remain mortgagee and/or secured party of record. The USDA-guaranteed portion and the unguaranteed portion of the loan are to be secured by the same collateral with equal lien priority. The USDA-guaranteed portion of a loan cannot be paid later than, or in any way be subordinated to, the related unguaranteed portion.

Under its charter, Farmer Mac is permitted to purchase, and guarantee securities backed by, rural electric and telephone loans made by lenders organized as cooperatives to borrowers who have received or are eligible to receive loans under the Rural Electrification Act of 1936 ("REA"). The REA is administered by the Rural Utilities Service ("RUS"), an agency of the USDA. None of Farmer Mac's outstanding Class A voting common stock (or approximately 5 percent of total voting shares). See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Related Party Transactions."

under the ~~only two rural utilities lenders that are cooperatives are CFC and CoBank, ACB ("CoBank"), an institution~~Rural Utilities line of ~~the FCS. To date, CFC is the only lender to have participated in~~business has involved telecommunications loans. Farmer Mac's Rural Utilities line of ~~business.~~

The following table presents the outstanding principal amount of AgVantage securities held by Farmer Mac and off-balance sheet AgVantage securities as of the dates indicated:

The principal sources of funding for the payment of Farmer Mac's obligations under its guarantees and LTSPCs are the fees Farmer Mac receives for its guarantees and commitments, net effective spread, proceeds of debt issuances, loan repayments, and maturities of AgVantage securities. Farmer Mac satisfies its obligations under LTSPCs and its guarantees by purchasing defaulted loans out of LTSPCs and from the related trusts for Farmer Mac Guaranteed Securities. Farmer Mac typically recovers a significant portion of the value of defaulted loans purchased either through borrower payments, loan payoffs, payments by third parties, or foreclosure and sale of the property securing the loans. Ultimate credit losses arising from Farmer Mac's guarantees and commitments are reflected in Farmer Mac's charge-offs against its allowance for losses, gains and losses on the sale of real estate owned ("REO"), which consists of real estate acquired through foreclosure, and fair value adjustments of REOs held. During ~~2015,~~2016, Farmer Mac had net credit losses of ~~$3.9~~$0.2 million, compared to net credit ~~recoveries~~losses of ~~$6,000~~$3.9 million during ~~2014,~~2015, primarily due to ~~an increase~~a decrease in the level of charge-offs in 2016 compared to 2015.

Farmer Mac's charter requires Farmer Mac to maintain in its accounts a portion of the guarantee fees it receives from its guarantee activities as a reserve against losses. As of December 31, ~~2015,~~2016, this reserve against losses arising from Farmer Mac's guarantee activities was ~~$56.4~~$63.6 million. Farmer Mac calculates the amount of this statutorily required reserve against losses arising from its guarantee activities based on the credit risk component of guarantee fees received on all Farmer Mac Guaranteed Securities, including AgVantage securities. This amount does not represent either anticipated credit losses or estimated probable credit losses and does not directly relate to either the allowance for loan losses or the reserve for losses in Farmer Mac's consolidated balance sheets. Rather, this is the amount that must be exhausted

before Farmer Mac may issue obligations to the U.S. Treasury against the $1.5 billion that Farmer Mac is statutorily authorized to borrow from the U.S. Treasury to fulfill its guarantee obligations. That borrowing authority is not intended to be a routine funding source and has never been used. For a more detailed discussion of Farmer Mac's borrowing authority from the U.S. Treasury, see "Business—Farmer Mac's Authority to Borrow from the U.S. Treasury."

Farmer Mac's total outstanding guarantees and LTSPCs exceed the total of: (1) the amount held as an allowance for losses, (2) the amount maintained as a reserve against losses arising from guarantee activities, and (3) the amount Farmer Mac may borrow from the U.S. Treasury. However, Farmer Mac does not expect its future payment obligations under its guarantees and LTSPCs to exceed amounts available to satisfy those obligations, including access to the underlying collateral in the event of default. For information about Farmer Mac's allowance for losses, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk – Loans and Guarantees" and Note 2(j) and Note 8 to the consolidated financial statements.

Farmer Mac's statutory charter authorizes Farmer Mac to issue debt obligations to purchase eligible loans, USDA Securities, and Farmer Mac Guaranteed Securities, and to maintain reasonable amounts for business operations, including adequate liquidity. Farmer Mac funds its purchases of eligible loan assets and liquidity investment assets primarily by issuing debt obligations of various maturities in the public capital markets. Farmer Mac also issues debt obligations to obtain funds to finance its transaction costs and its obligations under guarantees and LTSPCs. Farmer Mac's debt obligations include discount notes and fixed and floating rate medium-term notes, including callable notes.

The interest and principal on Farmer Mac's debt obligations are not guaranteed by, and do not constitute debts or obligations of, FCA or the United States or any agency or instrumentality of the United States other than Farmer Mac. Farmer Mac is an institution of the FCS, but is not liable for any debt or obligation of any other institution of the FCS. Likewise, neither the FCS nor any other individual institution of the FCS is liable for any debt or obligation of Farmer Mac. Income to the purchaser of a Farmer Mac discount note or medium-term note is not exempt under federal law from federal, state, or local taxation. Farmer Mac's discount notes and medium-term notes are not currently rated by an NRSRO.

Farmer Mac's board of directors has authorized the issuance of up to $18.0 billion of discount notes and medium-term notes (of which ~~$14.1~~$13.7 billion was outstanding as of December 31, ~~2015)~~2016), subject to periodic review of the adequacy of that level relative to Farmer Mac's borrowing needs. Farmer Mac invests the proceeds of its debt issuances in loan purchases, Farmer Mac Guaranteed Securities, and liquidity investment assets in accordance with policies established by its board of directors that comply with FCA's Liquidity and Investment Regulations, which establish limitations on dollar amount, issuer concentration, and credit quality. Farmer Mac's regular debt issuance supports its access to the capital markets, and Farmer Mac's liquidity investment assets provide an alternative source of funds should market conditions be unfavorable. Farmer Mac's current policies authorize liquidity investments in:

For more information about Farmer Mac's outstanding investments and indebtedness, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Balance Sheet Review" and Note 4 and Note 7 to the consolidated financial statements.

Farmer Mac's charter authorizes Farmer Mac to issue voting common stock, non-voting common stock, and non-voting preferred stock. Farmer Mac may obtain additional capital from future issuances of voting and non-voting common stock and non-voting preferred stock.

Only banks, other financial entities, insurance companies, and institutions of the FCS ~~eligible to participate in one or more of Farmer Mac's lines of business~~ may hold voting common stock. No holder of Class A voting common stock may directly or indirectly be a beneficial owner of more than 33 percent of the outstanding shares of Class A voting common stock. There are no restrictions on the maximum number or percentage of outstanding shares of Class B voting common stock that may be held by an eligible stockholder. No ownership restrictions apply to Class C non-voting common stock, ~~or to any preferred stock issued by Farmer Mac,~~ and those securities are freely transferable.

The dividend rights of all three classes of Farmer Mac's common stock are the same, and dividends may be paid on common stock only when, as, and if declared by Farmer Mac's board of directors in its sole discretion, subject to compliance with applicable capital requirements and the payment of dividends on outstanding preferred stock. Upon liquidation, dissolution, or winding up of the business of Farmer Mac, after payment and provision for payment of outstanding debt of Farmer Mac, the holders of shares of preferred stock would be paid at par value out of assets available for distribution, plus all declared and unpaid dividends, before the holders of shares of common stock received any payment. The assets of Farmer Mac II LLC are not directly available to satisfy the claims of Farmer Mac's creditors or stockholders. Those assets will only be available to the creditors and stockholders of Farmer Mac after all obligations owed to creditors of and equity holders in Farmer Mac II LLC have been satisfied.

As of December 31, ~~2015,~~2016, the following shares of Farmer Mac common stock were outstanding:

~~Farmer Mac may obtain additional capital from future issuances of voting and non-voting common stock and non-voting preferred stock.~~

Farmer Mac is authorized to borrow up to $1.5 billion from the U.S. Treasury through the issuance of debt obligations to the U.S. Treasury. Any funds borrowed from the U.S. Treasury may be used solely for the purpose of fulfilling Farmer Mac's guarantee obligations. Farmer Mac's charter provides that the U.S. Treasury is required to purchase Farmer Mac's debt obligations up to the authorized limit if Farmer Mac certifies that:

Any debt obligations issued by Farmer Mac under this authority would bear interest at a rate determined by the U.S. Treasury, taking into consideration the average rate on outstanding marketable obligations of the United States as of the last day of the last calendar month ending before the date of the purchase of the obligations from Farmer Mac. Farmer Mac would be required to repurchase any of its debt obligations held by the U.S. Treasury within a "reasonable time." As of December 31, ~~2015,~~2016, Farmer Mac had not used this borrowing authority and does not expect to use this borrowing authority in the future.

The United States government does not guarantee payments due on Farmer Mac Guaranteed Securities, funds invested in the equity or debt securities of Farmer Mac, any dividend payments on shares of Farmer Mac stock, or the profitability of Farmer Mac.

Farmer Mac was created by federal statute in 1988 in the aftermath of the collapse of the agricultural credit delivery system. Farmer Mac's primary committees of jurisdiction in Congress – the Committee on Agriculture of the U.S. House of Representatives and the U.S. Senate Committee on Agriculture, Nutrition and Forestry – added requirements for Farmer Mac that had not been included in any of the other statutes establishing other GSEs. Unlike the other existing GSEs at the time, Farmer Mac was required to be regulated by an independent regulator, FCA, which has the authority to regulate Farmer Mac's safety and soundness. The statute creating Farmer Mac expressly requires that eligible loans meet minimum credit

Since Farmer Mac's creation, Congress has amended Farmer Mac's charter four times:

Farmer Mac's authorities and regulatory structure were not revised by subsequent legislation adopted in 2008 to regulate other GSEs.

As an institution of the FCS, Farmer Mac (including its subsidiaries) is subject to the regulatory authority of FCA. Farmer Mac's charter assigns to FCA, acting through OSMO within FCA, the responsibility for the examination of Farmer Mac and the general supervision of the safe and sound performance of the powers, functions, and duties vested in Farmer Mac by its charter. The charter also authorizes FCA, acting through OSMO, to apply its general enforcement powers to Farmer Mac. Farmer Mac (including its subsidiaries) is the only entity regulated by OSMO, which was created as a separate office in

recognition of the different role that Farmer Mac plays in providing a secondary market, as compared to the roles of other FCS institutions as primary lenders. The Director of OSMO is selected by and reports to the FCA board.

Farmer Mac's charter requires an annual examination of the financial transactions of Farmer Mac and authorizes FCA to assess Farmer Mac for the cost of its regulatory activities, including the cost of any examination. Each year, OSMO conducts an examination of Farmer Mac to evaluate its safety and soundness, compliance with applicable laws and regulations, and mission achievement. The examination includes a review of Farmer Mac's capital adequacy, asset quality, management performance, earnings, liquidity, and sensitivity to interest rate risk. Farmer Mac is also required to file quarterly reports of condition with FCA.

General Requirements. Farmer Mac's charter establishes three capital standards for Farmer Mac:

Farmer Mac is required to comply with the higher of the minimum capital requirement and the risk-based capital requirement.

The risk-based capital stress test promulgated by FCA is intended to determine the amount of regulatory capital (core capital plus the allowance for losses) that Farmer Mac would need to maintain positive capital during a ten-year period in which:

The risk-based capital stress test then adds an additional 30 percent to the resulting capital requirement for management and operational risk.

As of December 31, ~~2015,~~2016, Farmer Mac's statutory minimum and critical capital requirements were ~~$462.1~~$466.5 million and ~~$231.0~~$233.3 million, respectively, and its actual core capital level was ~~$564.5~~$609.7 million, which is ~~$102.4~~$143.2 million above the statutory minimum capital requirement and ~~$333.5~~$376.4 million above the statutory critical capital requirement. Based on the risk-based capital stress test, Farmer Mac's risk-based capital requirement as of December 31, ~~2015~~2016 was ~~$71.7~~$104.8 million and Farmer Mac's regulatory capital of ~~$571.1~~$617.1 million exceeded that amount by approximately ~~$499.4~~$512.3 million. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Capital Requirements" for a presentation of Farmer Mac's current regulatory capital position.

Enforcement Levels. Farmer Mac's charter directs FCA to classify Farmer Mac within one of four enforcement levels for purposes of determining compliance with the capital standards established by

Failure to comply with the applicable required capital level in the charter would result in Farmer Mac being classified as within level II (below the applicable risk-based capital level, but above the minimum capital level), level III (below the minimum capital level, but above the critical capital level) or level IV (below the critical capital level). In the event that Farmer Mac were classified as within level II, III or IV, the charter requires the Director of OSMO to take a number of mandatory supervisory measures and provides the Director with discretionary authority to take various optional supervisory measures depending on the level in which Farmer Mac is classified. The mandatory measures applicable to levels II and III include:

If Farmer Mac were classified as within level III, then, in addition to the foregoing mandatory supervisory measures, the Director of OSMO could take any of the following discretionary supervisory measures:

Farmer Mac's charter does not specify any supervisory measures, either mandatory or discretionary, to be taken by the Director in the event Farmer Mac were classified as within level IV.

The Director of OSMO has the discretionary authority to reclassify Farmer Mac to a level that is one level below its then current level (for example, from level I to level II) if the Director determines that Farmer Mac is engaging in any action not approved by the Director that could result in a rapid depletion of core capital or if the value of property subject to mortgages backing Farmer Mac Guaranteed Securities has decreased significantly.

Capital Adequacy Requirements. Under FCA's rule on capital planning, Farmer Mac must develop and submit to OSMO for approval annually a plan for capital that considers the sources and uses of Farmer Mac's capital, addresses capital projections under stress scenarios, assesses Farmer Mac's overall capital adequacy, and incorporates a Farmer Mac board-approved policy on capital adequacy. In accordance with this regulation, Farmer Mac's board of directors has established a policy that will require Farmer Mac to maintain an adequate level of "Tier 1" capital, consisting of retained earnings, paid-in-capital, common

The policy also requires Farmer Mac to maintain a "capital conservation buffer" of additional Tier 1 capital of more than 2.5 percent of risk-weighted assets. If the capital conservation buffer drops to various levels at or below 2.5 percent, as shown in the table below, the policy requires Farmer Mac to restrict distributions of current quarter Tier 1-eligible dividends and any discretionary bonus payments to an amount not to exceed the corresponding payout percentage specified in the table below, which represents the percentage of the cumulative core earnings for the four quarters immediately preceding the distribution date:

These distribution restrictions will remain for so long as the Tier 1 capital conservation buffer remains at or below the minimum level of 2.5 percent, and Farmer Mac's board of directors may consider other factors, such as GAAP earnings and other regulatory requirements, in determining whether to restrict capital distributions, including dividends and bonus payments. As of December 31, ~~2015,~~2016, Farmer Mac's Tier 1 capital ratio was ~~10.5%~~12.7%. In 2016, Farmer Mac adjusted the calculation of its Tier 1 capital ratio to eliminate certain interest rate risk components of the risk weighting of assets to reflect the fact that Farmer Mac pursues a match-funding approach to funding its assets and therefore does not bear material interest rate risk in its portfolio. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Capital Requirements" for more information on Farmer Mac's Tier 1 capital ratio. Farmer Mac does not expect its compliance on an ongoing basis with FCA's

rule on capital planning, including Farmer Mac's policy on Tier 1 capital, to materially affect Farmer Mac's operations or financial condition.

Farmer Mac's business activities, financial performance, and results of operations are, by their nature, subject to a number of risks and uncertainties, including those related to the agricultural industry, the rural utilities industry, access to the capital markets, ~~the agricultural sector, the rural utilities industry,~~ the regulatory environment, and the level of prevailing interest rates and overall market conditions. The following risk factors ~~could materially affect Farmer Mac's financial condition and operating results and~~ should be considered in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7 of this Annual Report on Form 10-K, including the risks and uncertainties described in the "Forward-Looking Statements" section. Furthermore, because new risk factors likely will emerge from time to time, management can neither predict all such risk factors nor assess the effects of such factors on Farmer Mac's business, operating results, and financial condition or the extent to which any factor, or combination of factors, may affect Farmer Mac's actual results and financial condition. If any of the following risks

External factors or variables beyond Farmer Mac's or borrowers' control that could negatively affect borrowers' profitability, and therefore, their repayment capacity, could cause Farmer Mac to experience increased delinquency ~~and~~rates, default rates, and credit losses within its loan portfolio, including, but not limited to:

Farmer Mac's business, operating results, financial condition, and capital levels may be materially and adversely affected by external factors that may affect the price or marketability of Farmer Mac's products or Farmer Mac's ability to offer its products and services.

In the Farm & Ranch line of business, repayment of ~~eligible~~ loans typically depends on the success of the related farming operation, which, in turn, depends on many variables and factors, including those described above, over which farmers may have little or no control, such as weather conditions, animal and plant disease outbreaks, restrictions on water supply, economic conditions (both domestic and international), demand for U.S. agricultural products, and political conditions.control. Farmer Mac's credit risk may also increase in the case of a loan with a balloon payment due at maturity if the borrower seeks to refinance but is unable to do so. As of December 31, ~~2015, 65.8~~2016, 65.9 percent of the loans in the Farm & Ranch line of business included balloon payments. ~~In addition,~~Farmer Mac's credit risk may also increase as a result of its exposure to loans that are adversely affected by a decline in the sale value of the underlying collateral, which can vary based on several factors, including commodity type, geographic region, and the degree to which the collateral is single-use or highly improved. Loans to borrowers in ~~industries~~certain commodity groups or geographic regions that have had historically higher delinquency rates or credit losses relative to Farmer Mac's overall portfolio may present a higher risk of delinquency or credit losses in future periods. For example, as of December 31, ~~2015,~~2016, loans to borrowers in the permanent plantings and part-time farm categories comprised a combined ~~20.1~~22.2 percent of the Farm & Ranch portfolio, but delinquencies in these combined categories comprised ~~31.3~~30.9 percent of the aggregate delinquencies for all commodity categories. AsAlso, the degree to which the collateral for a commodity group is single-use or highly improved, such as for permanent plantings, agricultural storage or processing facilities, or certain livestock facilities, may be a significant determinant of the probability of ultimate losses on a given loan because producers requiring such highly improved collateral are less able to adapt their operations or switch commodity groups when faced with adverse conditions. For example, as of December 31, ~~2015,~~2016, loans to borrowers in the Agricultural Storage and Processing category (including ethanol facilities) comprised ~~1.4~~0.8 percent of the Farm & Ranch portfolio, but cumulative net credit losses for this category comprised ~~45.5~~45.3 percent of the cumulative net credit losses for all categories. Widespread deterioration in collateral values, resulting in the undercollateralization of the related loans, could have a material adverse effect on Farmer Mac's financial condition, results of operations, liquidity, or capital levels.

In the Rural Utilities line of business, eligible utilities operations include the distribution of electricity, the generation and transmission of electricity, and telecommunications. ~~Each~~Repayment of eligible loans in this line of business could be affected by several factors. Although each type of ~~utility~~utilities operation has different inherent risks associated with it, ~~but~~ all ~~share a common risk posed~~of them could be potentially affected by ~~potential~~ changes in public and regulatory policies. ~~Business~~In addition, business cash flows can be disrupted as a result of storms, though distribution cooperatives have in place cost-sharing arrangements with providers in other regions that mitigate this exposure. Historically, natural disasters have often resulted in disaster area declarations and financial aid to utilities providers through the Federal Emergency Management Agency and other conduits, although there can be no assurance that any such aid would be available in the event of any future natural disaster. ~~The electrical~~Electrical distribution and generation ~~sectors~~cooperatives can also be adversely affected

by changes in fuel costs and prices received from consumers, as well as by contractual power obligations that do not match up with supply or demand. In the event that Farmer Mac purchases telecommunications loans in the future, the depth and pace of technological change in the telecommunications industry can also provide significant challenges, as the industry requires heavy capital investment and correct judgments about the sustainability of new technologies in an area with many competitors. If any of the factors described above negatively impacts the cash flows or financial condition of utilities operations that are borrowers on loans in Farmer Mac's portfolio, Farmer Mac's financial condition, results of operations, liquidity, or capital levels could be adversely affected.

Farmer Mac's guarantee and purchase commitment obligations to third parties, including Farmer Mac Guaranteed Securities and LTSPCs, are obligations of Farmer Mac only and are not backed by the full faith and credit of the United States, FCA, or any other agency or instrumentality of the United States other than Farmer Mac. As of December 31, ~~2015,~~2016, Farmer Mac had ~~$4.6~~$4.9 billion of contingent liabilities related to Farmer Mac Guaranteed Securities and LTSPCs issued to third parties, which represents Farmer Mac's exposure if all loans underlying these guarantees and LTSPCs defaulted and Farmer Mac recovered

Farmer Mac is exposed to credit risk from issuers of AgVantage securities. Each AgVantage security is a general obligation of an issuing institution secured by eligible loans in an amount at least equal to the outstanding principal amount of the security and guaranteed by Farmer Mac. ~~However, most~~Most of Farmer Mac's AgVantage exposure is concentrated in a small number of issuers. Farmer Mac seeks to manage its risk to AgVantage counterparties by reviewing each institution for which Farmer Mac has AgVantage exposure and requiring those institutions to meet Farmer Mac's standards for creditworthiness. In addition, Farmer

~~addition, Farmer~~ Mac requires some level of overcollateralization (currently between ~~102~~103 percent and 125 percent of the principal amount of the securities issued) and, in some cases, compliance by the counterparty with specified financial covenants for the life of the related AgVantage securities, for AgVantage securities secured by Farm & Ranch loans. As of December 31, ~~2015,~~2016, nearly all of the $7.3 billion of AgVantage securities outstanding had been issued by three counterparties. A default by any of these counterparties could have a significant adverse effect on Farmer Mac's business, operating results, and financial condition.

Farmer Mac maintains an investment portfolio that can be drawn upon for liquidity needs. In addition to cash and cash equivalents (such as U.S. Treasury securities and short-term money market instruments), this portfolio consists of investment securities, including securities guaranteed by U.S. Government agencies and GSEs, GSE-issued preferred stock, corporate debt obligations, and auction-rate certificates. Though some of these investment securities do not qualify for purposes of calculating liquidity under the regulatory requirements prescribed by FCA, they still may be drawn upon for Farmer Mac's liquidity needs. Farmer Mac regularly reviews concentration limits to ensure that its investments are appropriately diversified and comply with policies approved by Farmer Mac's board of directors and with applicable FCA regulations, but Farmer Mac is still exposed to credit risk from issuers of the investment securities it holds. For example, as of December 31, ~~2015,~~2016, Farmer Mac held at fair value, as part of its liquidity investment portfolio, ~~$20.0~~$10.0 million of corporate debt securities, ~~$83.4~~$37.7 million of asset-backed securities principally backed by U.S. Government-guaranteed student loans (including ~~$44.9~~$17.7 million of auction-rate certificates), and ~~$1.1~~$1.0 billion of investment securities guaranteed by GSEs. A default by multiple issuers of investment securities held by Farmer Mac, or by a single issuer of investment securities in which Farmer Mac is more heavily concentrated, could have an adverse effect on Farmer Mac's business, operating results, and financial condition.

Farmer Mac relies on interest rate swap contracts and hedging arrangements to effectively manage its interest rate risk. Farmer Mac clears a significant portion of its interest rate swaps through a swap clearinghouse through which centrally-cleared derivatives and futures contracts are traded, and posts initial and variation margin to this clearinghouse. These collateral postings expose Farmer Mac to institutional credit risk in the event that either the clearinghouse or the futures commission merchant that Farmer Mac uses to post collateral to the clearinghouse fails to meet its obligations. Conversely, the use of centrally-cleared derivatives mitigates Farmer Mac's credit risk to individual counterparties because clearinghouses assume the credit risk among counterparties in centrally-cleared derivatives transactions. However, if either the clearinghouse or the futures commission merchant that Farmer Mac uses to post collateral to the clearinghouse fails to meet its obligations, Farmer Mac could face challenges in accessing its posted collateral, which could materially and adversely affect its business, operating results, and financial condition.

A portion of Farmer Mac's interest rate swap contracts are not cleared through swap clearinghouses, which creates swap counterparty credit risk on those non-cleared swaps transactions. In managing this risk, Farmer Mac contracts only with counterparties that have investment grade credit ratings, establishes and

maintains minimum threshold collateral requirements that are scaled based upon credit ratings (for non-cleared swaps transactions entered into prior to March 2017), and enters into netting agreements. Additionally, new rules that became effective in March 2017 establish zero threshold requirements for the exchange of variation margin between Farmer Mac and its swap dealer counterparties in non-cleared swaps transactions entered into following the effective date. However, failure to perform under a non-cleared derivatives contract by one or more of Farmer Mac's counterparties could disrupt Farmer Mac's hedging operations, particularly if Farmer Mac were entitled to a termination payment under the terms of the contract that it did not receive, or if Farmer Mac were unable to reposition the swap with a new counterparty. Of the $8.1 billion combined notional amount of Farmer Mac's interest rate swaps as of December 31, 2016, $1.2 billion were not cleared through swap clearinghouses. As of December 31, 2016, Farmer Mac's credit exposure to interest rate swap counterparties was $24.5 million excluding netting arrangements and $0.2 million including netting arrangements.

Farmer Mac's business, operating results, financial condition, and capital levels may be materially and adversely affected by external factors, including adverse changes in the capital markets or changes in public policy, that may affect the price or marketability of Farmer Mac's products and services or Farmer Mac's ability to offer its products and services, including, but not limited to:

Farmer Mac's ability to operate its business, meet its obligations, generate asset volume growth, and fulfill its statutory mission depends on Farmer Mac's capacity to remain adequately capitalized through the issuance of equity securities and to issue substantial amounts of debt frequently and at favorable rates. The issuance of equity and debt securities in the U.S. financial markets are the primary sources of Farmer Mac's capitalization and funding for Farmer Mac's purchases of eligible loan assets and liquidity investment assets and for repaying or refinancing existing debt. Moreover, one of the primary sources of Farmer Mac's revenue is the net interest income earned from the difference, or "spread," between the return received on assets held and the related borrowing costs. Farmer Mac's ability to obtain funds

through the issuance of equity and debt securities, at favorable rates and terms, depends on many factors, including:

Continued growth in Farmer Mac's business and future profitability may be constrained by conditions that limit the need or ability for lenders to obtain the benefits of the secondary market provided by Farmer Mac, including, but not limited to:

As of December 31, 2016, Farmer Mac had $7.3 billion of AgVantage securities outstanding, of which $1.6 billion and $1.7 billion will be maturing in 2017 and 2018, respectively. The terms of most AgVantage securities do not require the periodic payment of principal based on amortization schedules and instead have fixed maturity dates when the secured general obligation is due. If the issuer of a maturing AgVantage security defaults and does not pay the outstanding principal amount due upon maturity, Farmer Mac's liquidity position could be negatively affected because Farmer Mac will be required to obtain funds in a significant amount to pay the holder of the AgVantage security or, for

AgVantage securities owned by Farmer Mac, to pay off the debt securities used to fund the purchase of the AgVantage securities. Farmer Mac's income could also be adversely affected if the issuer of a maturing AgVantage security does not issue new AgVantage securities to replace the maturing securities and Farmer Mac does not find alternate sources of business, or if the net interest margin earned by Farmer Mac on new AgVantage securities that replace maturing AgVantage securities is lower than the margin earned on the maturing AgVantage securities.

Farmer Mac's business and ability to generate revenues and profits largely depends on its ability to purchase eligible loans or place eligible loans under guarantees or LTSPCs. Farmer Mac conducts a significant portion of its business with a small number of business partners. This results in vulnerability as existing assets pay down or mature and the status and needs of Farmer Mac's business partners evolve. In 2016, ten institutions generated approximately 59 percent of loan purchase volume in the Farm & Ranch line of business. As of December 31, 2016, approximately 95.3 percent of the $7.3 billion outstanding principal amount of AgVantage securities were issued by three institutions. Transactions with CFC have represented 100 percent of business volume under Farmer Mac's Rural Utilities line of business since its inception in 2008. Farmer Mac's ability to maintain the current relationships with its business partners or customers and the business generated by those business partners or customers is significant to Farmer Mac's business. Consequently, the loss of business from any one of Farmer Mac's key business partners could negatively impact Farmer Mac's revenues and profitability. Furthermore, Farmer Mac may not be able to replace the loss of business of a key business partner or customer with alternate sources of business due to limitations on the types of assets eligible for the secondary market provided by Farmer Mac under its charter, which could adversely affect Farmer Mac's business and result in a decrease in its revenues and profits.

Congress created Farmer Mac to provide for a secondary market for agricultural mortgage loans, loans to rural utilities cooperatives, and the guaranteed portions of USDA-guaranteed loans. In pursuing this mission, Farmer Mac's secondary market activities are designed to:

Although Farmer Mac strives to undertake its mission-related activities in a manner consistent with providing a positive return to Farmer Mac's stockholders, it is possible that these activities may contribute to a lower return to stockholders than if Farmer Mac's sole purpose were to maximize stockholder value. In addition, it is possible that the entities that regulate Farmer Mac could seek to alter Farmer Mac's mission-related activities in the future or place limits on its investments that provide liquidity for Farmer Mac's mission-related activities. If this were to happen, and Farmer Mac were required to undertake activities involving greater risk to satisfy its Congressional mission or that generate lower returns, Farmer Mac's business, operating results, or financial condition could be adversely affected.

Farmer Mac is exposed to operational risk due to the complex nature of its business operations and the processes and systems used to fulfill its Congressional mission, maintain operational efficiency and technological relevance, and comply with regulatory requirements. Operational risk refers to the risk of loss to Farmer Mac or damage to its reputation resulting from inadequate or failed internal processes, personnel, or systems or from external events, including a disruption involving physical site access, cyber incidents, catastrophic events, natural disasters, terrorist activities, or disease pandemics.

Inadequacies or failures in Farmer Mac's internal processes, personnel, or systems could lead to a significant disruption in its business operations, financial and economic loss, errors in its financial statements, impairment of its liquidity, liability or service interruptions to its customers, increased regulatory or legislative scrutiny, or reputational damage. Farmer Mac's financial, accounting, data processing, or other operating systems may fail to operate as intended or become temporarily unavailable as a result of events that are wholly or partially beyond Farmer Mac's control, which could adversely affect Farmer Mac's ability to conduct its business in the ordinary course. Farmer Mac relies upon business processes that largely depend on people, technology, and the use of complex systems and models to manage its business, process a high volume of daily transactions, and generate the records upon which

its financial statements are based. This heightened reliance increases the risk that Farmer Mac may be exposed to financial, reputational, or other losses as a result of errors or inherent design flaws in its processes or systems or the failed execution of these processes or systems. As Farmer Mac continues to enhance its technological capabilities and organizational structure, additional operational risks may arise in the implementation of these endeavors. Additionally, Farmer Mac's business relies on its ability to process, evaluate, and interpret significant amounts of information, much of which is provided by third parties, and that information may not be correct or Farmer Mac may fail to interpret it appropriately. Furthermore, the internal controls and processes Farmer Mac has in place designed to detect and prevent fraud may not be effective or successful.

Most of Farmer Mac's critical business operations and activities are conducted in its main office located in Washington, D.C., and this concentration of Farmer Mac's personnel, technology, and facilities increases Farmer Mac's risk of financial or other loss. Though Farmer Mac routinely reviews and updates its business continuity and disaster recovery plans, these plans may not be sufficient to mitigate all potential business continuity risks, as Farmer Mac's recovery capabilities could be overwhelmed by a disruption in its infrastructure or a catastrophic event such as a natural disaster, terrorist attack, extreme weather event, or disease pandemic. If Farmer Mac is not able to resume any business operations or its employees are unable to communicate with each other as a result of any of these events, Farmer Mac may not be able to successfully implement its continuity and disaster recovery plans, which could have a material adverse effect on Farmer Mac's business, liquidity, operating results, reputation, or financial condition.

Farmer Mac relies heavily on information systems, including from third parties, to conduct and manage its business operations. These information systems encompass an integrated set of hardware, software, infrastructure, and trained personnel organized to facilitate the planning, control, coordination, and decision-making processes occurring within Farmer Mac. As Farmer Mac's reliance on information systems has increased, so have the risks posed to its systems, including the effect of events that would threaten the confidentiality, integrity, or availability of Farmer Mac's information resources, known as cyber incidents. Farmer Mac has undertaken preventive measures and devotes significant resources to regularly audit, upgrade, and maintain its information systems and cyber security program consistent with industry best practices. Specifically, Farmer Mac's cyber security program routinely assesses Farmer Mac's cyber security risk profile and seeks to ensure there are sufficient measures and safeguards in place to mitigate the risks identified. However, Farmer Mac may not be able to prevent, address on a timely and adequate basis, or fully mitigate the negative effects associated with a successful cyber-attack on Farmer Mac's or its third-party information systems, which could adversely affect Farmer Mac's business, operating results, reputation, or financial condition. In addition, because the methods used to launch cyber-attacks change frequently or, in some cases, are not recognized until launched, Farmer Mac may be unable to implement effective preventive measures or proactively address these methods until they are discovered.A failure or interruption in any of Farmer Mac's information systems could result in a disruption or malfunction of its operations, which could adversely affect Farmer Mac's ability to conduct business with its lenders, loan servicers, service providers, or other counterparties, result in financial loss, or cause damage to Farmer Mac's reputation.

The secure transmission, processing, and storage of Farmer Mac's confidential, proprietary, and other information assets through Farmer Mac's or its third party information systems is instrumental to Farmer Mac's operations. Any action that results in unauthorized access to Farmer Mac's information systems by third parties, including through viruses, malware, cyber-attacks, or other information system breaches, could disrupt Farmer Mac's operations, corrupt its data, or result in the misappropriation, unauthorized release, loss, or destruction of the confidential, proprietary, or other information assets of its lenders, loan servicers, service providers, or other counterparties. Similar to many other financial institutions, Farmer Mac faces regular attempts by third parties to gain unauthorized access to its information systems. If unauthorized access to Farmer Mac's information systems occurs or sensitive information is obtained, this could cause Farmer Mac to experience prolonged operational interruption, damage to its reputation, material loss of business, legal liability, or increased costs from private data exposure, which could adversely affect Farmer Mac's business, operating results, reputation, or financial condition.

Farmer Mac relies on third-party vendors, including loan servicers, information systems providers, software-as-a-service (SaaS) providers, cloud computing service providers, and other service providers, to perform various functions for Farmer Mac. In the course of these activities, these vendors collect and have access to a variety of confidential or proprietary information, including, among others, sensitive financial information, information presented to Farmer Mac's board of directors, information provided to Farmer Mac's regulators, information about the lenders that participate in Farmer Mac's lines of business, and personal financial information about the borrowers with loans included in one of Farmer Mac's lines of business. Any unauthorized access to a vendor's information systems by third parties, including through viruses, malware, cyber-attacks, or other information system breaches, could result in the misappropriation and unauthorized release of the confidential or proprietary information entrusted to Farmer Mac. Also, any vendor's employees or agents that have access to confidential or proprietary information could inadvertently disseminate the information to unauthorized third parties. Any unauthorized access to or dissemination of confidential or proprietary information could result in liability for Farmer Mac or damage Farmer Mac's reputation, either of which could have a negative effect on Farmer Mac's business, operating results, or financial condition.

Farmer Mac continually develops and adapts profitability and risk management models to adequately address a wide range of possible market developments. Farmer Mac's techniques and strategies may not be effective in mitigating its risk exposure in all economic market environments or against all types of risk, including risks that Farmer Mac fails to identify or anticipate. Some of Farmer Mac's qualitative tools and metrics for managing risk are based upon its use of observed historical market behavior. Farmer Mac applies statistical and other tools to these observations to quantify its risks. These tools and metrics may fail to predict future or unanticipated risk. Such failures could, for example, arise from factors Farmer Mac did not anticipate or correctly evaluate in its models. In addition, Farmer Mac's quantified modeling does not take into account all risks. Farmer Mac's more qualitative approach to managing those

risks not accounted for in its quantitative models could prove insufficient, exposing it to material unanticipated losses. The inability of Farmer Mac to effectively identify and manage the risks inherent in its business could have a material adverse effect on its business, operating results, financial condition, or capital levels.

Farmer Mac is subject to interest rate risk due to the possible timing differences in the cash flows of the assets it holds and related liabilities. Farmer Mac's primary strategy for managing interest rate risk is to fund asset purchases with liabilities that have similar duration and cash flow characteristics so that they will perform similarly as interest rates change. Through Farmer Mac's issuances of debt securities in the form of discount notes and medium-term notes coupled with interest rate swap contracts that adjust the characteristics of the debt issued, Farmer Mac seeks to match its liabilities closely with the cash flow and duration characteristics of its loans and other assets. However, the ability of borrowers to prepay their loans prior to the scheduled maturities increases the risk of asset and liability cash flow mismatches. In a changing interest rate environment, these cash flow mismatches could reduce Farmer Mac's earnings if assets repay sooner than expected and the resulting cash flows must be reinvested in lower-yielding investments, particularly if Farmer Mac's related funding costs cannot be correspondingly repaid. In addition, if assets repay more slowly than anticipated and the associated debt issued to fund the assets must be reissued at a higher yield, Farmer Mac's earnings could be adversely affected. As of December 31, ~~2015,~~2016, of all the outstanding business volume held on Farmer Mac's balance sheet, ~~$4.9~~$5.3 billion had a fixed interest rate and ~~$6.4~~$7.2 billion had an ~~indexed or non-indexed~~ adjustable interest rate.

Farmer Mac is also subject to another type of interest rate risk due to changes in its cost of funds relative to floating rate market indexes (such as LIBOR) on some of the floating rate assets it holds, which is referred to as "basis risk." Some of Farmer Mac's floating rate assets reset on rate adjustment dates on the basis of a floating rate market index, whereas the related debt that Farmer Mac issued to fund those assets until their maturities may be refinanced on the basis of Farmer Mac's cost of funds at a particular time. Basis risk arises from the potential variability between the rates at which those floating rate assets reset and the rates at which Farmer Mac can issue or refinance debt to fund those assets until their maturities. Farmer Mac is also subject to basis risk on some of its fixed rate assets as a result of its use of pay-fixed interest rate swaps, combined with a series of discount note or medium-term note issuances, as an alternative source of effectively fixed rate funding. This risk arises because the rates at which Farmer Mac refinances its funding for some fixed rate assets through the issuance of discount notes or medium-term notes may vary from the agreed-upon rates based on the floating rate market index received by Farmer Mac on the associated swaps. If the rates on Farmer Mac’s discount notes or medium-term notes deteriorate relative to LIBOR during the time between when its indexed floating rate assets were first funded and when Farmer Mac refinances the associated debt or in cases when Farmer Mac uses pay-fixed swaps to fund its fixed rate assets, Farmer Mac is exposed to a commensurate reduction in its net effective spread. Conversely, if the rates on Farmer Mac’s discount notes or medium-term notes improve relative to LIBOR during that time or in cases when Farmer Mac uses pay-fixed swaps to fund its fixed rate assets, Farmer Mac would benefit from a commensurate increase in its net effective spread. Although Farmer Mac seeks to issue debt of sufficient maturity to reduce the frequency of required refinancing of that debt over the life of the associated asset, it may not be able to successfully do so, which could adversely impact its business, operating results, and financial condition. As of December 31, ~~2015,~~2016, Farmer Mac held ~~$5.8~~

$6.4 billion of floating-rate assets in its lines of business and its liquidity investment portfolio that reset on the basis of floating rate market indexes, primarily one-month and three-month LIBOR. As of the same date, Farmer Mac also had ~~$1.8~~$2.3 billion of interest rate swaps outstanding where Farmer Mac pays a fixed rate of interest and receives a floating rate of interest.

Farmer Mac enters into financial derivatives transactions to hedge interest rate risks inherent in its business and measures its financial derivatives at fair value. Although Farmer Mac's financial derivatives provide effective economic hedges of interest rate risk, changes in the fair values of financial derivatives can cause volatility in net income and in capital, particularly if those financial derivatives are not designated in hedge accounting relationships or if there is any ineffectiveness in a hedge accounting relationship. As interest rates increase or decrease, the fair values of Farmer Mac's derivatives change based on the position Farmer Mac holds relative to the specific characteristics of the derivative. Farmer Mac's core capital that is available to meet its statutory minimum capital requirement can be affected by changes in the fair values of financial derivatives, as noted above. Adverse changes in the fair values of Farmer Mac's financial derivatives that are not designated in hedge accounting relationships and any hedge ineffectiveness that results in a loss would reduce the amount of core capital available to meet this requirement, which could result in regulatory enforcement action against Farmer Mac if it were unable to meet the requirement. In ~~2015~~2016 and ~~2014,~~2015, Farmer Mac recorded unrealized gains of ~~$1.9~~$8.6 million and ~~unrealized losses of $21.8~~$1.9 million, respectively, from changes in the fair values of its financial derivatives as a result of movements in interest rates during those years.

Changes in interest rates as well as certain credit events may trigger collateralization requirements for Farmer Mac under its derivatives contracts, which could adversely affect Farmer Mac's liquidity position ~~and~~or operating results.

Farmer Mac uses derivatives contracts to help manage its interest rate risk. Changes in interest rates have required, and in the future may require, Farmer Mac to post cash or investment securities to its derivative counterparties to reflect the changes in fair market values of Farmer Mac's derivatives as a result of the changes in interest rates. For example, as of December 31, ~~2015,~~2016, Farmer Mac posted ~~$38.0~~$1.0 million of cash and $24.6 million of investment securities as collateral for its derivatives in net liability positions. If changes in interest rates were to result in a significant decrease in the fair value of Farmer Mac's derivatives, Farmer Mac would be required to post a significant amount of cash, cash equivalents, or investment securities, possibly within a short period of time, to satisfy its obligations under its derivatives contracts. For cleared swaps transactions, Farmer Mac is required to fully collateralize its derivatives positions without any minimum threshold. For non-cleared swaps transactions entered into prior to March 2017, Farmer Mac's derivatives contracts ~~currently~~ contain provisions establishing minimum threshold collateral amounts, ranging between $15 million and $25 million, below which Farmer Mac is not required to post collateral, though these amounts may be reduced to zero upon the occurrence of specified credit events such as insolvency, receivership, failure to make a payment under the contract when due, or failure to continue as an instrumentality of the United States. ~~The~~Under these contracts, the amount required to be posted would increase if Farmer Mac also experienced a credit event, thereby triggering full collateralization of its derivatives positions without any minimum threshold. Additionally, new rules that ~~become~~became effective ~~later this year will~~in March 2017 establish ~~minimum~~zero threshold requirements for the exchange of ~~initial and~~ variation margin between Farmer Mac and its swap dealer counterparties in non-cleared swaps transactions. ~~These~~As a result of these new rules, oras well as the evolving norms of the derivatives industry ~~as a result~~due to these rules,

Farmer ~~Mac's~~Mac has amended the provisions in its derivatives contracts with swap counterparties to ~~seek to amend~~provide for zero thresholds amounts for the ~~provisions in their derivatives contracts with Farmer Mac related to the minimum threshold collateral amounts below which Farmer Mac would not be required to post collateral~~exchange of variation margin for ~~currently existing~~non-cleared swaps ~~and/or swaps~~transactions entered into infollowing the ~~future, which could significantly increase~~effective date of the ~~amount of collateral~~rules. Thus, for these non-cleared swaps transactions, Farmer Mac is required to fully collateralize its derivatives positions without any minimum threshold, and therefore, the aggregate amount of collateral that Farmer Mac will be required to post or could ~~require a full collateralization of Farmer Mac's derivatives positions.~~significantly increase as compared to previous periods. As of December 31, ~~2015,~~2016, the amount that would have been required for full collateralization of all of Farmer Mac's derivatives positions given the fair value of Farmer Mac's derivatives at that time was ~~$45.2~~$15.8 million. If ~~Farmer Mac were required to significantly increase~~ the amount of collateral itFarmer Mac is required to post significantly increases or Farmer Mac is required to fully collateralize all of its derivatives ~~position~~positions in an adverse interest rate environment, it could have a ~~negative~~material adverse effect on Farmer Mac's liquidity position ~~and~~or operating results.

Deterioration in financial or credit market conditions could reduce the fair value of Farmer Mac's investment securities, particularly those securities that are less liquid and more subject to market variability. Some securities owned by Farmer Mac, including auction-rate certificates and GSE subordinated debt, do not have well-established secondary trading markets, making it more difficult to estimate current fair values for those securities. Adverse financial market conditions may further compound the challenges of estimating fair values for Farmer Mac's securities, as was the case in 2008 after widespread failure of the auction mechanism that had been established to provide liquidity for the auction-rate certificates that Farmer Mac currently holds.

Farmer Mac relies on market observations to determine the fair value of its investment securities, although the market data Farmer Mac relies upon may not reflect the actual sale conditions that Farmer Mac would

face when selling its investment securities. For example, the market value of auction-rate certificates held by Farmer Mac depends in large part on the amounts and timing of the expected cash flows on these securities, which may be highly uncertain. Therefore, a change in the amounts or timing of cash flows could materially alter the market price of those securities. Subsequent valuations of these and other investment securities, in light of factors then prevailing, may result in significant changes in the value of Farmer Mac's investment securities. For example, the current market values for the auction-rate certificates and GSE subordinated debt held by Farmer Mac are ~~significantly~~ below their amortized cost due to widening credit spreads after purchase. As of December 31, ~~2015,~~2016, the fair values of Farmer Mac's auction-rate certificates and GSE subordinated debt were ~~$44.9~~$17.7 million and ~~$66.2~~$67.0 million, respectively, compared to Farmer Mac's amortized cost of ~~$46.5~~$19.7 million and $70.0 million, respectively, for each of these classes of investment securities.

Farmer Mac also relies on internal models to estimate the fair values of its investment securities and to determine whether credit losses exist, which requires Farmer Mac to exercise judgment about estimates and assumptions used in the models. If Farmer Mac uses incorrect estimates or assumptions in the internal models it develops to estimate the fair value of its investment securities, those models could adversely affect reported income during the reporting period.

If Farmer Mac decides to sell securities in its investment portfolio, the price ultimately realized will depend on the demand and liquidity in the market at the time of sale. Farmer Mac's inability to sell the securities in its investment portfolio at or above their estimated fair values could adversely affect Farmer Mac's business, operating results, financial condition, ~~and capital levels.~~

The trading price of Farmer Mac's Class C non-voting common stock has at times experienced substantial price volatility and may continue to be volatile. For example, from January ~~2015~~2016 to December ~~2015,~~2016, the closing price of the stock ranged from ~~$22.41~~$26.36 per share to ~~$33.01~~$58.72 per share. The trading price may fluctuate in response to various factors, including short sales, hedging, the presence or absence of a share

Farmer Mac's efforts to pursue its Congressional mission of providing a secondary market for loans made to borrowers in rural America may adversely affect its business, operating results, and financial condition.

Farmer Mac was established under a statutory charter that is subject to amendment by the U.S. Congress at any time and is regulated by various government agencies, including the FCA and the SEC. As a result, Farmer Mac is exposed to the risk of legal or regulatory penalties, material financial loss, including fines, judgments, damages, and/or settlements, or of loss of reputation, if it fails to comply with applicable laws, regulations, or rules, as well as self-regulatory organization standards and codes of conduct, applicable to its business activities. Any future legislative action or regulatory action affecting Farmer Mac's statutory charter or its business activities, and any required changes to Farmer Mac's business or operations resulting from such actions, could result in a financial loss for Farmer Mac or otherwise reduce its profitability, impose additional compliance and other costs on Farmer Mac, limit the products offered by Farmer Mac or its ability to pursue business opportunities in which it might otherwise consider engaging, curtail business activities in which it is currently engaged, affect the value of assets that Farmer Mac holds, or otherwise adversely affect Farmer Mac's business, results of operations, reputation, or financial condition.

Significant new legislation and regulations affecting the financial services industry, in which most of Farmer Mac's ~~voting common stock are~~business partners and customers operate, have been enacted or proposed in the past several years. Specifically, to the extent that these or future legislative or regulatory actions affect the activities of banks, insurance companies, other rural lenders, derivatives counterparties, clearinghouses, securities dealers, or other regulated entities that constitute a large portion of Farmer Mac's business counterparties or customers, Farmer Mac could experience reduced customer demand or profitability, increased compliance costs, disadvantageous business terms in its dealings with counterparties, and unfavorable changes to its business practices or activities. As a result, Farmer Mac's business, operating results, reputation, or financial condition could be adversely affected.

Farmer Mac is required by statute and regulation to maintain certain capital levels. Any inability by Farmer Mac to meet these capital requirements could result in supervisory measures by FCA, adversely affect Farmer Mac's ability to declare dividends on its common and preferred stock, or otherwise materially and adversely affect Farmer Mac's business, operating results, or financial condition. In addition, as required by an FCA regulation on capital planning, Farmer Mac has adopted a policy to maintain a sufficient level of Tier 1 capital and to impose restrictions on paying Tier 1-eligible dividends in the event that Tier 1 capital falls below specified thresholds. For more information on Farmer Mac's capital requirements, including the Tier 1 capital requirement, see "Business—Government Regulation of Farmer Mac—Regulation—Capital Standards." Factors that could adversely affect the adequacy of Farmer Mac's capital levels in the future, and which may be beyond Farmer Mac's control, include:

Farmer Mac is a GSE that is governed by a statutory charter, which is subject to amendment by the U.S. Congress at any time, and regulated by government agencies, including the FCA and the SEC. Although Farmer Mac is not aware of any pending legislative proposals that would adversely affect either the manner in which Farmer Mac conducts its business or the status of Farmer Mac as ~~an indirect competitor because~~a GSE at this time, Farmer Mac's ~~secondary market activities often provide attractive funding~~ability to effectively conduct its business is subject to risks and ~~effective risk management tools~~uncertainties related to legislative or political developments that ~~help many lenders compete~~may affect the status or operations of GSEs generally. From time to time, legislative initiatives may be commenced that, if successful, could result in the ~~origination~~enactment of ~~eligible rural loans. As long as Farmer Mac's Class A and Class B voting common stock is highly concentrated in a small number~~legislation or the promulgation of ~~institutions, there is~~regulations that could negatively affect the ~~potential that these institutions will seek to influence Farmer Mac's business, strategy, or board composition in a way that may not be in the best interests~~status of ~~either~~ Farmer Mac ~~or all other stockholders. Furthermore, the interests of the holders of Farmer Mac's Class A and Class B voting common stock may not be fully aligned with each other~~as a GSE or the ~~interests of~~manner in which Farmer ~~Mac's Class C non-voting common stockholders, and this could lead~~Mac operates. Farmer Mac cannot predict whether any legislative proposals related to ~~a strategy that is not in~~ the ~~best interests~~housing GSEs would also address the continued GSE status of Farmer Mac or ~~all~~modify the current operating structure or authorities of Farmer Mac in any material way. Implementation of any such proposal could have a material and adverse effect on Farmer Mac's business, operating results, financial condition, or capital levels. See "Business—Government Regulation of Farmer Mac" for additional discussion on the rules and regulations governing Farmer Mac's activities.

Farmer Mac relies on its employees' breadth and depth of knowledge of agricultural and rural utilities lending, financial products, and other areas of expertise to run its business operations successfully. A significant disruption in the continuity of Farmer Mac's ~~Class A voting common stock~~employees would require Farmer Mac to expend resources to replace personnel and could result in a loss of productivity in the ~~holders of~~interim. If Farmer Mac is unable to continue to retain and attract qualified employees, Farmer Mac's Class B voting common stock each have the right to elect one third of the membership of Farmer Mac's Board. Accordingly, each of these stockholder classes has the potential to significantly influence Farmer Mac's business and strategy in a manner that may notperformance or financial condition could be ~~in the best interests of all stockholders.~~materially adversely affected.

Any of the risks described in this section could materially and adversely affect Farmer Mac's business, operating results, financial condition, reputation, capital levels, and future earnings. For additional discussion about Farmer Mac's risk management, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management" in Item 7 of this Annual Report on Form 10-K.

None.

Farmer Mac maintains its principal office at 1999 K Street, N.W., 4th Floor, Washington, D.C. 20006, under the terms of a sublease that began on October 1, 2011 and ends on August 30, 2024. Farmer Mac also maintains anthe following additional office ~~located at~~locations: (1) 5408 N.W. 88^th Street, Suite 120, Johnston, Iowa 50131, under the terms of a lease that began on July 1, 2013 and ends on June 30, ~~2018.~~2018; (2) 5200 N. Palm Avenue, Suite 306, Fresno, California 93704, under the terms of a lease that began on January 1, 2017 and ends on February 29, 2020; and (3) 1065 E. Winding Creek, Suite 200, Eagle, Idaho 83616, under the terms of a lease that began on October 1, 2016 and ends on November 30, 2019. Farmer Mac's offices are suitable and adequate for its current and currently anticipated needs.

None.

Farmer Mac's Class A voting common stock and Class C non-voting common stock are listed on the New York Stock Exchange under the symbols AGM.A and AGM, respectively. The Class B voting common stock, which has a limited market and trades infrequently, is not listed or quoted on any exchange or other quotation system, and Farmer Mac is not aware of any publicly available quotations or prices for that class of common stock.

The information below represents the high and low closing sales prices for shares of both the Class A and Class C common stock for the periods indicated below, as reported by the New York Stock Exchange:

The dividend rights of all three classes of Farmer Mac's common stock are the same, and dividends may be paid on common stock only when, as, and if declared by Farmer Mac's board of directors in its sole discretion, subject to compliance with applicable capital requirements and payment of dividends on any outstanding preferred stock. On February 6, 2014, Farmer Mac's board of directors declared a quarterly dividend of $0.14 per share on Farmer Mac's common stock payable for first quarter 2014. That dividend rate was paid quarterly through fourth quarter 2014. On February 5, 2015, Farmer Mac's board of directors declared a quarterly dividend of $0.16 per share on Farmer Mac's common stock payable for first quarter 2015. That dividend rate was paid quarterly through fourth quarter 2015. On March 2, 2016, Farmer Mac's board of directors declared a quarterly dividend of $0.26 per share on Farmer Mac's common stock payable for first quarter 2016. That dividend rate was paid quarterly through fourth quarter 2016. On March 1, 2017, Farmer Mac's board of directors declared a quarterly dividend of $0.36 per share on Farmer Mac's common stock payable on March 31, ~~2016.~~2017. See "Business—Finance—Equity Issuance" for more information on Farmer Mac's common stock.

Farmer Mac seeks to provide a competitive return on its common stockholders' investments through the payment of cash dividends while retaining sufficient capital to support future growth in its business and to meet regulatory requirements and metrics established by Farmer Mac's board of directors. Farmer Mac

Capital Resources—Capital Requirements" for more information on the capital requirements applicable to Farmer Mac.

Information about securities authorized for issuance under Farmer Mac's equity compensation plans appears under "Equity Compensation Plans" in Farmer Mac's definitive proxy statement to be filed on or about April ~~1, 2016.~~3, 2017. That portion of the definitive proxy statement is incorporated by reference into this Annual Report on Form 10-K.

Farmer Mac is a federally chartered instrumentality of the United States, and its common stock is exempt from registration under Section 3(a)(2) of the Securities Act. One type of transaction related to Farmer Mac's common stock occurred during fourth quarter ~~2015~~2016 that was not registered under the Securities Act and not otherwise reported on a Current Report on Form 8-K:

Performance Graph. The following graph compares the performance of Farmer Mac's Class A voting common stock and Class C non-voting common stock with the performance of the New York Stock Exchange Composite Index (the "NYSE Comp") and the Standard & Poor's 500 Diversified Financials Index (the "S&P 500 Div Fin") over the period from December 31, ~~2010~~2011 to December 31, ~~2015.~~2016. The graph assumes that $100 was invested on December 31, ~~2010~~2011 in each of: Farmer Mac's Class A voting common stock; Farmer Mac's Class C non-voting common stock; the NYSE Comp; and the S&P 500 Div Fin. The graph also assumes that all dividends were reinvested into the same securities throughout the past five years. Farmer Mac obtained the information contained in the performance graph from SNL Financial.

This performance graph shall not be deemed to be "soliciting material" or to be "filed" with the SEC, and this performance graph shall not be incorporated by reference into any of Farmer Mac's filings under the Securities Act or the Securities Exchange Act of 1934 and related regulations, or any other document, whether made before or after the date of this report and irrespective of any general incorporation language contained in a filing or document (except to the extent Farmer Mac specifically incorporates this section by reference into a filing or document).

The selected consolidated financial data presented below is summarized from Farmer Mac's consolidated balance sheet data as of December 31, ~~2015~~2016 and the five-year period then ended, as well as selected results of operations data for the five-year period then ended. This data should be reviewed in conjunction with the audited consolidated financial statements and related notes and with "Item 7—Management's Discussion and Analysis of Financial Condition and Results of Operations" included in this Annual Report on Form 10-K.

Financial information included in this report is consolidated to include the accounts of Farmer Mac and its three subsidiaries – Farmer Mac Mortgage Securities Corporation, Farmer Mac II LLC, and Contour Valuation Services, ~~LLC.~~LLC (which began doing business as AgVisory during first quarter 2016) ("AgVisory"). This discussion and analysis of financial condition and results of operations should be read together with Farmer Mac's consolidated financial statements and the related notes to the consolidated financial statements for the fiscal years ended December 31, 2016, 2015, ~~2014,~~ and ~~2013.~~2014.

Farmer Mac increased its outstanding business volume by ~~$1.3~~$1.5 billion ~~or 9 percent,~~ (9.4 percent) to $17.4 billion during ~~2015 to $15.9 billion as of December 31, 2015.~~2016. The primary drivers of this increase were ~~the addition of $522.3 million of Rural Utilities loans under LTSPCs (the first time Farmer Mac has provided LTSPCs on loans in the Rural Utilities line of business) and~~(1) net loan growth of ~~$417.8 million~~$0.6 billion in the Farm & Ranch line of business, (2) net growth in AgVantage securities issued of $0.6 billion in the Institutional Credit line of business, and (3) the addition of $0.4 billion of loans under LTSPCs in the Rural Utilities line of business. Farmer ~~Mac also added a $300.0 million revolving floating rate AgVantage facility~~Mac's overall credit quality deteriorated moderately during ~~2015. Farmer Mac's net effective spread improved $5.7 million in 2015 compared to 2014. Credit quality remained stable for~~2016, as the ~~year.~~total allowance

On September 8, 2015, Farmer Mac's board of directors approved a share repurchase program authorizing Farmer Mac to repurchase up to $25 million of its outstanding Class C non-voting common stock over the next two years. Asfor losses and substandard assets as of December 31, 2016 increased in terms of both dollars and percentage of the Farm & Ranch portfolio from their respective 2015 ~~Farmer Mac had repurchased approximately 362,000 shares~~levels, although 90-day delinquencies decreased as of ~~Class C non-voting common stock at a cost~~the end of ~~approximately $10.5 million under the share repurchase program.~~ 2016 compared to 2015.

Farmer Mac also increased the quarterly dividend on all three classes of its common stock by 6338 percent from ~~$0.16~~$0.26 per share in each quarter of ~~2015~~2016 to ~~$0.26~~$0.36 per share beginning in first quarter ~~2016.~~2017. This represents the ~~fifth~~sixth consecutive year that Farmer Mac has increased its quarterly dividend from the prior year, and Farmer Mac believes that the most recent increase is supported by Farmer Mac's earnings potential and overall capital position.

Farmer Mac completed its cash management and liquidity initiative in fourth quarter ~~2014. As described above, Farmer Mac completed~~2014 and its capital restructuring initiative in first quarter 2015. The effects of both of these initiatives are explained in the comparisons of financial results between 2016, 2015, ~~2014,~~ and ~~2013.~~2014. Both of these initiatives are described in more detail in Farmer Mac's 2014 Annual Report on Form 10-K filed with the SEC on March 16, 2015.

The discussion below of Farmer Mac's financial information includes measures of financial performance that are not presented in accordance with generally accepted accounting principles in the United States ("GAAP"), and these are considered "non-GAAP" measures. For more information about the non-GAAP measures Farmer Mac uses, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Use of Non-GAAP Measures."

Farmer Mac's net income attributable to common stockholders for ~~2015~~2016 was ~~$47.4~~$64.2 million, compared to ~~$38.3~~$47.4 million and ~~$71.8~~$38.3 million, respectively, for ~~2014~~2015 and ~~2013.~~2014.

The $16.8 million increase in net income attributable to common stockholders for 2016 compared to 2015 was driven by an increase of $9.4 million after-tax in net interest income and the effects of unrealized fair value changes on financial derivatives and hedged assets, which was a $8.9 million after-tax gain in 2016 compared to a $7.1 million after-tax gain in 2015. Also contributing to the year-over-year increase was the absence in 2016 of (1) an $8.1 million ($6.2 million after-tax) loss recorded in first quarter 2015 resulting from the write-off of deferred issuance costs upon the redemption of the Farmer Mac II LLC Preferred Stock on March 30, 2015; and (2) $3.5 million after-tax in dividend expense recorded during first quarter 2015 on that preferred stock. The increase was offset in ~~2015 from 2014~~part by a $3.1 million after-tax increase in non-interest expense in 2016 primarily attributable to higher general and administrative ("G&A") expenses, higher compensation and employee benefits expenses, and a decrease in the release of reserve for losses.

The $9.1 million increase in net income attributable to common stockholders for 2015 compared to 2014 ~~from 2013 were~~was primarily ~~attributable~~due to the effects of unrealized fair value changes on financial derivatives and hedged assets, which was a $7.1 million after-tax gain in 2015 compared to a $6.5 million after-tax loss in 2014 and ~~a $29.4~~an increase in net interest income of $10.5 million after-tax ~~gain~~excluding the effects of the cash management and liquidity initiative. The increase was offset in ~~2013. For more information about changes~~part by the absence in 2015 of the net ~~income attributable~~economic benefit of the cash management and liquidity initiative completed in 2014, which was $11.4 million after netting the related incremental after-tax financing costs over the term of the initiative with the tax benefit recognized in 2014. Also, non-interest expense increased in 2015 by $2.6 million after-tax primarily due to ~~common stockholders, see "—Results~~higher compensation and employee benefits expenses and higher G&A expenses.

Net interest income was $140.3 millionfor 2016, compared to ~~2013~~$125.8 million for 2015 and $70.3 million for 2014. The overall net interest yield was ~~primarily attributable~~0.90 percent for 2016, compared to 0.88 percent for 2015 and 0.51 percent for 2014.

The $14.5 million increase in net interest income for 2016 compared to 2015 was due to several factors. One factor was the effect of an increase in short-term interest rates on assets and liabilities indexed to LIBOR due to the ~~effects~~Federal Reserve's decision to raise the target range for the federal funds rate in fourth quarter 2015. This effect on net interest income occurred because interest expense used to calculate net interest income does not include all the funding expenses related to these assets, specifically the expense on financial derivatives not designated in hedge accounting relationships. This increase in short-term rates on assets and liabilities indexed to LIBOR did not have a similar effect on net effective spread because net effective spread includes interest expense from all funding related to such assets, including interest expense from financial derivatives not designated in hedge accounting relationships. Another factor contributing to the year-over-year increase in net interest income was an increase in the average outstanding balance of the capital restructuring initiative, which increased preferred dividend expense in 2014 by $6.3 million after-tax. Core earnings for 2013 included a $2.0 million after-tax gain on the sale of an available-for-sale investment security on which Farmer Mac realized tax benefits of $1.1 million, as well as a $1.0 million after-tax gain from the repurchase of debt, neither of which recurred in 2014.Farm & Ranch loans, USDA Securities, and AgVantage securities. Also contributing to the ~~decrease was a $1.9 million after-tax decrease~~increase were (1) lower net yield adjustments related to amortization of premiums and discounts on assets consolidated at fair value driven by slower prepayments on those assets and (2) an increase in the net ~~effective spread resulting from the redemption~~effect of ~~Farmer Mac's investment in $78.5 million of high-yielding preferred stock. Operating expenses increased $1.2 million after-tax in 2014 compared to 2013~~consolidated trusts due to ~~increases~~an increase in ~~compensation~~securitization activity of Farm & Ranch loans during 2016. Farmer Mac earns the difference between the interest income recognized on loans in consolidated trusts and the related interest expense ~~and other costs related to corporate strategic initiatives.~~recognized on debt securities of consolidated trusts held by third parties. The ~~decrease in core earnings~~increase was offset in part by (1) higher net yield adjustments from amortization of purchase premiums on certain Farm & Ranch loans and (2) a tighter spread on a large AgVantage security that was refinanced in first quarter 2016 at a shorter maturity than the ~~$11.4~~original security.

The $55.5 million increase in net ~~economic benefit resulting~~interest income in 2015 compared to 2014 primarily resulted from two items that did not recur in 2015 but were included in net interest income for 2014: (1) the acceleration of amortization of $11.6 million in premiums associated with certain Rural Utilities loans that were refinanced into other loan products in first quarter 2014; and (2) interest expense of $39.4 million associated with securities purchased under agreements to resell and securities sold, not yet purchased (related to Farmer Mac's cash management and liquidity initiative that began in second quarter 2014). The increase in net interest income was also attributable in part to an increase in the average outstanding balance of Farm & Ranch loans, USDA Securities, and ~~a $1.8 million after-tax reduction~~AgVantage securities and an increase in ~~credit-related expenses~~the net effect of consolidated trusts due to ~~releases from~~an increase in securitization activity of Farm & Ranch loans during 2015. The increase in net interest income was partially offset by the ~~allowance for losses~~loss of $6.5 million in ~~2014.~~

Net effective spread, a non-GAAP measure, was $125.1 million for 2016, compared to $119.4 million ~~for 2015 compared to~~and $113.7 ~~million and $116.6~~ million, respectively, for ~~2014~~2015 and ~~2013.~~2014. In percentage terms, net effective spread for ~~2015~~2016 was ~~0.87~~0.86 percent, compared to 0.87 percent and 0.91 percent, respectively, in 2015 and ~~0.96 percent, respectively, for 2014~~2014. Farmer Mac uses net effective spread as an alternative measure to net interest income because management believes it is a useful metric that accurately reflects the economics of the net spread between all the assets owned by Farmer Mac and ~~2013.~~all related funding, including any associated derivatives, some of which may not be reflected in net interest income under GAAP. For more information about the non-GAAP measures

Farmer Mac uses, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Use of Non-GAAP Measures."

For 2016 compared to 2015, the contraction in net effective spread in percentage terms was primarily attributable to (1) a higher average balance in lower-earning investment securities in 2016 compared to 2015, (2) a tighter spread on a large AgVantage security that was refinanced in first quarter 2016 at a shorter maturity than the original security, and (3) higher net yield adjustments from amortization of purchase premiums on certain Farm & Ranch loans in 2016 compared to 2015. This contraction was offset in part by a lower average balance in cash and cash equivalents primarily during the second half of 2016. The year-over-year increase in dollars was attributable to growth in outstanding business volume.

For 2015 compared to 2014, the contraction in net effective spread in percentage terms was attributable to the loss of $6.5 million in preferred dividend income ~~(5 basis points)~~(0.05 percent) from the October 2014 redemption of the high-yielding preferred stock previously held in Farmer Mac's investment portfolio and a higher average balance in cash and cash equivalents intended to increase Farmer Mac's liquidity position, partially offset by a shift towards products earning higher spreads. The year-over-year increase in dollars was ~~primarily~~ attributable to growth in outstanding business volume.

Farmer Mac added ~~$3.2~~$4.4 billion of new business volume during ~~2015.~~2016. The new business volume included purchases of ~~$748.4~~$2.1 billion of AgVantage securities, purchases of $966.0 million of newly originated Farm & Ranch loans, ~~purchases of $743.2 million of AgVantage securities,~~ Rural Utilities loans added under LTSPCs of ~~$522.3~~$441.4 million, Farm & Ranch loans added under LTSPCs of ~~$427.8~~$399.1 million, purchases of ~~$363.6~~$375.2 million of USDA Securities, ~~the addition~~issuance of ~~a $300.0 million revolving floating rate AgVantage facility, Rural Utilities loan purchases of $108.3 million, and purchases of $13.3~~$106.1 million of Farmer Mac Guaranteed USDA ~~Securities.~~Securities, and purchases of Rural Utilities loans of $50.5 million. The new business volume in AgVantage securities included two $500.0 million AgVantage securities which refinanced existing AgVantage securities that matured in first quarter 2016 and third quarter 2016, respectively. Taking into account maturities and paydowns on existing assets, Farmer Mac's outstanding business volume was ~~$15.9~~$17.4 billion as of December 31, ~~2015~~,2016, an increase of ~~$1.3~~$1.5 billion from December 31, ~~2014~~2015.

The preparation of Farmer Mac's consolidated financial statements in conformity with GAAP requires the use of estimates and assumptions that affect the amounts reported in the consolidated financial statements and related notes for the periods presented. Actual results could differ from those estimates. The critical accounting policies that are both important to the presentation of Farmer Mac's financial condition and results of operations and require complex, subjective judgments are the accounting policies for the allowance for losses and fair value measurement.

Farmer Mac maintains an allowance for losses to cover estimated probable losses incurred as of the balance sheet date on loans held for investment ("allowance for loan losses") and loans ~~that underlie off-~~

The allowance for loan losses increases through periodic provisions for loan losses that are charged against net interest income. The reserve for losses increases through provisions for losses that are charged to non-interest expense. Both the allowance for loan losses and reserve for losses decrease by charge-offs

for actual losses, net of recoveries. Charge-offs represent losses on the outstanding principal balance, any interest payments previously accrued or advanced, and expected costs of liquidation. Negative provisions, or releases of allowance for losses, occur when the estimate of probable losses as of the end of a period is lower than the estimate at the beginning of the period.

The total allowance for losses consists of a general allowance for losses and a specific allowance for individually identified impaired loans.

Farmer Mac's methodology for determining its general allowance for losses incorporates Farmer Mac's automated loan classification system. That system scores loans based on criteria such as historical repayment performance, indicators of current financial condition, loan seasoning, loan size, and loan-to-value ratio. For purposes of the loss allowance methodology, the loans in Farmer Mac's portfolio of loans and loans underlying off-balance sheet Farm & Ranch Guaranteed Securities and LTSPCs have been scored and classified for each calendar quarter since first quarter 2000. The allowance methodology captures the migration of loan scores across concurrent and overlapping three-year time horizons and calculates loss rates separately within each loan classification for (1) loans held for investment and (2) loans underlying off-balance sheet Farm & Ranch Guaranteed Securities and LTSPCs. The calculated loss rates are applied to the current classification distribution of unimpaired loans in Farmer Mac's portfolio to estimate probable losses, based on the assumption that the historical credit losses and trends used to calculate loss rates will continue in the future. Management evaluates this assumption by taking into consideration various factors, including:

Management believes that this methodology produces a reasonable estimate of probable losses, as of the balance sheet date, for all loans included in the Farm & Ranch line of business, including loans held for investment and loans underlying off-balance sheet Farm & Ranch Guaranteed Securities and LTSPCs.

Farmer Mac separately evaluates the Rural Utilities loans it holds for investment and loans underlying LTSPCs to estimate any probable losses inherent in those assets. Farmer Mac has not provided an allowance for losses for the portfolio segment related to the Rural Utilities line of business based on the credit quality of the collateral supporting rural utilities assets.

Farmer Mac individually analyzes certain loans in its portfolio for impairment. Farmer Mac's individually identified impaired loans generally include loans 90 days or more past due, in foreclosure, restructured, in bankruptcy, and certain performing loans that have previously been delinquent or are secured by real estate that produces agricultural commodities or products that are currently under stress.

For individually identified impaired loans with an updated appraisal, other updated collateral valuation, or management's estimate of discounted collateral value, this analysis compares the measurement of the fair value of the collateral to the total recorded investment in the loan. The total recorded investment in the loan includes principal, interest, and advances, net of any charge-offs. In the event that an individually analyzed loan's collateral value does not equal or exceed its total recorded investment, Farmer Mac provides a specific allowance for loss in the amount of the difference between the recorded investment and fair value, less estimated costs to liquidate the collateral. Estimated selling costs are based on historical selling costs incurred by Farmer Mac or management's best estimate of selling costs for a particular property. For individually identified impaired loans without updated valuations, this analysis is performed in the aggregate considering similar risk characteristics of the loans and historical statistics. Farmer Mac considers appraisals that are more than two years old as of the reporting date not to be updated for purposes of individually analyzing loans.

Further information regarding the allowance for losses is included in "—"Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk – Loans and Guarantees" and Note 2(j) to the consolidated financial statements.

A significant portion of Farmer Mac's assets consists of financial instruments that are measured at fair value in the consolidated balance sheets. For financial instruments that are complex in nature or for which observable inputs are not available, the measurement of fair value requires management to make significant judgments and assumptions. These judgments and assumptions, as well as changes in market conditions, may have a material impact on the consolidated balance sheets and statements of operations.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (also referred to as an exit price) and establishes a hierarchy for ranking fair value measurements. In determining fair value, Farmer Mac uses various valuation approaches, including market and income approaches. The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when

measuring fair value. When available, the fair value of Farmer Mac's financial instruments is based on quoted market prices, valuation techniques that use observable market-based inputs, or unobservable inputs that are corroborated by market data. Pricing information obtained from third parties is internally validated for reasonableness prior to use in the consolidated financial statements.

When observable market prices are not readily available, Farmer Mac estimates fair value using techniques that rely on alternate market data or internally developed models using significant inputs that are generally less readily observable. Market data includes prices of financial instruments with similar maturities and characteristics, interest rate yield curves, measures of volatility, and prepayment rates. If market data needed to estimate fair value is not available, Farmer Mac estimates fair value using internally-developed models that employ a discounted cash flow approach. Even when market assumptions are not readily available, Farmer Mac's assumptions reflect those that market participants would likely use in pricing the asset or liability at the measurement date.

Farmer Mac's assets and liabilities presented at fair value in the consolidated balance sheets on a recurring basis include investment securities, Farmer Mac Guaranteed Securities, USDA Securities, and financial derivatives. The changes in fair value from period to period are recorded either in the consolidated statements of comprehensive income as other comprehensive (loss)/income, net of tax or in the consolidated statements of operations as gains/(losses) on financial derivatives and hedging activities or gains/(losses) on trading assets.

The fair value hierarchy ranks the quality and reliability of the information used to determine fair values. The hierarchy gives highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The hierarchy has the following three levels to classify fair value measurements:

As of December 31, ~~2015,~~2016, Farmer Mac's assets and liabilities recorded at fair value included financial instruments valued at ~~$6.1~~$4.9 billion whose fair values were estimated by management in the absence of readily determinable fair values (i.e., level 3). These financial instruments measured as level 3 represented 3931 percent of total assets and 6965 percent of financial instruments measured at fair value as of December 31, ~~2015.~~2016.

See Note 13 to the consolidated financial statements for more information about fair value measurement.

Core earnings and core earnings per share principally differ from net income attributable to common stockholders and earnings per common share, respectively, by excluding the effects of fair value fluctuations. These fluctuations are not expected to have a cumulative net impact on Farmer Mac's financial condition or results of operations reported in accordance with GAAP if the related financial instruments are held to maturity, as is expected. Among other items, these fair value fluctuations have included unrealized gains or losses on financial derivatives and hedging activities related to the exchange of variation margin between Farmer Mac and its counterparties on both its cleared and non-cleared derivatives portfolios. However, beginning in first quarter 2017, the variation margin amounts exchanged between Farmer Mac and its counterparties on cleared derivatives will be considered as settlement rather than collateral as a result of a change in variation margin rules implemented by the Chicago Mercantile Exchange ("CME"), the central clearinghouse used by Farmer Mac. Specifically, effective January 3, 2017, CME began to deem the exchange of variation margin between derivatives counterparties as a partial settlement of each respective derivative contract rather than as collateral pledged by a counterparty. Accordingly, beginning in first quarter 2017, Farmer Mac will present its cleared derivatives portfolio net of variation margin payments on its consolidated balance sheets and will recognize realized gains or losses as a result of these payments on its consolidated statements of operations. However, Farmer Mac believes that even though these variation margin amounts will be accounted for as realized gains or losses on financial derivatives and hedging activities as a result of the CME rule change, the economic character of these transactions will remain the same as they were before the change. The fair value fluctuations related to the exchange of variation margin, whether considered a partial settlement of or the pledge of collateral under a derivatives contract, are not expected to have a cumulative net impact on Farmer Mac's financial condition or results of operations reported in accordance with GAAP because the related financial instruments are expected to be held to maturity. Therefore, beginning in first quarter 2017, Farmer Mac will exclude the effects of realized gains or losses resulting from the exchange of variation margin on its cleared derivatives portfolio in its calculations of core earnings and core earnings per share to present them on a consistent basis with quarters prior to 2017.

Core earnings and core earnings per share also differ from net income attributable to common stockholders and earnings per common share, respectively, by excluding specified infrequent or unusual transactions that Farmer Mac believes are not indicative of future operating results and that may not reflect the trends and economic financial performance of Farmer Mac's core business. For example, the loss from retirement of the Farmer Mac II LLC Preferred Stock in first quarter 2015 has been excluded from core earnings and core earnings per share because it is not a frequently occurring transaction and not indicative of future operating results. This is also consistent with Farmer Mac's previous treatment of these types of origination costs associated with securities underwriting that are capitalized and deferred during the life of the security. For a reconciliation of Farmer Mac's net income attributable to common stockholders to core earnings and of earnings per common share to core earnings per share, see

"Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations."

Farmer Mac's net income attributable to common stockholders for ~~2015~~2016 was ~~$47.4~~$64.2 million ~~or $4.19~~($5.97 per diluted common ~~share,~~share), compared to ~~$38.3~~$47.4 million ~~or $3.37~~($4.19 per diluted common ~~share,~~share) for ~~2014~~2015, and ~~$71.8~~$38.3 million ~~or $6.41~~($3.37 per diluted common ~~share,~~share) for ~~2013.~~2014. Farmer Mac's non-GAAP core earnings for ~~2015~~2016 were ~~$47.0~~$53.8 million ~~or $4.15~~($5.01 per diluted common ~~share,~~share), compared to ~~$53.0~~$47.0 million ~~or $4.67~~($4.15 per diluted common ~~share~~share) for ~~2014~~2015, and ~~$54.9~~$53.0 million, ~~or $4.90~~ ($4.67 per diluted common ~~share,~~share) for ~~2013.~~

A reconciliation of Farmer Mac's net income attributable to common stockholders to core earnings isand core earnings per share are presented in the following ~~table~~tables along with a breakdown of the composition of core earnings:

Table 1

The five non-GAAP reconciling items between net income attributable to common stockholders and core earnings ~~presented on an after-tax basis,~~ are:

1. Unrealized gains/(losses) on financial derivatives and hedging activities. The table below calculates the non-GAAP reconciling item for unrealized ~~gains/~~(losses)/gains on financial derivatives and hedging ~~activities, after tax.~~activities.

The following sections provide more detail regarding specific components of Farmer Mac's results of operations.

Net Interest Income.

Net interest income was ~~$125.8~~$140.3 million for ~~2015~~2016, compared to $125.8 million for 2015 and $70.3 million for ~~2014 and $109.5 million for 2013.~~2014. The overall net interest yield was ~~88 basis points~~0.90 percent for 2016, compared to 0.88 percent for 2015 ~~compared to 51 basis points~~and 0.51 percent for ~~2014 and 89 basis points for 2013.~~2014.

The $14.5 million increase in net interest income for 2016 compared to 2015 was due to several factors. One factor was the impact of an increase in short-term interest rates on assets and liabilities indexed to LIBOR due to the Federal Reserve's decision to raise the target range for the federal funds rate in fourth quarter 2015. This effect on net interest income occurred because interest expense used to calculate net interest income does not include all the funding expenses related to these assets, specifically the expense on financial derivatives not designated in hedge accounting relationships. This increase in short-term rates on assets and liabilities indexed to LIBOR did not have a similar effect on net effective spread because net effective spread includes interest expense from all funding related to such assets, including interest expense from financial derivatives not designated in hedge accounting relationships. Another factor contributing to the year-over-year increase in net interest income was an increase in the average outstanding balance of Farm & Ranch loans, USDA Securities, and AgVantage securities. Also contributing to the increase were (1) lower net yield adjustments related to amortization of premiums and discounts on assets consolidated at fair value driven by slower prepayments on those assets and (2) an increase in the net effect of consolidated trusts due to an increase in securitization activity of Farm & Ranch loans during 2016. Farmer Mac earns the difference between the interest income recognized on loans in consolidated trusts and the related interest expense recognized on debt securities of consolidated trusts held by third parties. The increase was offset in part by (1) higher net yield adjustments from amortization of purchase premiums on certain Farm & Ranch loans and (2) a tighter spread on a large AgVantage security that was refinanced in first quarter 2016 at a shorter maturity than the original security.

The $55.5 million increase in net interest income in 2015 compared to 2014 primarily resulted from two items that did not recur in 2015 but were included in net interest income for 2014: (1) the acceleration of amortization of $11.6 million in premiums associated with certain Rural Utilities loans that were refinanced into other

The decrease in net interest income in 2014 compared to 2013 was primarily attributable to interest expense of $39.4 million associated with securities purchased under agreements to resell and securities sold, not yet purchased (related to Farmer Mac's cash management and liquidity initiative that began in second quarter 2014) and the loss of $2.1 million of preferred dividends due to the October 2014 redemption of high yielding preferred stock previously held in Farmer Mac's investment portfolio. Included in net interest income for 2014 and 2013 was the acceleration of amortization of $11.6 million and $15.9 million, respectively, in premiums associated with certain Rural Utilities loans that were recast into other loan products in first quarter 2014 and fourth quarter 2013.

For 2015 compared to 2014, the decreases in income due to changes in rate on cash and investments reflects the effect of the October 1, 2014 redemption of $78.5 million of high-yielding preferred stock previously held in Farmer Mac's investment portfolio and an increase in the average balance of cash and cash equivalents in 2015 earning minimal yields. The average rate earned on cash and investments during 2014 included the effects of interest costs resulting from the slightly negative rate of return received on the securities purchased under agreements to resell (repos) that were part of Farmer Mac's cash management and liquidity initiative. Farmer Mac closed its positions in these securities in fourth quarter 2014, so they

Net effective spread was $125.1 million for 2016, compared to $119.4 million ~~for 2015 compared to~~and $113.7 ~~million and $116.6~~ million, respectively, for ~~2014~~2015 and ~~2013.~~2014. In percentage terms, net effective spread for ~~2015~~2016 was ~~0.87~~0.86 percent, compared to ~~0.91~~0.87 percent and ~~0.96~~0.91 percent, respectively, in ~~2014~~2015 and ~~2013.~~2014.

For 2016 compared to 2015, the contraction in net effective spread in percentage terms was primarily attributable to (1) a higher average balance in lower-earning investment securities in 2016 compared to 2015, (2) a tighter spread on a large AgVantage security that was refinanced in first quarter 2016 at a shorter maturity than the original security, and (3) higher yield adjustments from amortization of purchase premiums on certain Farm & Ranch loans in 2016 compared to 2015. This contraction was offset in part

by a lower average balance in cash and cash equivalents primarily during the second half of 2016. The year-over-year increase in dollars was attributable to growth in outstanding business volume.

For 2015 compared to 2014, the contraction in net effective spread in percentage terms was ~~primarily~~ attributable to the loss of $6.5 million in preferred dividend income ~~(5 basis points)~~(0.05 percent) from the October 2014 redemption of the high-yielding preferred stock previously held in Farmer Mac's investment portfolio and a higher average balance in cash and cash equivalents intended to increase Farmer Mac's liquidity position, partially offset by a shift towards products earning higher spreads. The year-over-year increase in dollars was attributable to growth in outstanding business volume.

For 2014 compared to 2013, the contraction in net effective spread in both dollars and percentage terms is primarily attributable to the loss of $2.1 million in preferred dividend income resulting from the October 2014 redemption of the high-yielding preferred stock previously held in Farmer Mac's investment

Provision for and Release of Allowance for Loan Losses and Reserve for Losses.

The provisions to the allowance for loan losses recorded during 2016 were attributable to (1) an increase in the general allowance due to overall net volume growth in on-balance sheet Farm & Ranch loans, (2) downgrades in risk ratings for certain loans, and (3) an increase in the specific allowance for on-balance sheet impaired loans resulting from an increase in the outstanding balance of such loans. The releases from the reserve for losses recognized during 2016 were primarily attributable to the release of a specific reserve on an impaired livestock loan underlying an LTSPC that was required to be removed from the LTSPC pool by the originator during third quarter 2016, offset in part by provisions to the reserve for losses attributable to an increase in the general reserve due to downgrades in risk rating on certain loans underlying LTSPCs.

The provisions to the allowance for loan losses recorded during 2015 were primarily attributable to the establishment of a specific allowance for two Agricultural Storage and Processing loans that financed one

canola facility due to a downgrade in risk rating resulting from collateral shortfalls relative to the unpaid principal balance for such loans. In fourth quarter 2015, Farmer Mac purchased these defaulted Agricultural Storage and Processing loans under the terms of the applicable LTSPC agreement. As a result, Farmer Mac recognized a charge-off of $3.7 million in fourth quarter 2015. ~~The addition to the provision for losses in fourth quarter 2015 related to these loans was $0.1 million because~~ Farmer Mac had previously established a specific allowance of $3.6 million for these loans as of September 30, 2015. In January 2016, Farmer Mac received funds in the amount of $9.8 million to pay off these Agricultural Storage and Processing loans. The provisions to the total allowance for losses were offset by a reduction in the specific allowance for a permanent planting loan based on an updated appraised value of the collateral underlying that loan and by releases from the general ~~allowance~~reserve from the reserve for losses due to substantial paydowns of Agricultural Storage and Processing loans underlying LTSPCs resulting from repayments of these loans at par.

The releases from the allowance for loan losses and the reserve for losses during 2014 were primarily related to a decrease in the general allowance due to substantial paydowns of ethanol loans held for

The releases from the allowance for loan losses during 2013 were primarily related to a decrease in the general allowance due to improved credit quality in the Farm & Ranch loans held for investment. The charge-offs in 2013 included a $3.6 million charge-off related to one ethanol loan that was foreclosed during first quarter 2013 and for which Farmer Mac recorded a gain of $1.1 million upon sale of the REO property in second quarter 2013. The provisions to the reserve for losses in 2013 were primarily attributable to increased estimated probable losses inherent in Farmer Mac's non-ethanol related Agricultural Storage and Processing loans (e.g., grain elevators and cold storage) due to an enhancement in Farmer Mac's loss methodology that takes into consideration the more developed and specialized nature of these types of properties.

Guarantee and Commitment Fees. Guarantee and commitment fees, which compensate Farmer Mac for assuming the credit risk on loans underlying off-balance sheet Farmer Mac Guaranteed Securities and LTSPCs, were ~~$14.1~~$14.9 million for ~~2015,~~2016, compared to$14.1 million and $14.7 million, respectively, for 2015 and ~~$15.6 million, respectively~~, ~~for 2014 and 2013.~~2014. The ~~decrease~~increase in guarantee and commitment fees was ~~primarily~~ attributable to athe addition of $0.5 billion in third quarter 2015 and $0.4 billion in second quarter 2016 of Rural Utilities loans under LTSPCs, offset in part by lower average ~~balance~~ outstanding ~~for~~balances of off-balance sheet Farm & Ranch Guaranteed Securities and ~~LTSPCs, offset in part by the addition of $522.3 million of Rural Utilities~~Farm & Ranch loans ~~under LTSPCs in the second half of 2015, which is the first time Farmer Mac has provided LTSPCs on loans in the Rural Utilities line of business.~~underlying LTSPCs.

~~Gains and Losses~~ Gains/(Losses)on Financial Derivatives and Hedging Activities. The effect of unrealized and realized gains and losses on Farmer Mac's financial derivatives and hedging activities was net gains of $2.3 million for 2016, compared to net gains of $2.5 million for 2015 ~~compared to~~and net losses of~~$21.6~~ $21.6 million for ~~2014 and net gains of $31.8 million for 2013.~~2014.

The components of gains and losses on financial derivatives and hedging activities for the years ended December 31, 2016, 2015, ~~2014,~~ and ~~2013~~2014 are summarized in the following table:

Changes in the fair values of Farmer Mac's open derivative positions for both designated and undesignated hedges are captured in the table above in unrealized losses due to fair value changes and are primarily the result of fluctuations in long-term interest rates. For financial derivatives designated in fair value ~~hedges,~~hedge accounting relationships, changes in the fair values of the hedged items attributable to the hedged risk are also included in the table above in unrealized ~~gains/~~(losses)/gains due to fair value changes. For financial derivatives designated in cash flow hedge accounting relationships, the ineffective portion of changes in fair value are included as losses on cash flow hedges. The accrual of periodic cash settlements for interest paid or received from Farmer Mac's interest rate swaps that are not designated in hedge accounting relationships is shown as expense related to financial derivatives. Payments or receipts to terminate derivative positions or net cash settled forward sales contracts on the debt of other GSEs and U.S. Treasury futures that are not designated in hedge accounting relationships are included in losses due to terminations or net settlements.

Gains ~~and Losses~~ on Trading Securities. During ~~2015,~~2016, Farmer Mac recorded unrealized gains on trading securities of ~~$1.2~~$1.5 million, compared to unrealized gains of $1.2 million during 2015 and realized and unrealized gains of $38.6 million during ~~2014 and unrealized losses of $0.8 million during 2013.~~2014. During ~~2015, $0.8~~2016, $0.3 million of ~~gains~~losses related to financial assets selected to be carried at fair value with changes in fair value included in earnings (the fair value option), compared to recorded gains of $0.8 million and gains of $1.2 million during ~~2014~~2015 and recorded losses of $1.3 million during 2013. Farmer Mac has not elected to account for any financial assets under the fair value option since 2008. Of the total gains recognized during 2014, $37.0 million related to realized gains on securities sold, not yet purchased as part of Farmer Mac's cash management and liquidity initiative.2014.

Other Income. Other income totaled $1.8 million during 2016, compared to $2.3 million ~~during 2015, compared to~~and $1.7 ~~million and $3.1~~ million, respectively, for ~~2014~~2015 and ~~2013.~~2014. Other income during ~~2015~~2016 included the recognition of $1.3 million, compared to $0.6 million during 2015, of appraisal fees received by Farmer Mac's consolidated appraisal company subsidiary, ~~Contour Valuation Services, LLC,~~AgVisory, which was formed in fourth quarter 2014. ~~Farmer Mac's recognition of appraisal fees received by Contour Valuation Services, LLC was immaterial in 2014.~~ Other income during 2016, 2015, ~~2014,~~ and ~~2013~~2014 also included the recognition of $0.2 million of losses, $1.0 million of gains, and $0.9 million ~~and $1.2 million,~~of gains, respectively, of losses or gains previously deferred in accumulated other comprehensive income related to fair value changes of certain available-for-sale securities contributed to Farmer Mac II LLC in 2010 and other miscellaneous items. Additionally, the decrease in other income in 2014 compared to 2013 was primarily attributable to the collection in 2013 of $0.4 million in late fees upon final payoff of a defaulted loan, which did not recur in 2014, and a decrease in other miscellaneous fee income.

Compensation and Employee Benefits. Compensation and employee benefits were $22.8 million in 2016, compared to $22.0 million ~~in 2015, compared to~~and $19.0 ~~million and $17.8~~ million, respectively, in ~~2014~~2015 and ~~2013.~~2014. The increase in compensation and employee benefits in 2016 compared to 2015 was due primarily to an increase in headcount and employee health insurance costs. The increase in compensation and employee benefits in 2015 compared to 2014 was due primarily to payment of higher incentive compensation driven by meeting certain performance targets, an increase in average headcount, annual salary adjustments, and adjustments to stock compensation expense to reflect changes in forfeiture rates. Compensation costs for 2016, 2015, and 2014 also included $0.9 million, $1.0 million, and $40,000, respectively, in compensation costs for Farmer Mac's consolidated appraisal company subsidiary, Contour Valuation Services, LLC. The increase in compensation and employee benefits in 2014 compared to 2013 was due primarily to increased headcount and annual salary adjustments. The increase in annual salary adjustments reflects a change to the allocation of total compensation elements for Farmer Mac's executive officers in 2014 that resulted in a shift in compensation opportunity toward base salary and annual cash compensation and a commensurate reduction in the targeted value of equity-based long-term incentive compensation.AgVisory.

General and Administrative Expenses. General and administrative expenses, including legal, audit, and consulting fees, were $15.1 million for 2016, compared to $13.1 million ~~for 2015 compared to~~and $12.2 ~~million and $11.6~~ million, respectively, for ~~2014~~2015 and ~~2013.~~2014. The increase in general and administrative expenses in 2016 compared to 2015 was due primarily to higher consulting fees and information services expenses related to corporate strategic initiatives, continued technology and business infrastructure investments, and expenses related to business development efforts. The increase in general and administrative expenses in 2015 compared to 2014 was

Regulatory Fees. Regulatory fees, ~~(which~~which consist of the fees paid to ~~FCA)~~FCA, were $2.5 million for 2016, compared to $2.4 million for 2015 ~~2014,~~ and ~~2013.~~2014. FCA has advised Farmer Mac that its estimated fees for the federal fiscal year ending September 30, ~~2016~~2017 will ~~remain at the same level~~increase approximately $50,000 to $2.5 million ($~~0.6~~0.625 million per federal fiscal quarter) as compared to the prior federal fiscal year. After the end of a federal government fiscal year, FCA may revise its prior year estimated assessments to reflect actual costs incurred, and has issued both additional assessments and refunds in the past.

Income Tax Expense. Income tax expense totaled ~~$34.2~~$42.1 million ~~in 2015,~~for 2016, compared to income tax expense of ~~$2.8~~$34.2 million and ~~$33.8~~$2.8 million, respectively, for ~~2014~~2015 and ~~2013.~~2014. The increase in income tax expense in 2016 compared to 2015, was due to higher pre-tax income and two items that occurred during first quarter 2015 but did not recur during 2016: (1) the consolidated tax benefits recognized from the dividends declared on Farmer Mac II LLC Preferred Stock, which is included in the presentation of "Net income attributable to non-controlling interest" on the consolidated statements of operations on a pre-tax basis, and (2) the loss on retirement of the Farmer Mac II LLC Preferred Stock. These items were also the primary reasons why Farmer Mac's effective tax rate was lower than the statutory rate in 2015. The increase in income tax expense in 2015 compared to 2014 was a result of higher pre-tax income in 2015 and the absence of the income tax benefit of $13.0 million related to the cash management and liquidity

initiative that was recorded in 2014. The consolidated tax benefits of the dividends declared on Farmer Mac II LLC Preferred Stock, which is included in the presentation of "Net income attributable to non-controlling interest" on the consolidated statements of operations on a pre-tax basis ~~and the loss on retirement of the Farmer Mac II LLC Preferred Stock were~~was the primary ~~reasons for why~~reason that Farmer Mac's effective tax rate was lower than the statutory federal rate of 35 percent for 2015. For 2014 and 2013, the change in the deferred tax valuation allowance, which, in 2014, was primarily related to the aforementioned income tax benefit, dividends on Farmer Mac II LLC Preferred Stock, and non-taxable dividend income were the primary reasons for why Farmer Mac's effective tax rate was lower than the statutory rate.

Loss on Retirement of Preferred Stock. On March 30, 2015, Farmer Mac II LLC redeemed all of the outstanding shares of Farmer Mac II LLC Preferred Stock, which, in turn, triggered the redemption of all of the outstanding ~~FALConS~~related Farm Asset-Linked Capital Securities, or "FALConS," on that same day. As a result, Farmer Mac recognized an expense in first quarter 2015 of $8.1 million of deferred issuance costs related to those shares of Farmer Mac II LLC Preferred Stock as "Loss on retirement of preferred stock" on the consolidated statements of operations.

Business Volume. During ~~2015~~2016, Farmer Mac added ~~$3.2~~$4.4 billion of new business volume, compared to $3.2 billion in 2015 and $2.8 billion in ~~2014 and $3.1 billion in 2013.~~2014. Specifically, Farmer Mac:

~~Of the~~Farmer Mac's outstanding business volume was $17.4 billion as of December 31, 2016, an increase of $1.5 billion or 9.4 percent from December 31, 2015. The increase in Farmer Mac's outstanding business volume was driven by broad-based portfolio growth across most of Farmer Mac's products and lines of business, including Farm & Ranch loans, AgVantage securities, Rural Utilities loans under LTSPCs, and USDA Securities. The increase in Rural Utilities loans under LTSPCs was driven by a $421.4 million LTSPC transaction in second quarter 2016. The increase in AgVantage securities was primarily driven by net portfolio growth from two of Farmer Mac's long-standing issuers: (1) Rabo Agrifinance, Inc. and (2) National Rural Utilities Cooperative Finance Corporation ("CFC"), which increased their outstanding AgVantage business volume with Farmer Mac by $300.0 million and $210.1 million, respectively, in 2016.

The new business volume in the Institutional Credit line of business included the purchase of two $500.0 million AgVantage securities ~~for 2015, $99.1~~from Metropolitan Life Insurance Company ("MetLife"). MetLife used the proceeds from Farmer Mac's purchase of each of the $500 million ~~was~~AgVantage securities to refinance AgVantage securities of the same amount that matured in first quarter 2016 and third quarter 2016, respectively. Farmer Mac also purchased AgVantage securities of $68.4 million in 2016 under Farm Equity AgVantage facilities with agricultural real estate investment funds, compared to ~~$95.0~~$99.1 million ~~for 2014.~~in 2015.

The following table sets forth purchases of non-delinquent eligible loans, new loans added under LTSPCs, and new guarantees during the periods indicated in the Farm & Ranch, USDA Guarantees, and Rural Utilities lines of business, as well as purchases of AgVantage securities in the Institutional Credit line of business:

New business volume for loans purchased within the Farm & Ranch line of business for ~~2015~~2016 was ~~ahead of 2014 and reflected a modest~~substantially greater than 2015. This was primarily due to an increase in ~~loan demand. Prepayment rates remained subdued~~borrower demand for long-term real estate financing, as farmers used equity in farmland assets to increase sources of operating capital, and ~~contributed to favorable trends~~an increase in ~~net loan growth.~~the average size of loans purchased. New business volume for loans added under LTSPCs within the Farm & Ranch line of business for ~~2015~~2016 compared to ~~2014~~2015 reflected ~~slightly increased~~a decrease in demand ~~for pools of loans under LTSPCs by~~among Farm Credit System ~~institutions.~~institutions for the LTSPC product. The increase in new business volume in the USDA Guarantees line of business for ~~2015~~2016 compared to ~~2014~~2015 reflected an increase in lender usage of USDA guaranteed loan programs ~~and~~due to available federal funding for such programs. Loan purchase volume in the resulting increase in loans available for purchase on the secondary market, as well as the increasing willingness of banks to sell the lower-return guaranteed portions of these loans to fund other new loan originations. Rural Utilities ~~loan purchase volume~~line of business remained low due to ~~modest~~limited demand for credit associated with slow economic growth and greater energy efficiency in recent years, as well as an ongoing preference by CFC, Farmer Mac's only current rural utilities cooperative counterparty, to retain loans on its balance sheet. The large LTSPC transaction completed with CFC in second quarter 2016 marked the second time Farmer Mac has added loans under LTSPCs in the Rural Utilities line of business. Changes in AgVantage securities volume are primarily driven by the generally larger transaction sizes for that product and the fluctuating funding and liquidity needs of Farmer Mac's customer network and scheduled maturity ~~amounts.~~amounts, which was reflected by the refinancing of two $500.0 million AgVantage securities during first quarter 2016 and third quarter 2016.

The purchase price of non-delinquent eligible loans and portfolios is their respective fair value based on current market interest rates and Farmer Mac's target net yield. The purchase price includes an amount to compensate Farmer Mac for credit risk that is similar to the guarantee or commitment fees it receives for assuming credit risk on loans underlying off-balance sheet Farmer Mac Guaranteed Securities and LTSPCs. Based on market conditions, Farmer Mac either retains the loans it purchases or securitizes them and retains or sells Farmer Mac Guaranteed Securities backed by those loans. ~~Historically, Farmer Mac has retained the vast majority of loans it has purchased.~~ The weighted-average age of the Farm & Ranch non-delinquent eligible loans purchased and retained (excluding the purchases of defaulted loans) during ~~2015~~2016 and ~~2014~~2015 was less than one year. Of those loans, 6160 percent and 5961 percent, respectively, had

payments at maturity, with a weighted-average remaining term to maturity of ~~16.6~~17.7 years and ~~15.4~~16.6 years, respectively.

During 2016, 2015, ~~2014,~~ and ~~2013,~~2014, Farmer Mac securitized some of the Farm & Ranch loans it had purchased and sold the resulting Farmer Mac Guaranteed Securities in the amounts of $511.4 million, $336.9 million ~~$175.8 million,~~ and ~~$150.4~~$175.8 million, respectively. Farmer Mac consolidates these loans and presents them as "Loans held for investment in consolidated trusts, at amortized cost" on the consolidated balance sheets. In 2016, 2015, ~~2014,~~ and ~~2013,~~2014,$273.6 million, $255.3 million, ~~$147.2 million,~~ and ~~$120.4~~$147.2 million, respectively, of Farmer Mac Guaranteed Securities were sold to Zions First National Bank, ~~("Zions"),~~ which is a related party to Farmer Mac.

The following table sets forth information regarding the Farmer Mac Guaranteed Securities issued during the periods indicated:

The following table sets forth information regarding outstanding volume in each of Farmer Mac's four lines of business as of the dates indicated:

The following table summarizes by maturity date the scheduled principal amortization of loans held, loans underlying off-balance sheet Farmer Mac Guaranteed Securities (excluding AgVantage securities) and LTSPCs, USDA Securities, and Farmer Mac Guaranteed USDA Securities as of December 31, ~~2015:~~2016:

Of the ~~$15.9~~$17.4 billion outstanding principal balance of volume included in Farmer Mac's four lines of business as of December 31, ~~2015, $6.7~~2016, $7.3 billion were AgVantage securities included in the Institutional Credit line of business. Unlike business volume in the form of purchased loans, USDA Securities, and loans underlying LTSPCs and non-AgVantage Farmer Mac Guaranteed Securities, most AgVantage securities do not require periodic payments of principal based on amortization schedules and instead have fixed maturity dates when the secured general obligation is due. The following table summarizes by maturity date the outstanding principal amount of both on- and off-balance sheet AgVantage securities as of December 31, ~~2015~~2016:

The weighted-average remaining maturity of the outstanding AgVantage securities shown in the table above was ~~4.1~~3.9 years as of December 31, ~~2015~~2016. ~~As a general matter, if maturing AgVantage securities are not replaced with new AgVantage securities, either from the same issuer or from new business, or if the~~

As part of fulfilling its guarantee obligations for Farm & Ranch Guaranteed Securities and commitments to purchase eligible loans underlying LTSPCs, Farmer Mac purchases defaulted loans, all of which are at least ~~90-days~~90 days delinquent or in material non-monetary default at the time of purchase, out of the loan pools underlying those securities and LTSPCs, and records the purchased loans as such on its balance sheet. The purchase price for a defaulted loan purchased out of a pool of loans backing Farm & Ranch Guaranteed Securities is the then-current outstanding principal balance of the loan plus accrued and unpaid interest. The purchase price for a defaulted loan purchased under an LTSPC is the then-current outstanding principal balance of the loan, with accrued and unpaid interest on the defaulted loan payable out of any future loan payments or liquidation proceeds as received. The purchase price of a defaulted loan is not an indicator of the expected loss on that loan; many other factors affect expected loss, if any, on any loan so purchased. The ~~weighted-average age of~~ delinquent loans purchased out of securitized pools and LTSPCs ~~was~~during 2016, 2015, and 2014 had a weighted average age of 9 years, 6 years, and 7 years, ~~and 11 years during 2015, 2014 and 2013,~~ respectively. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk – Loans and Guarantees."

The following table presents Farmer Mac's purchases of defaulted loans underlying Farm & Ranch Guaranteed Securities and LTSPCs for the periods indicated:

Related Party Transactions. As provided by Farmer Mac's statutory charter, only banks, insurance companies, and other financial institutions or similar entities may hold Farmer Mac's Class A voting common stock, and only institutions of the FCS may hold Farmer Mac's Class B voting common stock. Farmer Mac's charter also provides that holders of Class A voting common stock elect five members of Farmer Mac's 15-member board of directors and that holders of Class B voting common stock elect five members of the board of directors. The ownership of Farmer Mac's two classes of voting common stock is currently concentrated in a small number of institutions. Approximately 44 percent of the Class A voting common stock is held by three financial institutions, with 31 percent held by one institution. Approximately 97 percent of the Class B voting common stock is held by five FCS institutions (two of which are related to each other through a parent-subsidiary relationship).

Unlike some other GSEs, specifically other FCS institutions and the Federal Home Loan Banks, Farmer Mac is not structured as a cooperative owned exclusively by member institutions and established to provide services exclusively to its members. Farmer Mac, as a stockholder-owned, publicly-traded corporation, seeks to fulfill its mission of serving the financing needs of ~~agriculture and~~ rural America in a manner that is consistent with providing a return on the investment of its stockholders, including those who do not directly participate in the secondary market provided by Farmer Mac. Farmer Mac's policy is to generally require financial institutions to own a requisite amount of common stock, based on the size and type of

institutions affiliated with members of Farmer Mac's board of directors and institutions that own large amounts of Farmer Mac's voting common stock. Farmer Mac has adopted a Code of Business Conduct and Ethics that governs any conflicts of interest that may arise in these transactions, and Farmer Mac's policy is to require that any transactions with related parties be conducted in the ordinary course of business, with terms and conditions comparable to those available to any other counterparty not related to Farmer Mac.

The following table summarizes the material relationships between Farmer Mac and certain related parties. The related parties listed in the table below consist of (1) all holders of at least five percent of a class of Farmer Mac voting common stock as of December 31, ~~2015~~2016 and (2) other institutions that are considered "related parties" through an affiliation with a Farmer Mac director and that have conducted business with Farmer Mac during the two years ended December 31, ~~2015.~~2016. The table below does not specify any relationships based on the ownership of Farmer Mac's non-voting common stock or any series of preferred stock.

As discussed in more detail in Note 2(q) to the consolidated financial statements, Farmer Mac’s consolidated financial statements include the accounts of VIEs in which Farmer Mac determines itself to be the primary beneficiary, including securitization trusts where Farmer Mac shares the power to make decisions regarding default mitigation with a related party. In the event that related party status changes, consolidation or deconsolidation of securitization trusts may occur. For more information about related party transactions, see Note 3 to the consolidated financial statements.

Outlook

Farmer Mac continues to provide a stable source of liquidity, capital, and risk management tools as the secondary market that helps meet the financing needs of rural America. While the pace of Farmer Mac's growth will depend on the capital and liquidity needs of the participants in the rural financing business, Farmer Mac foresees opportunities for continued growth. More specifically, Farmer Mac believes that its Farm & Ranch, USDA Guarantees, ~~Rural Utilities,~~ and Institutional Credit lines of business all have opportunities for growth, driven by several key factors:

Farmer Mac believes that these growth opportunities will be important in replacing income earned on the loans and other assets as they mature, pay down, or are reinvested at potentially lower spreads.

Agricultural ~~Sector~~Industry. The agricultural ~~sector~~industry includes many diverse ~~industries~~sectors that respond in different ways to changes in economic conditions. Those individual ~~industries~~sectors often are affected differently, sometimes positively and sometimes negatively, by prevailing domestic and global economic factors and regional weather conditions. This results in cycles where one or more ~~industries~~sectors may be under stress at the same time that others are not. ~~In addition, borrowers that rely on non-farm sources of income as a significant percentage of overall income may experience stress associated with weakness in the general economy.~~ The profitability of agricultural ~~industries~~sectors is also affected by commodity inventories and their associated market prices, which can vary largely as a result of global production trends, weather patterns, access to water supply, and harvest conditions that may affect both domestic and global supplies. The strength of the U.S. dollar relative to other worldwide currencies, combined with a slowdown in global economic growth, could also continue to adversely affect the demand for certain U.S. agricultural exports, which may result in producers receiving lower commodity prices.

~~Farmer Mac continues to monitor land~~Net farm income, as reported by the USDA, has decreased annually since reaching a cyclical peak in 2013. Additionally, farmland values ~~and commodity prices~~have weakened recently in some regions, primarily in the Midwest, in response to ~~cyclical swings. Although farmland values~~declining prices for certain commodities and ~~commodity prices~~lower farm income levels. During this same period, the 90-day delinquencies and credit losses in Farmer Mac's portfolio have ~~declined recently~~remained low compared to its historical averages. However, some indications of stress emerged during late 2016 as the volume of Farmer Mac's substandard assets increased from the historically low levels observed in ~~some sectors, primarily~~2015. Nevertheless, Farmer Mac's average substandard assets as a percentage of its Farm & Ranch portfolio remains below its historical average, and the increase in substandard assets has not yet translated into rising delinquency rates or credit losses.

Farmer Mac believes that any losses associated with the ~~Midwest,~~current agricultural credit cycle will be moderated by the strength and diversity of its portfolio, which Farmer Mac believes is adequately collateralized. Farmer Mac believes that its portfolio remains sufficiently diversified, both geographically and by commodity, and that its portfolio has ~~generally demonstrated historically~~been underwritten to high credit quality ~~and low delinquency rates~~standards. Accordingly, Farmer Mac believes that its portfolio is well-positioned to endure reasonably foreseeable volatility in farmland values and commodity prices. Farmer Mac also continues to closely monitor sector profitability, economic conditions, and agricultural land value and geographic trends to tailor underwriting practices to changing conditions. For more information about the loan balances, ~~and~~ loan-to-value ratios, 90-day delinquencies, and substandard asset rate for the Farm & Ranch loans in Farmer Mac's portfolio as of December 31, ~~2015~~2016, see "—"Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk – Loans and Guarantees."

The western part of the United States, and in particular California, ~~continues~~has recently experienced above-average precipitation, providing an easing of prolonged drought conditions. However, the extent to ~~experience~~which this cycle of precipitation will provide relief from the effects of the drought ~~conditions, with the water level in many California reservoirs at or near historically low levels. Although~~on a long-term basis is yet to ~~date~~be determined. Farmer Mac has not observed any material effect on its portfolio from the drought conditions, the persistence of extreme drought conditions in the western states could have an adverse effect on Farmer Mac’s delinquency rates or loss experience. This is particularly true in the permanent plantings sector, where the value of the related collateral is closely tied to the production value and capability of the permanent plantings. Farmer Macthrough December 31, 2016 but continues to remain informed about the effects of the drought ~~and its effects on the agricultural industries located~~conditions in the western states and on Farmer Mac's Farm & Ranch portfolio through regular discussions with its loan servicers that service loans in drought-stricken areas, as well as customers and other lenders in the industry.affected areas.

Farmer Mac continues to monitor the establishment and evolution of legislation and regulations, as well as the status of various international trade agreements and partnerships, that could affect farmers, ranchers, rural lenders, and rural ~~lenders. Many federal agricultural~~America in general. As the new Trump administration and the U.S. Congress begin their review of existing regulations and the promotion of new legislative or regulatory proposals and policies, ~~previously in effect have been altered with the enactment of the Agricultural Act of 2014, including those affecting crop subsidies, crop insurance~~, ~~and other aspects of agricultural production.~~ Farmer Mac will ~~continue to~~ monitor the effects ~~of these altered federal agricultural policies as the USDA adopts~~that any ~~final regulations implementing the Agricultural Act of 2014.~~changes in legislation or regulation could have on Farmer Mac or its customers.

Mac's Rural Utilities line of business. ~~The rural utilities industry may experience needs for financing in the future to make improvements in response to environmental and clean energy policies. In addition, CFC,~~Although competitive pressures remain within the rural utilities ~~lender that is the only current participant in Farmer Mac's Rural Utilities line of business, may experience increased needs for term funding and potentially LTSPC business from~~lending industry, Farmer Mac as a result of new requirements implemented by debt rating agencies and other factors. In third quarter 2015, CFC utilized Farmer Mac's LTSPC product for the first time. Domestic economic indicators also continue to show modest growth, and as the economy strengthens, Farmer Mac believes that demand for rural utilities loans may increase. Farmer Mac also foreseessees opportunities for growth ~~pertaining to the rural utilities industry~~in this area within Farmer Mac's Institutional Credit line of business asbecause the wholesale funding rates that Farmer Mac provides may be highly competitive compared to other available sources of debt funding for rural utilities cooperative lenders.

Assets. Farmer Mac's total assets as of December 31, ~~2015~~2016 were ~~$15.5~~$15.6 billion, compared to ~~$14.3~~$15.5 billion as of December 31, ~~2014.~~2015. The increase in total assets was primarily attributable to an increase in total ~~investment securities,~~Farmer Mac Guaranteed Securities and total loans, net of allowance, offset in part by a decrease in cash and ~~total USDA Securities.~~cash equivalents.

As of December 31, ~~2015,~~2016, Farmer Mac had $0.3 billion of cash and cash equivalents and $2.5 billion of investment securities, compared to $1.2 billion of cash and cash equivalents and $2.8 billion of investment securities ~~compared to $1.4 billion of cash and cash equivalents and $1.9 billion of investment securities~~ as of December 31, ~~2014.~~2015. As of December 31, ~~2015,~~2016, Farmer Mac had $6.0 billion of Farmer Mac Guaranteed Securities, $4.5 billion of loans, net of allowance, and $2.0 billion of USDA Securities. This compares to $5.4 billion of Farmer Mac Guaranteed Securities, $4.0 billion of loans, net of allowance, and $1.9 billion of USDA ~~Securities. This compares to $5.5 billion of Farmer Mac Guaranteed Securities, $3.5 billion of loans, net of allowance, and $1.8 billion of USDA~~ Securities as of December 31, ~~2014.~~2015.

Liabilities. Farmer Mac's total liabilities ~~increased to~~were $15.0 billion as of both December 31, ~~2015 from $13.5 billion as of December 31, 2014.~~2016 and 2015. The increase in ~~liabilities~~in debt securities of consolidated trusts held by third parties was ~~primarily attributable to an increase~~offset by a decrease in total notes ~~payable due within one year.~~payable.

Equity. As of December 31, 2016, Farmer Mac had total equity of $643.6 million, comprised of stockholders' equity of $643.4 million and non-controlling interest of $0.2 million related to Farmer Mac's appraisal subsidiary, AgVisory. As of December 31, 2015, Farmer Mac had total equity of $553.7 million, comprised of stockholders' equity of $553.5 million and non-controlling interest of $0.2 million related to Farmer Mac's appraisal subsidiary, Contour Appraisal Services, LLC. As of December 31, 2014, Farmer Mac had total equity of $781.8 million, comprised of stockholders' equity of $545.8 million and non-controlling interest of $236.0 million. The ~~decrease~~increase in total equity was a result of ~~the redemption of all of the outstanding shares of Farmer Mac II LLC Preferred Stock (included~~an increase in ~~the presentation of "Non-controlling interest" within equity on Farmer Mac's consolidated balance sheets) during first quarter 2015~~retained earnings and ~~a decrease~~accumulated other comprehensive income. The increase in accumulated other comprehensive income was due to ~~decreases~~increases in fair value on certain fixed-rate USDA Securities. On October 1, 2016, Farmer Mac transferred $2.0 billion of USDA Securities and $32.8 million of Farmer Mac Guaranteed USDA Securities from available-for-sale to held-to-maturity to reflect Farmer Mac’s positive intent and ability to hold these securities until maturity or payoff. Farmer Mac transferred these securities at fair value as of the date of the transfer, which included a cost basis adjustment of unrealized appreciation in the ~~fair value~~amount of ~~available-for-sale securities, offset~~$73.8 million. The accumulated unrealized appreciation was retained in ~~part by~~accumulated other comprehensive income. Both the cost basis adjustment and accumulated unrealized appreciation will be amortized as an ~~increase in retained earnings. The decrease in~~adjustment to the ~~fair value~~yield on the held-to-maturity USDA Securities and Farmer Mac Guaranteed USDA Securities over the remaining term of available-for-sale securities was driven primarily by higher market interest rates and wider credit spreads on certain investment securities as of December 31, 2015 compared to as of December 31, 2014.the transferred securities.

Credit Risk – Loans and Guarantees. Farmer Mac is exposed to credit risk resulting from the inability of borrowers to repay their loans in conjunction with a deficiency in the value of the collateral relative to the outstanding balance of the loan and the costs of liquidation. Farmer Mac is exposed to credit risk on:

Farmer Mac generally assumes 100 percent of the credit risk on loans held and loans underlying LTSPCs in the Farm & Ranch and Rural Utilities lines of business and ~~Farmer Mac Guaranteed Securities in the~~loans underlying Farm & Ranch ~~line~~Guaranteed Securities. Farmer Mac's direct credit exposure to Farm & Ranch loans held and loans underlying Farm & Ranch Guaranteed Securities and LTSPCs as of ~~business.~~December 31, 2016 was $6.1 billion across 48 states. Farmer Mac's direct credit exposure to Rural Utilities loans held and loans underlying LTSPCs as of December 31, 2016 was $1.9 billion across 39 states, of which $1.5 billion were loans to electric distribution cooperatives and $0.4 billion were loans to G&T cooperatives. Farmer Mac has direct credit exposure to loans in non-AgVantage transactions and indirect credit exposure to loans that secure AgVantage transactions because AgVantage securities represent a general obligation of an issuer that is, in turn, secured by eligible loans. The credit exposure of Farmer Mac and Farmer Mac II LLC on USDA Securities, including those underlying Farmer Mac Guaranteed USDA Securities, is covered by the full faith and credit of the United States. Therefore, Farmer Mac believes that Farmer Mac and Farmer Mac II LLC have little or no credit risk exposure in the USDA Guarantees line of business because of the USDA guarantee. As of December 31, ~~2015~~2016, neither Farmer Mac nor Farmer Mac II LLC had experienced any credit losses on

Farmer Mac has established underwriting, collateral valuation, and documentation standards for agricultural real estate mortgage loans and rural utilities loans. Farmer Mac believes that these standards mitigate the risk of loss from borrower defaults and provide guidance about the management, administration, and conduct of underwriting and appraisals to all participating and potential lenders. These standards were developed based on industry practices for agricultural real estate mortgage loans and rural utilities loans and are designed to assess the creditworthiness of the borrower, as well as the value of the collateral securing the loan. Farmer Mac evaluates and adjusts these standards on an ongoing basis based on current and anticipated market conditions. For more information about Farmer Mac's underwriting and collateral valuation standards, see "Business—Farmer ~~Mac~~Mac's Lines of Business—Farm & Ranch—Underwriting and Collateral Valuation (Appraisal) Standards" and "Business—Farmer ~~Mac~~Mac's Lines of Business—Rural Utilities—Underwriting."

Loans in the Farm & Ranch line of business are all secured by first liens on agricultural real estate. Accordingly, Farmer Mac's exposure on a loan is limited to the difference between (1) the total of the accrued interest, advances, and the principal balance of a loan and (2) the value of the property less the cost to sell. Measurement of that excess or shortfall is the best predictor and determinant of loss, compared to other measures that evaluate the efficiency of a particular farm operator. For example, debt service ratios depend upon farm operator efficiency and leverage, which can vary widely within a geographic region, commodity type, or an operator's business and farming skills. Thus, Farmer Mac considers a loan's original loan-to-value ratio as one of many factors in evaluating loss severity and this ratio is calculated by dividing the loan principal balance at the time of guarantee, purchase, or

commitment by the appraised value at the date of loan origination or, when available, updated appraised value at the time of guarantee, purchase, or commitment. Other factors Farmer Mac considers include, but are not limited to, other underwriting standards, commodity and farming forecasts, and regional economic and agricultural conditions.

Loan-to-value ratios depend upon the market value of a property, as determined in accordance with Farmer Mac's collateral valuation standards. As of December 31, 2016 and 2015, the average unpaid loan balance for loans outstanding in the Farm & Ranch line of business was $611,000 and $602,000, respectively. The original loan-to-value ratio is based on the original appraised value that has not been indexed to provide a current market value or reflect amortization of loans. The weighted average original loan-to-value ratio for Farm & Ranch loans purchased during 2016 and 2015 was 47 percent. The weighted average original loan-to-value ratio for all Farm & Ranch loans held and all loans underlying off-balance sheet Farm & Ranch Guaranteed Securities and LTSPCs was approximately 45 percent and 46 percent, respectively, as of December 31, 2016 and 2015. The weighted-average original loan-to-value ratio for all 90-day delinquencies was 47 percent and 45 percent, respectively, as of December 31, 2016 and 2015.

The weighted average current loan-to-value ratio, which is the loan-to-value ratio based on original appraised value but which reflects loan amortization since purchase, for Farm & Ranch loans held and loans underlying off-balance sheet Farm & Ranch Guaranteed Securities and LTSPCs was approximately 44 percent as of both December 31, 2016 and 2015.

Farmer Mac has developed different underwriting standards for rural utilities loans that depend on whether direct or indirect credit exposure is assumed on a loan and whether the borrower is an electric distribution cooperative or a G&T cooperative. As of December 31, 2016, there were no delinquencies in Farmer Mac's portfolio of Rural Utilities loans, and Farmer Mac has not experienced any credit losses on rural utilities loans since Congress authorized Farmer Mac's Rural Utilities line of business in 2008. Based on this performance, Farmer Mac excludes the loans in the Rural Utilities line of business from the credit risk metrics it discloses. Farmer Mac also had indirect credit exposure to the rural utilities loans securing AgVantage securities and included in the Institutional Credit line of business, some of which are loans to G&T cooperatives. For more information, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk – Institutional."

Farmer Mac also requires approved lenders to make representations and warranties regarding the conformity of eligible agricultural mortgage and rural utilities loans to Farmer Mac's standards, the accuracy of loan data provided to Farmer Mac, and other requirements related to the loans. Sellers are responsible to Farmer Mac for breaches of those representations and warranties, and Farmer Mac has the ability to require a seller to cure, replace, or repurchase a loan sold or transferred to Farmer Mac if any breach of a representation or warranty is discovered that was material to Farmer Mac's decision to purchase the loan or that directly or indirectly causes a default or potential loss on a loan sold or transferred by the seller to Farmer Mac. ~~As of~~During the previous three years ended December 31, ~~2015,~~2016, Farmer Mac had ~~not~~ required aone seller to ~~cure or~~ repurchase a ~~loan purchased by Farmer Mac~~total of two loans aggregating $0.8 million for ~~breach~~breaches of ~~a representation or warranty in the three preceding years.~~representations and warranties made about those two loans, both of which repurchases occurred during first quarter 2016. In addition to relying on the representations and warranties of lenders, Farmer Mac also underwrites all of the agricultural real estate mortgage loans (other than rural housing and part-time farm mortgage loans) and rural utilities loans that it holds in its portfolio. For rural housing and part-time farm mortgage loans, Farmer Mac relies on representations and warranties from the seller that those loans conform to Farmer Mac's specified underwriting criteria without exception. For more information about Farmer Mac's loan eligibility requirements, see "Business—Farmer ~~Mac~~ Mac's

Lines of Business—Farm & Ranch—Loan Eligibility" and "Business—Farmer ~~Mac~~Mac's Lines of Business—Rural Utilities—Loan Eligibility."

Under contracts with Farmer Mac and in consideration for servicing fees, Farmer Mac-approved central servicers service loans in accordance with Farmer Mac's requirements. Central servicers are responsible to Farmer Mac for serious errors in the servicing of those loans. If a central servicer materially breaches the terms of its servicing agreement with Farmer Mac, such as failing to forward payments received or releasing collateral without Farmer Mac's consent, or experiences insolvency or bankruptcy, Farmer Mac has the right to terminate the servicing relationship for a particular loan or the entire portfolio serviced by the central servicer. In addition, Farmer Mac can proceed against the central servicer in arbitration or exercise any remedies available to it under law. In the last three years, Farmer Mac has not exercised any remedies or taken any formal action against any central servicers. For more information about Farmer Mac's servicing requirements, see "Business—Farmer ~~Mac~~Mac's Lines of Business—Farm & Ranch—Servicing" and "Business—Farmer ~~Mac~~Mac's Lines of Business—Rural Utilities—Servicing."

Farmer Mac's AgVantage securities are general obligations of institutions approved by Farmer Mac and are secured by eligible loans in an amount at least equal to the outstanding principal amount of the security. Farmer Mac excludes the loans that secure AgVantage securities from the credit risk metrics it discloses because Farmer Mac has only indirect credit risk on those loans and because of the other characteristics of AgVantage securities that mitigate credit risk. Those characteristics include a general

Liquidity. The funding and liquidity needs of Farmer Mac's lines of business are driven by the purchase and retention of eligible loans, USDA Securities, and Farmer Mac Guaranteed Securities (including AgVantage securities); the maturities of Farmer Mac's discount notes and medium-term notes; and payment of principal and interest on Farmer Mac Guaranteed Securities. Farmer Mac's primary sources of funds to meet these needs are the proceeds of its debt issuances, fees for its guarantees and commitments, net effective spread, loan repayments, and maturities of AgVantage securities.

Farmer Mac maintains cash, cash equivalents (including U.S. Treasury securities and other short-term money market instruments), and other investment securities that can be drawn upon for liquidity needs. The following table presents these assets as of December 31, ~~2015~~2016 and ~~December 31, 2014:~~2015:

Farmer Mac's asset-backed investment securities include callable, highly rated auction-rate certificates ("ARCs"), the interest rates on which are reset through an auction process, most commonly at intervals of 28 days, or at formula-based floating rates as set forth in the related transaction documents in the event of a failed auction. These formula-based floating rates, which may at times reset to zero, are intended to preserve the underlying principal balance of the securities and avoid overall cash shortfalls. Accordingly, payments of accrued interest may be delayed and are ultimately subject to cash availability. Beginning in mid-February 2008, there were widespread failures of the auction mechanism designed to provide regular liquidity to these types of securities. Consequently, Farmer Mac has not sold any of its ARCs into the auctions since that time. All ARCs held by Farmer Mac are collateralized entirely by pools of Federal Family Education Loan Program guaranteed student loans that are backed by the full faith and credit of the United States. Farmer Mac continues to believe that the credit quality of these securities is high, based on the underlying collateralization and the securities' ratings. To date, Farmer Mac has received all interest due on ARCs it holds and expects to continue to do so. Farmer Mac does not believe that the auction failures will affect Farmer Mac's liquidity or its ability to fund its operations or make dividend payments. All ARCs held by Farmer Mac are callable by the issuers at par at any time.

The carrying value of Farmer Mac's ARCs investments was $~~44.9~~17.7 million as of December 31, ~~2015~~2016, compared to $~~40.6~~44.9 million as of December 31, ~~2014~~.2015. During ~~2015,~~first quarter 2016, Farmer Mac sold two available-for-sale auction rate certificates and received gross proceeds of $26.8 million, resulting in a realized loss of $0.1 million, which Farmer Mac had recognized in ~~earnings $0.1 million of~~third quarter 2015 as other-than-temporary impairment ~~losses on two ARCs.~~losses. As of December 31, ~~2015, Farmer Mac intended to sell these two ARC securities in~~ 2016, ~~at a price of 99.63 percent of par pursuant to a forward sales agreement. As of~~ ~~December 31, 2015~~, Farmer Mac's carrying value of all of its ARCs investments was 9790 percent of par. The discounted carrying value reflects uncertainty regarding the ability

Capital Requirements. Farmer Mac is subject to the following capital requirements – minimum, critical, and risk-based. Farmer Mac is required to comply with the higher of the minimum capital requirement and the risk-based capital requirement. The minimum capital requirement is expressed as a percentage of on-balance sheet assets and off-balance sheet obligations. The critical capital requirement is equal to one-half of the minimum capital amount. Farmer Mac's statutory charter does not specify the required level of risk-based capital but directs FCA to establish a risk-based capital stress test for Farmer Mac, using specified stress test parameters. Certain enforcement powers are given to FCA depending on Farmer Mac's compliance with these capital standards. As of December 31, ~~2015 and 2014,~~2016, Farmer Mac was in compliance with its statutory capital requirements and was classified as within "level I" (the highest compliance level). See Note 9 to the consolidated financial statements for more information about Farmer Mac's capital position and see "Business—Government Regulation of Farmer Mac—~~Regulation—~~Capital Standards" for more information on the capital requirements applicable to Farmer Mac.

In accordance with FCA's rule on capital planning, Farmer Mac's board of directors has adopted a policy for maintaining a sufficient level of "Tier 1" capital (consisting of retained earnings, paid-in-capital, common stock, qualifying preferred stock, and accumulated other comprehensive income allocable to investments not included in one of the four operating lines of business). That policy imposes restrictions on Tier 1-eligible dividends and any discretionary bonus payments in the event that Tier 1 capital falls below specified thresholds. As of December 31, ~~2015~~2016 and ~~2014,~~2015, Farmer Mac's Tier 1 capital ratio was ~~10.5%~~12.7% and ~~11.3%~~10.5%, respectively. The increase in the Tier 1 capital ratio from year-end 2015 was due primarily to an adjustment made during 2016 to eliminate certain interest rate risk components of the risk weighting of assets to reflect the fact that Farmer Mac pursues a match funding approach to funding its assets and therefore does not bear material interest rate risk in its portfolio. The impact of this change to eliminate certain interest rate risk components of risk weighted assets served to increase the Tier 1 capital ratio by 320 basis points. This increase was offset in part by an increase in risk weighted assets primarily resulting from growth in outstanding business volume. For more information about Farmer Mac's capital adequacy policy and FCA's rule on capital planning, see "Business—Government Regulation of Farmer Mac—~~Regulation—~~Capital Standards." As of December 31, ~~2015,~~2016, Farmer Mac was in compliance with its capital adequacy policy.

Farmer Mac II LLC redeemed all of the outstanding shares of Farmer Mac II LLC Preferred Stock on March 30, 2015, the initial redemption date, at a cash redemption price equal to the liquidation preference (the same as the par value) of $1,000 per share, using the $150.0 million in proceeds of the preferred stock offerings Farmer Mac completed in 2014 and cash on hand to fund this redemption. The redemption of the Farmer Mac II LLC Preferred Stock triggered the redemption of all of the outstanding FALConS on the same day. The redemption of the Farmer Mac II LLC Preferred Stock caused a decrease in Farmer Mac's core capital level from $766.3 million as of December 31, 2014 to $564.5 million as of December 31, 2015. For more information on the Farmer Mac II LLC Preferred Stock and Farmer Mac's capital, see "Business—Financing—Equity Issuance—Non-Controlling Interest in Farmer Mac II LLC" and "Business—Government Regulation of Farmer Mac—Regulation—Capital Standards."

Contractual Obligations. The following table presents the amount and timing of Farmer Mac's known, fixed, and determinable contractual obligations by payment date as of December 31, ~~2015.~~2016. The payment amounts represent those amounts contractually due to the recipient (including return of discount and interest on debt) and do not include unamortized premiums or discounts or other similar carrying value adjustments.

Farmer Mac enters into financial ~~derivative~~derivatives contracts under which it either receives cash from counterparties, or is required to pay cash to them, depending on changes in interest rates. Financial derivatives are carried on the consolidated balance sheets at fair value, representing the net present value of expected future cash payments or receipts based on market interest rates as of the balance sheet date adjusted for the consideration of credit risk of Farmer Mac and its counterparties. The fair values of the contracts change daily as market interest rates change. Because the financial derivative liabilities recorded on the consolidated balance sheet as of December 31, ~~2015~~2016 do not represent the amounts that may ultimately be paid under the financial derivative contracts, those liabilities are not included in the table of contractual obligations presented above. Further information regarding financial derivatives is included in Note 2(h) and Note 6 to the consolidated financial statements.

Contingent Liabilities. In conducting its loan purchase activities, Farmer Mac enters into mandatory delivery commitments to purchase agricultural real estate mortgage loans and USDA Securities. In conducting its LTSPC activities, Farmer Mac enters into arrangements whereby it commits, subject to the terms of the applicable LTSPC agreement, to a future purchase of one or more loans from an identified pool of eligible loans that met Farmer Mac's standards at the time the transaction was entered into and Farmer Mac assumed the credit risk on the loans. The following table presents these significant commitments:

For more information about Farmer Mac's commitments to purchase loans, see Note 12 to the consolidated financial statements.

Farmer Mac offers approved lenders two credit enhancement alternatives to increase their liquidity or lending capacity while retaining the cash flow benefits of their loans: (1) Farmer Mac Guaranteed Securities, which are available through each of the Farm & Ranch, USDA Guarantees, Rural Utilities, and Institutional Credit lines of business; and (2) LTSPCs, which are available through the Farm & Ranch and Rural Utilities lines of business. For securitization trusts where Farmer Mac is the primary beneficiary, the trust assets and liabilities are included on Farmer Mac's consolidated balance sheet. For the remainder of these transactions, and in the event of deconsolidation, both of these alternatives result in the creation of off-balance sheet obligations for Farmer Mac. See Note 12 to the consolidated financial statements for more information about consolidation and Farmer Mac's off-balance sheet business activities. See "—Business Volume" for more information about the two types of off-balance sheet transactions that Farmer Mac completed with CFC for the first time during 2015 – an LTSPC transaction and a revolving floating rate AgVantage facility for the issuance of Farmer Mac Guaranteed Securities that is currently not drawn upon but on which Farmer Mac earns an annual fee on the full facility size.

As of December 31, ~~2015~~2016 and ~~2014,~~2015, outstanding off-balance sheet LTSPCs and Farmer Mac Guaranteed Securities totaled ~~$4.6~~$4.9 billion and ~~$3.9~~$4.6 billion, respectively. The following table presents the balance of outstanding LTSPCs and off-balance sheet Farmer Mac Guaranteed Securities as of December 31, ~~2015~~2016 and ~~2014:~~2015:

See "—Risk Management—Credit Risk – Loans and Guarantees" and Notes 2(d), 2(f), 5 and 12 to the consolidated financial statements for more information about Farmer Mac Guaranteed Securities and Notes 2(o) and 12 to the consolidated financial statements for more information about LTSPCs.

The following tables present quarterly and annual information regarding new business volume, repayments, and outstanding business volume:

Table 3031

Farmer Mac is exposed to market risk from changes in interest rates. Farmer Mac manages this market risk by entering into various financial transactions, including financial derivatives, and by monitoring and measuring its exposure to changes in interest rates. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Interest Rate Risk" for more information about Farmer Mac's exposure to interest rate risk and its strategies to manage such risk. For information ~~about~~regarding Farmer Mac's use of financial derivatives and related accounting policies, see Note ~~2(h) and Note~~ 6 to the consolidated financial statements.

The Federal Agricultural Mortgage Corporation ("Farmer Mac") is a stockholder-owned, federally chartered instrumentality of the United States established under Title VIII of the Farm Credit Act of 1971, as amended (12 U.S.C. §§ 2279aa et seq.), which is sometimes referred to as Farmer Mac's charter. Farmer Mac was originally created by the United States Congress to provide a secondary market for a variety of loans made to borrowers in rural America. This secondary market is designed to increase the availability of long-term credit at stable interest rates to America's rural communities and to provide rural borrowers with the benefits of capital markets pricing and product innovation. Since Farmer Mac's inception, Congress has expanded Farmer Mac's charter to authorize Farmer Mac to create the USDA Guarantees line of business and to purchase, and guarantee securities backed by, loans made by cooperative lenders to finance electrification and telecommunications systems in rural areas.

Farmer Mac's main secondary market activities are:

As of December 31, ~~2015~~2016 and ~~2014,~~2015, the total outstanding balance in all of Farmer Mac's lines of business was ~~$15.9~~$17.4 billion and ~~$14.6~~$15.9 billion, respectively.

Under the Farm & Ranch line of business, Farmer Mac purchases eligible mortgage loans secured by first liens on agricultural real estate, which includes part-time farms and rural housing ("Farm & Ranch loans"). Farmer Mac also guarantees securities representing interests in pools of mortgage loans eligible for the Farm & Ranch line of ~~business.~~business, which are referred to as "Farm & Ranch Guaranteed Securities." Additionally, Farmer Mac commits to purchase, subject to the terms of the applicable LTSPC agreement, eligible Farm & Ranch mortgage loans. ~~The securities guaranteed by Farmer Mac under this line of business are referred to as "Farm & Ranch Guaranteed Securities."~~ To be eligible, loans must meet Farmer Mac's credit underwriting, collateral valuation, documentation, and other specified standards. As of December 31, ~~2015~~2016 and ~~2014,~~2015, outstanding loans held by Farmer Mac, loans that either backed off-balance sheet Farm & Ranch Guaranteed Securities or were subject to LTSPCs, and other Farm & Ranch Guaranteed Securities totaled ~~$5.7~~$6.1 billion and ~~$5.4~~$5.7 billion, respectively.

Under the USDA Guarantees line of business, Farmer Mac II LLC, a subsidiary of Farmer Mac, purchases the portions of certain agricultural, rural development, business and industry, and community facilities loans guaranteed by the United States Department of Agriculture under the Consolidated Farm and Rural Development Act (7 U.S.C. §§ 1921 et seq.). USDA-guaranteed portions are referred to and presented on the consolidated balance sheets as "USDA Securities." Farmer Mac II LLC also purchases USDA Securities in exchange for issuing securities to third parties backed by those USDA Securities, which are then also guaranteed by Farmer Mac. These issued securities are referred to and presented on the consolidated balance sheets as Farmer Mac Guaranteed USDA Securities. As of December 31, 2016 and 2015, ~~and~~

Farmer Mac's authorized activities under the Rural Utilities line of business are similar to those conducted under the Farm & Ranch line of business – purchases of, and guarantees of securities backed by, eligible rural utilities loans, as well as the issuance of LTSPCs for pools of eligible rural utilities loans ("Rural Utilities loans"). To be eligible, loans must meet Farmer Mac's credit underwriting and other specified standards. As of December 31, ~~2015~~2016 and ~~2014,~~2015, the aggregate outstanding principal balance of Rural Utilities loans held or subject to LTSPCs was ~~$1.5~~$1.9 billion and ~~$1.0~~$1.5 billion, respectively.

Under the Institutional Credit line of business, Farmer Mac guarantees and purchases general obligations of lenders that are secured by pools of loans that would be eligible under Farmer Mac's Farm & Ranch, USDA Guarantees, or Rural Utilities lines of business. AgVantage^® is a registered trademark of Farmer Mac used to designate Farmer Mac's guarantees of securities related to these general obligations of lenders that are secured by pools of eligible loans and that comprise the Institutional Credit line of business. ~~For more information on the products currently offered under Farmer Mac's Institutional Credit line of business, see "Business—Farmer Mac Lines of Business—Institutional Credit."~~ As of December 31, ~~2015~~2016 and ~~2014,~~2015, outstanding securities held or guaranteed by Farmer Mac in its Institutional Credit line of business totaled ~~$6.7~~$7.3 billion and ~~$6.4~~$6.7 billion, respectively.

Farm & Ranch Guaranteed Securities, Farmer Mac Guaranteed USDA Securities, and AgVantage Securities are collectively referred to as "Farmer Mac Guaranteed Securities." The assets collateralizing Farmer Mac Guaranteed Securities include (1) loans or loan participation interests eligible for purchase under either the Farm & Ranch or Rural Utilities lines of business or (2) USDA Securities eligible for purchase under the USDA Guarantees line of business. Farmer Mac guarantees the timely payment of principal and interest on the resulting Farmer Mac Guaranteed Securities. Farmer Mac may retain Farmer Mac Guaranteed Securities in its portfolio or sell them to third parties.

Farmer Mac's two principal sources of revenue are:

Farmer Mac funds its purchases of eligible loan assets and liquidity investment assets primarily by issuing debt obligations of various maturities in the public capital markets. As of December 31, ~~2015,~~2016, Farmer Mac had ~~$6.6~~$3.8 billion of discount notes and ~~$7.4~~$9.9 billion of medium-term notes outstanding. The proceeds of debt issuance are invested in loan purchases, Farmer Mac Guaranteed Securities, and liquidity investment assets in accordance with policies established by Farmer Mac's board of directors that comply with regulations promulgated by the Farm Credit Administration ("FCA").

The accounting and reporting policies of Farmer Mac conform with accounting principles generally accepted in the United States of America ("generally accepted accounting principles" or "GAAP"). The preparation of consolidated financial statements in conformity with generally accepted accounting

and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. The following are the significant accounting policies that Farmer Mac follows in preparing and presenting its consolidated financial statements:

The consolidated financial statements include the accounts of Farmer Mac and its three subsidiaries: (1) Farmer Mac Mortgage Securities Corporation ("FMMSC"), whose principal activities are to facilitate the purchase and issuance of Farmer Mac Guaranteed Securities; (2) Farmer Mac II LLC, whose principal activity is the operation of substantially all of the business related to the USDA Guarantees line of business – primarily the acquisition of USDA Securities; and (3) Contour Valuation Services, LLC (which began doing business as AgVisory during first quarter 2016), whose principal activity is to appraise agricultural real estate. The consolidated financial statements also include the accounts of ~~variable interest entities ("VIEs")~~VIEs in which Farmer Mac determined itself to be the primary beneficiary. See Note 2(q) for more information on consolidated VIEs.

Farmer Mac considers highly liquid investment securities with maturities at the time of purchase of three months or less to be cash equivalents. Farmer Mac does not consider securities purchased under agreements to resell to be cash equivalents if it intends to reinvest the funds from maturing repurchase agreements into new repurchase agreements and the aggregate term of the repurchase agreements exceeds ~~six~~three months. Changes in the balance of cash and cash equivalents are reported in the consolidated statements of cash flows.

The following table sets forth information regarding certain cash and non-cash transactions for the years ended December 31, 2016, 2015, ~~2014,~~ and ~~2013:~~2014:

Securities purchased under agreements to resell are treated as collateralized lending transactions. Farmer Mac's counterparties are required to pledge collateral for transactions involving securities purchased under agreements to resell. Farmer Mac considers the types of securities being pledged as collateral when determining how much to lend in these transactions. Additionally, on a daily basis, Farmer Mac reviews the fair values of these securities compared to amounts loaned and derivative counterparty collateral posting thresholds in an effort to minimize exposure to losses. These transactions are reported as

Securities for which Farmer Mac has the intent and ability to hold to maturity are classified as held-to-maturity and are carried at amortized cost. Securities for which Farmer Mac does not have the positive intent and ability to hold to maturity are classified as available-for-sale or trading and are carried at estimated fair value. Unrealized gains and losses on available-for-sale securities are reported as a component of accumulated other comprehensive income in stockholders' equity. For securities classified as trading, unrealized gains and losses are included in earnings. Gains and losses on the sale of available-for-sale and trading securities are determined using the specific identification cost method.

Farmer Mac determines the fair value of investment securities using quoted market prices, when available, and evaluates the securities for other-than-temporary impairment. Farmer Mac determines the fair values of certain investment securities for which quoted market prices are not available, Farmer Mac Guaranteed Securities, and USDA Securities based on the present value of the associated expected future cash flows. In estimating the present value of the expected future cash flows, management is required to make estimates and assumptions. The key estimates and assumptions include discount rates and collateral repayment rates. Premiums, discounts, and other deferred costs are amortized to interest income ~~over the estimated life of the security~~ using the effective interest method.

Farmer Mac generally receives compensation when loans with yield maintenance provisions underlying Farmer Mac Guaranteed Securities prepay. These yield maintenance payments mitigate Farmer Mac's exposure to reinvestment risk and are calculated such that, when reinvested with the prepaid principal, they should generate substantially the same cash flows that would have been generated had the loans not prepaid. Yield maintenance payments are recognized as interest income in the consolidated statements of operations upon receipt.

Non-accrual loans are loans for which it is probable that Farmer Mac will be unable to collect all amounts due according to the contractual terms of the loan agreement and include all loans 90 days or more past due. When a loan becomes 90 days past due, interest accrual on the loan is discontinued and interest previously accrued is reversed against interest income in the current period. The interest on such loans is accounted for on the cash basis until a loan qualifies for return to accrual status. Loans are returned to accrual status when all the principal and interest payments contractually due are collected and certain performance criteria are met.

Asset securitization involves the transfer of financial assets to another entity in exchange for cash and/or beneficial interests in the assets transferred. Farmer Mac or third parties transfer agricultural real estate mortgage loans or rural utilities loans into trusts that are used as vehicles for the securitization of the transferred loans. The trusts issue Farmer Mac Guaranteed Securities that are beneficial interests in the assets of the trusts, to either Farmer Mac or third party investors. Farmer Mac guarantees the timely payment of principal and interest on the securities issued by the trusts and receives guarantee fees as compensation for its guarantee. Farmer Mac recognizes guarantee fees on anthe accrual basis over the terms of the Farmer Mac Guaranteed Securities, which generally coincide with the terms of the underlying loans. As such, no guarantee fees are unearned at the end of any reporting period. When Farmer Mac purchases a delinquent loan underlying a Farmer Mac Guaranteed Security, Farmer Mac stops accruing the guarantee fee upon loan purchase.

Farmer Mac enters into financial derivative transactions principally to protect against risk from the effects of market price or interest rate movements on the value of certain assets, future cash flows or debt issuance, not for trading or speculative purposes. Farmer Mac enters into interest rate swap contracts principally to adjust the characteristics of its short-term debt to match more closely the cash flow and duration characteristics of its longer-term loans and other assets, and also to adjust the characteristics of its long-term debt to match more closely the cash flow and duration characteristics of its short-term assets, thereby reducing interest rate risk and, often times, deriving an overall lower effective cost of borrowing than would otherwise be available to Farmer Mac in the conventional debt market. Farmer Mac is required to recognize certain contracts and commitments as derivatives when the characteristics of those contracts and commitments meet the definition of a ~~derivative.~~derivative under GAAP.

Accounting for financial derivatives differs depending on whether a derivative is designated in a ~~formal hedging~~hedge accounting relationship. Derivative instruments designated in fair value ~~hedging~~hedge accounting relationships mitigate exposure to changes in the fair value of assets or liabilities. Derivative instruments designated in cash flow ~~hedging~~hedge accounting relationships mitigate exposure to the variability in expected future cash flows or other forecasted transactions. In order to qualify for fair value or cash flow hedge accounting treatment, documentation must indicate the intention to designate the derivative as a hedge of a specific asset, or liability, or a future cash flow. Effectiveness of the hedge is assessed at inception and monitored over the life of the hedging relationship.

All financial derivatives are recorded on the balance sheet at fair value as a freestanding asset or liability. Changes in the fair values of financial derivatives not designated as cash flow hedges are reported in "Gains/(losses) on financial derivatives and hedging activities" in the consolidated statements of operations. For financial derivatives designated in fair value hedging relationships, changes in the fair values of the hedged items related to the risk being hedged are also reported in "Gains/(losses) on financial derivatives and hedging activities" in the consolidated statements of operations. The accrual of the contractual amounts due on the financial derivative is included as an adjustment to the yield of the hedged item and is reported in net interest income. For financial derivatives designated in cash flow hedging relationships, the effective portion of the derivative gain/loss is recorded in other comprehensive income; amounts are disclosed as a reclassification out of other comprehensive income and affecting net interest income when the hedged forecasted transaction affects earnings. Any ineffective portion of designated hedge transactions is recognized immediately in "Gains/(losses) on financial derivatives and hedging activities" in the consolidated statements of operations.

Notes payable are classified as due within one year or due after one year based on the length of time remaining to their contractual maturities. Debt issuance costs and premiums and discounts are deferred and amortized to interest expense using the effective interest method over the contractual life of the related debt.

Farmer Mac maintains an allowance for losses to cover estimated probable losses incurred as of the balance sheet date on loans held ("allowance for loan losses") and loans underlying LTSPCs and off-balance sheet Farmer Mac Guaranteed Securities ("reserve for losses") based on available information. Disaggregation by commodity type is performed, where appropriate, in analyzing the need for an allowance for losses.

The allowance for losses increases through periodic provisions for loan losses that are charged against net interest income and the reserve for losses increases through provisions for losses that are charged to non-interest expense, and decreases by charge-offs for ~~actual~~realized losses, net of recoveries. Negative provisions, or releases offrom the allowance for losses, generally occur when the estimate of probable losses as of the end of a period is ~~lower~~less than the estimate at the beginning of the period. In certain circumstances, for example,

The total allowance for losses consists of a general allowance for losses and a specific allowance for individual impaired loans.

Farmer Mac records a charge-off against the allowance for losses principally when a loss has been confirmed through the receipt of assets, generally the underlying collateral, in full satisfaction of the loan. The loss equals the excess of the recorded investment in the loan over the fair value of the collateral less estimated selling costs.

Farmer Mac's methodology for determining its allowance for losses incorporates Farmer Mac's automated loan classification system. That system scores loans based on criteria such as historical repayment performance, indicators of current financial condition, loan seasoning, loan size and loan-to-value ratio. The allowance methodology captures the migration of loan scores across concurrent and overlapping 3-year time horizons and calculates loss rates separately within each loan classification for (1) loans underlying LTSPCs and (2) loans held and loans underlying Farm & Ranch Guaranteed Securities. The calculated loss rates are applied to the current classification distribution of unimpaired

loans in Farmer Mac's portfolio to estimate inherent losses, on the assumption that the historical credit losses and trends used to calculate loss rates will continue in the future.

Management evaluates this assumption by taking into consideration several factors, including:

Management believes that its use of this methodology produces a reasonable estimate of probable losses, as of the balance sheet date, for all loans held in the Farm & Ranch portfolio and loans underlying off-balance sheet Farm & Ranch Guaranteed Securities and LTSPCs. ~~There were no purchases or sales during 2015 that materially affected the credit profile of the Farm & Ranch portfolio.~~

Farmer Mac separately evaluates the rural utilities loans it owns to determine if there are any probable losses inherent in those assets. No allowance for losses has been provided for this portfolio segment based on the performance of these loans and the credit quality of the collateral supporting rural utilities assets

Farmer Mac also analyzes certain loans in its portfolio for impairment in accordance with accounting guidance on measuring individual impairment of a loan. Farmer Mac's impaired loans generally include loans 90 days or more past due, in foreclosure, restructured, in bankruptcy and certain performing loans that have previously been delinquent or are secured by real estate that produces agricultural commodities or products currently under stress.

For loans with an updated appraised value, other updated collateral valuation or management's estimate of discounted collateral value, this analysis includes the measurement of the fair value of the underlying collateral for individual loans relative to the total recorded investment, including principal, interest, and advances and net of any charge-offs. In the event that the collateral value does not support the total

recorded investment, Farmer Mac specifically provides an allowance for the loan for the difference between the recorded investment and its fair value, less estimated costs to liquidate the collateral. Estimated selling costs are based on historical selling costs incurred by Farmer Mac or management's best estimate of selling costs for a particular property. For the remaining impaired assets without updated valuations, this analysis is performed in the aggregate in consideration of the similar risk characteristics of the assets and historical statistics. Farmer Mac considers appraisals aged more than two years as of the reporting period end date to be outdated. Farmer Mac believes this methodology that uses loan classification scores and historical loss experience is a better indication of impairment for these collateral-dependent loans than other valuation methods.

Deferred federal income tax assets and liabilities are established for temporary differences between financial and taxable income and are measured using the current enacted statutory tax rate. Income tax expense is equal to the income taxes payable in the current year plus the net change in the deferred tax asset or liability balance.

Farmer Mac evaluates its tax positions ~~at least~~ quarterly to identify and recognize any liabilities related to uncertain tax positions in its federal income tax returns. Farmer Mac uses a two-step approach in which income tax benefits are recognized if, based on the technical merits of a tax position, it is more likely than not (a probability of greater than 50 percent) that the tax position would be sustained upon examination by the taxing authority, which includes all related appeals and litigation process. The amount of tax benefit recognized is then measured at the largest amount of tax benefit that is greater than 50 percent likely to be

realized upon settlement with the taxing authority, considering all information available at the reporting date. Farmer Mac's policy for recording interest and penalties associated with uncertain tax positions is to record them as a component of income tax expense. Farmer Mac establishes a valuation allowance for deferred tax assets if it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Farmer Mac accounts for its stock-based employee compensation plans using the grant date fair value method of accounting. Farmer Mac measures the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award determined using the Black-Scholes option pricing model. The cost is recognized over the period during which an employee is required to provide service in exchange for the award. For performance-based grants, Farmer Mac recognizes the grant-date fair value over the vesting period as long as it remains probable that the performance conditions will be met. If the service or performance conditions are not met, Farmer Mac reverses previously recognized compensation expense upon forfeiture.

Farmer Mac recognized $3.3 million ~~$2.9~~$3.3 million, and ~~$3.0~~$2.9 million of compensation expense related to stock options, SARs, and non-vested restricted stock awards for 2016, 2015, ~~2014,~~ and ~~2013,~~2014, respectively.

Farmer Mac accounts for its LTSPCs as guarantees. Commitment fee income represents a reduction of the commitment obligation based on amortization using the actual prepayment experience on the underlying loans. See Note 2(j) for Farmer Mac's policy for estimating probable losses for LTSPCs and Note 12 for more information on the accounting for LTSPCs.

Farmer Mac defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and establishes a fair value hierarchy that ranks the quality and reliability of the inputs to valuation techniques used to measure fair value. The hierarchy gives highest rank to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest rank to unobservable inputs (level 3 measurements).

Farmer Mac's assessment of the significance of the input to the fair value measurement requires judgment and considers factors specific to the financial instrument. Both observable and unobservable inputs may be used to determine the fair value of financial instruments that Farmer Mac has classified within the level 3 category. As a result, the unrealized gains and losses for assets and liabilities within the level 3 category may include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in projected prepayment rates) inputs. See Note 13 for more information regarding fair value measurement.

Farmer Mac has interests in various entities that are considered to be VIEs. These interests include investments in securities issued by VIEs, such as Farmer Mac agricultural mortgage-backed securities created pursuant to Farmer Mac's securitization transactions and mortgage and asset-backed trusts that Farmer Mac did not create. The consolidation model uses a qualitative evaluation that requires consolidation of an entity when the reporting enterprise both (1) has the power to direct matters which significantly impact the activities and success of the entity, and (2) has exposure to benefits and/or losses that could potentially be significant to the entity. The reporting enterprise that meets both these conditions is deemed the primary beneficiary of the VIE. Upon consolidation of a VIE, Farmer Mac accounts for the incremental assets and liabilities initially at their carrying amounts.

The VIEs in which Farmer Mac has a variable interest are limited to securitization trusts. The major factor in determining if Farmer Mac is the primary beneficiary is whether Farmer Mac has the power to direct the activities of the trust that potentially have the most significant impact on the economic performance of the trust. Generally, the ability to make decisions regarding default mitigation is evidence of that power. Farmer Mac determined that it is the primary beneficiary for the securitization trusts related to most Farm & Ranch and all Rural Utilities securitization transactions because of its rights as guarantor under both programs to control the default mitigation activities of the trusts. For certain securitization trusts created when loans subject to LTSPCs were converted to Farm & Ranch Guaranteed Securities, Farmer Mac determined that it was not the primary beneficiary since the power to make decisions regarding default mitigation was shared among unrelated parties. For these trusts, the shared power provisions are substantive with respect to decision-making power and relate to the same activity (i.e., default mitigation). For similar securitization transactions where the power to make decisions regarding default mitigation was shared with a related party, Farmer Mac determined that it was the primary beneficiary because the applicable accounting guidance does not permit parties within a related party group to conclude that the power is shared. In the event that a related party status changes, consolidation or deconsolidation of these securitization trusts could occur.

For those trusts that Farmer Mac is the primary beneficiary, the assets and liabilities are presented on the consolidated balance sheets as "Loans held for investment in consolidated trusts, at amortized cost" and

For those trusts where Farmer Mac has a variable interest but has not been determined to be the primary beneficiary, Farmer Mac's interests are presented as either "Farmer Mac Guaranteed Securities," "USDA Securities," or "Investment securities" on the consolidated balance sheets. Farmer Mac's involvement in VIEs classified as Farmer Mac Guaranteed Securities or USDA Securities include securitization trusts under the USDA Guarantees line of business and certain trusts related to AgVantage securities. In the case of USDA guaranteed trusts, Farmer Mac is not determined to be the primary beneficiary because it does not have the decision-making power over default mitigation activities. Based on the USDA's program authority over the servicing and default mitigation activities of the USDA guaranteed portions of loans, Farmer Mac believes that the USDA has the power to direct the activities that most significantly impact the trust's economic performance. Farmer Mac does not have exposure to losses that could be significant to the trust and there are no triggers that would result in Farmer Mac superseding the USDA's authority with regard to directing the activities of the trust. For the AgVantage trusts, Farmer Mac currently does not have the power to direct the activities that have the most significant economic impact to the trust unless, as guarantor, there is a default by the issuer of the trust securities. Should there be a default, Farmer Mac would reassess whether it is the primary beneficiary of those trusts. The amounts disclosed in the tables below represent Farmer Mac's holdings of a portion of the beneficial interests issued by these AgVantage Trusts. For VIEs classified as investment securities, which include auction-rate certificates, asset-backed securities, and government-sponsored enterprise ("GSE")-guaranteed mortgage-backed securities, Farmer Mac is determined not to be the primary beneficiary because of the lack of voting rights or other powers to direct the activities of the trust. The following tables present, by line of business, details about the consolidation of VIEs:

(r) New Accounting Standards

In ~~February 2015,~~May 2014, the FASB issued ~~ASU 2015-02,~~Accounting Standards Update ("ASU") 2014-09 "~~Amendments to the Consolidation Analysis.~~Revenue from Contracts with Customers (Topic 606)" ~~This update modifies~~that revises guidance for the ~~evaluation~~recognition, measurement, and disclosure of ~~whether limited partnerships and similar legal entities are VIEs or voting interest~~revenue from contracts with customers. The guidance is applicable to all entities and ~~eliminates~~will supersede the ~~presumption that~~existing industry and transaction-specific revenue recognition rules with a ~~general partner should consolidate~~more principles-based single model for revenue recognition. The following contracts with customers are excluded from the scope of the new standard and will continue to be accounted for under the existing guidance: leases, insurance, financial instruments (e.g., receivables, investments, liabilities, debt and derivatives) and guarantees. Entities can elect to adopt the guidance either on a limited partnership. It also affects the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships. ASU 2015-02full or modified retrospective basis. The new guidance is effective for fiscal years and interim ~~and annual~~ periods within those fiscal years beginning after December 15, ~~2015. The adoption of the new~~2017. Farmer Mac has evaluated this guidance and determined it will not have a material ~~effect~~impact on ~~Farmer Mac's~~its consolidated financial ~~position, results of operations, or cash flows.~~statements.

In January 2016, the FASB issued ASU 2016-01,"Recognition and Measurement of Financial Assets and Financial Liabilities," which amends the guidance in GAAP on the classification and measurement of financial instruments. The ASU significantly revises an entity's accounting related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. The ASU also amends certain disclosure requirements associated with the fair value of financial instruments. The new standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2017. ~~The~~Farmer Mac does not expect

that adoption of the new guidance will ~~not~~ have a material effect on Farmer ~~Mac's~~Mac’s financial position, results of operations, or cash flows.

In February 2016, the FASB issued ASU 2016-02, "Leases," which provides new guidance intended to improve financial reporting about leasing transactions. The ASU will require organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The ASU also will require disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. The new standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. ~~The~~Farmer Mac does not expect that adoption of the new guidance will ~~not~~ have a material effect on Farmer ~~Mac's~~Mac’s financial position, results of operations, or cash flows.

In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting,” which provides new guidance intended to simplify several aspects of accounting for employee share-based payment transactions including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The new standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2016. Farmer Mac does not expect that adoption of the new guidance will have a material effect on Farmer Mac’s financial position, results of operations, or cash flows.

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments—Credit Losses," which will require entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Entities will be required to use forward-looking information to form their credit loss estimates. The ASU will also require enhanced disclosures to help users of financial statements better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an entity’s portfolio. The new standard is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2019. Early application will be permitted for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Farmer Mac is currently evaluating the impact that the new guidance will have on its consolidated financial statements. That impact will primarily be from the new requirement to recognize all expected losses rather than just incurred losses as of the reporting date.

In August 2016, the FASB issued ASU 2016-15, "Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force)," which amends the existing guidance to add or clarify current guidance in GAAP on the classification of certain cash receipts and payments in the statement of cash flows to reduce diversity in practice in how certain transactions are classified. The new standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2017. Farmer Mac does not expect that adoption of the new guidance will have a material effect on Farmer Mac's statement of cash flows.

Certain reclassifications of prior period information were made to conform to the current period presentation.

Zions First National Bank:

Farmer Mac considers Zions First National Bank and its affiliates ("Zions") a related party due to the ownership by Zions of approximately 31.2 percent of Class A voting common stock. The following transactions occurred between Farmer Mac and Zions during 2016, 2015, ~~2014,~~ and ~~2013:~~2014:

The purchases of loans from Zions under the Farm & Ranch line of business represented approximately 15.9 percent, 23.9 percent, ~~22.3 percent,~~ and ~~25.5~~22.3 percent of Farm & Ranch loan purchases for the years ended December 31, 2016, 2015, ~~2014,~~ and ~~2013,~~2014, respectively, and 11.2 percent, 15.2 percent ~~14.6 percent,~~ and ~~15.4~~14.6 percent, respectively, of total new Farm & Ranch business volume. The purchases of USDA Securities from Zions under the USDA Guarantees line of business represented approximately 3.4 percent, 3.6 percent, ~~12.4 percent,~~ and ~~3.6~~12.4 percent of purchases in that line of business for the years ended December 31, 2016, 2015, ~~2014,~~ and ~~2013,~~2014, respectively. Outstanding Farm & Ranch loans, USDA Securities, and AgVantage securities purchased from Zions represented ~~5.7~~5.3 percent and ~~5.9~~5.7 percent, respectively, of Farmer Mac's outstanding business volume as of December 31, ~~2015~~2016 and ~~2014.~~2015.

Zions retained servicing fees of $9.9 million, $9.3 million, and $8.4 million in 2016, 2015, and ~~$7.0 million in 2015,~~ 2014, ~~and 2013,~~ respectively, for its work as a Farmer Mac servicer.

Zions acted as dealer for $5.0 million par value of Farmer Mac medium term notes during 2014 and none for ~~2015~~2016 and ~~2013.~~2015. The related commissions Farmer Mac paid to Zions for these services were immaterial.

~~The~~ National Rural Utilities Cooperative Financial Corporation:

The transactions with CFC represented 100 percent of Farmer Mac's volume of loan purchases and LTSPC transactions under the Rural Utilities line of business for 2016, 2015, and 2014, ~~and 2013,~~ represented 11.9 percent, 65.2 percent, ~~64.7 percent,~~ and ~~64.4~~64.7 percent of AgVantage securities volume under the Institutional Credit line of business for 2016, 2015, ~~2014,~~ and ~~2013,~~2014, respectively, and represented 16.7 percent, 40.6 percent, ~~32.7 percent,~~ and ~~29.4~~32.7 percent of total ~~loan~~ purchases, guarantees, and LTSPCs for 2016, 2015, ~~2014,~~ and ~~2013,~~2014, respectively. Of Farmer Mac's total outstanding business volume as of December 31, ~~2015~~2016 and ~~2014,~~2015, Rural Utilities loans, loans under LTSPCs, and AgVantage securities issued by CFC represented ~~24.6~~25.7 percent and ~~18.7~~24.6 percent, respectively. For the years ended December 31, 2016, 2015, ~~2014,~~ and ~~2013,~~2014, Farmer Mac earned guarantee fees of $0.1 million.

Farmer Mac had interest receivable of ~~$1.8~~$3.2 million and ~~$1.2~~$1.8 million as of December 31, ~~2015~~2016 and ~~2014,~~2015, respectively, and earned interest income of $27.6 million, $15.9 million, and $15.8 million during 2016, 2015, and ~~$27.8 million during 2015,~~ 2014, ~~and 2013,~~ respectively, related to its AgVantage transactions with CFC.

As of December 31, ~~2015~~2016 and ~~for the year then ended,~~2015 Farmer Mac had $0.2 million and $0.1 million, respectively of commitment fees receivable from CFC and earned commitment fees of $2.0 million and $0.5 million, ~~respectively.~~respectively for 2016 and 2015. Farmer Mac earned no commitment fees from CFC during ~~2014 or 2013.~~2014.

CFC retained servicing fees of $3.3 million, ~~for 2015~~$3.3 million, and $3.4 million in ~~both~~2016, 2015, and 2014, ~~and 2013~~respectively, for its work as a Farmer Mac central servicer.

AgFirst Farm Credit Bank:

Farmer Mac has a related party relationship with AgFirst Farm Credit Bank ("AgFirst") resulting from AgFirst being a holder of approximately 16.8 percent of Farmer Mac Class B voting common stock.

AgFirst entered into $36.4 million, $28.5 million ~~$19.7 million,~~ and ~~$8.1~~$19.7 million of LTSPC transactions in 2016, 2015, ~~2014,~~ and ~~2013,~~2014, respectively, and the aggregate balance of LTSPCs outstanding as of December 31, 2016 and 2015 ~~and 2014~~ was ~~$112.7~~$331.3 million and $~~112.8~~320.7 million, respectively. Farmer Mac received from AgFirst ~~$0.4~~$1.1 million, ~~$0.6~~$1.2 million, and ~~$0.7~~$1.3 million in commitment fees in 2016, 2015, ~~2014,~~ and ~~2013,~~2014, respectively, and had $0.1 million of commitment fees receivable as of both December 31, ~~2015~~2016 and ~~2014.~~2015.

AgFirst owns certain securities backed by rural housing loans for which Farmer Mac is the second-loss guarantor for the last ten percent. As of December 31, ~~2015~~2016 and ~~2014,~~2015, the outstanding balance of those securities owned by AgFirst was ~~$24.6~~$19.7 million and ~~$28.9~~$24.6 million, respectively. Farmer Mac received

December 31, 2015. Farmer Mac does not intend to sell these securities, and it is not more likely than not that Farmer Mac will be required to sell the securities before recovery of the amortized cost basis.

During 2016, 2015, ~~2014,~~ and ~~2013,~~2014, Farmer Mac ~~realized no gains or losses from the sale of~~did not sell any Farmer Mac Guaranteed Securities and USDA Securities.

The amortized cost, fair value, and weighted average yield of available-for-sale and held-to-maturity Farmer Mac Guaranteed Securities and USDA Securities by remaining contractual maturity as of December 31, ~~2015~~2016 are set forth below. The balances presented are based on their final maturities, although the actual maturities may differ due to prepayments of the underlying assets.

As of December 31, 2016, Farmer Mac owned trading USDA Securities with an amortized cost of $20.7 million, a fair value of $20.4 million, and a weighted average yield of 5.44 percent. As of December 31, 2015, Farmer Mac owned trading USDA Securities with an amortized cost of $29.1 million, a fair value of $29.0 million, and a weighted average yield of 5.53 percent. ~~As of~~ ~~December 31, 2014, Farmer Mac owned trading USDA Securities with an amortized cost of~~ ~~$41.2 million, a fair value of~~ ~~$40.3 million, and a weighted average yield of~~ ~~5.60 percent~~.

Farmer Mac enters into financial derivative transactions principally to protect against risk from the effects of market price or interest rate movements on the value of certain assets, future cash flows, or debt issuance, and not for trading or speculative purposes. Certain financial derivatives are designated as fair value hedges of fixed rate assets, primarily classified as available-for-sale, to protect against fair value changes in the assets related to a benchmark interest rate (i.e., LIBOR). Other financial derivatives are

designated as cash flow hedges to mitigate the volatility of future interest rate payments on floating rate debt.

Farmer Mac manages the interest rate risk related to loans it has committed to acquire, but has not yet permanently funded, through the use of forward sale contracts on the debt of other GSEs and futures

All financial derivatives are recorded on the balance sheet at fair value as a freestanding asset or liability. Changes in the fair values of financial derivatives not designated as cash flow hedges are reported in "Gains/(losses) on financial derivatives and hedging activities" in the consolidated statements of operations. For financial derivatives designated in fair value ~~hedging~~hedge accounting relationships, changes in the fair values of the hedged items, which are primarily fixed rate AgVantage securities, related to the risk being hedged are also reported in "Gains/(losses) on financial derivatives and hedging activities" in the consolidated statements of operations. Interest accruals on derivatives designated in fair value ~~hedging~~hedge accounting relationships are recorded in ~~"Total~~"Net interest income" in the consolidated statements of operations. For the years ended December 31, 2016, 2015, ~~2014,~~ and ~~2013,~~2014, the amount of interest ~~income~~expense recognized on those derivatives was ~~$22.6~~$16.4 million, ~~$19.7~~$22.8 million, and ~~$18.0~~$19.7 million, respectively. For financial derivatives designated in cash flow ~~hedging~~hedge accounting relationships, the effective portion of the derivative gain/loss is recorded in other comprehensive income and any ineffective portion is recognized immediately ~~in"Gains/~~in "Gains/(losses) on financial derivatives and hedging activities" in the consolidated statements of operations. Because the hedging instrument is an interest rate swap and the hedged forecasted transactions are future interest payments on variable-rate debt, amounts recorded in accumulated other comprehensive income are reclassified to "Total interest expense" in conjunction with the recognition of interest expense on the debt. ~~During~~For the years ended December 31, 2016, 2015, and 2014, $2.0 million, $1.2 million, and $0.2 million, respectively, was reclassified out of accumulated other comprehensive income into interest expense. ~~The amount for 2013 was not material.~~ As of December 31, ~~2015,~~2016, Farmer Mac expects to reclassify ~~$1.4~~$1.5 million pretax, or ~~$0.9~~$1.0 million after-tax, from accumulated other comprehensive income, net of tax, to earnings over the next twelve months. This amount could differ from amounts actually recognized due to changes in interest rates, hedge de-designations, and the addition of other hedges subsequent to December 31, ~~2015. The maximum term over which Farmer Mac is hedging exposure to the variability of future cash flows for all forecasted transactions is 10 years.~~2016. During the years ended December 31, 2016, 2015, ~~2014,~~ and ~~2013,~~2014 there were no gains or losses from interest rate swaps designated as cash flow hedges reclassified to earnings because it became probable the original forecasted transaction would not occur.

The following tables summarize information related to Farmer Mac's financial derivatives on a gross basis without giving consideration to master netting arrangements as of December 31, ~~2015~~2016 and ~~2014~~2015 and the effects of financial derivatives on the consolidated statements of operations for the ~~year~~years ended December 31, ~~2015, 2014,~~2016,2015, and ~~2013:~~2014:

As of December 31, ~~2015~~2016 and ~~2014,~~2015, Farmer Mac's credit exposure to interest rate swap counterparties, excluding netting arrangements and any adjustment for nonperformance risk, but including accrued interest, was ~~$6.4~~$24.5 million and ~~$6.1~~$6.4 million, respectively; however, including netting arrangements and accrued interest, Farmer Mac's credit exposure was ~~$47,000~~$0.2 million and ~~$0.4 million~~$47,000 as of December 31, ~~2015~~2016 and ~~2014,~~2015, respectively. As of December 31, ~~2015 and 2014,~~2016, Farmer Mac held no cash as collateral for its derivatives in net asset positions resulting in uncollateralized net asset positions of ~~$47,000 and $0.4 million, respectively.~~$0.2 million. As of December 31, 2015, Farmer Mac held no cash collateral for its derivatives in net asset positions, resulting in uncollateralized net asset positions of $47,000.

For certain derivatives, Farmer Mac clears interest rate swaps through a ~~clearinghouse.~~clearinghouse, the Chicago Mercantile Exchange ("CME"). Farmer Mac posts initial and variation margin to ~~the clearinghouses~~this clearinghouse through which centrally-cleared derivatives and futures contracts are traded. These collateral postings expose Farmer Mac to institutional credit risk in the event that either the clearinghouse or the futures commission merchant that Farmer Mac uses to post collateral to the clearinghouse fails to meet its obligations. Conversely, the use of centrally-cleared derivatives mitigates Farmer Mac's credit risk to individual counterparties because clearinghouses assume the credit risk among counterparties in centrally-cleared derivatives transactions. Of Farmer Mac's $8.1 billion notional amount of interest rate swaps outstanding as of December 31, 2016, $6.9 billion were cleared through swap clearinghouses. Of Farmer Mac's $8.4 billion notional amount of interest rate swaps outstanding as of December 31, 2015, $6.2 billion were cleared through swap clearinghouses. ~~Of Farmer Mac's $6.8 billion notional amount of interest rate swaps outstanding as of December 31, 2014, $4.0 billion were cleared through swap clearinghouses.~~

The following tables set forth information related to Farmer Mac's borrowings as of December 31, ~~2015~~2016 and ~~2014:~~2015:

The maximum amount of Farmer Mac's discount notes outstanding at any month end during each of the years ended December 31, 2016 and 2015 ~~and 2014~~ was ~~$6.7~~$6.9 billion and ~~$4.9~~$6.7 billion, respectively.

Callable medium-term notes give Farmer Mac the option to redeem the debt at par value on a specified call date or at any time on or after a specified call date. The following table summarizes by maturity date the amounts and costs for Farmer Mac debt callable in ~~2016~~2017 as of December 31, ~~2015:~~2016:

During ~~2015~~2016 and ~~2014,~~2015, Farmer Mac called ~~$2.4~~$1.3 billion and ~~$0.5~~$2.4 billion of callable medium-term notes, respectively.

Farmer Mac's statutory charter authorizes it to borrow up to $1.5 billion from the U.S. Treasury through the issuance of debt obligations to the U.S. Treasury. Any funds borrowed from the U.S. Treasury may be used solely for the purpose of fulfilling Farmer Mac's guarantee obligations. Any debt obligations issued by Farmer Mac under this authority would bear interest at a rate determined by the U.S. Treasury, taking into consideration the average rate on outstanding marketable obligations of the United States as of the last day of the last calendar month ending before the date of the purchase of the obligations from Farmer Mac. The charter requires Farmer Mac to repurchase any of its debt obligations held by the U.S. Treasury within a reasonable time. As of December 31, ~~2015,~~2016, Farmer Mac had not used this borrowing authority and does not expect to use this borrowing authority in the future.

No outstanding debt repurchases were made in 2016, 2015, or 2014. ~~In 2013, Farmer Mac repurchased $29.1 million of outstanding debt at a gain of $1.5 million.~~

Farmer Mac maintains an allowance for losses presented in two components on its consolidated balance sheets: (1) an allowance for loan losses to account for estimated probable losses on loans held, and (2) a reserve for losses to account for estimated probable losses on loans underlying LTSPCs and off-balance sheet Farmer Mac Guaranteed ~~Securities.~~Securities (excluding AgVantage securities). As of December 31, ~~2015~~2016 and ~~2014,~~2015, Farmer ~~Mac reported~~Mac's total allowances for losses ~~of $6.6~~were $7.4 million and ~~$10.1~~$6.6 million, respectively. See Note ~~5 and Note 12~~6 for more information about off-balance sheet Farmer Mac Guaranteed Securities and LTSPCs.

The following is a summary of the changes in the total allowance for losses for each year in the three-year period ended December 31, 2016 and 2015:

During ~~2015~~2016, Farmer Mac recorded provisions to its allowance for loan losses of $1.1 million and releases to its reserve for losses of $0.1 million. The provisions to the allowance for loan losses recorded during 2016 were attributable to an increase in the general allowance due to overall net volume growth in on-balance sheet Farm & Ranch loans and downgrades in risk ratings for certain loans. The releases to the reserve for losses recorded during the year ended December 31, 2016 were attributable to the release of a specific reserve on an impaired livestock loan underlying an LTSPC that was required to be removed from the LTSPC pool by the originator during 2016. Farmer Mac recorded $0.1 million of charge-offs to its allowance for loan losses during 2016.

During 2015, Farmer Mac recorded provisions to its allowance for loan losses of $2.4 million and releases to its reserve for losses of $2.2 million. The provisions to the allowance for loan losses recorded during 2015 were primarily attributable to the establishment of a specific allowance for two Agricultural Storage and Processing loans that financed one canola facility. Farmer Mac recognized a charge-off of $3.7 million in fourth quarter 2015 on those loans. The provisions to the allowance for losses were offset by the reduction in the specific allowance for a permanent planting loan based on the updated appraised value of the collateral underlying such loan and releases to the general ~~allowance~~reserve from the reserve for losses due to substantial paydowns of Agricultural Storage and Processing loans underlying LTSPCs due to repayments of these loans at par.

During 2014, Farmer Mac recorded releases from its allowance for loan losses of $1.0 million and releases from its reserve for losses of $2.2 million, primarily related to a decrease in the balance of its ethanol loans as well as a general improvement in the quality of the ethanol loans held and loans underlying LTSPCs. Farmer Mac recorded $0.1 million of charge-offs and recoveries of $45,000 to its allowance for loan losses during 2014.

During 2013, Farmer Mac recorded releases from its allowance for loan losses of $0.5 million and provisions to its reserve for losses of $0.9 million. Farmer Mac also recorded $4.0 million in charge-offs to its allowance for loan losses during 2013. Charge-offs recorded during 2013 included a $3.6 million charge-off related to one ethanol loan that transitioned to real estate owned ("REO") for which Farmer Mac had previously provided a specific allowance.

The following tables present the changes in the total allowance for losses for ~~the years~~year ended December 31, ~~2015~~2016 and ~~2014~~2015 by commodity type:

The following tables present the unpaid principal balances of loans held and loans underlying LTSPCs and off-balance sheet Farmer Mac Guaranteed Securities (excluding AgVantage securities) and the related total allowance for losses by impairment method and commodity type as of December 31, ~~2015~~2016 and ~~2014:~~2015:

The following tables present by commodity type the unpaid principal balances, recorded investment, and specific allowance for losses related to impaired loans and the recorded investment in loans on nonaccrual status as of December 31, ~~2015~~2016 and ~~2014:~~2015:

The following table presents by commodity type the average recorded investment and interest income recognized on impaired loans for the ~~years~~year ended December 31, ~~2015~~2016 and ~~2014~~2015:

A modification to the contractual terms of a loan that results in granting a concession to a borrower experiencing financial difficulties is considered a troubled debt restructuring ("TDR"). Farmer Mac has granted a concession when, as a result of the restructuring, it does not expect to collect all amounts due in a timely manner, including interest accrued at the original contract rate. In making its determination of whether a borrower is experiencing financial difficulties, Farmer Mac considers several factors, including whether (1) the borrower has declared or is in the process of declaring bankruptcy, (2) there is substantial doubt as to whether the borrower will continue to be a going concern, and (3) the borrower can obtain funds from other sources at an effective interest rate at or near a current market interest rate for debt with similar risk characteristics. Farmer Mac evaluates TDRs similarly to other impaired loans for purposes of the allowance for losses. For the year ended December 31, 2016, there were no TDRs. For the year ended ended December 31, 2015, the recorded investment of loans determined to be TDRs was $1.1 million both before and after restructuring. For the year ended December 31, 2014, the recorded investment of loans determined to be TDRs was $5.3 million before restructuring and $6.0 million after restructuring. ~~For the year ended December 31, 2013, the recorded investment of loans determined to be TDRs was $1.1 million both before and after restructuring.~~ As of December 31, ~~2015~~2016 and ~~2014,~~2015, there were no TDRs identified during the previous 12 months that were in default under the modified terms. The impact of TDRs on Farmer Mac's allowance for loan losses was immaterial for the ~~year~~years ended December 31, ~~2015~~2016 and ~~2014. The impact of TDRs on Farmer Mac's allowance for loan losses for the year ended December 31, 2013 was a provision of $0.1 million.~~2015.

When particular criteria are met, such as the default of the borrower, Farmer Mac becomes entitled to purchase the defaulted loans underlying Farmer Mac Guaranteed Securities (commonly referred to as "removal-of-account" provisions). Farmer Mac records all such defaulted loans at their unpaid principal balance during the period in which Farmer Mac becomes entitled to purchase the loans and therefore regains effective control over the transferred loans. In accordance with the terms of all LTSPCs, Farmer Mac acquires loans that are either 90 days or 120 days delinquent (depending on the provisions of the

loans are treated as nonaccrual loans and, therefore, interest is accounted for on the cash basis. Any decreases in expected cash flows are recognized as impairment.

During the year ended ended December 31, 2016, Farmer Mac purchased eight defaulted loans having an unpaid principal balance of $2.5 million from pools underlying LTSPCs and Farm & Ranch Guaranteed Securities. During the year ended ended December 31, 2015, Farmer Mac purchased six defaulted loans having an unpaid principal balance of $16.9 million from pools underlying Farm & Ranch Guaranteed ~~Securities and LTSPCs.~~Securities. During 2014, Farmer Mac purchased twodefaulted loans having an unpaid principal balance of $0.7 million from a pool underlying an LTSPC. ~~During 2013, Farmer Mac purchased 11 defaulted loans having an unpaid principal balance of $6.7 million from pools underlying Farm & Ranch Guaranteed Securities and LTSPCs.~~

The following tables present information related to Farmer Mac's acquisition of defaulted loans for the years ended ended December 31, ~~2015~~2016, ~~2014~~2015, and ~~2013~~2014 and the outstanding balances and carrying amounts of all such loans as of December 31, ~~2015~~2016~~, 2014,~~ and ~~2013:~~2015:

Net credit losses and 90-day delinquencies as of and for the periods indicated for loans held and loans underlying off-balance sheet Farm & Ranch Guaranteed Securities and LTSPCs are presented in the table below. As of December 31, ~~2015~~2016, there were no delinquencies and no probable losses inherent in Farmer Mac's Rural Utilities loan portfolio and Farmer Mac had not experienced credit losses on any Rural Utilities loans.

Of the $~~26.9 million~~ ~~and~~ ~~$18.4~~19.8 million of on-balance sheet loans reported as 90-day delinquencies as of December 31, ~~2015~~2016, $0.1 million ~~and 2014, respectively,~~ ~~none~~ ~~and $1.8~~were loans subject to "removal-of-account" provisions. Of the $26.9 million ~~respectively,~~of on-balance sheet loans reported as 90-day delinquencies as of December 31, 2015, none were loans subject to "removal-of-account" provisions.

The following tables present credit quality indicators related to Farm & Ranch loans held and loans underlying LTSPCs and off-balance sheet Farm & Ranch Guaranteed Securities as of December 31, ~~2015~~2016 and ~~2014:~~2015:

The following table sets forth the geographic and commodity/collateral diversification, as well as the range of original loan-to-value ratios, for all Farm & Ranch loans held and loans underlying off-balance sheet Farm & Ranch Guaranteed Securities and LTSPCs as of December 31, ~~2015~~2016 and ~~December 31, 2014:~~2015:

The original loan-to-value ratio is calculated by dividing the loan principal balance at the time of guarantee, purchase, or commitment by the appraised value at the date of loan origination or, when available, the updated appraised value at the time of guarantee, purchase, or commitment. Current loan-to-value ratios may be higher or lower than the original loan-to-value ratios.

Farmer Mac has three classes of common stock outstanding:

During 2016, 2015, ~~2014,~~ and ~~2013,~~2014, Farmer Mac paid a quarterly dividend of $0.26, $0.16, ~~$0.14,~~ and ~~$0.12,~~$0.14, respectively, per share on all classes of its common stock. Farmer Mac's ability to declare and pay ~~a dividend~~dividends on its common stock could be restricted if it fails to comply with applicable capital requirements.

On ~~June 20, 2014,~~January 17, 2013, Farmer Mac issued ~~3.0~~2.4 million shares of ~~6.000~~5.875 percent ~~Fixed-to-Floating Rate~~ Non-Cumulative Preferred Stock, Series CA (the "Series CA Preferred Stock"). On March 25, 2014, Farmer Mac issued 3.0 million shares of 6.875 percent Non-Cumulative Preferred Stock, Series B (the "Series B Preferred Stock"). On ~~January 17, 2013,~~June 20, 2014, Farmer Mac issued ~~2.4~~3.0 million shares of ~~5.875~~6.000 percent Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series AC (the "Series AC Preferred Stock"). The Series A Preferred Stock, the Series B Preferred Stock, and the Series C Preferred Stock (collectively referred to as the "Outstanding Preferred Stock") each has a par value of $25.00 per share and a liquidation preference of $25.00 per share. The Series A Preferred Stock and the Series B Preferred Stock pay an annual dividend rate of 5.875 percent and 6.875 percent, respectively, for the life of the securities. The Series C Preferred Stock pays an annual dividend rate of 6.000 percent from the date of issuance to and including the quarterly payment date occurring on July 17, 2024, and thereafter, at a floating rate equal to three-month LIBOR plus 3.26 percent. Farmer Mac has the right, but not the obligation, to redeem the Series A Preferred Stock at any time on and after January 17, 2018, the Series B Preferred Stock at any time on and after April 17, 2019, and the Series C Preferred Stock at any time on and after July 18, 2024, all at a price equal to the then-applicable liquidation preference. Dividends on all series of Outstanding Preferred Stock are non-cumulative, which means that if Farmer Mac's Board of Directors has not declared a dividend before the applicable dividend payment date for any dividend period, such dividend will not be paid or cumulate, and Farmer Mac will have no obligation to pay dividends for such dividend period, whether or not dividends on any series of Outstanding Preferred Stock are declared for any future dividend period. Farmer Mac

incurred direct costs of $1.7 million related to the issuance of the Series A Preferred Stock, direct costs of



Federally chartered instrumentality of the United States		52-1578738
(State or other jurisdiction of incorporation or organization)		(I.R.S. employer identification number)

1999 K Street, N.W., 4th Floor, Washington, D.C.		20006
(Address of principal executive offices)		(Zip code)



Large accelerated filer	o	Accelerated filer	x
Non-accelerated filer	o	Smaller reporting company	o



	Forward-Looking Statements	4
PART I		56
Item 1.	Business	56
	General	56
	Farmer ~~Mac~~Mac's Lines of Business	13
	Farm & Ranch	14
	USDA Guarantees	25
	Rural Utilities	27
	Institutional Credit	31
	Funding of Guarantee and LTSPC Obligations	34
	Financing	35
	Debt Issuance	35
	Equity Issuance	36
	Farmer Mac's Authority to Borrow from the U.S. Treasury	4039
	Government Regulation of Farmer Mac	40
	General	40
	Office of Secondary Market Oversight	4140
	Capital Standards	4241
Item 1A.	Risk Factors	44
Item 1B.	Unresolved Staff Comments	5859
Item 2.	Properties	5860
Item 3.	Legal Proceedings	5860
Item 4.	Mine Safety Disclosures	5860
PART II		5860
Item 5.	Market for Registrant's Common Equity, Related Stockholders Matters, and Issuer Purchases of Equity Securities	5860
Item 6.	Selected Financial Data	6364
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	6465
	Overview	6465
	Critical Accounting Policies and Estimates	6770
	Use of Non-GAAP Measures	73
	Results of Operations	7176
	Outlook	9496
	Balance Sheet Review	9799
	Risk Management	97100
	Liquidity and Capital Resources	~~115~~118
	Regulatory Matters	~~120~~124
	Other Matters	~~121~~124
	Supplemental Information	~~121~~125
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	~~125~~130
Item 8.	Financial Statements	~~126~~130
	Management's Report on Internal Controls Over Financial Reporting	~~126~~130
	Report of Independent Registered Public Accounting Firm	~~126~~
	~~Consolidated Balance Sheets~~	~~128~~131



	Consolidated Balance Sheets	133
	Consolidated Statements of Operations	~~129~~134
	Consolidated Statements of Comprehensive Income	~~130~~135
	Consolidated Statements of Equity	~~131~~136
	Consolidated Statements of Cash Flows	~~132~~137
	Notes to Consolidated Financial Statements	~~133~~138
Item 9.	Changes in Disagreements with Accountants on Accounting and Financial Disclosure	~~207~~211
Item 9A.	Controls and Procedures	~~207~~211
Item 9B.	Other Information	~~208~~212
PART III		~~208~~212
Item 10.	Directors, Executive Officers, and Corporate Governance	~~208~~212
Item 11.	Executive Compensation	~~208~~212
Item 12.	Security Ownership of Certain Beneficial Owners and Management Related Stockholder Matters	~~208~~212
Item 13.	Certain Relationships and Related Transactions and Director Independence	~~209~~212
Item 14.	Principal Accountant Fees and Services	~~209~~213
PART IV		~~209~~213
Item 15.	Exhibits and Financial Statement Schedules	~~209~~213
Item 16.	Form 10-K Summary	217
Signatures		~~213~~218

									Lines of Business - Outstanding Business Volume
	As of December 31, 2015		As of December 31, 2014		As of December 31, 2016		As of December 31, 2015
	(in thousands)				(in thousands)
On-balance sheet:
Farm & Ranch:
Loans	$	2,249,864	$	2,118,867	$	2,381,488	$	2,249,864
Loans held in trusts:
Beneficial interests owned by third party investors	708,111		421,355		1,132,966		708,111
USDA Guarantees:
USDA Securities	1,876,451		1,756,224		1,954,800		1,876,451
Farmer Mac Guaranteed USDA Securities	31,554		27,832		35,599		31,554
Rural Utilities:
Loans⁽¹⁾	1,008,126		718,213		999,512		1,008,126
Loans held in trusts:
Beneficial interests owned by Farmer Mac⁽¹⁾	—		267,396
Institutional Credit:
AgVantage Securities	5,439,383		5,410,413		6,004,472		5,439,383
Total on-balance sheet	$	11,313,489	$	10,720,300	$	12,508,837	$	11,313,489
Off-balance sheet:
Farm & Ranch:
LTSPCs	$	2,253,273	$	2,240,866	$	2,209,409	$	2,253,273
Guaranteed Securities	514,051		636,086		415,441		514,051
USDA Guarantees:
Farmer Mac Guaranteed USDA Securities	10,272		13,978		103,976		10,272
Rural Utilities:
LTSPCs⁽²⁾	522,864		—
LTSPCs⁽¹⁾					878,598		522,864
Institutional Credit:
AgVantage Securities	984,871		986,528		983,214		984,871
Revolving floating rate AgVantage facility⁽³⁾	300,000		—
Revolving floating rate AgVantage facility⁽²⁾					300,000		300,000
Total off-balance sheet	$	4,585,331	$	3,877,458	$	4,890,638	$	4,585,331
Total	$	15,898,820	$	14,597,758	$	17,399,475	$	15,898,820



x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



Title of each class		Exchange on which registered
Class A voting common stock		New York Stock Exchange
Class C non-voting common stock		New York Stock Exchange
5.875% Non-Cumulative Preferred Stock, Series A		New York Stock Exchange
6.875% Non-Cumulative Preferred Stock, Series B		New York Stock Exchange
6.000% Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series C		New York Stock Exchange


⁽¹⁾	~~Reflects the dissolution~~Includes $20.0 million and $8.8 million related to one-year loan purchase commitments on which Farmer Mac receives a nominal unused commitment fee as of ~~certain consolidated trusts that caused loans that were previously consolidated as "Loans held in trusts" to be included within "Loans."~~December 31, 2016 and 2015, respectively.


⁽²⁾	~~Includes $8.8 million related to a one-year loan purchase commitment on which Farmer Mac receives a nominal unused commitment fee.~~


⁽³⁾	As of both December 31, 2016 and, 2015, this facility had not been utilized. Farmer Mac receives a fixed fee based on the full dollar amount of the facility. If the counterparty draws on the facility, the amounts drawn will be presented as AgVantage Securities, and Farmer Mac will earn interest income on those securities.



New Business Volume – Farmer Mac Loan Purchases, Guarantees, and LTSPCs
	For the Year Ended December 31,
	2015		2014		2013
	(in thousands)
Farm & Ranch:
Loans	$	748,368	$	697,824	$	824,881
LTSPCs	427,795		369,857		540,798
USDA Guarantees:
USDA Securities	363,621		335,359		361,894
Farmer Mac Guaranteed USDA Securities	13,314		7,627		—
Rural Utilities:
Loans	108,337		75,500		86,965
LTSPCs	522,262		—		—
Institutional Credit:
AgVantage Securities	743,158		1,279,655		1,273,500
Revolving floating rate AgVantage facility	300,000		—		—
Total purchases, guarantees, and LTSPCs	$	3,226,855	$	2,765,822	$	3,088,038



New Business Volume – Farmer Mac Loan Purchases, Guarantees, and LTSPCs
	For the Year Ended December 31,
	2016		2015		2014
	(in thousands)
Farm & Ranch:
Loans	$	966,023	$	748,368	$	697,824
LTSPCs	399,095		427,795		369,857
USDA Guarantees:
USDA Securities	375,203		363,621		335,359
Farmer Mac Guaranteed USDA Securities	106,054		13,314		7,627
Rural Utilities:
Loans	50,491		108,337		75,500
LTSPCs	441,404		522,262		—
Institutional Credit:
AgVantage Securities	2,098,852		743,158		1,279,655
Revolving floating rate AgVantage facility	—		300,000		—
Total purchases, guarantees, and LTSPCs	$	4,437,122	$	3,226,855	$	2,765,822


	As of December 31,				As of December 31,
	2015		2014		2016		2015
	(in thousands)				(in thousands)
On-balance sheet:
Loans	$	2,249,864	$	2,118,867	$	2,381,488	$	2,249,864
Loans held in trusts:
Beneficial interests owned by third party investors	708,111		421,355		1,132,966		708,111
Total on-balance sheet	$	2,957,975	$	2,540,222	$	3,514,454	$	2,957,975
Off-balance sheet:
LTSPCs	$	2,253,273	$	2,240,866	$	2,209,409	$	2,253,273
Guaranteed Securities	514,051		636,086		415,441		514,051
Total off-balance sheet	$	2,767,324	$	2,876,952	$	2,624,850	$	2,767,324
Total	$	5,725,299	$	5,417,174	$	6,139,304	$	5,725,299


⁽¹⁾	Includes $20.0 million and $8.8 million related to one-year loan purchase commitments on which Farmer Mac receives a nominal unused commitment fee as of December 31, 2016 and 2015, respectively.


⁽¹⁾	As of both December 31, 2016 and 2015, this facility had not been utilized by CFC. Farmer Mac receives a fixed fee based on the full dollar amount of the facility. If CFC draws on the facility, the amounts drawn will be presented as on-balance sheet AgVantage securities, and Farmer Mac will earn interest on the drawn balance.



Date Dividend Declared	Per Share Amount	For Holders Of Record As Of	Date Paid
~~February 5, 2015~~	~~$0.16~~	~~March 16, 2015~~	~~March 31, 2015~~
~~June 3, 2015~~	~~$0.16~~	~~June 17, 2015~~	~~June 30, 2015~~
~~August 6, 2015~~	~~$0.16~~	~~September 15, 2015~~	~~September 30, 2015~~
~~November 4, 2015~~	~~$0.16~~	~~December 16, 2015~~	~~December 31, 2015~~
March 2, 2016	$0.26	March 21, 2016	March 31, 2016
May 4, 2016	$0.26	June 15, 2016	June 30, 2016
August 3, 2016	$0.26	September 15, 2016	September 30, 2016
November 2, 2016	$0.26	December 16, 2016	December 31, 2016
March 1, 2017	$0.36	March 20, 2017	*



Date Dividend Declared	Per Share Amount	For Period Beginning	For Period Ending	Date Paid
~~February 5, 2015~~	~~$0.3672~~	~~January 18, 2015~~	~~April 17, 2015~~	~~April 17, 2015~~
~~June 3, 2015~~	~~$0.3672~~	~~April 18, 2015~~	~~July 17, 2015~~	~~July 17, 2015~~
~~August 6, 2015~~	~~$0.3672~~	~~July 18, 2015~~	~~October 17, 2015~~	~~October 17, 2015~~
~~November 4, 2015~~	~~$0.3672~~	~~October 18, 2015~~	~~January 17, 2016~~	~~January 17, 2016~~
March 2, 2016	$0.3672	January 18, 2016	April 17, 2016	April 17, 2016
May 4, 2016	$0.3672	April 18, 2016	July 17, 2016	July 17, 2016
August 3, 2016	$0.3672	July 18, 2016	October 17, 2016	October 17, 2016
November 2, 2016	$0.3672	October 18, 2016	January 17, 2017	January 17, 2017
March 1, 2017	$0.3672	January 18, 2017	April 17, 2017	*



~~Date~~ ~~Dividend~~ ~~Declared~~	~~Per~~ ~~Share~~ ~~Amount~~	~~For~~ ~~Period~~ ~~Beginning~~	~~For~~ ~~Period~~ ~~Ending~~	~~Date~~ ~~Paid~~
~~February 5, 2015~~	~~$22.1875~~	~~December 30, 2014~~	~~March 29, 2015~~	~~March 30, 2015~~


◦	the unpaid principal balance of outstanding Farmer Mac Guaranteed Securities;


◦	instruments issued or guaranteed by Farmer Mac that are substantially equivalent to Farmer Mac Guaranteed Securities, including LTSPCs; and



Capital Conservation Buffer	Payout Percentage
(percentage of risk-weighted assets)	(percentage of four quarters' accumulated core earnings)
greater than 2.5%	No limitation
greater than 1.875% to and including 2.5%	60%
greater than 1.25% to and including 1.875%	40%
greater than 0.625% to and including 1.25%	20%
equal to or less than 0.625%	0% (no payout permitted)


	Sales Prices								Sales Prices
	Class A Stock				Class C Stock				Class A Stock				Class C Stock
	High		Low		High		Low		High		Low		High		Low
	(per share)								(per share)
2017
First quarter (through March 1, 2017)									$	65.96	$	54.51	$	59.53	$	55.05
2016
First quarter (through March 1, 2016)	$	29.99	$	26.09	$	33.92	$	26.36
Fourth quarter									$	62.00	$	43.48	$	58.72	$	39.72
Third quarter									52.38		36.60		42.32		33.95
Second quarter									41.61		34.99		43.50		32.62
First quarter									38.00		26.09		40.00		26.36
2015
Fourth quarter	$	27.04	$	24.75	$	32.77	$	25.67	$	27.04	$	24.75	$	32.77	$	25.67
Third quarter	27.98		25.50		29.48		22.41		27.98		25.50		29.48		22.41
Second quarter	29.20		23.43		33.01		29.06		29.20		23.43		33.01		29.06
First quarter	28.25		19.64		32.80		26.43		28.25		19.64		32.80		26.43
2014
Fourth quarter	$	24.98	$	20.03	$	33.82	$	26.40
Third quarter	26.50		22.75		33.75		28.34
Second quarter	28.50		22.60		35.82		29.52
First quarter	28.55		22.41		33.37		29.36


(c)	~~The table below sets forth information regarding Farmer Mac's purchases of shares of its outstanding Class C non-voting common stock during the quarter ended December 31, 2015:~~



	Total Number of Shares Purchased⁽¹⁾	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan⁽¹⁾	Approximate Maximum Dollar Value That May Yet Be Purchased Under the Plan
	(Dollars in thousands, except per share information)
Period:
October 1, 2015 – October 31, 2015	66,559	$	28.16	66,559	$	20,338
November 1, 2015 – November 30, 2015	88,141	30.00		88,141	17,694
December 1, 2015 – December 31, 2015	103,245	31.03		103,245	14,490
Total	257,945	29.94		257,945


	As of December 31,															As of December 31,
Summary of Financial Condition:	2015			2014			2013			2012			2011			2016			2015			2014			2013			2012
	(dollars in thousands)															(dollars in thousands)
Cash and cash equivalents	$	1,210,084		$	1,363,387		$	749,313		$	785,564		$	817,046		$	265,229		$	1,210,084		$	1,363,387		$	749,313		$	785,564
Investment securities	2,775,516			1,939,188			2,484,075			2,499,629			2,184,490			2,515,851			2,775,516			1,939,188			2,484,075			2,499,629
Farmer Mac Guaranteed Securities	5,426,621			5,453,901			5,091,600			4,766,258			4,289,272			6,002,916			5,426,621			5,453,901			5,091,600			4,766,258
USDA Securities	1,917,319			1,771,532			1,612,013			1,590,783			1,491,905			2,029,613			1,917,319			1,771,532			1,612,013			1,590,783
Loans, net	3,962,044			3,520,075			3,193,248			2,729,774			2,894,156			4,507,435			3,962,044			3,520,075			3,193,248			2,729,774
Total assets	15,540,354			14,287,821			13,361,780			12,622,201			11,883,508			15,606,020			15,540,354			14,287,821			13,361,780			12,622,201
Notes payable:
Due within one year	9,111,461			7,353,953			7,338,781			6,567,366			6,087,879			8,440,123			9,111,461			7,353,953			7,338,781			6,567,366
Due after one year	4,967,036			5,471,186			5,001,169			5,034,739			4,104,882			5,222,977			4,967,036			5,471,186			5,001,169			5,034,739
Total liabilities	14,986,634			13,505,992			12,787,311			12,029,239			11,328,975			14,962,373			14,986,634			13,505,992			12,787,311			12,029,239
Stockholders' equity	553,517			545,801			332,616			351,109			312,680			643,425			553,517			545,801			332,616			351,109
Non-controlling interest⁽¹⁾	203			236,028			241,853			241,853			241,853			222			203			236,028			241,853			241,853
Capital:
Statutory minimum capital requirement	$	462,070		$	421,328		$	398,531		$	374,037		$	348,649		$	466,498		$	462,070		$	421,328		$	398,531		$	374,037
Core capital	564,536			766,296			590,671			518,993			475,163			609,667			564,536			766,296			590,671			518,993
Capital in excess of minimum capital requirement	102,466			344,968			192,140			144,956			126,514			143,169			102,466			344,968			192,140			144,956
Selected Financial Ratios:
Return on average assets⁽²⁾	0.32		%	0.28		%	0.55		%	0.36		%	0.13		%	0.41		%	0.32		%	0.28		%	0.55		%	0.36		%
Return on average common equity⁽³⁾	13.83		%	12.42		%	28.17		%	22.21		%	8.18		%	16.78		%	13.83		%	12.42		%	28.17		%	22.21		%
Average equity to assets⁽⁴⁾	3.69		%	3.18		%	2.63		%	2.71		%	2.57		%	3.84		%	3.69		%	3.18		%	2.63		%	2.71		%
Average total equity to assets⁽⁵⁾	4.48		%	4.91		%	4.49		%	4.68		%	4.84		%	3.84		%	4.48		%	4.91		%	4.49		%	4.68		%
Tier 1 capital ratio⁽⁶⁾																12.7		%	10.5		%	11.3		%	6.7		%	5.1		%


⁽²⁾	Calculated as net income attributable to common stockholders divided by the simple average of beginning and ending total assets.


⁽⁴⁾	Calculated as the simple average of beginning and ending stockholders' equity divided by the simple average of beginning and ending total assets.


⁽⁵⁾	Calculated as the simple average of beginning and ending stockholders' equity and non-controlling interest divided by the simple average of beginning and ending total assets.


	For the Year Ended December 31,															For the Year Ended December 31,
Summary of Operations:	2015			2014			2013			2012			2011			2016			2015			2014			2013			2012
	(in thousands, except per share amounts)															(in thousands, except per share amounts)
Interest Income:
Net interest income after provision for loan losses	$	124,654		$	71,308		$	109,934		$	128,922		$	130,090		$	139,209		$	123,419		$	71,308		$	109,934		$	128,922
Non-interest income:																—
Guarantee and commitment fees	14,077			14,694			15,627			14,330			15,426			14,868			14,077			14,694			15,627			14,330
Gains/(losses) on financial derivatives, hedging activities and trading assets	2,516			16,983			30,945			(19,522		)	(89,190		)	3,771			3,751			16,983			30,945			(19,522		)
Gains/(losses) on asset sales and debt repurchases	9			(238		)	3,575			18			269
(Losses)/gains on the sale of real estate owned	(1		)	137			1,236			878			974
(Losses)/gains on asset sales and debt repurchases																(9		)	9			(238		)	3,575			18
Gains/(losses) on the sale of real estate owned																15			(1		)	137			1,236			878
Lower of cost or fair value adjustment on loans held for sale	—			—			—			(5,943		)	8,887			—			—			—			—			(5,943		)
Other income	2,305			1,714			3,057			3,341			6,850			1,823			2,305			1,714			3,057			3,341
Non-interest income/(loss)	18,906			33,290			54,440			(6,898		)	(56,784		)	20,468			20,141			33,290			54,440			(6,898		)
Non-interest expense	35,482			31,492			33,107			30,908			28,659			40,320			35,482			31,492			33,107			30,908
Income before income taxes	108,078			73,106			131,267			91,116			44,647			119,357			108,078			73,106			131,267			91,116
Income tax expense	34,239			2,824			33,752			22,156			5,797			42,057			34,239			2,824			33,752			22,156
Net income	73,839			70,282			97,515			68,960			38,850			77,300			73,839			70,282			97,515			68,960
Less: Net income attributable to non-controlling interest	(5,139		)	(22,192		)	(22,187		)	(22,187		)	(22,187		)
Less: Net loss/(income) attributable to non-controlling interest																34			(5,139		)	(22,192		)	(22,187		)	(22,187		)
Preferred stock dividends	(13,182		)	(9,839		)	(3,495		)	(2,879		)	(2,879		)	(13,182		)	(13,182		)	(9,839		)	(3,495		)	(2,879		)
Loss on retirement of preferred stock	(8,147		)	—			—			—			—			—			(8,147		)	—			—			—
Net income attributable to common stockholders	$	47,371		$	38,251		$	71,833		$	43,894		$	13,784		$	64,152		$	47,371		$	38,251		$	71,833		$	43,894
Allowance for Losses Activity:
Provision for /(release of) losses	$	208		$	(3,166	)	$	448		$	1,875		$	(2,347	)	$	1,002		$	208		$	(3,166	)	$	448		$	1,875
Net charge-offs	3,772			41			4,004			2,501			252			130			3,772			41			4,004			2,501
Ending balance	6,563			10,127			13,334			16,890			17,516			7,435			6,563			10,127			13,334			16,890
Earnings Per Common Share and Dividends:
Basic earnings per common share	$	4.33		$	3.50		$	6.64		$	4.19		$	1.32		$	6.12		$	4.33		$	3.50		$	6.64		$	4.19
Diluted earnings per common share	4.19			3.37			6.41			3.98			1.28			5.97			4.19			3.37			6.41			3.98
Common stock dividends per common share	0.64			0.56			0.48			0.40			0.20			1.04			0.64			0.56			0.48			0.40


Level 1	Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.


Level 2	Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly.


Level 3	Prices or valuations that require unobservable inputs that are significant to the fair value measurement.

																			Reconciliation of Net Income Attributable to Common Stockholders to Core Earnings
	For the Year Ended December 31,									For the Year Ended December 31,
	2015			2014			2013			2016			2015			2014
	(in thousands, except per share amounts)									(in thousands, except per share amounts)
Net income attributable to common stockholders	$	47,371		$	38,251		$	71,833		$	64,152		$	47,371		$	38,251
Less the after-tax effects of:
Less reconciling items:
Unrealized gains/(losses) on financial derivatives and hedging activities	7,101			(6,480		)	29,368			13,628			10,924			(9,968		)
Unrealized gains/(losses) on trading assets ⁽¹⁾	793			1,038			(533		)
Unrealized gains on trading securities⁽¹⁾										1,460			1,220			1,596
Amortization of premiums/discounts and deferred gains on assets consolidated at fair value⁽²⁾	(857		)	(9,457		)	(12,467		)	(849		)	(1,319		)	(14,549		)
Net effects of settlements on agency forward contracts	(395		)	103			573			1,699			(607		)	159
Loss on retirement of Farmer Mac II LLC Preferred Stock⁽³⁾	(6,246		)	—			—			—			(8,147		)	—
Income tax effect related to reconciling items										(5,577		)	(1,675		)	7,966
Sub-total	396			(14,796		)	16,941			10,361			396			(14,796		)
Core earnings	$	46,975		$	53,047		$	54,892		$	53,791		$	46,975		$	53,047

Composition of Core Earnings:
Revenues:
Net effective spread⁽⁴⁾	$	119,380		$	113,693		$	116,582		$	125,102		$	119,380		$	113,693
Guarantee and commitment fees⁽⁵⁾	17,155			16,780			16,591			19,170			17,155			16,780
Other⁽⁶⁾	(806		)	(4,216		)	3,421			515			(806		)	(4,216		)
Total revenues	135,729			126,257			136,594			144,787			135,729			126,257

Credit related expense/(income) (GAAP):
Provision for/(release of) losses	208			(3,166		)	448
Provision for losses										1,002			208			(3,166		)
REO operating expenses	91			110			423			39			91			110
Losses/(gains) on sale of REO	1			(137		)	(1,236		)
(Gains)/losses on sale of REO										(15		)	1			(137		)
Total credit related expense/(income)	300			(3,193		)	(365		)	1,026			300			(3,193		)

Operating expenses (GAAP):
Compensation and employee benefits	22,047			19,009			17,817			22,772			22,047			19,009
General and administrative	13,111			12,197			11,563			15,109			13,111			12,197
Regulatory fees	2,413			2,381			2,375			2,463			2,413			2,381
Total operating expenses	37,571			33,587			31,755			40,344			37,571			33,587

Net earnings	97,858			95,863			105,204			103,417			97,858			95,863
Income tax expense⁽⁷⁾	32,562			10,785			24,630			36,478			32,562			10,785
Net income attributable to non-controlling interest (GAAP)	5,139			22,192			22,187
Net (loss)/income attributable to non-controlling interest (GAAP)										(34		)	5,139			22,192
Preferred stock dividends (GAAP)	13,182			9,839			3,495			13,182			13,182			9,839
Core earnings	$	46,975		$	53,047		$	54,892		$	53,791		$	46,975		$	53,047

Core earnings per share:
Basic	$	4.29		$	4.86		$	5.07		$	5.13		$	4.29		$	4.86
Diluted	4.15			4.67			4.90			5.01			4.15			4.67
Weighted-average shares:
Basic	10,949			10,914			10,816			10,477			10,949			10,920
Diluted	11,309			11,360			11,209			10,745			11,309			11,367


⁽¹⁾	Excludes realized gains related to securities sold, not yet purchased of $37.0 million during 2014.