Edgar Filing: FEDERAL AGRICULTURAL MORTGAGE CORP

Name of Institution

Ownership of
Farmer Mac Voting Common Stock

Affiliation with Any
Farmer Mac Directors

Primary Aspects of Institution's
Business Relationship with Farmer Mac

Zions First National Bank

322,100 shares of Class A voting common stock
(31.25% of outstanding Class A stock and 21.04% of total voting common stock outstanding)

In 2015 and 2014, Farmer Mac's purchases of loans from Zions under the Farm & Ranch line of business represented approximately 23.9 percent and 22.3 percent, respectively, of Farm & Ranch loan purchase volume for those years. Those purchases represented 15.2 percent and 14.6 percent, respectively, of total Farm & Ranch business volume for those years. The purchases of USDA Securities from Zions under the USDA Guarantees line of business represented approximately 3.6 percent and 12.4 percent, respectively, of the USDA Guarantees line of business purchases for the year ended December 31, 2015 and 2014. Farmer Mac did not purchase AgVantage securities from Zions for the year ended December 31, 2015. The purchases of AgVantage securities from Zions under the Institutional Credit line of business represented approximately 3.9 percent of the Institutional Credit line of business purchases for the year ended December 31, 2014. Transactions with Zions represented 5.7 percent and 5.9 percent, respectively, of Farmer Mac's total outstanding business volume as of December 31, 2015 and 2014.

In 2015 and 2014, Zions retained approximately $9.3 million and $8.4 million, respectively, in servicing fees for its work as a Farmer Mac servicer.

10-K

As filed with the Securities and Exchange Commission on March 10, 2016

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)



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

For the fiscal year ended December 31, 2015



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

For the transition period from _____ to _____.

Commission File Number 001-14951

FEDERAL AGRICULTURAL MORTGAGE CORPORATION

(Exact name of registrant as specified in its charter)



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)

(202) 872-7700

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



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

Securities registered pursuant to Section 12(g) of the Act: Class B voting common stock

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes o No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (17 C.F.R. §229.405) is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):



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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

The aggregate market value of the Class A voting common stock and Class C non-voting common stock held by non-affiliates of the registrant was $297,772,287 as of June 30, 2015 based upon the closing prices for the respective classes on June 30, 2015 reported by the New York Stock Exchange. For purposes of this information, the outstanding shares of Class C non-voting common stock owned by directors and executive officers of the registrant were deemed to be held by affiliates. The aggregate market value of the Class B voting common stock is not ascertainable due to the absence of publicly available quotations or prices for the Class B voting common stock as a result of the limited market for, and infrequency of trades in, Class B voting common stock and the fact that any such trades are privately negotiated transactions.

As of March 1, 2016, the registrant had outstanding 1,030,780 shares of Class A voting common stock, 500,301 shares of Class B voting common stock and 8,849,409 shares of Class C non-voting common stock.

DOCUMENTS INCORPORATED BY REFERENCE

The definitive proxy statement relating to the registrant's 2016 Annual Meeting of Stockholders (portions of which are incorporated by reference into Part III of this Annual Report on Form 10-K).

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	Forward-Looking Statements	4
PART I		5
Item 1.	Business	5
	General	5
	Farmer Mac 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	40
	Government Regulation of Farmer Mac	40
	General	40
	Office of Secondary Market Oversight	41
	Capital Standards	42
Item 1A.	Risk Factors	44
Item 1B.	Unresolved Staff Comments	58
Item 2.	Properties	58
Item 3.	Legal Proceedings	58
Item 4.	Mine Safety Disclosures	58
PART II		58
Item 5.	Market for Registrant's Common Equity, Related Stockholders Matters, and Issuer Purchases of Equity Securities	58
Item 6.	Selected Financial Data	63
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	64
	Overview	64
	Critical Accounting Policies and Estimates	67
	Results of Operations	71
	Outlook	94
	Balance Sheet Review	97
	Risk Management	97
	Liquidity and Capital Resources	115
	Regulatory Matters	120
	Other Matters	121
	Supplemental Information	121
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	125
Item 8.	Financial Statements	126
	Management's Report on Internal Controls Over Financial Reporting	126
	Report of Independent Registered Public Accounting Firm	126
	Consolidated Balance Sheets	128



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

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FORWARD-LOOKING STATEMENTS

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:


•	prospects for earnings;


•	prospects for growth in business volume;


•	trends in net interest income and net effective spread;


•	trends in portfolio credit quality, delinquencies, and provisions for losses;


•	trends in expenses;


•	trends in investment securities;


•	prospects for asset impairments and allowance for losses;


•	changes in capital position; and


•	other business and financial matters.

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 and uncertainties regarding:


•	the availability to Farmer Mac of debt and equity financing and, if available, the reasonableness of rates and terms;


•	legislative or regulatory developments that could affect Farmer Mac, its sources of business, or the agricultural sector or the rural utilities industry;


•	fluctuations in the fair value of assets held by Farmer Mac and its subsidiaries;


•	the rate and direction of development of the secondary market for agricultural mortgage and rural utilities loans, including lender interest in Farmer Mac credit products and the secondary market provided by Farmer Mac;


•	the general rate of growth in agricultural mortgage and rural utilities indebtedness;


•	the impact of economic conditions, including the effects of drought and other weather-related conditions and fluctuations in agricultural real estate values, on agricultural mortgage lending and borrower repayment capacity;


•	developments in the financial markets, including possible investor, analyst, and rating agency reactions to events involving government-sponsored enterprises, including Farmer Mac;


•	changes in the level and direction of interest rates, which could, among other things, affect the value of collateral securing Farmer Mac's agricultural mortgage loan assets;


•	the degree to which Farmer Mac is exposed to basis risk, which results from fluctuations in Farmer Mac's borrowing costs relative to market indexes such as LIBOR; and

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•	volatility in commodity prices relative to costs of production and/or export demand for U.S. agricultural products.

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.

PART I


Item 1.	Business

GENERAL

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:


•	purchasing eligible loans directly from lenders;


•	providing advances against eligible loans by purchasing obligations secured by those loans;


•	securitizing assets and guaranteeing the payment of principal and interest on the resulting securities that represent interests in, or obligations secured by, pools of eligible loans; and


•	issuing long-term standby purchase commitments ("LTSPCs") for eligible loans.

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 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 – 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.

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Farmer Mac's two principal sources of revenue are:


•	interest income earned on assets held on balance sheet, net of related funding costs and interest payments and receipts on financial derivatives; and


•	guarantee and commitment fees received in connection with outstanding guaranteed securities and LTSPCs.

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 be unfavorable. As of December 31, 2015, Farmer Mac had $6.6 billion of discount notes and $7.4 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."

Secondary Market

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 LTSPCs for eligible loans held by lenders, as well as Farmer Mac's 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, long-term fixed rate products, and portfolio diversification. 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.

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Lines of Business

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:


•	mortgage loans secured by first liens on agricultural real estate, including part-time farms and rural housing (comprising the assets eligible for the Farm & Ranch line of business);


•	agricultural and rural development loans guaranteed by the United States Department of Agriculture ("USDA") (comprising the assets eligible for the USDA Guarantees line of business); and


•	loans made by lenders organized as cooperatives to finance electrification and telecommunications systems in rural areas (comprising the assets eligible for the Rural Utilities line of business).

Farmer Mac also guarantees and purchases general obligations of lenders that are secured by pools of these types of eligible loans (comprising the assets eligible for the Institutional Credit line of business). As of December 31, 2015, the total outstanding business volume in all of Farmer Mac's lines of business was $15.9 billion.

Farm & Ranch

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 ("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 in "Business—Farmer Mac Lines of Business—Farm & Ranch." As of December 31, 2015, 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 billion.

USDA Guarantees

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, outstanding USDA Securities and Farmer Mac Guaranteed USDA Securities totaled $1.9 billion, of which $41.8 million were Farmer Mac Guaranteed USDA Securities.

Rural Utilities

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

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by, eligible rural utilities loans ("Rural Utilities loans"). To be eligible, loans must meet Farmer Mac's credit underwriting and other specified standards that are discussed in "Business—Farmer Mac Lines of Business—Rural Utilities." As of December 31, 2015, the aggregate outstanding principal balance of Rural Utilities loans held by Farmer Mac or that were subject to LTSPCs totaled $1.5 billion. There currently are no guaranteed securities issued under the Rural Utilities line of business.

Institutional Credit

Under the Institutional Credit line of business, Farmer Mac 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 Lines of Business—Institutional Credit." As of December 31, 2015, outstanding securities held or guaranteed by Farmer Mac in its Institutional Credit line of business totaled $6.7 billion.

Competition

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

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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.

Capital and Corporate Governance

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.

•

Class A voting common stock. The charter restricts ownership of Farmer Mac's Class A voting common stock to banks, insurance companies, and other financial institutions or similar entities that are not institutions of the FCS. The charter also provides that five members of Farmer Mac's 15-member board of directors are elected by a plurality of the votes of the Class A stockholders each year. The charter limits the amount of Class A voting common stock that may be owned by one holder to no more than 33 percent of the outstanding shares of Class A voting common stock. Farmer Mac is not aware of any regulation applicable to non-FCS financial institutions that requires a minimum investment in Farmer Mac's Class A voting common stock or that prescribes a maximum investment amount lower than the 33 percent limit set forth in the charter. Farmer Mac's Class A voting common stock is listed on the New York Stock Exchange under the symbol AGM.A.

•

Class B voting common stock. The charter restricts ownership of Farmer Mac's Class B voting common stock to FCS institutions and also provides that five members of Farmer Mac's 15-member board of directors are elected by a plurality of the votes of the Class B stockholders each year. The charter does not contain any restrictions on the maximum number or percentage of outstanding shares of Class B voting common stock that may be held by an eligible stockholder, and Farmer Mac is not aware of any regulation applicable to FCS institutions that requires a minimum investment in its Class B voting common stock or that prescribes a maximum amount. Farmer Mac's 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 this class of common stock.


•	Class C non-voting common stock. The charter does not impose any ownership restrictions on Farmer Mac's Class C non-voting common stock, and shares of this class are freely transferable. Holders of the Class C common stock do not vote on the election of directors or any other matter. Farmer Mac's Class C non-voting common stock is listed on the New York Stock Exchange under the symbol AGM.


•	Presidential director appointments. The remaining five members of Farmer Mac's board of directors are individuals who meet the qualifications specified in the charter and are appointed by the President of the United States with the advice and consent of the United States Senate. These appointed directors serve at the pleasure of the President of the United States.

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

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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 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 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.

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. Until March 30, 2015, Farmer Mac II LLC had preferred stock outstanding, which had been permanent equity of Farmer Mac II LLC and is included in the presentation of "Non-controlling interest" within total equity on Farmer Mac's consolidated balance sheets. On March 30, 2015, Farmer Mac II LLC redeemed all of the outstanding shares of its preferred stock. See "Business—Financing—Equity Issuance—Non-Controlling Interest in Farmer Mac II LLC."

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. 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 investment of its stockholders.

Farmer Mac's policy is to require financial institutions to own a requisite amount of Farmer Mac common stock, based on the size and type of institution, to participate in the Farm & Ranch line of business. As a result of this requirement, coupled with the ability of holders of Class A and Class B voting common stock to elect two-thirds of Farmer Mac's board of directors, Farmer Mac regularly conducts business with "related parties," including 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

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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. For more information about related party transactions, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Related Party Transactions" and Note 3 to the consolidated financial statements.

Regulatory Oversight

Farmer Mac's charter assigns to FCA, acting through the separate Office of Secondary Market Oversight ("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 the charter. The charter also authorizes FCA, acting through OSMO, to apply its general enforcement powers to Farmer Mac. 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 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 publicly-traded corporation, Farmer Mac is required to comply with the periodic reporting requirements of the SEC. For a more detailed discussion of Farmer Mac's regulatory and governmental relationships, see "—Government Regulation of Farmer Mac."

Capital

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 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 establishment and monitoring of those requirements and levels, see "—Government Regulation of Farmer Mac—Regulation—Capital Standards," "Management's Discussion and Analysis of Financial Condition and Results of Operations—Balance Sheet Review—Equity," and "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Capital Requirements."

Employees and Property

As of December 31, 2015, Farmer Mac employed 71 people, located primarily at its office at 1999 K Street, N.W., 4th Floor, Washington, D.C. 20006. Farmer Mac also maintains an office at 5408 NW 88^th Street, Suite 120, Johnston, Iowa 50131. Farmer Mac's main telephone number is (202) 872-7700.

Available Information

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.

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FARMER MAC LINES OF BUSINESS

The following tables present the outstanding balances and new business volume under Farmer Mac's four lines of business – Farm & Ranch, USDA Guarantees, Rural Utilities, and Institutional Credit:



Lines of Business - Outstanding Business Volume
	As of December 31, 2015		As of December 31, 2014
	(in thousands)
On-balance sheet:
Farm & Ranch:
Loans	$	2,249,864	$	2,118,867
Loans held in trusts:
Beneficial interests owned by third party investors	708,111		421,355
USDA Guarantees:
USDA Securities	1,876,451		1,756,224
Farmer Mac Guaranteed USDA Securities	31,554		27,832
Rural Utilities:
Loans⁽¹⁾	1,008,126		718,213
Loans held in trusts:
Beneficial interests owned by Farmer Mac⁽¹⁾	—		267,396
Institutional Credit:
AgVantage Securities	5,439,383		5,410,413
Total on-balance sheet	$	11,313,489	$	10,720,300
Off-balance sheet:
Farm & Ranch:
LTSPCs	$	2,253,273	$	2,240,866
Guaranteed Securities	514,051		636,086
USDA Guarantees:
Farmer Mac Guaranteed USDA Securities	10,272		13,978
Rural Utilities:
LTSPCs⁽²⁾	522,864		—
Institutional Credit:
AgVantage Securities	984,871		986,528
Revolving floating rate AgVantage facility⁽³⁾	300,000		—
Total off-balance sheet	$	4,585,331	$	3,877,458
Total	$	15,898,820	$	14,597,758


⁽¹⁾	Reflects the dissolution of certain consolidated trusts that caused loans that were previously consolidated as "Loans held in trusts" to be included within "Loans."


⁽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 December 31, 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.

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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

Farm & Ranch

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) providing LTSPCs on 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.

Loan Eligibility

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


•	be secured by a fee simple mortgage or a long-term leasehold mortgage, with status as a first lien on agricultural real estate (including part-time farms and rural housing) located within the United States;


•	be an obligation of a citizen or national of the United States, an alien lawfully admitted for permanent residence in the United States, or a private corporation or partnership that is majority-owned by U.S. citizens, nationals, or legal resident aliens;


•	be an obligation of a person, corporation, or partnership having training or farming experience that is sufficient to ensure a reasonable likelihood that the loan will be repaid according to its terms; and


•	meet the credit underwriting, collateral valuation, documentation, and other specified standards for the Farm & Ranch line of business. See "—Underwriting and Collateral Valuation (Appraisal) Standards" and "—Approved Lenders" for a description of these standards.

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


•	is used for the production of one or more agricultural commodities or products; and


•	either consists of a minimum of five acres or generates minimum annual receipts of $5,000.

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 $12.3 million as of December 31, 2015 and increased to $12.6 million as of January 1, 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 real estate, Farmer Mac currently limits the size of those loans to:


•	$50.0 million in cumulative exposure to any one borrower or related borrowers for transactions involving direct exposure to credit risk on loans (e.g., loan purchases, LTSPC transactions, and non-AgVantage Farm & Ranch Guaranteed Securities, which are not backed by a general obligation of a lender); and

•

$75.0 million in cumulative exposure through a single lender to any one borrower or related borrowers (with the amount of any direct borrower exposure described above not counting toward the $75.0 million limit) for AgVantage transactions, which involve the general obligation of a lender that is in turn secured by eligible loans, resulting in indirect exposure to credit risk on those loans. See "Farmer Mac Lines of Business—Institutional Credit."

Farmer Mac includes its part-time farm loans and rural housing loans in the 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 $211.1 million of those loans in Farmer Mac's portfolio as of December 31, 2015.

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 current 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 is $269,807. That limit is generally adjusted annually based on changes in home values during the previous year, though it was not adjusted in 2015. 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 $3.3 million of those loans in Farmer Mac's portfolio as of December 31, 2015.

Summary of Farm & Ranch Transactions

During the year ended December 31, 2015, Farmer Mac added a total of $1.2 billion of 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 $5.7 billion

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of total outstanding business volume in this line of business as of December 31, 2015, compared to $5.4 billion as of December 31, 2014.

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 in the Farm & Ranch line of business. 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. During 2013, Farmer Mac purchased eligible loans from 218 entities (the top ten institutions generated 53 percent of the purchase volume) and placed loans under LTSPCs with 25 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, 2015, 2014, and 2013:



	For the Year Ended December 31,
	2015		2014		2013
	(in thousands)
Loans	$	748,368	$	697,824	$	824,881
LTSPCs	427,795		369,857		540,798
Total	$	1,176,163	$	1,067,681	$	1,365,679

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:



	As of December 31,
	2015		2014
	(in thousands)
On-balance sheet:
Loans	$	2,249,864	$	2,118,867
Loans held in trusts:
Beneficial interests owned by third party investors	708,111		421,355
Total on-balance sheet	$	2,957,975	$	2,540,222
Off-balance sheet:
LTSPCs	$	2,253,273	$	2,240,866
Guaranteed Securities	514,051		636,086
Total off-balance sheet	$	2,767,324	$	2,876,952
Total	$	5,725,299	$	5,417,174

Loan Purchases

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 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 of interest rates at the time of prepayment). Of the $748.4 million of loans purchased in the Farm & Ranch line of business during 2015, 61 percent

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included balloon payments and none included yield maintenance prepayment protection. By comparison, of the $697.8 million of loans purchased in the Farm & Ranch line of business during 2014, 59 percent included balloon payments and none included yield maintenance prepayment protection.

Guarantees and Commitments

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 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 Farm & Ranch Guaranteed Securities. 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, 2015 and 2014, approximately 7.8 percent and 8.2 percent, respectively, of

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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:


•	par if the loans become delinquent for either 90 days or 120 days (depending on the agreement) or are in material non-monetary default, with accrued and unpaid interest on the defaulted loans payable out of any future loan payments or liquidation proceeds; or


•	fair value or in exchange for Farm & Ranch Guaranteed Securities (if the loans are not delinquent), in accordance with the terms of the applicable agreement.

In 2015, Farmer Mac entered into $427.8 million of LTSPCs, compared to $369.9 million in 2014, in the Farm & Ranch line of business. In 2015, 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 2015 and 2014, there were no conversions of LTSPCs into Farm & Ranch Guaranteed Securities. As of December 31, 2015, Farmer Mac's outstanding LTSPCs covered 4,057 mortgage loans with an aggregate principal balance of $2.3 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 the 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, such as yield maintenance provisions that may be associated with the underlying loans. For more information about yield maintenance provisions, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Interest Rate Risk."

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Of the $15.9 billion outstanding principal balance of assets included in Farmer Mac's four lines of business as of December 31, 2015, $1.2 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, 2015, Farmer Mac had outstanding Farm & Ranch Guaranteed Securities of $708.1 million that represent interests in whole loans and $514.1 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, 2015 and 2014, Farmer Mac sold Farm & Ranch Guaranteed Securities in the amounts of $336.9 million and $175.8 million, respectively. No gains or losses resulted from these sales in either 2015 or 2014. During 2015 and 2014, there were no conversions of LTSPCs into Farm & Ranch Guaranteed Securities. As of December 31, 2015, Farmer Mac's outstanding Farm & Ranch Guaranteed Securities, which may or may not be consolidated on-balance sheet depending on the primary beneficiary determination described above, were backed by 3,952 mortgage loans with an aggregate principal balance of $1.2 billion. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Business Volume."

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Underwriting and Collateral Valuation (Appraisal) Standards

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:


•	provide that no loan with a loan-to-value ratio ("LTV") in excess of 80 percent may be eligible;


•	require each borrower to demonstrate sufficient cash flow to adequately service the loan;


•	require sufficient documentation standards;


•	protect the integrity of the appraisal process for any loan; and


•	confirm that the borrower is or will be actively engaged in agricultural production.

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

Farmer Mac uses experienced internal agricultural credit underwriters and loan servicers along with external agricultural loan servicing and collateral valuation contractors to perform those respective functions on Farm & Ranch loans. Farmer Mac relies on the combined expertise of its own internal staff and those third-party service providers with which Farmer Mac has contracted to provide Farmer Mac with suitable resources for performing the necessary underwriting, collateral valuation, and servicing functions.

Underwriting. To manage Farmer Mac's credit risk and to provide guidance for the management, administration, and conduct of underwriting to all participating and potential Farm & Ranch lenders, Farmer Mac has adopted credit underwriting standards that vary by loan type and loan product. Farmer Mac developed these standards based on industry practices for similar mortgage loans and designed them to assess the creditworthiness of the borrower, as well as the risk to Farmer Mac for having assumed the credit risk on those loans. Furthermore, Farmer Mac requires 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.

Farmer Mac's credit underwriting standards for 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 housing and part-time farm loans secured primarily by owner-occupied residences (up to 80 percent original LTV). The original LTV of a 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

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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:


•	pro forma total debt service coverage ratio supported by historical profitability, including farm and non-farm income, of 1.25 or higher;


•	pro forma debt-to-asset ratio of 50 percent or less; and


•	pro forma ratio of current assets to current liabilities of 1.25 or higher.

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 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 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:


•	has compensating strengths, which means it exceeds minimum requirements for one or more of the underwriting standards to a degree that compensates for noncompliance with one or more other standards; and


•	is made to a producer of particular agricultural commodities or products in a segment of agriculture in which such compensating strengths are typical of the financial condition of sound borrowers in that segment.

Although underwriting approvals may be made based on 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.

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In the case 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 line of business, a seasoned loan generally will be deemed an eligible loan if:


•	it has been outstanding for at least five years and has an LTV of 60 percent or less;


•	there have been no payments more than 30 days past due during the three-year period immediately before the date the loan is either purchased by Farmer Mac or made subject to an LTSPC; and


•	there have been no material restructurings or modifications for credit reasons during the previous five years.

A seasoned loan that has been outstanding for more than one year but less than five years must substantially comply with the applicable underwriting standards for newly originated loans as of the date the loan was originated by the lender.

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


•	evaluating loan database information to determine conformity to the criteria set forth in the preceding paragraphs;


•	confirming that loan file data conform to database information;


•	validating supporting credit information in the loan files; and


•	reviewing loan documentation and collateral valuations.

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 a guaranteed security 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:

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•	is not associated, except by the engagement for the collateral valuation, with the credit underwriters making the loan decision, though the appraiser or evaluator and the credit underwriter may be directly or indirectly employed by a common employer;


•	receives no financial or professional benefit of any kind by virtue of the report content, valuation, or credit decision made, or based on the valuation report; and


•	has no present or contemplated future direct or indirect interest in the property serving or to serve as collateral.

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.

In October 2014, Farmer Mac formed a collateral valuation subsidiary, Contour Valuation Services, LLC ("Contour"). Contour's principal activity is to provide appraisal services related to agricultural real estate in an effort to meet the needs of Farmer Mac's customer base. As of December 31, 2015, Farmer Mac owned 65 percent of Contour, which represented an initial investment of $325,000 and additional contributions totaling approximately $450,000 made during 2015. Conterra Holdings, LLC, Farmer Mac's business partner with experience in creating and managing a collateral valuation function, owns the remaining 35 percent of Contour. Although Farmer Mac owns the majority interest in Contour, Farmer Mac does not run the day-to-day operations of Contour, does not direct or supervise Contour’s appraisers, and does not permit any individual who is an employee of Farmer Mac to also be employed by Contour, which ensures that the appraisals performed by Contour are independent of Farmer Mac's loan purchase process and not subject to conflicts of interest. The President of Contour has general supervisory authority for the management of Contour’s business, subject to the oversight of a management committee to which Farmer Mac has appointed representatives in proportion to its ownership interest. The financial condition and results of Contour are reflected in the Corporate segment within Farmer Mac's consolidated financial statements.

Portfolio Diversification

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 loan that meets its underwriting and collateral valuation 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 Farm & Ranch line of business. For example, if industry forecasts indicate possible weakness in a geographic area or agricultural commodity or product, Farmer Mac may decide not to purchase or commit to purchase an affected loan as part of managing

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Farmer Mac's overall portfolio exposure to areas of possible heightened risk exposure. Because Farmer Mac effectively assumes the credit risk on all loans under an LTSPC, Farmer Mac's commodity/product and geographic diversification disclosures reflect all loans under LTSPCs and any loans that have been purchased out of LTSPC pools. For information about the diversification of Farmer Mac's existing portfolio, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk – Loans and Guarantees" and Note 8 to the consolidated financial statements.

Approved Lenders

As of December 31, 2015, Farmer Mac had 786 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 792 eligible approved lenders as of December 31, 2014. In addition to participating directly in the Farm & Ranch line of business, some of the approved lenders facilitate indirect participation by other lenders by managing correspondent networks of lenders from which the approved lenders purchase loans to sell to Farmer Mac. As of December 31, 2015, of the 786 approved lenders eligible to participate, 187 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 or entering into an LTSPC transaction with Farmer Mac.

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:


•	own a requisite amount of Farmer Mac common stock according to a schedule prescribed for the size and type of institution;


•	have, in the judgment of Farmer Mac, the ability and experience to make or purchase and sell loans eligible for Farmer Mac's Farm & Ranch line of business and service those loans in accordance with Farmer Mac's requirements either through the lender's own staff or through contractors and originators;


•	maintain a minimum adjusted net worth; and


•	enter into a Seller/Servicer Agreement, which requires compliance with the terms of the Farmer Mac Seller/Servicer Guide, including providing representations and warranties regarding the eligibility of the loans and accuracy of loan data provided to Farmer Mac.

Servicing

Farmer Mac generally does not directly service the 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 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

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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 the holders of those loans in accordance with those lenders' servicing procedures, which are reviewed by Farmer 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.

USDA Guarantees

General

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


•	USDA-guaranteed portions of loans (which Farmer Mac refers to as "USDA Securities") guaranteed under the Consolidated Farm and Rural Development Act (7 U.S.C. § 1921 et seq.) are statutorily included in the definition of loans eligible for the secondary market programs provided by Farmer Mac;


•	USDA Securities are exempted from the credit underwriting, collateral valuation, documentation, and other standards that other loans must meet to be eligible for the secondary market provided by Farmer Mac, and are exempted from any diversification and internal credit enhancement that may be required of pools of other eligible loans; and


•	Farmer Mac is authorized to pool and issue Farmer Mac Guaranteed Securities backed by USDA Securities.

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 business related 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 Farmer Mac or Farmer Mac II LLC.

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Summary of USDA Guarantees Transactions

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 years ended December 31, 2015, 2014, and 2013, Farmer Mac II LLC purchased approximately $376.9 million, $343.0 million, and $361.9 million, respectively, of USDA Securities, all of which were retained on its balance sheet. Farmer Mac did not purchase any USDA Securities in 2015, 2014, or 2013. During 2015, 2014, and 2013, Farmer Mac and Farmer Mac II LLC conducted USDA Guarantees transactions with 209, 185, and 195 entities, respectively.

As of December 31, 2015 and 2014, $1.9 billion and $1.8 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:



	For the Year Ended December 31,
	2015		2014		2013
	(in thousands)
Purchased and retained	$	376,935	$	342,986	$	361,894
Purchased and sold	—		—		—
Total	$	376,935	$	342,986	$	361,894

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		2014
	(in thousands)
On-balance sheet:
USDA Securities	$	1,876,451	$	1,756,224
Farmer Mac Guaranteed USDA Securities	31,554		27,832
Off-balance sheet:
Farmer Mac Guaranteed USDA Securities	10,272		13,978
Total	$	1,918,277	$	1,798,034

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

United States Department of Agriculture Guaranteed Loan Programs

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.

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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:


•	the borrower under the guaranteed loan is in default not less than 60 days in the payment of any principal or interest due on the USDA-guaranteed portion of the loan; or


•	the lender has failed to remit to the holder the payment made by the borrower on the USDA-guaranteed portion of the loan or any related loan subsidy within 30 days after the lender's receipt of the payment.

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 lenders, consisting mostly of community and regional banks, sold USDA Securities to Farmer Mac, compared to 185 lenders that did so during 2014.

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.

Rural Utilities

General

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 business to date under the Rural Utilities line of business has involved telecommunications loans. Farmer Mac's Rural

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Utilities line of business encompasses purchases of eligible rural utilities loans and guarantees of securities backed by those loans, as well as the issuance of LTSPCs for pools of eligible rural utilities loans. Farmer Mac issued LTSPCs for pools of eligible rural utilities loans for the first time in the second half of 2015.

Summary of Rural Utilities Transactions

During the year ended December 31, 2015, Farmer Mac added $630.6 million of new Rural Utilities business, compared to $75.5 million and $87.0 million for the years ended December 31, 2014 and 2013, respectively. As of December 31, 2015 and 2014, the aggregate outstanding principal balance of Rural Utilities loans held and underlying LTSPCs was $1.5 billion and $1.0 billion, respectively.

The following table summarizes new Rural Utilities business activity for each of the years ended December 31, 2015, 2014, and 2013:



	For the Year Ended December 31,
	2015		2014		2013
	(in thousands)
Loans	$	108,337	$	75,500	$	86,965
LTSPCs	522,262		—		—
Total	$	630,599	$	75,500	$	86,965

The following table presents the outstanding balances of Rural Utilities loans held as of the dates indicated:



	As of December 31,
	2015		2014
	(in thousands)
On-balance sheet:
Loans	$	1,008,126	$	718,213
Loans held in trusts:
Beneficial interests owned by Farmer Mac⁽¹⁾	—		267,396
Total on-balance sheet	$	1,008,126	$	985,609
Off-balance sheet:
LTSPCs⁽²⁾	522,864		—
Total	$	1,530,990	$	985,609


⁽¹⁾	Reflects the dissolution of certain consolidated trusts with the effect that loans previously consolidated on the balance sheet as "Loans held in trusts" currently are included within "Loans."


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

Loan Eligibility

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


•	be made for an electric or telephone facility by a lender organized as a cooperative to a borrower that has received or is eligible to receive a loan under the REA;

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•	be performing and not more than 30 days delinquent; and


•	meet Farmer Mac's underwriting standards described in more detail below.

Underwriting

Farmer Mac's charter does not specify minimum underwriting criteria for eligible rural utilities loans under the Rural Utilities line of business. 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, Farmer Mac has adopted credit underwriting standards that vary by loan product and by loan type, based on whether loans are made to electric distribution cooperatives or electric generation and transmission ("G&T") cooperatives. These standards are based on industry practices for similar rural utilities loans and are designed to assess the creditworthiness of the borrower, as well as the risk to Farmer Mac. Farmer Mac reviews lenders' 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 utilities loans. Furthermore, Farmer Mac requires sellers of rural utilities loans to make representations and warranties regarding the conformity of eligible 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.

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 rural utilities loans on which it assumes direct credit exposure (i.e., with no general obligation of a lender involved in the transaction) require:


•	each borrower to demonstrate sufficient cash flow to adequately service the loan; and


•	each borrower's leverage position to be adequate based on industry standards.

In the case of a newly-originated loan to a distribution cooperative on which Farmer Mac assumes direct credit exposure, the borrower typically must, among other criteria set forth in Farmer Mac's credit underwriting standards, meet the following ratios (based on the average of the most recent three years):


•	the ratio of long-term debt to "net utility plant" does not exceed 90 percent;


•	the modified debt service coverage ratio (the cooperative's available cash plus patronage capital credits allocated to the cooperative, relative to debt expense) equals or exceeds 1.35; and


•	the ratio of equity to total assets equals or exceeds 20 percent.

The "net utility plant" means the real and tangible personal property of a rural utilities borrower constituting the long-term assets of property, plant, and equipment (PPE), less depreciation, computed in accordance with applicable accounting requirements.

In the case of a newly-originated loan to a G&T cooperative on which Farmer Mac assumes direct credit exposure, the borrower typically must, among other criteria set forth in Farmer Mac's credit underwriting standards, meet the following ratios (based on the average of the most recent three years):


•	the equity to total assets ratio equals or exceeds 10 percent;


•	the modified debt service coverage ratio equals or exceeds 1.10;

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•	the debt to EBITDA (earnings before interest, taxes, depreciation, and amortization) ratio does not exceed 12; and


•	the aggregate members' equity to total capitalization ratio equals or exceeds 25 percent.

The due diligence Farmer Mac performs before purchasing, or guaranteeing securities backed by, rural utilities loans includes:


•	evaluating loan database information to determine conformity to Farmer Mac's underwriting standards;


•	confirming that loan file data conforms to database information;


•	validating supporting credit information in the loan files; and


•	reviewing loan documentation.

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. Farmer Mac may consider other factors, such as portfolio diversification, in deciding whether or not to accept the loans.

Collateral

It is customary in loans to distribution cooperatives and G&T cooperatives for the lender to take a security interest in substantially all of the borrower's assets. In cases in which Farmer Mac purchases a rural utilities loan with a pledge of all assets and a lender also has a lien on all assets, Farmer Mac verifies that a lien accommodation results in either a shared first lien or a first lien in favor of Farmer Mac. In cases where debt indentures are used, Farmer Mac determines if available collateral is adequate to support the loan program and Farmer Mac's investment. As of December 31, 2015, all of the Rural Utilities loans held by Farmer Mac consisted of loans with a pledge of all assets.

Servicing

Farmer Mac generally does not directly service the Rural Utilities loans held in its portfolio. Those loans are serviced by a servicer designated by Farmer Mac. National Rural Utilities Cooperative Finance Corporation ("CFC") currently services all of the Rural Utilities loans in Farmer Mac's portfolio. CFC is a related party to Farmer Mac by virtue of CFC's stock ownership in Farmer Mac. As of December 31, 2015, CFC held approximately 8 percent 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."

Approved Lenders

Farmer Mac's charter requires eligible rural utilities loans be made by a lender organized as a cooperative. Currently, the only two rural utilities lenders that are cooperatives are CFC and CoBank, ACB ("CoBank"), an institution of the FCS. To date, CFC is the only lender to have participated in Farmer Mac's Rural Utilities line of business.

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Portfolio Diversification

Rural utilities loans are made throughout the entire United States. Farmer Mac analyzes the geographic distribution of loans to cooperatives and considers regional concentration levels in connection with its business activities under the Rural Utilities program. As of December 31, 2015, Farmer Mac had direct credit exposure on 1,136 loans to electric cooperatives constituting $1.5 billion across 38 states.

Farmer Mac's charter does not prescribe a maximum loan size for an eligible rural utilities loan, but Farmer Mac currently has a $50.0 million limit in place for cumulative direct credit exposure on those loans (e.g., purchases of loans, LTSPCs, or guarantees of securities representing interests in loans) to any one borrower or related borrowers. For indirect credit exposures on rural utilities loans (e.g., AgVantage transactions), Farmer Mac's current limit is $75.0 million for cumulative loan exposure to any one borrower or related borrowers, with the amount of any direct exposure to a borrower not counting toward the $75.0 million limit. See "—Institutional Credit." As of December 31, 2015, Farmer Mac's direct credit exposure to rural utilities loans consisted of $1.3 billion in loans to distribution cooperatives and $0.2 billion in loans to G&T cooperatives.

Institutional Credit

Under the Institutional Credit line of business, Farmer Mac provides advances against eligible loans by guaranteeing and purchasing general obligations of institutions approved by Farmer Mac, which obligations are also secured by a pool of guaranteed securities or the types of loans eligible for one of Farmer Mac's other lines of business. Farmer Mac refers to these obligations as AgVantage^® securities. Farmer Mac guarantees the timely payment of principal and interest on AgVantage securities and may retain AgVantage securities in its portfolio or sell them to third parties in the capital markets as Farmer Mac Guaranteed Securities.

Farmer Mac has direct credit exposure to the issuers of AgVantage securities and assumes the ultimate credit risk of issuer default on the AgVantage securities. Before approving an institution as an issuer in an AgVantage transaction, Farmer Mac assesses the institution's creditworthiness as well as its loan performance. Farmer Mac continues to monitor the counterparty risk assessment on an ongoing basis after the AgVantage security is issued. In addition to being a general obligation of the issuing institution, AgVantage securities must be secured by eligible loans or guaranteed securities in an amount at least equal to the outstanding principal amount of the security. As a result, Farmer Mac has indirect credit exposure to the loans or guaranteed securities that are pledged to secure the AgVantage securities, which would be available to Farmer Mac in the event of a default by the issuer.

Loans pledged under AgVantage securities are serviced by the issuers of the securities in accordance with that institution's servicing procedures. Farmer Mac reviews these servicing procedures before entering into those transactions. In AgVantage transactions, the issuer is required to remove from the pool of pledged collateral any loan that becomes more than 30 days delinquent in the payment of principal or interest and to substitute an eligible loan that is current in payment to maintain the minimum required collateralization level.

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For AgVantage securities secured by loans eligible for Farmer Mac's Farm & Ranch line of business, Farmer Mac currently requires the general obligation to be overcollateralized, either by more eligible loans or any of the following types of assets:


•	cash;


•	securities issued by the U.S. Treasury or guaranteed by an agency or instrumentality of the United States; or


•	other highly-rated securities.

The required collateralization level for the AgVantage securities secured by Farm & Ranch loans currently ranges from 102 percent to 125 percent. Within this range, Farmer Mac generally requires higher collateralization levels for securities issued by institutions without long-term debt ratings from a nationally recognized statistical rating organization ("NRSRO"). The required collateralization level is established at the time the AgVantage facility is entered into with the counterparty and does not change during the life of the AgVantage securities issued under such facility.

For AgVantage securities that are secured by Farm & Ranch loans, Farmer Mac requires that the loans meet the minimum standards set forth in the charter for those types of loans and that the value is supported by either appraisals that conform to the USPAP or similar collateral valuation methods based upon Farmer Mac's evaluation of the lender's collateral valuation protocols and history. 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 real estate, Farmer Mac currently limits the size of those loans to $75.0 million in cumulative exposure through a single lender to any one borrower or related borrowers (with the amount of any direct borrower exposure not counting toward the $75 million limit) for AgVantage transactions.

In July 2014, Farmer Mac expanded the AgVantage product to a new type of issuer – institutional investors in agricultural assets that qualify as collateral for the types of loans eligible for the Farm & Ranch line of business. Farmer Mac refers to this product variation as the Farm Equity AgVantage^® product. This product has similar requirements for AgVantage securities secured by Farm & Ranch loans described above, but Farmer Mac also requires that Farm Equity AgVantage transactions (1) generally maintain a higher collateralization level, through lower loan-to-value ratio thresholds and higher overcollateralization requirements, and (2) generally contain specified financial covenants for the life of the related Farm Equity AgVantage security to avoid default. As of December 31, 2015, Farmer Mac had $194.3 million of outstanding Farm Equity AgVantage securities.

For AgVantage securities secured by loans eligible for Farmer Mac's Rural Utilities line of business, Farmer Mac requires:


•	the counterparty issuing the general obligation to have a credit rating from an NRSRO that is at least investment grade, or be of comparable creditworthiness as determined through Farmer Mac's analysis;


•	the collateral to be comprised of loans, or interests in loans, for electric or telephone facilities by a lender organized as a cooperative to a borrower that has received or is eligible to receive a loan under the REA;


•	the collateral to be performing and not more than 30 days delinquent; and


•	the collateralization (consisting of current, performing loans) to be maintained at the contractually prescribed level, in an amount at least equal to the outstanding principal amount of the security.

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Although Farmer Mac has only indirect credit exposure on the rural utilities loans pledged to secure AgVantage securities, the same underwriting standards that apply to loans made to distribution cooperatives on which Farmer Mac assumes direct credit exposure also apply to loans made to distribution cooperatives that secure the general obligation of the lender in AgVantage transactions. See "—Rural Utilities—Underwriting." For loans made to G&T cooperatives that secure the general obligation of the issuer in AgVantage transactions, the G&T cooperative must either (1) have a rating from an NRSRO of BBB- (or equivalent rating) or better or (2) meet the following underwriting standards (based on the average of the most recent three years):


•	the aggregate members' equity to total capitalization ratio equals or exceeds 25 percent;


•	the modified debt service coverage ratio equals or exceeds 1.10; and


•	the equity to total assets ratio equals or exceeds 10 percent.

Farmer Mac's charter does not prescribe a maximum loan size or a total borrower exposure for an eligible rural utilities loan, but Farmer Mac's current limit for AgVantage transactions is $75.0 million for cumulative loan exposure to any one borrower or related borrowers (with the amount of any direct exposure to a borrower not counting towards the $75 million limit). Farmer Mac also permits up to 20 percent of rural utilities loans pledged to secure AgVantage securities to be unsecured or secured by less than all of the borrower's assets. As of December 31, 2015, all AgVantage securities secured by eligible rural utilities loans were issued by CFC, which is a related party to Farmer Mac by virtue of CFC's stock ownership in Farmer Mac. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Related Party Transactions."

As of December 31, 2015, Farmer Mac had not experienced any credit losses, nor had it been called upon to make a guarantee payment to third parties, on any of its AgVantage securities. For more information on Farmer Mac's AgVantage securities, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk – Institutional."

Summary of Institutional Credit Transactions

During the year ended December 31, 2015, Farmer Mac added a total of $1.0 billion of new business volume under the Institutional Credit line of business, including a $0.3 billion revolving floating rate AgVantage facility entered into with CFC, which had not been drawn upon as of December 31, 2015. That new business volume was partially offset by repayments on existing assets (principal paydowns and maturities) during the year, resulting in $6.7 billion of total outstanding business volume in this line of business as of December 31, 2015 compared to $6.4 billion as of December 31, 2014.

As of both December 31, 2015 and 2014, the outstanding principal amount of AgVantage securities held by Farmer Mac on its balance sheet was $5.4 billion . As of December 31, 2015 , the aggregate outstanding principal amount of off-balance sheet AgVantage securities sold to third parties totaled $1.3 billion compared to $1.0 billion as of December 31, 2014. The amount as of December 31, 2015 includes a $0.3 billion revolving floating rate AgVantage facility entered into with CFC that had not been drawn upon as of that date. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Business Volume" and "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk – Institutional." The following table summarizes new Institutional Credit line of business activity for each of the years ended December 31, 2015, 2014, and 2013:

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	For the Year Ended December 31,
	2015		2014		2013
	(in thousands)
AgVantage Securities	$	743,158	$	1,279,655	$	1,273,500
Revolving floating rate AgVantage facility	300,000		—		—
	$	1,043,158	$	1,279,655	$	1,273,500

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:



	As of December 31,
	2015		2014
	(in thousands)
On-balance sheet:
AgVantage Securities	$	5,439,383	$	5,410,413
Off-balance sheet:
AgVantage Securities	$	984,871	$	986,528
Revolving floating rate AgVantage facility⁽¹⁾	300,000		—
Total off-balance sheet	$	1,284,871	$	986,528
Total	$	6,724,254	$	6,396,941


⁽¹⁾	As of December 31, 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.

FUNDING OF GUARANTEE AND LTSPC OBLIGATIONS

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, Farmer Mac had net credit losses of $3.9 million, compared to net credit recoveries of $6,000 during 2014, primarily due to an increase in the level of charge-offs in 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, this reserve against losses arising from Farmer Mac's guarantee activities was $56.4 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

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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.

FINANCING

Debt Issuance

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 billion was outstanding as of December 31, 2015), 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:


•	obligations of or guaranteed by the United States;


•	obligations of GSEs;


•	municipal securities;

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•	international and multilateral development bank obligations;


•	money market instruments;


•	diversified investment funds;


•	asset-backed securities;


•	corporate debt securities; and


•	mortgage-backed securities.

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.

Equity Issuance

Farmer Mac's charter authorizes Farmer Mac to issue voting common stock, 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.

Common Stock

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


•	1,030,780 shares of Class A voting common stock;


•	500,301 shares of Class B voting common stock; and


•	9,155,661 shares of Class C non-voting common stock.

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

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Class C non-voting common stock at a cost of approximately $10.5 million under the share repurchase program. Farmer Mac did not repurchase any common stock during 2014.

The following table presents the dividends declared on Farmer Mac's common stock during and subsequent to 2015:



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	*

* The dividend declared on March 2, 2016 is scheduled to be paid on March 31, 2016.

Farmer Mac's ability to declare and pay common stock dividends could be restricted if it were to fail to comply with applicable capital requirements. See Note 9 to the consolidated financial statements and "Business—Government Regulation of Farmer Mac—Regulation—Capital Standards."

Preferred Stock

As of December 31, 2015, the following shares of Farmer Mac preferred stock were outstanding:


•	2,400,000 shares of Series A Preferred Stock, all of which were issued on January 17, 2013;


•	3,000,000 shares of Series B Preferred Stock, all of which were issued on March 25, 2014; and


•	3,000,000 shares of Series C Preferred Stock, all of which were issued on June 20, 2014.

The Series A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock (collectively referred to as the "Outstanding Preferred Stock") each has a par value of $25.00 per share and an initial liquidation preference of $25.00 per share. Since each of their respective issuances, Farmer Mac has not issued any additional shares of any series of Outstanding Preferred Stock. Each series of Outstanding Preferred Stock ranks senior to Farmer Mac's outstanding Class A voting common stock, Class B voting common stock, Class C non-voting common stock, and any other common stock of Farmer Mac issues in the future. The Series A Preferred Stock and the Series B Preferred Stock pay an annual dividend rate fixed at 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 3.260 percent. Dividends on all series of Outstanding Preferred Stock are non-cumulative, which means that if the 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 may pay dividends on the Outstanding Preferred Stock without paying dividends on any class or series of stock Farmer Mac may issue in the future that ranks junior to the Outstanding Preferred Stock. The Series A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock rank equally with each other and will rank equally with any other class or series of stock Farmer Mac may issue in the future of equal priority as to dividends and upon liquidation. Farmer Mac has the right, but not the obligation, to redeem some or all of the issued

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and outstanding shares of Series A Preferred Stock on and anytime after January 17, 2018, the Series B Preferred Stock on and anytime after April 17, 2019, and the Series C Preferred Stock on and anytime after July 18, 2024, all at a price equal to the then-applicable liquidation preference. The Outstanding Preferred Stock is considered Tier 1 capital for Farmer Mac. For more information on Farmer Mac's capital requirements, see "Business—Government Regulation of Farmer Mac—Regulation—Capital Standards."

Farmer Mac incurred direct costs of $1.7 million related to the issuance of the Series A Preferred Stock, direct costs of $1.9 million related to the issuance of the Series B Preferred Stock, and direct costs of $1.6 million related to the issuance of the Series C Preferred Stock. Farmer Mac used the proceeds from the sale of the Series A Preferred Stock to redeem and retire on January 17, 2013 Farmer Mac's then-outstanding shares of Series C Non-Voting Cumulative Preferred Stock, which is different than the Series C Preferred Stock that is currently outstanding and which had a par value and liquidation preference of $1,000 per share and had been issued in 2008 and 2009.

The following table presents the dividends declared and paid on Series A Preferred Stock during and subsequent to 2015:



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	*

* The dividend declared on March 2, 2016 is scheduled to be paid on April 17, 2016.

The following table presents the dividends declared and paid on Series B Preferred Stock during and subsequent to 2015:



Date Dividend Declared	Per Share Amount	For Period Beginning	For Period Ending	Date Paid
February 5, 2015	$0.4297	January 18, 2015	April 17, 2015	April 17, 2015
June 3, 2015	$0.4297	April 18, 2015	July 17, 2015	July 17, 2015
August 6, 2015	$0.4297	July 18, 2015	October 17, 2015	October 17, 2015
November 4, 2015	$0.4297	October 18, 2015	January 17, 2016	January 17, 2016
March 2, 2016	$0.4297	January 18, 2016	April 17, 2016	*

* The dividend declared on March 2, 2016 is scheduled to be paid on April 17, 2016.

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The following table presents the dividends declared and paid on Series C Preferred Stock during and subsequent to 2015:



Date Dividend Declared	Per Share Amount	For Period Beginning	For Period Ending	Date Paid
February 5, 2015	$0.3750	January 18, 2015	April 17, 2015	April 17, 2015
June 3, 2015	$0.3750	April 18, 2015	July 17, 2015	July 17, 2015
August 6, 2015	$0.3750	July 18, 2015	October 17, 2015	October 17, 2015
November 4, 2015	$0.3750	October 18, 2015	January 17, 2016	January 17, 2016
March 2, 2016	$0.3750	January 18, 2016	April 17, 2016	*

* The dividend declared on March 2, 2016 is scheduled to be paid on April 17, 2016.

Non-Controlling Interest in Farmer Mac II LLC

Until March 30, 2015, Farmer Mac II LLC had 250,000 shares of preferred stock outstanding ("Farmer Mac II LLC Preferred Stock") as a result of a private offering completed in January 2010 of $250.0 million aggregate face amount of securities issued by a newly formed Delaware statutory trust. The trust securities, called Farm Asset-Linked Capital Securities or "FALConS," represented undivided beneficial ownership interests in the 250,000 shares of Farmer Mac II LLC Preferred Stock. The Farmer Mac II LLC Preferred Stock did not constitute a Tier 1 capital-eligible security for Farmer Mac. Consistent with Farmer Mac's plan to increase its Tier 1 capital, Farmer Mac issued the Series B Preferred Stock and Series C Preferred Stock in 2014 and caused Farmer Mac II LLC to redeem all of the outstanding Farmer Mac II LLC Preferred Stock on March 30, 2015, the initial redemption date, using the proceeds of these two preferred stock offerings and cash on hand. The redemption of Farmer Mac II LLC Preferred Stock on March 30, 2015 triggered the redemption of all the outstanding FALConS securities on that same day. For more information on Farmer Mac's capital plan, see "Government Regulation of Farmer Mac—Capital Standards—Capital Adequacy Requirements."

Farmer Mac II LLC Preferred Stock had been permanent equity of Farmer Mac II LLC until it was redeemed and is included in the presentation of "Non-controlling interest" within total equity on the consolidated balance sheets of Farmer Mac. Farmer Mac II LLC incurred $8.1 million of direct costs related to the issuance of the Farmer Mac II LLC Preferred Stock, which reduced the amount of non-controlling interest and was recognized as expense in the period in which the Farmer Mac II LLC Preferred Stock was redeemed. Additionally, in May 2014, Farmer Mac purchased in the open market $6.0 million of FALConS, representing undivided beneficial ownership interests in 6,000 shares of Farmer Mac II LLC Preferred Stock, which is reflected as "Purchase of interest – Non-controlling interest – preferred stock" on the consolidated statements of equity of Farmer Mac.

The Farmer Mac II LLC Preferred Stock had a liquidation preference of $1,000 per share. Dividends on the Farmer Mac II LLC Preferred Stock were payable if, when, and as declared by Farmer Mac II LLC's board of directors, quarterly, on a non-cumulative basis, on March 30, June 30, September 30, and December 30 of each year. From the date of issuance to but excluding the quarterly payment date occurring on March 30, 2015, the annual dividend rate on the Farmer Mac II LLC Preferred Stock was 8.875 percent, at which time the annual dividend rate would have increased to 10.875 percent had the Farmer Mac II Preferred Stock not been redeemed on March 30, 2015. The accrual of declared dividends is presented as "Net income attributable to non-controlling interest – preferred stock dividends" on the

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consolidated statements of operations on a pre-tax basis. The consolidated tax benefit is included in "income tax expense" on the consolidated statements of operations.

The following table presents the dividends declared on Farmer Mac II LLC Preferred Stock during 2015, prior to its redemption on March 30, 2015:



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

FARMER MAC'S AUTHORITY TO BORROW FROM THE U.S. TREASURY

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:


•	a portion of the guarantee fees assessed by Farmer Mac has been set aside as a reserve against losses arising out of Farmer Mac's guarantee activities in an amount determined by Farmer Mac's board of directors to be necessary and such reserve has been exhausted (that amount was

$56.4 million as of December 31, 2015); and


•	the proceeds of such obligations are needed to fulfill 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. 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, 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.

GOVERNMENT REGULATION OF FARMER MAC

General

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

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and appraisal standards that represent sound loans to profitable businesses. The enabling legislation also did not contain a specific federal securities law exemption as had been given to the housing GSEs, which had the effect of requiring Farmer Mac to comply with the periodic reporting requirements of the SEC, including filing annual and quarterly reports on the financial status of Farmer Mac and current reports when there are significant developments. Farmer Mac's statutory charter also requires offerings of Farmer Mac Guaranteed Securities to be registered under the Securities Act of 1933 and related regulations (collectively, the "Securities Act"), unless an exemption for an offering is available that is not related to Farmer Mac's status as an instrumentality of the United States.

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


•	in 1990 to create the USDA Guarantees line of business;


•	in 1991 to clarify Farmer Mac's authority to purchase its guaranteed securities, establish OSMO as Farmer Mac's financial regulator, and set minimum regulatory capital requirements for Farmer Mac;


•	in 1996 to remove certain barriers to and restrictions on Farmer Mac's operations to be more competitive (e.g., allowing Farmer Mac to buy loans directly from lenders and issue guaranteed securities representing 100 percent of the principal of the purchased loans and modifying capital requirements); and


•	in 2008 to authorize Farmer Mac to purchase, and guarantee securities backed by, loans made by lenders organized as cooperatives to borrowers to finance electrification and telecommunications systems in rural areas.

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

Office of Secondary Market Oversight (OSMO)

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.

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Capital Standards

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


•	Statutory minimum capital requirement. Farmer Mac's minimum capital level is an amount of core capital (stockholders' equity less accumulated other comprehensive income) equal to the sum of 2.75 percent of Farmer Mac's aggregate on-balance sheet assets, as calculated for regulatory purposes, plus 0.75 percent of Farmer Mac's aggregate off-balance sheet obligations, specifically including:


◦	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


◦	other off-balance sheet obligations of Farmer Mac.


•	Statutory critical capital requirement. Farmer Mac's critical capital level is an amount of core capital equal to 50 percent of the total minimum capital requirement at that time.


•	Risk-based capital. The charter directs FCA to establish a risk-based capital stress test for Farmer Mac, using specified stress-test parameters.

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:


•	annual losses occur at a rate of default and severity "reasonably related" to the rates of the highest sequential two years in a limited U.S. geographic area; and


•	interest rates increase to a level equal to the lesser of 600 basis points or 50 percent of the ten-year U.S. Treasury rate, and interest rates remain at such level for the remainder of the period.

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, Farmer Mac's statutory minimum and critical capital requirements were $462.1 million and $231.0 million, respectively, and its actual core capital level was $564.5 million, which is $102.4 million above the statutory minimum capital requirement and $333.5 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 was $71.7 million and Farmer Mac's regulatory capital of $571.1 million exceeded that amount by approximately $499.4 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

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Farmer Mac's charter. As of December 31, 2015, Farmer Mac was classified as within level I – the highest compliance level.

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:


•	requiring Farmer Mac to submit and comply with a capital restoration plan;


•	prohibiting the payment of dividends if such payment would result in Farmer Mac being reclassified as within a lower level and requiring the pre-approval of any dividend payment even if such payment would not result in reclassification as within level IV; and


•	reclassifying Farmer Mac as within one level lower if it does not submit a capital restoration plan that is approved by the Director, or the Director determines that Farmer Mac has failed to make, in good faith, reasonable efforts to comply with such a plan and fulfill the schedule for the plan approved by the Director.

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:


•	imposing limits on any increase in, or ordering the reduction of, any obligations of Farmer Mac, including off-balance sheet obligations;


•	limiting or prohibiting asset growth or requiring the reduction of assets;


•	requiring the acquisition of new capital in an amount sufficient to provide for reclassification as within a higher level;


•	terminating, reducing, or modifying any activity the Director determines creates excessive risk to Farmer Mac; or


•	appointing a conservator or a receiver for Farmer Mac.

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

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stock, qualifying preferred stock, and accumulated other comprehensive income allocable to "non-program" investments that are not included in the Farm & Ranch, USDA Guarantees, Rural Utilities, and Institutional Credit lines of business. Under this policy, Farmer Mac must maintain at all times during 2015 a Tier 1 capital ratio of not less than 4.25 percent of risk-weighted assets, calculated using an advanced internal ratings based ("AIRB") asset risk weighting regime that is consistent with current Basel-based principles, with the minimum Tier 1 capital ratio increasing by 0.25 percent annually to reach 5.0 percent in 2018.

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:



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)

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, Farmer Mac's Tier 1 capital ratio was 10.5%. 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.

Item 1A. Risk Factors

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 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

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materialize, Farmer Mac's business, financial condition, or results of operations could be materially and adversely affected. Farmer Mac undertakes no obligation to update or revise this risk factor discussion, except as required by law.

An inability to access the equity and debt capital markets could have a material adverse effect on Farmer Mac's business, operating results, financial condition, and capital levels.

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 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:


•	Farmer Mac's corporate structure established by its charter, including its status as a government-sponsored enterprise, or GSE, and perceptions about the viability of stockholder-owned GSEs in general;


•	compliance with applicable statutory, regulatory, and board-approved capital requirements and any measures imposed by Farmer Mac's regulator or board of directors if Farmer Mac failed to comply with those requirements;


•	Farmer Mac's financial results and changes in its financial condition;


•	public perception of the risks to and financial prospects of Farmer Mac's business;


•	prevailing conditions in the capital markets;


•	lack of a public debt rating may reduce demand for Farmer Mac's debt securities;


•	competition from other issuers of GSE equity or debt; and


•	legislative or regulatory actions relating to Farmer Mac's business, including any actions that would affect Farmer Mac's GSE status.

Factors affecting the agricultural sector or the rural utilities industry may negatively affect borrowers' profitability and, as a consequence, their ability to repay their loans on which Farmer Mac has assumed credit risk.

External factors beyond Farmer Mac's control that could negatively affect borrowers' profitability could cause Farmer Mac to experience increased delinquency and default rates within its loan portfolio, including, but not limited to:


•	severe protracted or sudden adverse weather conditions, animal and plant disease outbreaks, restrictions on water supply, limited access to transportation to move agricultural products to markets, or other conditions affecting particular geographic regions or industries;


•	volatility in production expenses, including in commodity or fuel prices or labor costs or availability within any particular industry;


•	fluctuations in currency exchange markets or changes in the global economy that would reduce export demand for U.S. agricultural products;


•	slow or negative economic growth, which could reduce demand for U.S. agricultural products;

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•	adverse changes in interest rates, agricultural land values, or other factors that may affect delinquency levels and credit losses on agricultural real estate mortgage loans;


•	legislative or regulatory developments or actions adversely affecting the agricultural sector or rural utilities industry;


•	changes in the general economy that could affect the availability of off-farm sources of income and prices of real estate for borrowers; and


•	economic conditions that may negatively affect the market for electricity in rural areas and consequently limit the ability of rural electric cooperatives to provide electricity or raise rates to achieve profitable levels.

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.

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:


•	disruptions in the capital markets, which could adversely affect the value and performance of Farmer Mac's eligible loan assets and investment securities, liquidity position, and ability to access funding at favorable levels or to raise capital;


•	competitive pressures in the purchase of loans eligible for Farmer Mac's lines of business and the sale of Farmer Mac Guaranteed Securities and debt securities;


•	changes in interest rates that may increase the basis risk of Farmer Mac's hedging instruments, thereby increasing its funding costs; and


•	legislative or regulatory developments or interpretations of Farmer Mac's statutory charter that could adversely affect Farmer Mac or its ability to offer new products, the ability or motivation of certain lenders to participate in Farmer Mac's lines of business or the terms of any such participation, or increase the cost of related corporate activities.

Farmer Mac's business development, profitability, and capital depend on the continued growth of the secondary market for agricultural real estate mortgage loans and for rural utilities loans, which may be constrained by a number of factors.

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:


•	reduced growth rates in the agricultural mortgage market caused by prevailing conditions in the overall economy;


•	the increase in capital levels or the availability of other sources of capital for customers of Farmer Mac;


•	the acceptance by Federal Home Loan Banks of agricultural real estate mortgage loans as collateral;


•	the historical preference of many agricultural lending institutions to retain loans in their portfolios rather than to sell them into the secondary market;

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•	the small number of business partners that currently provide a significant portion of Farmer Mac's business volume, resulting in vulnerability as existing business volume pays down or matures and the status of these business partners evolves; and


•	expanded funding alternatives available to rural utilities.

The loss of business from key business partners or customers could adversely affect Farmer Mac's business and result in a decrease in its revenues and profits.

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 purchase commitments. 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 2015, ten institutions generated approximately 55 percent of loan purchase volume in the Farm & Ranch line of business. As of December 31, 2015, approximately 95.7 percent of the $6.7 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.

The failure of an issuer to pay the outstanding principal amount or to issue new AgVantage securities upon the maturity of outstanding AgVantage securities could negatively affect Farmer Mac's liquidity position and income.

As of December 31, 2015, Farmer Mac had $6.7 billion of AgVantage securities outstanding, of which $1.4 billion and $1.6 billion will be maturing in 2016 and 2017, respectively. AgVantage securities are guaranteed by Farmer Mac as to the timely payment of interest and principal. 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.

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Farmer Mac is a GSE that may be materially and adversely affected by legislative or political developments, which may affect the ongoing operations or continued existence of GSEs.

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. 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 a GSE at this time, Farmer Mac's ability to effectively conduct its business is subject to risks and uncertainties related to legislative or political developments that 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 enactment of legislation or the promulgation of regulations that could negatively affect the status of Farmer Mac as a GSE or the manner in which Farmer Mac operates. Farmer Mac cannot predict whether any legislative proposals related to the housing GSEs would also address the continued GSE status of Farmer Mac or 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, and capital levels. See "Government Regulation of Farmer Mac" in Item 1 of this Annual Report on Form 10-K for additional discussion on the rules and regulations governing Farmer Mac's activities.

Farmer Mac is subject to capital requirements that are subject to change, and failure to meet those requirements could result in supervisory measures or the inability of Farmer Mac to declare dividends, or otherwise materially and adversely affect Farmer Mac's business, operating results, or financial condition.

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:


•	the potential for any other-than-temporary impairment charges;


•	adverse changes in interest rates or credit spreads;


•	the potential need to increase the level of the allowance for losses on eligible loan assets in the future;


•	legislative or regulatory actions that increase Farmer Mac's applicable capital requirements; and


•	changes in U.S. generally accepted accounting principles ("GAAP").

Farmer Mac is exposed to credit risk on its eligible loan assets, the repayment of which may depend on factors outside of Farmer Mac's or the borrower's control, and widespread repayment shortfalls on loans could have a material adverse effect on Farmer Mac's financial condition, results of operations, and liquidity.

Farmer Mac's earnings depend significantly on the performance of its eligible loan assets and the spread between the interest, guarantee fees, and commitment fees earned on such assets and interest paid on

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Farmer Mac's obligations and liabilities. Farmer Mac assumes the ultimate credit risk of borrower defaults on the agricultural mortgage and rural utilities loans it holds, as well as the loans underlying LTSPCs and non-AgVantage Farmer Mac Guaranteed Securities. Widespread repayment shortfalls on loans in the Farm & Ranch line of business or Rural Utilities line of business could result in losses on loans held or require Farmer Mac to pay under its guarantees and LTSPCs, which could have a material adverse effect on Farmer Mac's financial condition, results of operations, and liquidity.

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 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. 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 percent of the loans in the Farm & Ranch line of business included balloon payments. In addition, loans to borrowers in industries that have had historically higher delinquency rates relative to Farmer Mac's overall portfolio may present a higher risk of delinquency in future periods. For example, as of December 31, 2015, loans to borrowers in the permanent plantings and part-time farm categories comprised a combined 20.1 percent of the Farm & Ranch portfolio, but delinquencies in these combined categories comprised 31.3 percent of the aggregate delinquencies for all commodity categories. As of December 31, 2015, loans to borrowers in the Agricultural Storage and Processing category (including ethanol facilities) comprised 1.4 percent of the Farm & Ranch portfolio, but cumulative net credit losses for this category comprised 45.5 percent of the cumulative net credit losses for all categories.

In the Rural Utilities line of business, eligible utilities operations include the distribution of electricity, the generation and transmission of electricity, and telecommunications. Each type of utility operation has different inherent risks associated with it, but all share a common risk posed by potential changes in public and regulatory policies. 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 distribution and generation sectors can 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.

Farmer Mac Guaranteed Securities and LTSPCs expose Farmer Mac to significant contingent liabilities, and Farmer Mac's ability to fulfill its obligations under its guarantees and LTSPCs may be limited.

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, Farmer Mac had $4.6 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

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no value from the related collateral. Farmer Mac's principal sources of funds for payments on all of its liabilities, including claims that may arise under its guarantees and LTSPCs, are the liquid assets held by Farmer Mac (including cash and cash equivalents), guarantee and commitment fees, interest payments on assets held by Farmer Mac, loan repayments, repayment of principal amounts due upon maturity of AgVantage securities, and proceeds from the issuance of debt securities. If all of the loans underlying Farmer Mac's guarantees and LTSPCs defaulted and Farmer Mac recovered no value from the related collateral, the funds for payment on these guarantees and LTSPCs could be substantially less than the aggregate amount of the corresponding liabilities. It is difficult to quantify at any particular point in time the funds that would be available from interest payments, loan repayments, and maturing AgVantage securities for payment on Farmer Mac's guarantees and LTSPCs, and Farmer Mac's ability to issue debt as a source of repayment would be subject to its ability to access the debt markets and market conditions at that time. As of December 31, 2015, Farmer Mac held cash, cash equivalents, and other investment securities with a fair value of $4.0 billion that could be used as a source of funds for payment on its obligations. Although Farmer Mac believes that it remains well-collateralized on the assets underlying its guarantee and purchase commitment obligations to third parties and that the estimated probable losses for these obligations remain low relative to the amount available for payment of claims on these obligations, Farmer Mac's total contingent liabilities for these obligations exceed the amount it may have available for payment of claims on these obligations. See "Management's Discussion and Analysis—Risk Management—Credit Risk – Loans and Guarantees" for more information on Farmer Mac's management of credit risk.

Farmer Mac is exposed to swap counterparty credit risk on its non-cleared swaps that could materially and adversely affect its business, operating results, and financial condition.

Farmer Mac relies on interest rate swap contracts and hedging arrangements to effectively manage its interest rate risk. A significant 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. In managing this risk, Farmer Mac contracts only with counterparties that have investment grade credit ratings, establishes and maintains collateral requirements that are scaled based upon credit ratings, and enters into netting agreements. Additionally, new rules that become effective later this year will establish minimum requirements for the exchange of initial and variation margin between Farmer Mac and its swap dealer counterparties in non-cleared swaps transactions. 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 $8.4 billion combined notional amount of interest rate swaps, $2.2 billion were not cleared through swap clearinghouses as of December 31, 2015. As of December 31, 2015, Farmer Mac's credit exposure to interest rate swap counterparties was $6.4 million excluding netting arrangements and $47,000 including netting arrangements.

Farmer Mac is exposed to counterparty credit risk on AgVantage securities that could materially and adversely affect its business, operating results, and financial condition.

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 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

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addition, Farmer Mac requires some level of overcollateralization (currently between 102 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, nearly all of the 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 is exposed to counterparty credit risk on its investment securities that could materially and adversely affect its 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, Farmer Mac held at fair value, as part of its liquidity investment portfolio, $20.0 million of corporate debt securities, $83.4 million of asset-backed securities principally backed by U.S. Government-guaranteed student loans (including $44.9 million of auction-rate certificates), and $1.1 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 is exposed to interest rate risk that could materially and adversely affect its business, operating results, and financial condition.

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, of all the outstanding business volume held on Farmer Mac's balance sheet, $4.9 billion had a fixed interest rate and $6.4 billion had an indexed or non-indexed adjustable interest rate.

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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, Farmer Mac held $5.8 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 billion of interest rate swaps outstanding where Farmer Mac pays a fixed rate of interest and receives a floating rate of interest.

Changes in interest rates relative to Farmer Mac's management of interest rate risk through derivatives may cause volatility in financial results and capital levels and may adversely affect net income.

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 and 2014, Farmer Mac recorded unrealized gains of $1.9 million and unrealized losses of $21.8 million, respectively, from changes in the fair values of its financial derivatives as a result of movements in interest rates during those years.

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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 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, Farmer Mac posted $38.0 million of cash 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. 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 amount required to be posted would increase if Farmer Mac also experienced a credit event triggering full collateralization of its derivatives positions without any minimum threshold. Additionally, new rules that become effective later this year will establish minimum requirements for the exchange of initial and variation margin between Farmer Mac and its swap dealer counterparties in non-cleared swaps transactions. These rules or the evolving norms of the derivatives industry as a result of these rules may cause some or all of Farmer Mac's swap counterparties to seek to amend 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 for currently existing swaps and/or swaps entered into in the future, which could significantly increase the amount of collateral Farmer Mac is required to post or could require a full collateralization of Farmer Mac's derivatives positions. As of December 31, 2015, the amount that would have been required for full collateralization of Farmer Mac's derivatives positions given the fair value of Farmer Mac's derivatives at that time was $45.2 million. If Farmer Mac were required to significantly increase the amount of collateral it is required to post or fully collateralize its derivatives position in an adverse interest rate environment, it could have a negative effect on Farmer Mac's liquidity position and operating results.

Incorrect estimates and assumptions by management in preparing financial statements could adversely affect Farmer Mac's business, operating results, reported assets and liabilities, financial condition, and capital levels.

Incorrect estimates and assumptions by management in connection with the preparation of Farmer Mac's consolidated financial statements could adversely affect the reported amounts of assets and liabilities and the reported amounts of income and expenses. The preparation of Farmer Mac's consolidated financial statements requires management to make certain critical accounting estimates and assumptions that could affect the reported amounts of assets and liabilities and the reported amounts of income and expense during the reporting periods. For example, as of December 31, 2015, Farmer Mac's assets and liabilities recorded at fair value included financial instruments valued at $6.1 billion whose fair values were estimated by management in the absence of readily determinable fair values (in other words, level 3). These financial instruments measured as level 3 represented 39 percent of total assets and 69 percent of financial instruments measured at fair value as of December 31, 2015. Further information regarding fair value measurement is included in "Management's Discussion and Analysis—Critical Accounting Policies—Fair Value Measurement." If management makes incorrect assumptions or estimates, Farmer Mac may

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understate or overstate reported financial results, which could materially and adversely affect Farmer Mac's business, operating results, reported assets and liabilities, financial condition, and capital levels.

Changes in the value or composition of Farmer Mac's investment securities could adversely affect Farmer Mac's business, operating results, financial condition, and capital levels.

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, the fair values of Farmer Mac's auction-rate certificates and GSE subordinated debt were $44.9 million and $66.2 million, respectively, compared to Farmer Mac's amortized cost of $46.5 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.

Farmer Mac's ability to attract and retain qualified employees is critical to the success of its business, and failure to do so may materially adversely affect Farmer Mac's performance or financial condition.

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 employees would require Farmer Mac to expend resources to replace personnel and could result in a loss of productivity in the interim. If Farmer Mac is

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unable to continue to retain and attract qualified employees, Farmer Mac's performance or financial condition could be materially adversely affected.

Any failure, interruption, or breach in Farmer Mac's information systems, including the occurrence of successful cyber incidents or a significant deficiency in Farmer Mac's cyber security, could result in a loss of business, damage to Farmer Mac's reputation, the disclosure or misuse of confidential or proprietary information, or increased costs or liability to Farmer Mac, which could adversely affect Farmer Mac's business, operating results, 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 according to 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, or financial condition. 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. To Farmer Mac's knowledge, no cyber incident has resulted in unauthorized access to Farmer Mac's or its customers' confidential, proprietary, or other information . However, any future instance in which unauthorized access to Farmer Mac's information systems or sensitive information is obtained 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, or financial condition.

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Farmer Mac depends on third-party vendors, including loan servicers, information systems providers, and other service providers, to protect confidential information from unauthorized access and dissemination, and these vendors' failure to do so could result in liability for Farmer Mac or damage Farmer Mac's reputation, which could have a negative effect on Farmer Mac's business, operating results, or financial condition.

Farmer Mac relies on third-party vendors, including loan servicers, information systems 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.

If Farmer Mac's management of risk associated with its eligible loan assets and investment securities is not effective, its business, operating results, financial condition, and capital levels could be materially adversely affected.

Events in the financial markets since 2008 leading to heightened volatility and tightened liquidity and credit have challenged financial institutions, including Farmer Mac, to adapt and further develop profitability and risk management models adequate to address a wider 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 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, and capital levels.

The trading price for Farmer Mac's Class C non-voting common stock may be volatile due to market influences, trading volume, or the effects of equity awards for Farmer Mac's officers, directors, and employees.

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 to December 2015, the closing price of the stock ranged from $22.41 per share to $33.01 per share. The trading price may fluctuate in response to various factors, including short sales, hedging, the presence or absence of a share

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repurchase program, or stock market influences in general that are unrelated to Farmer Mac's operating performance. In September 2015, Farmer Mac implemented a share repurchase program under which it is authorized to repurchase up to $25 million of its Class C non-voting common stock until September 2017. As of December 31, 2015, approximately $14.5 million of this authorization remained. In addition, as a component of compensation for officers, directors, and employees, Farmer Mac typically grants equity awards each year that are based on the Class C non-voting common stock, including stock appreciation rights and restricted stock that vest over time or upon the achievement of specified performance goals. Sales of stock acquired upon vesting or the exercise of equity awards by Farmer Mac's officers, directors, or employees, whether pursuant to an established trading plan or otherwise, could adversely affect the trading price of Farmer Mac's Class C non-voting common stock. These factors may be exacerbated during periods of low trading volume for Farmer Mac's Class C non-voting common stock, which averaged approximately 39,000 shares daily during 2015, and may have a prolonged negative effect on its trading price or increase price volatility.

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.

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:


•	increase the availability of long-term credit to rural borrowers at stable interest rates;


•	provide greater liquidity and lending capacity in extending credit to rural borrowers; and


•	provide an arrangement for new lending by facilitating capital market investments in long-term funding for rural borrowers, including funds at fixed rates of interest.

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 liquidity 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, Farmer Mac's business, operating results, and financial condition could be adversely affected.

A few stockholders who own large amounts of Farmer Mac voting common stock may seek to influence Farmer Mac's business, strategy, or board composition, and the interests of these stockholders may differ from the interests of Farmer Mac or other holders of Farmer Mac's common stock.

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 Farmer Mac's Class A voting common stock is held by three financial institutions, with 31 percent held by one institution. Approximately 97 percent of Farmer Mac's Class B voting common stock is held by five FCS institutions (two of which are related to each other through a parent-subsidiary relationship). Three of those five FCS institutions may be deemed to have entered into a voting arrangement regarding the election of directors to Farmer Mac's board of directors.

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Many holders of Farmer Mac's voting common stock are rural lenders that may compete directly with each other. At times, some of these voting stockholders may also view Farmer Mac as an indirect competitor because Farmer Mac's secondary market activities often provide attractive funding and effective risk management tools that help many lenders compete in the origination 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 of institutions, there is 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 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 or the interests of Farmer Mac's Class C non-voting common stockholders, and this could lead to a strategy that is not in the best interests of Farmer Mac or all of its stockholders. The holders of Farmer Mac's Class A voting common stock and the holders of 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 not be in the best interests of all stockholders.

Any of the risks described in this section could materially and adversely affect Farmer Mac's business, operating results, financial condition, 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.


Item 1B.	Unresolved Staff Comments

None.


Item 2.	Properties

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 an office located at 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. Farmer Mac's offices are suitable and adequate for its current and currently anticipated needs.


Item 3.	Legal Proceedings

None.


Item 4.	Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities

(a)Farmer Mac has three classes of common stock outstanding – Class A voting common stock, Class B voting common stock, and Class C non-voting common stock. Ownership of Class A voting common stock is restricted to banks, insurance companies, and other financial institutions or similar entities that are not institutions of the FCS. Ownership of Class B voting common stock is restricted to institutions of the

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FCS. There are no ownership restrictions on the Class C non-voting common stock. Under the terms of the original public offering of the Class A and Class B voting common stock, Farmer Mac reserved the right to redeem at book value any shares of either class held by an ineligible holder.

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.

As of March 1, 2016, there were 983 registered owners of the Class A voting common stock, 77 registered owners of the Class B voting common stock, and 919 registered owners of the Class C non-voting 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:



	Sales Prices
	Class A Stock				Class C Stock
	High		Low		High		Low
	(per share)
2016
First quarter (through March 1, 2016)	$	29.99	$	26.09	$	33.92	$	26.36
2015
Fourth quarter	$	27.04	$	24.75	$	32.77	$	25.67
Third quarter	27.98		25.50		29.48		22.41
Second quarter	29.20		23.43		33.01		29.06
First quarter	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

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 on March 31, 2016. 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

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expects to maintain a growing and sustainable common dividend and to target a common dividend payout ratio of its core earnings to common stockholders that is anticipated to grow over time to approximately 30 percent. However, the declaration and payment of future dividends to holders of Farmer Mac's common stock are at the discretion of Farmer Mac's board of directors and depend on many factors, including Farmer Mac's financial condition, actual results of operations and earnings, the capital needs of Farmer Mac's business, regulatory requirements, and other factors that Farmer Mac's board deems relevant. Farmer Mac's ability to pay dividends on its common stock is also subject to the payment of dividends on its outstanding preferred stock. Applicable FCA regulations require Farmer Mac to provide FCA with 15 days' advance notice of certain capital distributions. Farmer Mac's ability to declare and pay dividends could be restricted if it were to fail to comply with applicable capital requirements. 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" and "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and 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. 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 that was not registered under the Securities Act and not otherwise reported on a Current Report on Form 8-K:

•

On October 7, 2015, pursuant to Farmer Mac's policy that permits directors of Farmer Mac to elect to receive shares of Class C non-voting common stock in lieu of their cash retainers, Farmer Mac issued an aggregate of 140 shares of its Class C non-voting common stock to the three directors who elected to receive such stock in lieu of a portion of their cash retainers. The number of shares issued to the directors was calculated based on a price of $25.93 per share, which was the closing price of the Class C non-voting common stock on September 30, 2015, the last business day of the third quarter, as reported by the New York Stock Exchange.

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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 to December 31, 2015. The graph assumes that $100 was invested on December 31, 2010 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).


(b)	Not applicable.

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(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

⁽¹⁾

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 until September 7, 2017. Repurchases of Class C non-voting common stock will be made at management's discretion from time to time in the open market at prevailing market prices, through private transactions, or block trades, in each case subject to compliance with all SEC rules and other legal requirements, and may be made in part under one or more Rule 10b5-1 plans. The timing and amount of repurchases will depend on market conditions, share price, applicable legal requirements, and other factors.

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Item 6.	Selected Financial Data

The selected consolidated financial data presented below is summarized from Farmer Mac's consolidated balance sheet data as of December 31, 2015 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.



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


⁽¹⁾	On May 14, 2014, Farmer Mac purchased $6.0 million of FALConS from certain holders. 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 on that same day.


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


⁽³⁾	Calculated as net income attributable to common stockholders divided by the simple average of beginning and ending stockholders' equity, net of preferred stock, at redemption value and accumulated other comprehensive (loss)/income, net of tax.


⁽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.

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	For the Year Ended December 31,
Summary of Operations:	2015			2014			2013			2012			2011
	(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
Non-interest income:
Guarantee and commitment fees	14,077			14,694			15,627			14,330			15,426
Gains/(losses) on financial derivatives, hedging activities and trading assets	2,516			16,983			30,945			(19,522		)	(89,190		)
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
Lower of cost or fair value adjustment on loans held for sale	—			—			—			(5,943		)	8,887
Other income	2,305			1,714			3,057			3,341			6,850
Non-interest income/(loss)	18,906			33,290			54,440			(6,898		)	(56,784		)
Non-interest expense	35,482			31,492			33,107			30,908			28,659
Income before income taxes	108,078			73,106			131,267			91,116			44,647
Income tax expense	34,239			2,824			33,752			22,156			5,797
Net income	73,839			70,282			97,515			68,960			38,850
Less: Net income attributable to non-controlling interest	(5,139		)	(22,192		)	(22,187		)	(22,187		)	(22,187		)
Preferred stock dividends	(13,182		)	(9,839		)	(3,495		)	(2,879		)	(2,879		)
Loss on retirement of preferred stock	(8,147		)	—			—			—			—
Net income attributable to common stockholders	$	47,371		$	38,251		$	71,833		$	43,894		$	13,784
Allowance for Losses Activity:
Provision for /(release of) losses	$	208		$	(3,166	)	$	448		$	1,875		$	(2,347	)
Net charge-offs	3,772			41			4,004			2,501			252
Ending balance	6,563			10,127			13,334			16,890			17,516
Earnings Per Common Share and Dividends:
Basic earnings per common share	$	4.33		$	3.50		$	6.64		$	4.19		$	1.32
Diluted earnings per common share	4.19			3.37			6.41			3.98			1.28
Common stock dividends per common share	0.64			0.56			0.48			0.40			0.20


Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations

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. 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, 2015, 2014, and 2013.

Overview

Farmer Mac increased its outstanding business volume by $1.3 billion, or 9 percent, during 2015 to $15.9 billion as of December 31, 2015. 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 net loan growth of $417.8 million in the Farm & Ranch line of business. Farmer Mac also added a $300.0 million revolving floating rate AgVantage facility during 2015. Farmer Mac's net effective spread improved $5.7 million in 2015 compared to 2014. Credit quality remained stable for the year.

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On March 30, 2015, Farmer Mac completed the capital restructuring initiative that began during 2014 to enhance its Tier 1 capital position. Under this initiative, Farmer Mac issued an aggregate of $150 million of non-cumulative preferred stock during the first half of 2014 and used the proceeds of these preferred stock offerings and cash on hand to cause Farmer Mac II LLC to redeem all of the outstanding shares of Farmer Mac II LLC Preferred Stock on its first redemption date. The redemption of the Farmer Mac II LLC Preferred Stock on March 30, 2015 triggered the immediate redemption of all of the related outstanding Farm Asset Linked Capital Securities ("FALConS"), which were the trust securities owned by investors that represented interests in the Farmer Mac II LLC Preferred Stock. The preferred stock issued in 2014 qualifies as Tier 1 capital for Farmer Mac. The Farmer Mac II LLC Preferred Stock did not constitute a Tier 1 capital-eligible security for Farmer Mac and was scheduled to step up in dividend rate by 2.0 percent on March 30, 2015. Going forward, Farmer Mac expects to decrease its preferred stock dividend payments by $14.1 million after-tax annually, compared to previous years in which the Farmer Mac II LLC Preferred Stock and the related FALConS were outstanding.

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. As of December 31, 2015, Farmer Mac had repurchased approximately 362,000 shares of Class C non-voting common stock at a cost of approximately $10.5 million under the share repurchase program. Farmer Mac also increased the quarterly dividend on all three classes of its common stock by 63 percent from $0.16 per share in each quarter of 2015 to $0.26 per share beginning in first quarter 2016. This represents the fifth 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 its capital restructuring initiative in first quarter 2015. The effects of both of these initiatives are explained in the comparisons of financial results between 2015, 2014, and 2013. 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.

Net Income and Core Earnings

Farmer Mac's net income attributable to common stockholders for 2015 was $47.4 million, compared to $38.3 million and $71.8 million, respectively, for 2014 and 2013. The increase in 2015 from 2014 and decrease in 2014 from 2013 were primarily attributable 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 million after-tax gain in 2013. For more information about changes in net income attributable to common stockholders, see "—Results of Operations."

Farmer Mac's non-GAAP core earnings for 2015 were $47.0 million, compared to $53.0 million in 2014 and $54.9 million in 2013.

The $6.0 million decrease in core earnings in 2015 compared to 2014 was primarily attributable to: (1) the absence in 2015 of the net 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, and (2) the loss of $5.6 million after-tax in preferred dividend income resulting from the fourth quarter 2014 redemption of $78.5 million of high-yielding preferred stock previously held in Farmer Mac's investment portfolio. Also contributing to the

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decrease was a $2.6 million after-tax increase in operating expenses primarily due to higher compensation costs resulting from the consolidation of Contour Valuation Services, LLC (Farmer Mac's appraisal subsidiary) and higher legal fees, consulting fees, and information services expenses related to corporate strategic initiatives. Credit-related expenses increased $2.3 million after-tax primarily due to provisions for losses in 2015 compared to releases from the allowance for losses in 2014. The decrease in core earnings in 2015 compared to 2014 was offset in part by: (1) a $7.7 million after-tax increase in net effective spread resulting from net growth in outstanding business volume, excluding the effect of the October 1, 2014 redemption of Farmer Mac's investment in $78.5 million of high-yielding preferred stock, and (2) a $7.6 million after-tax decrease in preferred dividend expense resulting from the redemption of all outstanding shares of Farmer Mac II LLC Preferred Stock in first quarter 2015.

The $1.9 million decrease in core earnings in 2014 compared to 2013 was primarily attributable to the effects 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. Also contributing to the decrease was a $1.9 million after-tax decrease in net effective spread resulting from the redemption 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 due to increases in compensation expense and other costs related to corporate strategic initiatives. The decrease in core earnings was offset in part by the $11.4 million net economic benefit resulting from the cash management and liquidity initiative and a $1.8 million after-tax reduction in credit-related expenses due to releases from the allowance for losses in 2014.

Fair value changes on derivatives do not affect core earnings. For more information about the composition of core earnings, see "—Results of Operations."

Net Effective Spread

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

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) 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.

For 2014 compared to 2013, the contraction in net effective spread was 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 portfolio (2 basis points). Also contributing to the decrease was a $2.2 million decrease in interest income received from non-accruing Farm & Ranch loans.

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Business Volume

Farmer Mac added $3.2 billion of new business volume during 2015. The new business volume included purchases of $748.4 million of newly originated Farm & Ranch loans, purchases of $743.2 million of AgVantage securities, Rural Utilities loans added under LTSPCs of $522.3 million, Farm & Ranch loans added under LTSPCs of $427.8 million, purchases of $363.6 million of USDA Securities, the addition of a $300.0 million revolving floating rate AgVantage facility, Rural Utilities loan purchases of $108.3 million, and purchases of $13.3 million of Farmer Mac Guaranteed USDA Securities. Taking into account maturities and paydowns on existing assets, Farmer Mac's outstanding business volume was $15.9 billion as of December 31, 2015, an increase of $1.3 billion from December 31, 2014.

Capital

As of December 31, 2015, Farmer Mac's core capital level was $564.5 million, $102.4 million above the minimum capital level required by Farmer Mac's statutory charter. As of December 31, 2014, Farmer Mac's core capital level was $766.3 million, which was $345.0 million above the minimum capital requirement. The decrease in capital in excess of the minimum capital level was due primarily to the redemption of the Farmer Mac II LLC Preferred Stock in first quarter 2015.

Credit Quality

Farmer Mac continued to maintain favorable credit quality, as substandard assets and the total allowance for losses in terms of both dollars and percentage of the Farm & Ranch portfolio decreased from their respective levels in 2014. During 2015, Farmer Mac reduced its total allowance for losses by $3.6 million, primarily attributable to the charge-off of the specific allowance in the amount of $3.7 million for two Agricultural Storage and Processing loans that financed one canola facility. As of December 31, 2015, Farmer Mac's 90-day delinquencies were $32.1 million (0.56 percent of the Farm & Ranch portfolio), compared to $18.9 million (0.35 of the Farm & Ranch portfolio) as of December 31, 2014. The primary cause of the increase in 90-day delinquencies during 2015 was the delinquency of those two Agricultural Storage and Processing loans. Although those two loans were outstanding and delinquent at December 31, 2015, Farmer Mac collected funds in the amount of $9.8 million to pay them off in January 2016. For more information about Farmer Mac's credit metrics, including 90-day delinquencies, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk – Loans and Guarantees."

Critical Accounting Policies and Estimates

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.

Allowance for Losses

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-

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balance sheet Farmer Mac Guaranteed Securities and LTSPCs ("reserve for losses") based on available information. For purposes of this accounting policy, the allowance for loan losses and the reserve for losses are described collectively as the "allowance for losses" because the estimation methodology is identical for loans that are held for investment and for loans that underlie off-balance sheet Farmer Mac Guaranteed Securities and LTSPCs. Disaggregation by commodity type is performed, where appropriate, in analyzing the need for an allowance for losses.

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.

General Allowance for Losses

Farm & Ranch

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:


•	economic conditions;


•	geographic and agricultural commodity/product concentrations in the portfolio;


•	the credit profile of the portfolio;


•	delinquency trends of the portfolio;


•	historical charge-off and recovery activities of the portfolio; and


•	other factors to capture current portfolio trends and characteristics that differ from historical experience.

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.

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Rural Utilities

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.

Specific Allowance for Impaired Loans

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.

Farmer Mac uses a risk-based approach in determining the necessity of obtaining updated appraisals on impaired loans. For example, larger exposures associated with highly improved and specialized collateral will generally receive updated appraisals once the loans are identified as impaired. In addition, updated appraisals are always obtained during the foreclosure process. Depending on the risk factors associated with the loan and underlying collateral, which can vary widely depending on the circumstances of the loan and collateral, this can occur early in the foreclosure process, while in other instances this may occur just prior to the transfer of title. As part of its routine credit review process, Farmer Mac often will exercise judgment in discounting an appraised value due to local real estate trends or the condition of the property (e.g., following an inspection by Farmer Mac or the servicer). In addition, a property's appraised value may be discounted based on the market's reaction to Farmer Mac's asking price for sale of the property.

Further information regarding the allowance for losses is included in "—Risk Management—Credit Risk – Loans and Guarantees" and Note 2(j) to the consolidated financial statements.

Fair Value Measurement

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.

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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:


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.

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

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Results of Operations

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

Farmer Mac uses core earnings to measure corporate economic performance and develop financial plans because, in management's view, core earnings is a useful alternative measure in understanding Farmer Mac's economic performance, transaction economics, and business trends. Core earnings principally differs from net income attributable to common stockholders by excluding the effects of fair value fluctuations, which are not expected to have a cumulative net impact on financial condition or results of operations reported in accordance with GAAP if the related financial instruments are held to maturity, as is generally expected. Core earnings also differs from net income attributable to common stockholders 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. Accordingly, the loss from retirement of the Farmer Mac II LLC Preferred Stock in first quarter 2015 has been excluded from core earnings 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. The inclusion of the effects of the cash management and liquidity initiative in core earnings is consistent with the inclusion in core earnings of the investment portfolio losses recognized in 2008 and 2009 that generated the capital loss carryforwards related to the tax benefits recognized in 2014. However, the interest expense, realized gains, and tax benefits for 2014 related to the cash management and liquidity initiative are not expected to significantly affect Farmer Mac's earnings beyond 2014.

The non-GAAP financial measure of core earnings used by Farmer Mac may not be comparable to similarly labeled non-GAAP financial measures disclosed by other companies. Farmer Mac's disclosure of this non-GAAP measure is intended to be supplemental in nature, and is not meant to be considered in isolation from, as a substitute for, or as more important than, the related financial information prepared in accordance with GAAP.

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A reconciliation of Farmer Mac's net income attributable to common stockholders to core earnings is presented in the following table along with a breakdown of the composition of core earnings:

Table 1



Reconciliation of Net Income Attributable to Common Stockholders to Core Earnings
	For the Year Ended December 31,
	2015			2014			2013
	(in thousands, except per share amounts)
Net income attributable to common stockholders	$	47,371		$	38,251		$	71,833
Less the after-tax effects of:
Unrealized gains/(losses) on financial derivatives and hedging activities	7,101			(6,480		)	29,368
Unrealized gains/(losses) on trading assets ⁽¹⁾	793			1,038			(533		)
Amortization of premiums/discounts and deferred gains on assets consolidated at fair value⁽²⁾	(857		)	(9,457		)	(12,467		)
Net effects of settlements on agency forward contracts	(395		)	103			573
Loss on retirement of Farmer Mac II LLC Preferred Stock⁽³⁾	(6,246		)	—			—
Sub-total	396			(14,796		)	16,941
Core earnings	$	46,975		$	53,047		$	54,892

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

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

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

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

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


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


⁽²⁾	Includes $7.5 million and $10.3 million related to the acceleration of premium amortization in 2014 and 2013, respectively, due to significant refinancing activity in the Rural Utilities line of business.


⁽³⁾	Relates to the write-off of deferred issuance costs as a result of the retirement of Farmer Mac II LLC Preferred Stock.

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⁽⁴⁾

Includes reconciling adjustments to exclude amortization of premiums and discounts on assets consolidated at fair value to reflect core earnings amounts. Also includes reconciling adjustments to include the reclassification of expenses related to interest rate swaps not designated as hedges and reclassification of interest expense related to securities purchased under agreements to resell and securities sold, not yet purchased.


⁽⁵⁾	Includes interest income and interest expense related to consolidated trusts owned by third parties reclassified from interest income and interest expense to guarantee and commitment fees to reflect that the net interest income Farmer Mac earns is effectively a guarantee fee on the consolidated Farmer Mac Guaranteed Securities.

⁽⁶⁾

Includes interest income and interest expense related to securities purchased under agreements to resell and securities sold, not yet purchased. Also reflects reconciling adjustments for the reclassification to exclude expenses related to interest rate swaps not designated as hedges and fair value adjustments on financial derivatives and trading assets and a reconciling adjustment to exclude the recognition of deferred gains over the estimated lives of certain Farmer Mac Guaranteed Securities and USDA Securities. Includes $39.4 million of interest expense related to securities purchased under agreements to resell and securities sold, not yet purchased and $37.0 million of realized gains on securities sold, not yet purchased during 2014. Includes $3.1 million of realized gains from the sale of an available-for-sale investment security during 2013.

⁽⁷⁾

Includes the tax impact of non-GAAP reconciling items between net income attributable to common stockholders and core earnings because those non-GAAP reconciling items are presented after tax. Income tax expense as reported in the consolidated statements of operations includes the reduction of $13.0 million tax valuation allowance against capital loss carryforwards related to capital gains on securities sold, not yet purchased during 2014, a reduction in tax valuation allowance of $0.9 million and $2.1 million associated with certain gains on investment portfolio assets during 2014 and 2013, respectively, and the reduction of $1.1 million of tax valuation allowance against capital loss carryforwards related to realized gains from the sale of an available-for-sale investment security during 2013.

Specifically, 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) on financial derivatives and hedging activities, after tax.

Table 2



Non-GAAP Reconciling Item for Unrealized Gains/(Losses) on Financial Derivatives and Hedging Activities, After Tax
	For the Year Ended December 31,
	2015			2014			2013
	(in thousands)
Fair value hedges:
Gains on fair value hedges (see Table 8)	$	9,065		$	11,791		$	11,308
No hedge designation:
Unrealized gains/(losses) due to fair value changes (see Table 8)	1,859			(21,760		)	33,873
Unrealized gains/(losses) on financial derivatives and hedging activities, before tax	10,924			(9,969		)	45,181
Income tax impact at 35% statutory corporate income tax rate	(3,823		)	3,489			(15,813		)
Unrealized gains/(losses) on financial derivatives and hedging activities, after tax	$	7,101		$	(6,480	)	$	29,368

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2. Gains/(losses) on trading assets. The table below calculates the non-GAAP reconciling item for gains/(losses) on trading assets, after tax.

Table 3



Non-GAAP Reconciling Item for Unrealized Gains/(Losses) on Trading Assets, After Tax
	For the Year Ended December 31,
	2015			2014			2013
	(in thousands)
Gains/(losses) on trading securities (see Consolidated Statements of Operations)	$	1,220		$	38,629		$	(819	)
Less:
Realized gains related to securities sold, not yet purchased (see "MD&A - Results of Operations - Gains and Losses on Trading Securities")	—			(37,032		)	—
Unrealized gains/(losses) on trading assets, before tax	1,220			1,597			(819		)
Income tax impact at 35% statutory corporate income tax rate	(427		)	(559		)	286
Unrealized gains/(losses) on trading assets, after tax	$	793		$	1,038		$	(533	)

3. Amortization of premiums/discounts and deferred gains on assets consolidated at fair value. The amount of this non-GAAP reconciling item is the recorded amount of premium, discount, or deferred gain amortization during the reporting period on those assets for which the premium, discount or deferred gain was based on the application of an accounting principle (e.g., consolidation of variable interest entities) rather than on a cash transaction (e.g., a purchase price premium or discount).

4. The net effect of settlements on agency forward contracts that are used as a short-term economic hedge of the issuance of debt. For GAAP purposes, realized gains or losses on settlements of agency forward contracts used as a short-term hedge of the issuance of debt are reported in the consolidated statements of operations in the period in which they occur. For core earnings purposes, these realized gains or losses on settlements of agency forward contracts are deferred and amortized as yield adjustments over the term of the related debt, which generally ranges from 3 to 15 years.

5. The loss on retirement of the Farmer Mac II LLC Preferred Stock in first quarter 2015 has been excluded from core earnings 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.

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

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Net Interest Income.

The following table provides information regarding interest-earning assets and funding for the years ended December 31, 2015, 2014, and 2013. The average balance of non-accruing loans is included in the average balance of loans, Farmer Mac Guaranteed Securities, and USDA Securities presented, though the related income is accounted for on a cash basis. Therefore, as the average balance of non-accruing loans and the income received increases or decreases, the net interest yield will fluctuate accordingly. The average balance of loans in consolidated trusts with beneficial interests owned by third parties is disclosed in the net effect of consolidated trusts and is not included in the average balances of interest-earning assets and interest-bearing liabilities. The interest income and expense associated with these trusts are shown in the net effect of consolidated trusts.

Table 4



	For the Year Ended
	December 31, 2015						December 31, 2014						December 31, 2013
	Average Balance		Income/ Expense		Average Rate		Average Balance		Income/ Expense		Average Rate		Average Balance		Income/ Expense		Average Rate
	(dollars in thousands)
Interest-earning assets:
Cash and investments⁽¹⁾	$	3,310,948	$	13,338	0.40	%	$	3,659,527	$	17,269	0.47	%	$	2,897,795	$	21,940	0.76	%
Loans, Farmer Mac Guaranteed Securities and USDA Securities⁽²⁾⁽³⁾	10,453,343		231,342		2.21	%	9,729,840		209,860		2.16	%	9,302,145		216,887		2.33	%
Total interest-earning assets	13,764,291		244,680		1.78	%	13,389,367		227,129		1.70	%	12,199,940		238,827		1.96	%
Funding:
Notes payable due within one year	6,013,079		13,472		0.22	%	4,592,329		6,995		0.15	%	4,532,662		7,939		0.18	%
Notes payable due after one year⁽⁴⁾	7,235,869		108,479		1.50	%	7,230,908		112,866		1.56	%	7,140,897		122,399		1.71	%
Other interest-bearing liabilities⁽⁵⁾	—		—		—	%	909,261		39,007		4.29	%	—		—		—	%
Total interest-bearing liabilities⁽⁶⁾	13,248,948		121,951		0.92	%	12,732,498		158,868		1.25	%	11,673,559		130,338		1.12	%
Net non-interest-bearing funding	515,344		—				656,869		—				526,381		—
Total funding	13,764,292		121,951		0.89	%	13,389,367		158,868		1.19	%	12,199,940		130,338		1.07	%
Net interest income/yield prior to consolidation of certain trusts	13,764,292		122,729		0.89	%	13,389,367		68,261		0.51	%	12,199,940		108,489		0.89	%
Net effect of consolidated trusts⁽⁷⁾	546,022		3,078		0.56	%	358,017		2,086		0.58	%	167,227		964		0.58	%
Adjusted net interest income/yield	$	14,310,314	$	125,807	0.88	%	$	13,747,384	$	70,347	0.51	%	$	12,367,167	$	109,453	0.89	%


⁽¹⁾	Average balance in 2014 includes $906.4 million of securities purchased under agreements to resell. Includes $0.4 million of interest expense related to securities purchased under agreements to resell in 2014.


⁽²⁾	Includes $11.6 million and $15.9 million related to the acceleration of premium amortization in first quarter 2014 and fourth quarter 2013 due to refinancing activity in the Rural Utilities line of business.


⁽³⁾	Excludes interest income of $20.1 million, $13.9 million, and $7.9 million in 2015, 2014, and 2013, respectively, related to consolidated trusts with beneficial interests owned by third parties.


⁽⁴⁾	Includes current portion of long-term notes.


⁽⁵⁾	Represents securities sold, not yet purchased.


⁽⁶⁾	Excludes interest expense of $17.1 million, $11.8 million, and $6.9 million in 2015, 2014, and 2013, respectively, related to consolidated trusts with beneficial interests owned by third parties.


⁽⁷⁾	Includes the effect of consolidated trusts with beneficial interests owned by third parties.

Net interest income was $125.8 million for 2015 compared to $70.3 million for 2014 and $109.5 million for 2013. The overall net interest yield was 88 basis points for 2015, compared to 51 basis points for 2014 and 89 basis points for 2013.

The 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

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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 AgVantage securities. The increase in net interest income was partially offset by the loss of $6.5 million in preferred dividend income due to the October 2014 redemption of high-yielding preferred stock previously held in Farmer Mac's investment portfolio.

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.

The following table sets forth information regarding changes in the components of Farmer Mac's net interest income for the periods indicated. For each category, information is provided on changes attributable to changes in volume (change in volume multiplied by old rate) and changes in rate (change in rate multiplied by old volume). Combined rate/volume variances, the third element of the calculation, are allocated based on their relative size.

Table 5



	2015 vs 2014									2014 vs 2013
	Increase/(Decrease) Due to									Increase/(Decrease) Due to
	Rate			Volume			Total			Rate			Volume		Total
	(in thousands)
Income from interest-earning assets:
Cash and investments⁽¹⁾	$	(2,381	)	$	(1,550	)	$	(3,931	)	$	(9,544	)	$	4,873	$	(4,671	)
Loans, Farmer Mac Guaranteed Securities and USDA Securities⁽²⁾	5,576			15,906			21,482			(16,716		)	9,689		(7,027		)
Total	3,195			14,356			17,551			(26,260		)	14,562		(11,698		)
Expense from other interest-bearing liabilities⁽³⁾	(43,136		)	6,219			(36,917		)	16,101			12,429		28,530
Change in net interest income prior to consolidation of certain trusts⁽⁴⁾	$	46,331		$	8,137		$	54,468		$	(42,361	)	$	2,133	$	(40,228	)


⁽¹⁾	Includes $0.4 million of interest expense and an average balance of $906.4 million related to securities purchased under agreements to resell in 2014.


⁽²⁾	Includes $11.6 million and $15.9 million related to the acceleration of premium amortization in first quarter 2014 and fourth quarter 2013, respectively, due to refinancing activity in the Rural Utilities line of business.


⁽³⁾	Includes $39.0 million of interest expense and average balance of $909.3 million related to securities sold, not yet purchased in 2014.


⁽⁴⁾	Excludes the effect of debt in consolidated trusts with beneficial interests owned by third parties.

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

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did not have an effect during 2015 as they did in 2014. The increase in income due to changes in rate on loans, Farmer Mac Guaranteed Securities, and USDA Securities was due to the acceleration of amortization of premiums associated with certain Rural Utilities loans that occurred in 2014 but not in 2015, partially offset by the decline in market rates as reflected in the rates on loans and AgVantage securities acquired, reset, or refinanced during 2014 and 2015. The decrease in expense due to changes in rate reflects the retirement of older debt and the issuance of new debt at lower market rates and the effects of interest expense associated with high coupon U.S. Treasury securities sold, but not yet purchased, entered into beginning in second quarter 2014 as part of Farmer Mac's cash management and liquidity initiative. Farmer Mac closed these positions in fourth quarter 2014, so they did not have an effect during 2015 as they did in 2014. The decrease in income earned from cash and investments due to changes in volume was the result of a decline in the average balance of these assets. The increases in income from other interest-earning assets and in expense from other interest-bearing liabilities due to changes in volume reflect the increase in the average balance of on-balance sheet assets and the related funding for those assets, respectively.

For 2014 compared to 2013, the decreases in income due to changes in rate reflect positions in securities purchased under agreements to resell with a slightly negative rate of return, the reset of variable rate investments and adjustable rate mortgages to lower rates, the acceleration of premium amortization in first quarter 2014 and fourth quarter 2013 due to significant refinancing activity in the Rural Utilities line of business, and the acquisition of new lower-yielding investments, loans, Farmer Mac Guaranteed Securities, and USDA Securities. The increase in expense due to changes in rate reflects the interest expense associated with high coupon U.S. Treasury securities sold, but not yet purchased, partially offset by decreased cost of funding due to lower interest rates in the debt markets. The increases due to changes in volume reflect the increase in on-balance sheet assets during 2014 compared to 2013 and the related funding for those assets, respectively.

Net interest yield includes the amortization of premiums and discounts on assets consolidated at fair value and excludes the accrual of income and expense related to the contractual amounts due on financial derivatives that are not designated in hedge accounting relationships. The following paragraphs describe the effects of these items on the net interest yield and the table below presents them as adjustments to reconcile to the net effective spread Farmer Mac earns on the difference between its interest-earning assets and its net funding costs, including payments for income and expense related to derivative financial instruments that are not designated as hedging instruments in a hedge accounting relationship ("undesignated financial derivatives").

Farmer Mac uses interest rate swaps to manage its interest rate risk exposure by synthetically modifying the interest rate reset or maturity characteristics of certain assets and liabilities. The accrual of the contractual amounts due on interest rate swaps designated in hedge accounting relationships is included as an adjustment to the yield or cost of the hedged item and is included in net interest income. For interest rate swaps not designated in hedge accounting relationships, Farmer Mac records the income or expense related to the accrual of the contractual amounts due in "Gains/(losses) on financial derivatives and hedging activities" on the consolidated statements of operations. However, Farmer Mac does include the accrual of the contractual amounts due for undesignated financial derivatives in its calculation of net effective spread, which is intended to reflect the net spread between the asset and all of its related funding, including any associated derivatives, whether or not they are in a hedge accounting relationship.

Farmer Mac's net interest income and net interest yield include net yield adjustments related to the amortization of premiums and discounts on assets consolidated at fair value. These premiums and

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discounts are amortized as adjustments to yield in interest income over the contractual or estimated remaining lives of the underlying assets. Farmer Mac excludes these amounts from net effective spread because they either do not reflect actual cash premiums paid for the assets at acquisition or are not expected to have an economic effect on Farmer Mac's financial performance if the assets are held to maturity, as is generally expected. Farmer Mac also excluded from net effective spread the amount of interest expense included in net interest income that was incurred during 2014 related to securities purchased under agreements to resell and securities sold, not yet purchased because the associated benefits from these securities were not similarly recorded in net interest income, but rather were recorded as income tax benefits. Because Farmer Mac's positions in these securities were closed during fourth quarter 2014, adjustments to net interest income for interest expense related to these securities were not necessary for 2015.

The following table presents the net effective spread between Farmer Mac's interest-earning assets and its net funding costs. This spread is measured by including income or expense related to undesignated financial derivatives (the income or expense related to financial derivatives designated in hedge accounting relationships is already included in net interest income) and excluding the amortization of premiums and discounts on assets consolidated at fair value and the interest expense related to securities purchased under agreements to resell and securities sold, not yet purchased.

Table 6



	For the Year Ended December 31,
	2015					2014					2013
	Dollars			Yield		Dollars			Yield		Dollar			Yield
	(dollars in thousands)
Net interest income/yield prior to consolidation of certain trusts⁽¹⁾⁽²⁾	$	122,729		0.89	%	$	68,261		0.54	%	$	108,489		0.89	%
Expense related to undesignated financial derivatives	(5,649		)	(0.04	)%	(9,425		)	(0.07	)%	(12,325		)	(0.10	)%
Amortization of premiums on assets consolidated at fair value⁽²⁾	2,300			0.02	%	15,482			0.12	%	20,418			0.17	%
Interest expense related to securities purchased under agreements to resell and securities sold, not yet purchased	—			—	%	39,375			0.32	%	—			—	%
Net effective spread	$	119,380		0.87	%	$	113,693		0.91	%	$	116,582		0.96	%


⁽¹⁾	For 2014, net interest yield is adjusted to remove the average balance of $0.9 billion related to securities purchased under agreements to resell.


⁽²⁾	Includes $11.6 million and $15.9 million related to the acceleration of premium amortization in first quarter 2014 and fourth quarter 2013 due to refinancing activity in the Rural Utilities line of business.

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) 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

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portfolio (2 basis points). Also contributing to the decrease was a $2.2 million decrease in interest income received from non-accruing Farm & Ranch loans (2 basis points).

See Note 14 to the consolidated financial statements for more information regarding net effective spread from Farmer Mac's individual business segments. Additionally, see "—Supplemental Information" for quarterly net effective spread by line of business.

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

The following table summarizes the components of Farmer Mac's total allowance for losses for each year in the three-year period ended December 31, 2015:

Table 7



	Allowance for Loan Losses			Reserve for Losses			Total Allowance for Losses
	(in thousands)
Balance as of January 1, 2013	$	11,351		$	5,539		$	16,890
(Release of)/provision for losses	(481		)	929			448
Charge-offs	(4,004		)	—			(4,004		)
Balance as of December 31, 2013	6,866			6,468			13,334
Release of losses	(961		)	(2,205		)	(3,166		)
Charge-offs	(86		)	—			(86		)
Recoveries	45			—			45
Balance as of December 31, 2014	5,864			4,263			10,127
Provision for/(release of) losses	2,388			(2,180		)	208
Charge-offs	(3,772		)	—			(3,772		)
Balance as of December 31, 2015	$	4,480		$	2,083		$	6,563

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 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 releases from the general allowance 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

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investment and loans underlying LTSPCs, as well as a general improvement in the quality of the ethanol loans remaining in the portfolio.

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.

As of December 31, 2015 and December 31, 2014, Farmer Mac's allowance for loan losses was $4.5 million compared to $5.9 million as of December 31, 2014. As of December 31, 2015, Farmer Mac's reserve for losses was $2.1 million compared to $4.3 million as of December 31, 2014. See Note 8 to the consolidated financial statements and "—Risk Management—Credit Risk – Loans and Guarantees."

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 million for 2015, compared to $14.7 million and $15.6 million, respectively, for 2014 and 2013. The decrease in guarantee and commitment fees was primarily attributable to a lower average balance outstanding for off-balance sheet Farm & Ranch Guaranteed Securities and LTSPCs, offset in part by the addition of $522.3 million of Rural Utilities 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.

Gains and 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 $2.5 million for 2015, compared to net losses of $21.6 million for 2014 and net gains of $31.8 million for 2013.

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

Table 8



	For the Year Ended December 31,
	2015			2014			2013
	(in thousands)
Fair value hedges:
Unrealized gains/(losses) due to fair value changes:
Financial derivatives⁽¹⁾	$	5,965		$	(2,729	)	$	29,538
Hedged items	3,100			14,520			(18,230		)
Gains on fair value hedging activities	9,065			11,791			11,308
Cash flow hedges:
Loss recognized (ineffective portion)	(551		)	(10		)	(39		)
Losses on cash flow hedges	(551		)	(10		)	(39		)
No hedge designation:
Unrealized gains/(losses) due to fair value changes	1,859			(21,760		)	33,873
Realized:
Expense related to financial derivatives	(5,098		)	(9,415		)	(12,286		)
Losses due to terminations or net settlements	(2,744		)	(2,252		)	(1,092		)
(Losses)/gains on financial derivatives not designated in hedging relationships	(5,983		)	(33,427		)	20,495
Gains/(losses) on financial derivatives and hedging activities	$	2,531		$	(21,646	)	$	31,764

⁽¹⁾

Included in the assessment of hedge effectiveness as of December 31, 2015, but excluded from the amounts in the table, were losses of $9.2 million, for the year ended December 31, 2015, attributable to the fair value of the swaps at the inception of the hedging relationship. Accordingly, the amounts recognized as hedge ineffectiveness for the year ended December 31, 2015 were gains of $0.1 million. The comparable amounts as of December 31, 2014 were losses of $11.6 million for the year ended December 31, 2014, attributable to the fair value of the swaps at the inception of the hedging relationship and, accordingly, losses of $0.2 million for the year ended December 31, 2014, attributable to hedge ineffectiveness. The comparable amounts as of December 31, 2013 were losses of $11.8 million for the year ended December 31, 2013, attributable to the fair value of the swaps at the inception of the hedging relationships and, accordingly, gains of $0.5 million for the year ended December 2013, attributable to hedge ineffectiveness.

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, 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) due to fair value changes. 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, Farmer Mac recorded unrealized gains on trading securities of $1.2 million, compared to realized and unrealized gains of $38.6 million during 2014 and unrealized losses of $0.8 million during 2013. During 2015, $0.8 million of gains 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 $1.2 million during 2014 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.

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Gains and Losses on Sale of Available-for-Sale Investment Securities. During 2015, Farmer Mac realized net gains of $9,000, compared to realized net losses of $0.2 million and realized net gains of $2.1 million, respectively, for 2014 and 2013. The realized net gains recognized during 2015 were from sales of securities from the available-for-sale investment portfolio which were partially offset by $0.1 million of other-than-temporary impairment losses on two available-for-sale auction rate certificates. As of December 31, 2015, Farmer Mac intends to sell the securities in 2016 at a price of 99.63 percent of par pursuant to a forward sales agreement. The net losses in 2014 related to sales of two auction-rate certificates at a price of 97 percent of par, resulting in realized losses of $0.8 million, which were partially offset by realized gains from sales of other securities from the available-for-sale investment portfolio. The gains in 2013 were primarily due to the sale of a mortgage-backed security from the available-for-sale investment portfolio, which resulted in a $3.1 million gain.

Gains on the Repurchase of Debt. No debt repurchases were made in 2015 or 2014. During 2013, Farmer Mac repurchased $29.1 million of outstanding debt at a gain of $1.5 million.

Gains and Losses on Sale of Real Estate Owned. During 2015, 2014, and 2013, Farmer Mac realized losses of $1,000 and gains of $0.1 million and $1.2 million, respectively, from the sales of real estate owned.

Other Income. Other income totaled $2.3 million during 2015, compared to $1.7 million and $3.1 million, respectively, for 2014 and 2013. Other income during 2015 included the recognition of $0.6 million of appraisal fees received by Farmer Mac's consolidated appraisal company subsidiary, Contour Valuation Services, LLC, 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 2015, 2014, and 2013 also included the recognition of $1.0 million, $0.9 million, and $1.2 million, respectively, of 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 $22.0 million in 2015, compared to $19.0 million and $17.8 million, respectively, in 2014 and 2013. 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 2015 and 2014 also included $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.

General and Administrative Expenses. General and administrative expenses, including legal, audit, and consulting fees, were $13.1 million for 2015 compared to $12.2 million and $11.6 million, respectively, for 2014 and 2013. The increase in general and administrative expenses in 2015 compared to 2014 was

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due primarily to legal fees incurred for the preparation of comment letters in response to FCA's proposed rule on Farmer Mac's board governance and standards of conduct and higher legal and consulting fees and information services expenses related to corporate strategic initiatives. Additionally, general and administrative costs for 2015 and 2014 included $0.5 million and $0.1 million, respectively, in operating expenses for Farmer Mac's consolidated appraisal company subsidiary. The increase in general and administrative expenses in 2014 compared to 2013 were primarily attributable to fees related to Farmer Mac's cash management and liquidity initiative and other corporate strategic initiatives.

Regulatory Fees. Regulatory fees (which consist of the fees paid to FCA) were $2.4 million for 2015, 2014, and 2013. FCA has advised Farmer Mac that its estimated fees for the federal fiscal year ending September 30, 2016 will remain at the same level ($0.6 million per federal fiscal quarter) as 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 million in 2015, compared to income tax expense of $2.8 million and $33.8 million, respectively, for 2014 and 2013. 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 the primary reasons for why 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.

Farmer Mac carried a valuation allowance of $2.1 million as of December 31, 2015 and 2014. During 2014, Farmer Mac reduced its deferred tax valuation allowance by $13.5 million upon utilizing capital loss carryforwards, primarily from the recognition of capital gains on securities sold, not yet purchased. In addition, $0.1 million and $63.7 million of capital loss carryforwards expired on December 31, 2015 and 2014, respectively, and Farmer Mac removed $39,000 and $22.3 million, respectively, of corresponding deferred tax assets and the related deferred tax asset valuation allowance. The remaining valuation allowance related to capital loss carryforwards will expire on December 31, 2016. For more information about income taxes, see Note 10 to the consolidated financial statements.

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 on that same day. As a result, Farmer Mac recognized an expense 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.

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


•	purchased $748.4 million of newly originated Farm & Ranch loans;


•	purchased $743.2 million of AgVantage securities;


•	added $522.3 million of Rural Utilities loans under LTSPCs;


•	added $427.8 million of Farm & Ranch loans under LTSPCs;


•	purchased $363.6 million of USDA Securities;


•	added a $300.0 million revolving floating rate AgVantage facility;


•	purchased $108.3 million of Rural Utilities loans; and


•	purchased $13.3 million of Farmer Mac Guaranteed USDA Securities.

Of the new business volume in AgVantage securities for 2015, $99.1 million was purchased under Farm Equity AgVantage facilities with agricultural real estate investment funds compared to $95.0 million for 2014.

Farmer Mac's outstanding business volume was $15.9 billion as of December 31, 2015, an increase of $1.3 billion from December 31, 2014. The increase in Farmer Mac's outstanding business volume was driven by the addition of $522.3 million of Rural Utilities loans under LTSPCs, as well as broad-based portfolio growth across most of Farmer Mac's other products, including AgVantage securities, Farm & Ranch loans, and USDA Securities. The large LTSPC transaction completed in 2015 was the first time Farmer Mac has provided LTSPCs under its Rural Utilities line of business. Of the new business volume in AgVantage securities for 2015, a $300.0 million revolving floating rate AgVantage facility with the National Rural Utilities Cooperative Finance Corporation ("CFC") was added as an off-balance commitment because CFC had not drawn on the facility as of December 31, 2015. Farmer Mac receives a fixed fee based on the full dollar amount of the facility. If CFC draws on this facility, the amounts drawn will be presented as on-balance sheet AgVantage securities, and Farmer Mac will earn interest income on the drawn balance.

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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:

Table 9



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 for loans within the Farm & Ranch line of business for 2015 was ahead of 2014 and reflected a modest increase in loan demand. Prepayment rates remained subdued and contributed to favorable trends in net loan growth. New business volume for LTSPCs within the Farm & Ranch line of business for 2015 compared to 2014 reflected slightly increased demand for pools of loans under LTSPCs by Farm Credit System institutions. The increase in new business volume in the USDA Guarantees line of business for 2015 compared to 2014 reflected an increase in lender usage of USDA guaranteed loan programs and 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 remained low due to modest 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. 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.

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 and 2014 was less than one year. Of those loans, 61 percent and 59 percent, respectively, had

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principal amortization periods longer than the maturity date, resulting in balloon payments at maturity, with a weighted-average remaining term to maturity of 16.6 years and 15.4 years, respectively.

During 2015, 2014, and 2013, Farmer Mac securitized some of the Farm & Ranch loans it had purchased and sold the resulting Farmer Mac Guaranteed Securities in the amounts of $336.9 million, $175.8 million, and $150.4 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 2015, 2014, and 2013, $255.3 million, $147.2 million, and $120.4 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:

Table 10



	For the Year ended December 31,
	2015		2014		2013
	(in thousands)
Loans securitized and sold as Farm & Ranch Guaranteed Securities	$	336,913	$	175,754	$	150,417
AgVantage Securities	743,158		1,279,655		1,273,500
Total Farmer Mac Guaranteed Securities issuances	$	1,080,071	$	1,455,409	$	1,423,917

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

Table 11



Lines of Business - Outstanding Business Volume
	As of December 31,
	2015		2014		2013
	(in thousands)
Farm & Ranch:
Loans	$	2,249,864	$	2,118,867	$	1,875,958
Loans held in trusts:
Beneficial interests owned by third party investors	708,111		421,355		259,509
LTSPCs	2,253,273		2,240,866		2,261,862
Guaranteed Securities	514,051		636,086		765,751
USDA Guarantees:
USDA Securities	1,876,451		1,756,224		1,645,806
Farmer Mac Guaranteed USDA Securities	41,826		41,810		41,311
Rural Utilities:
Loans⁽¹⁾	1,008,126		718,213		698,010
Loans held in trusts:
Beneficial interests owned by Farmer Mac⁽¹⁾	—		267,396		354,241
LTSPCs⁽²⁾	522,864		—		—
Institutional Credit:
AgVantage Securities	6,424,254		6,396,941		6,047,864
Revolving floating rate AgVantage facility⁽³⁾	300,000		—		—
Total	$	15,898,820	$	14,597,758	$	13,950,312


⁽¹⁾	Reflects the dissolution of certain consolidated trusts that caused loans that were previously consolidated as "Loans held in trusts" to be included within "Loans."


⁽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 December 31, 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.

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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:

Table 12



Schedule of Principal Amortization as of December 31, 2015
	Loans Held		Loans Underlying Off-Balance Sheet Farmer Mac Guaranteed Securities and LTSPCs		USDA Securities and Farmer Mac Guaranteed USDA Securities		Total
	(in thousands)
2016	$	176,797	$	278,930	$	95,298	$	551,025
2017	174,248		255,851		90,634		520,733
2018	177,852		659,825		88,842		926,519
2019	170,184		193,238		90,579		454,001
2020	181,730		185,093		90,261		457,084
Thereafter	3,085,290		1,717,251		1,462,663		6,265,204
Total	$	3,966,101	$	3,290,188	$	1,918,277	$	9,174,566

Of the $15.9 billion outstanding principal balance of volume included in Farmer Mac's four lines of business as of December 31, 2015, $6.7 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:

Table 13



AgVantage Balances by Year of Maturity
	As of
	December 31, 2015
	(in thousands)
2016	$	1,371,295
2017	1,572,420
2018⁽¹⁾	1,222,840
2019	320,349
2020	456,389
Thereafter⁽²⁾	1,780,961
Total	$	6,724,254


⁽¹⁾	Includes the expiration of the $300.0 million revolving floating rate AgVantage facility. As of December 31, 2015, this facility had not been utilized.


⁽²⁾	Includes various maturities ranging from 2020 to 2044.

The weighted-average remaining maturity of the outstanding AgVantage securities shown in the table above was 4.1 years as of December 31, 2015. 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

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spread earned by Farmer Mac on new AgVantage securities that replace maturing AgVantage securities is lower than the spread earned on the maturing securities, Farmer Mac's income could be adversely affected.

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 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 6 years, 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:

Table 14



	For the Year Ended December 31,
	2015		2014		2013
	(in thousands)
Defaulted loans purchased underlying Farm & Ranch Guaranteed Securities owned by third party investors	$	3,407	$	—	$	6,667
Defaulted loans purchased underlying LTSPCs	13,500		705		37
Total loan purchases	$	16,907	$	705	$	6,704

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 require financial institutions to own a requisite amount of common stock, based on the size and type of

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institution, to participate in the Farm & Ranch line of business. As a result of this requirement, coupled with the ability of holders of Class A and Class B voting common stock to elect two-thirds of Farmer Mac's board of directors, Farmer Mac regularly conducts business with "related parties," including 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 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. The table below does not specify any relationships based on the ownership of non-voting common stock or preferred stock.

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Table 15



Name of Institution	Ownership of Farmer Mac Voting Common Stock	Affiliation with Any Farmer Mac Directors	Primary Aspects of Institution's Business Relationship with Farmer Mac
AgFirst Farm Credit Bank	84,024 shares of Class B voting common stock (16.79% of outstanding Class B stock and 5.49% of total voting common stock outstanding)	None	In 2015 and 2014, Farmer Mac earned approximately $0.5 million and $0.7 million, respectively, in fees attributable to transactions with AgFirst, primarily commitment fees for LTSPCs.
AgGeorgia Farm Credit, ACA	Less than 5% ownership	Former Farmer Mac director Dan Raines was a director of AgGeorgia during 2014.	Farmer Mac entered into $20.2 million of new LTSPCs with AgGeorgia during 2014. Farmer Mac received $0.1 million commitment fees during 2014.
AgriBank, FCB	201,621 shares of Class B voting common stock (40.30% of outstanding Class B stock and 13.17% of total voting common stock outstanding)	Farmer Mac director Richard H. Davidson is currently a director of AgriBank, and Farmer Mac director James B. McElroy is a former director of AgriBank.	No Farmer Mac business through any of its lines of business was conducted between the parties.
Bath State Bank	Less than 5% ownership	Farmer Mac director Dennis L. Brack is a director of Bath State Bank and Bath State Bancorp, the holding company of Bath State Bank.	Farmer Mac purchased $2.1 million and $4.5 million in USDA Securities from Bath State Bank in 2015 and 2014, respectively.
CoBank, ACB	163,253 shares of Class B voting common stock (32.63% of outstanding Class B stock and 10.66% of total voting common stock outstanding)	Farmer Mac director Douglas E. Wilhelm served as an executive officer of CoBank until June 30, 2012. Mr. Wilhelm is also currently a party to a services agreement with CoBank, under which he serves as an employee of CoBank.	No Farmer Mac business through any of its lines of business was conducted between the parties.

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Name of Institution	Ownership of Farmer Mac Voting Common Stock	Affiliation with Any Farmer Mac Directors	Primary Aspects of Institution's Business Relationship with Farmer Mac
Farm Credit Bank of Texas (FCBT)	38,503 shares of Class B voting common stock (7.70% of outstanding Class B stock and 2.51% of total voting common stock outstanding)	Farmer Mac director Thomas W. Hill served as an executive officer of FCBT until November 2010. Mr. Hill is also currently a party to a services agreement with FCBT, under which he serves as an employee of FCBT.	In 2015 and 2014, Farmer Mac earned approximately $0.1 million and $0.2 million, respectively, in fees attributable to transactions with FCBT, primarily commitment fees for LTSPCs.
			In 2015 and 2014, FCBT retained approximately $0.3 million and $0.4 million, respectively, in servicing fees for its work as a Farmer Mac central servicer.
First Dakota National Bank (First Dakota)	Less than 5% ownership	Farmer Mac director Dennis Everson is a director of First Dakota and also served as Branch Administration Director of First Dakota until December 2012.	Farmer Mac purchased $21.1 million and $35.1 million in loans from First Dakota in 2015 and 2014, respectively, and entered into $7.8 million of new LTSPCs with First Dakota in 2015 and none in 2014.
			In 2015 and 2014, First Dakota retained approximately $1.0 million and $0.8 million, respectively, in servicing fees for its work as a Farmer Mac servicer.

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Name of Institution	Ownership of Farmer Mac Voting Common Stock	Affiliation with Any Farmer Mac Directors	Primary Aspects of Institution's Business Relationship with Farmer Mac
National Rural Utilities Cooperative Finance Corporation (CFC)	81,500 shares of Class A voting common stock (7.91% of outstanding Class A stock and 5.32% of total voting common stock outstanding)	None	Transactions with CFC represent 100 percent of business volume under the Rural Utilities line of business since its inception in 2008, and 100 percent of the AgVantage securities secured by Rural Utilities loans that have been issued to date.
			Transactions with CFC during 2015 and 2014 represented 40.6 percent and 32.7 percent, respectively, of Farmer Mac's total purchases for those years. Transactions with CFC represented 24.6 percent and 18.7 percent, respectively, of Farmer Mac's total outstanding business volume as of December 31, 2015 and 2014.
			In 2015 and 2014, Farmer Mac earned guarantee fees of approximately $0.1 million attributable to transactions with CFC. In 2015, Farmer Mac earned commitment fees of approximately $0.5 million attributable to transactions with CFC. In 2014, Farmer Mac did not earn commitments fees attributable to transactions with CFC.
			In 2015 and 2014, Farmer Mac earned interest income of $15.9 million and $15.8 million, respectively, attributable to AgVantage transactions with CFC.
			In 2015 and 2014, CFC retained approximately $3.3 million and $3.4 million, respectively, in servicing fees for its work as a Farmer Mac central servicer.
			CFC is currently the only servicer of rural utilities loans and loans underlying LTSPCs in the Rural Utilities line of business and securing AgVantage securities in the Institutional Credit line of business.
The Vanguard Group, Inc.	53,995 shares of Class A voting common stock (5.24% of outstanding Class A stock and 3.53% of total voting common stock outstanding)	None	No Farmer Mac business through any of its lines of business was conducted between the parties.

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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:


•	As agricultural and rural utilities lenders face increased equity capital requirements under new regulatory frameworks or rating agency requirements, or seek to reduce exposure due to lending limits or concentration limits, Farmer Mac can provide relief for those institutions through loan purchases, guarantees, or LTSPCs.


•	Lending opportunities in the rural utilities industry exist as rural utilities seek alternatives for financing, including refinancing existing debt.

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•	As a result of targeted marketing and product development efforts, Farmer Mac's lender network and customer base continues to expand, which may generate additional demand for Farmer Mac's products from new sources.

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. The agricultural sector includes many diverse industries that respond in different ways to changes in economic conditions. Those individual industries 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 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 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 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 values and commodity prices in response to cyclical swings. Although farmland values and commodity prices have declined recently in some sectors, primarily in the Midwest, Farmer Mac believes that its portfolio remains sufficiently diversified, both geographically and by commodity, and that its portfolio has generally demonstrated historically high credit quality and low delinquency rates 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 for Farm & Ranch loans in Farmer Mac's portfolio as of December 31, 2015, see "—Risk Management—Credit Risk – Loans and Guarantees."

The western part of the United States, and in particular California, continues to experience drought conditions, with the water level in many California reservoirs at or near historically low levels. Although to date Farmer Mac has not observed any material effect on its portfolio from 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 Mac continues to remain informed about the drought and its effects on the agricultural industries located 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.

Farmer Mac continues to monitor the establishment and evolution of legislation and regulations that affect farmers, ranchers, and rural lenders. Many federal agricultural 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 any final regulations implementing the Agricultural Act of 2014.

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Farmer Mac's marketing efforts directed towards the Farm & Ranch line of business focus on lenders that have demonstrated a commitment to agricultural lending based on their lending history. Farmer Mac directs its outreach efforts to these lenders through direct personal contact, which is facilitated through Farmer Mac's frequent participation in state and national banking conferences, its alliances with the American Bankers Association and the Independent Community Bankers of America, and its business relationships with members of the Farm Credit System. In the Farm & Ranch line of business, Farmer Mac has experienced continuing stable demand for its loan products. Demand for Farmer Mac's secondary market tools could also increase as rural lenders adapt to new and changing regulations, which may require lenders to obtain more liquidity and capital to continue their lending practices.

Farmer Mac also directs marketing efforts towards the agricultural industry by trying to identify and develop relationships with potential issuers of AgVantage securities, including insurance company agricultural lenders, who can pledge loans as collateral to obtain financing as part of Farmer Mac's Institutional Credit line of business. As part of these efforts, Farmer Mac has recently increased its focus on wholesale financing for institutional investors in agricultural assets that qualify as eligible collateral under Farmer Mac's charter. In July 2014, Farmer Mac expanded its AgVantage product to this new type of issuer and refers to this product variation as the Farm Equity AgVantage product. Farmer Mac directs its outreach efforts to these potential issuers through its business relationships within the agricultural community and through executive outreach to institutions whose profile presents opportunity to benefit from wholesale financing. As institutional investment in agricultural assets continues to grow, Farmer Mac believes that it is in a unique position to help increase access to capital for these types of counterparties and thereby provide a new source of capital to benefit rural America. Farmer Mac designed the Farm Equity AgVantage product to provide an efficient, low-cost source of financing tailored to meet the needs of institutional investors that can be adapted to many different types of organizational structures and for both public and private institutional investors. Although this product is still in the early stages of development, Farmer Mac believes there is opportunity to expand this type of business as both the trend toward institutional investment in agricultural assets and awareness of the Farm Equity AgVantage product continue to grow. For more information about the Farm Equity AgVantage product, see "Business—Farmer Mac Lines of Business—Institutional Credit" and "—Risk Management—Credit Risk – Institutional."

Rural Utilities Industry. Moderate demand for capital within the rural utilities industry has resulted in an ongoing high level of competition between rural utilities cooperative lenders, which could suppress loan growth opportunities for those lenders, including lenders that participate in Farmer 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, 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 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 foresees opportunities for growth pertaining to the rural utilities industry within Farmer Mac's Institutional Credit line of business as 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.

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Balance Sheet Review

Assets. Farmer Mac's total assets as of December 31, 2015 were $15.5 billion, compared to $14.3 billion as of December 31, 2014. The increase in total assets was primarily attributable to an increase in total investment securities, total loans, net of allowance, and total USDA Securities.

As of December 31, 2015, Farmer Mac had $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. As of December 31, 2015, Farmer Mac had $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.

Liabilities. Farmer Mac's total liabilities increased to $15.0 billion as of December 31, 2015 from $13.5 billion as of December 31, 2014. The increase in liabilities was primarily attributable to an increase in notes payable due within one year.

Equity. 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 in total equity was a result of the redemption of all of the outstanding shares of Farmer Mac II LLC Preferred Stock (included in the presentation of "Non-controlling interest" within equity on Farmer Mac's consolidated balance sheets) during first quarter 2015 and a decrease in accumulated other comprehensive income due to decreases in the fair value of available-for-sale securities, offset in part by an increase in retained earnings. The decrease in the fair value 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.

Risk Management

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:


•	loans held;


•	loans underlying Farmer Mac Guaranteed Securities; and


•	loans underlying LTSPCs.

Farmer Mac generally assumes 100 percent of the credit risk on loans held, loans underlying LTSPCs in the Farm & Ranch and Rural Utilities lines of business and Farmer Mac Guaranteed Securities in the Farm & Ranch line of business. 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, neither Farmer Mac nor Farmer Mac II LLC had experienced any credit losses on

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any business under the USDA Guarantees line of business, and neither expects to incur any such losses in the future.

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 Lines of Business—Farm & Ranch—Underwriting and Collateral Valuation (Appraisal) Standards" and "Business—Farmer Mac Lines of Business—Rural Utilities—Underwriting."

Farmer Mac 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 December 31, 2015, Farmer Mac had not required a seller to cure or repurchase a loan purchased by Farmer Mac for breach of a representation or warranty in the three preceding years. In addition to relying on the representations and warranties of lenders, Farmer Mac also underwrites all of the agricultural 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 Lines of Business—Farm & Ranch—Loan Eligibility" and "Business—Farmer Mac 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 Lines of Business—Farm & Ranch—Servicing" and "Business—Farmer Mac 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

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obligation of an issuing institution approved by Farmer Mac, the required collateralization level for the securities, the requirement for delinquent loans to be removed from the pool of pledged loans and replaced with current eligible loans, and in some cases, the requirement for the counterparty to comply with specified financial covenants for the life of the related AgVantage security. As such, all AgVantage securities are secured by current loans representing at least 100 percent of the outstanding amount of these securities. As of December 31, 2015, Farmer Mac had not experienced any credit losses on any AgVantage securities and does not expect to incur any such losses in the future. See "—Credit Risk – Institutional" for more information about Farmer Mac's credit risk on AgVantage securities.

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, 2015, 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's direct credit exposure to rural utilities loans and loans underlying LTSPCs as of December 31, 2015 was $1.5 billion across 38 states, of which $1.3 billion were loans to electric distribution cooperatives and $0.2 billion were loans to G&T cooperatives. 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 "—Credit Risk – Institutional."

Farmer Mac maintains an allowance for loan losses to cover estimated probable losses on loans held and a reserve for losses to cover estimated probable losses on loans underlying LTSPCs and off-balance sheet Farm & Ranch Guaranteed Securities. The methodology that Farmer Mac uses to determine the level of its allowance for losses is described in Note 2(j) to the consolidated financial statements. Management believes that this methodology produces a reasonable estimate of probable losses, as of the balance sheet date, for all loans held and loans underlying off-balance sheet Farm & Ranch Guaranteed Securities and LTSPCs.

The following table summarizes the components of Farmer Mac's allowance for losses as of December 31, 2015 and 2014:

Table 16



	As of December 31, 2015		As of December 31, 2014
	(in thousands)
Allowance for loan losses	$	4,480	$	5,864
Reserve for losses:
Off-balance sheet Farm & Ranch Guaranteed Securities	279		261
LTSPCs	1,804		4,002
Total allowance for losses	$	6,563	$	10,127

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The following table summarizes the changes in the components of Farmer Mac's allowance for each year in the five-year period ended December 31, 2015:

Table 17



	Allowance for Loan Losses			Reserve for Losses			Total Allowance for Losses
	(in thousands)
Balance as of January 1, 2011	$	9,803		$	10,312		$	20,115
Provision for/(release of) losses	610			(2,957		)	(2,347		)
Charge-offs	(252		)	—			(252		)
Balance as of December 31, 2011	$	10,161		$	7,355		$	17,516
Provision for/(release of) losses	3,691			(1,816		)	1,875
Charge-offs	(2,501		)	—			(2,501		)
Balance as of December 31, 2012	$	11,351		$	5,539		$	16,890
(Release of)/provision for losses	(481		)	929			448
Charge-offs	(4,004		)	—			(4,004		)
Balance as of December 31, 2013	$	6,866		$	6,468		$	13,334
Release of losses	(961		)	(2,205		)	(3,166		)
Charge-offs	(86		)	—			(86		)
Recoveries	45			—			45
Balance as of December 31, 2014	$	5,864		$	4,263		$	10,127
Release of losses	2,388			(2,180		)	208
Charge-offs	(3,772		)	—			(3,772		)
Balance as of December 31, 2015	$	4,480		$	2,083		$	6,563

Activity affecting the allowance for loan losses and reserve for losses is discussed in "—Results of Operations—Provision for and Release of Allowance for Loan Losses and Reserve for Losses." As of December 31, 2015, Farmer Mac's allowances for losses totaled $6.6 million, or 11 basis points, of the outstanding principal balance of loans held for investment and loans underlying LTSPCs and off-balance sheet Farm & Ranch Guaranteed Securities, compared to $10.1 million, or 19 basis points, as of December 31, 2014.

Farmer Mac's 90-day delinquency measure includes loans 90 days or more past due, as well as loans in foreclosure and non-performing loans where the borrower is in bankruptcy. As of December 31, 2015, Farmer Mac's 90-day delinquencies were $32.1 million (0.56 percent of the Farm & Ranch portfolio), compared to $18.9 million (0.35 percent of the Farm & Ranch portfolio) as of December 31, 2014. Those 90-day delinquencies were comprised of 35 delinquent loans as of December 31, 2015, compared with 29 delinquent loans as of December 31, 2014. The increase in 90-day delinquencies during 2015 was primarily related to the delinquency of two Agricultural Storage and Processing loans that financed one canola facility. In January 2016, Farmer Mac received $9.8 million to pay off these two Agricultural Storage and Processing loans, which completed the workout of these loans. Farmer Mac recognized a charge-off of $3.7 million on these loans in fourth quarter 2015. Farmer Mac expects that over time its 90-day delinquency rate will eventually revert closer to Farmer Mac's historical averages due to macroeconomic and other potential factors, but Farmer Mac has not yet seen an impact on its portfolio or a rise in delinquencies related to these factors. Farmer Mac's average 90-day delinquency rate for the Farm & Ranch line of business over the last fifteen years is approximately 1 percent.

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The following table presents historical information regarding Farmer Mac's 90-day delinquencies in the Farm & Ranch line of business compared to the principal balance of all Farm & Ranch loans held and loans underlying off-balance sheet Farm & Ranch Guaranteed Securities and LTSPCs:

Table 18



	Farm & Ranch Line of Business		90-Day Delinquencies		Percentage
	(dollars in thousands)
As of:
December 31, 2015	$	5,725,299	$	32,136	0.56	%
September 30, 2015	5,504,030		36,669		0.67	%
June 30, 2015	5,485,570		31,852		0.58	%
March 31, 2015	5,347,248		32,101		0.60	%
December 31, 2014	5,417,174		18,917		0.35	%
September 30, 2014	5,314,437		24,661		0.46	%
June 30, 2014	5,310,664		25,911		0.49	%
March 31, 2014	5,293,975		29,437		0.56	%
December 31, 2013	5,163,080		28,296		0.55	%

When analyzing the overall risk profile of its lines of business, Farmer Mac takes into account more than the Farm & Ranch loan delinquency percentages provided above. The lines of business also include AgVantage securities and Rural Utilities loans held and underlying LTSPCs, neither of which have any delinquencies, and USDA Securities, which are backed by the full faith and credit of the United States. Across all of Farmer Mac's lines of business, 90-day delinquencies represented 0.20 percent of total outstanding business volume as of December 31, 2015, compared to 0.13 percent as of December 31, 2014.

As of December 31, 2015, Farmer Mac individually evaluated $29.3 million of the $75.7 million of recorded investment in impaired loans for collateral shortfalls against updated appraised values, other updated collateral valuations, or discounted values. For the remaining $46.4 million of impaired assets for which updated valuations were not available, Farmer Mac evaluated them in the aggregate in consideration of their similar risk characteristics and historical statistics. Farmer Mac recorded specific allowances of $1.9 million for undercollateralized assets as of December 31, 2015. Farmer Mac's non-specific or general allowances were $4.7 million as of December 31, 2015.

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. 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. A loan's original loan-to-value ratio is one of many factors Farmer Mac considers in evaluating loss severity and 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 include, but are not limited to, other underwriting standards, commodity and farming forecasts, and regional economic and agricultural conditions.

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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, 2015 and 2014, the average unpaid loan balance for loans outstanding in the Farm & Ranch line of business was $602,000 and $589,000, 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 2015 was 47 percent, compared to 43 percent for loans purchased in 2014. 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 46 percent as of December 31, 2015 and 47 percent as of December 31, 2014. The weighted-average original loan-to-value ratio for all 90-day delinquencies was 45 percent and 46 percent, respectively, as of December 31, 2015 and December 31, 2014.

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, 2015 and December 31, 2014.

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The following table presents outstanding Farm & Ranch loans held and loans underlying LTSPCs and off-balance sheet Farm & Ranch Guaranteed Securities and 90-day delinquencies as of December 31, 2015 by year of origination, geographic region, commodity/collateral type, and original loan-to-value ratio:

Table 19



Farm & Ranch 90-Day Delinquencies as of December 31, 2015
	Distribution of Farm & Ranch Line of Business		Farm & Ranch Line of Business		90-Day Delinquencies⁽¹⁾		Percentage
	(dollars in thousands)
By year of origination:
2002 and prior	7	%	$	382,031	$	2,137	0.56	%
2003	2	%	125,360		2,176		1.74	%
2004	2	%	142,864		862		0.60	%
2005	3	%	184,992		2,245		1.21	%
2006	3	%	176,046		4,376		2.49	%
2007	3	%	183,895		5,933		3.23	%
2008	4	%	233,312		1,663		0.71	%
2009	3	%	153,461		584		0.38	%
2010	5	%	259,802		—		—	%
2011	6	%	353,644		9,838		2.78	%
2012	13	%	760,132		—		—	%
2013	19	%	1,098,255		1,136		0.10	%
2014	14	%	781,493		1,186		0.15	%
2015	16	%	890,012		—		—	%
Total	100	%	$	5,725,299	$	32,136	0.56	%
By geographic region⁽²⁾:
Northwest	10	%	$	582,127	$	12,714	2.18	%
Southwest	30	%	1,726,927		7,907		0.46	%
Mid-North	35	%	2,009,654		1,265		0.06	%
Mid-South	14	%	769,831		1,237		0.16	%
Northeast	4	%	215,883		730		0.34	%
Southeast	7	%	420,877		8,283		1.97	%
Total	100	%	$	5,725,299	$	32,136	0.56	%
By commodity/collateral type:
Crops	57	%	$	3,243,651	$	5,167	0.16	%
Permanent plantings	16	%	941,411		7,405		0.79	%
Livestock	22	%	1,236,781		7,059		0.57	%
Part-time farm	4	%	211,125		2,667		1.26	%
Ag. Storage and Processing	1	%	81,990		9,838		12.00	%
Other	—		10,341		—		—	%
Total	100	%	$	5,725,299	$	32,136	0.56	%
By original loan-to-value ratio:
0.00% to 40.00%	28	%	$	1,594,818	$	11,650	0.73	%
40.01% to 50.00%	22	%	1,279,321		3,141		0.25	%
50.01% to 60.00%	28	%	1,593,025		7,215		0.45	%
60.01% to 70.00%	19	%	1,107,710		9,049		0.82	%
70.01% to 80.00%⁽³⁾	2	%	126,860		933		0.74	%
80.01% to 90.00%⁽³⁾	1	%	23,565		148		0.63	%
Total	100	%	$	5,725,299	$	32,136	0.56	%


⁽¹⁾	Includes loans held and loans underlying off-balance sheet Farm & Ranch Guaranteed Securities and LTSPCs that are 90 days or more past due, in foreclosure, and in bankruptcy, excluding loans performing under either their original loan terms or a court-approved bankruptcy plan.


⁽²⁾	Geographic regions: Northwest (AK, ID, MT, OR, WA, WY); Southwest (AZ, CA, CO, HI, NM, NV, UT); Mid-North (IA, IL, IN, MI, MN, NE, ND, SD, WI); Mid-South (AR, KS, LA, MO, OK, TX); Northeast (CT, DE, KY, MA, MD, ME, NH, NJ, NY, OH, PA, RI, VA, VT, WV); Southeast (AL, FL, GA, MS, NC, SC, TN).


⁽³⁾	Primarily part-time farm loans. Loans with an original loan-to-value ratio of greater than 80% are required to have private mortgage insurance.

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The following table presents Farmer Mac's cumulative net credit losses relative to the cumulative original balance for all Farm & Ranch loans purchased and loans underlying LTSPCs and off-balance sheet Farm & Ranch Guaranteed Securities as of December 31, 2015 by year of origination, geographic region, and commodity/collateral type. The purpose of this information is to present information regarding losses relative to original Farm & Ranch purchases, guarantees, and commitments.

Table 20



Farm & Ranch Credit Losses Relative to Cumulative
Original Loans, Guarantees, and LTSPCs as of December 31, 2015
	Cumulative Original Loans, Guarantees and LTSPCs		Cumulative Net Credit Losses			Cumulative Loss Rate
	(dollars in thousands)
By year of origination:
Before 2001	$	7,024,996	$	10,987		0.16	%
2001	1,039,893		178			0.02	%
2002	1,094,909		89			0.01	%
2003	932,908		350			0.04	%
2004	739,031		311			0.04	%
2005	898,369		(184		)	(0.02	)%
2006	900,770		9,578			1.06	%
2007	715,926		4,686			0.65	%
2008	808,969		3,247			0.40	%
2009	540,587		1,508			0.28	%
2010	647,517		—			—	%
2011	748,286		3,661			0.49	%
2012	1,097,389		—			—	%
2013	1,372,775		—			—	%
2014	909,401		—			—	%
2015	929,009		—			—	%
Total	$	20,400,735	$	34,411		0.17	%
By geographic region⁽¹⁾:
Northwest	$	2,771,380	$	11,063		0.40	%
Southwest	7,106,237		9,069			0.13	%
Mid-North	5,162,818		12,830			0.25	%
Mid-South	2,421,038		(211		)	(0.01	)%
Northeast	1,266,158		169			0.01	%
Southeast	1,673,104		1,491			0.09	%
Total	$	20,400,735	$	34,411		0.17	%
By commodity/collateral type:
Crops	$	9,426,174	$	4,343		0.05	%
Permanent plantings	4,098,751		9,332			0.23	%
Livestock	5,022,792		3,859			0.08	%
Part-time farm	1,056,776		1,204			0.11	%
Ag. Storage and Processing	645,681		15,673			2.43	%
Other	150,561		—			—	%
Total	$	20,400,735	$	34,411		0.17	%


⁽¹⁾	Geographic regions: Northwest (AK, ID, MT, OR, WA, WY); Southwest (AZ, CA, CO, HI, NM, NV, UT); Mid-North (IA, IL, IN, MI, MN, NE, ND, SD, WI); Mid-South (AR, KS, LA, MO, OK, TX); Northeast (CT, DE, KY, MA, MD, ME, NH, NJ, NY, OH, PA, RI, VA, VT, WV); Southeast (AL, FL, GA, MS, NC, SC, TN).

Analysis of portfolio performance indicates that commodity type is the primary determinant of Farmer Mac's exposure to loss on a given loan. Within most commodity groups, certain geographic areas allow greater economies of scale or proximity to markets than others and, consequently, may result in more successful operations within the commodity group. Certain geographic areas also offer better growing conditions and market access than others and, consequently, may result in more versatile and more

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successful operators within a given commodity group. Farmer Mac's board of directors has established policies regarding geographic and commodity concentration to maintain adequate diversification and measure concentration risk.

However, in Farmer Mac's experience, the degree to which the collateral for a commodity group is single-use or highly improved is a more significant determinant of the probability of ultimate losses on a given loan than diversity of geographic location within a commodity group. Commodity groups that tend to be single-use or highly improved include permanent plantings (for example, nut crops), agricultural storage and processing facilities (for example, canola plants and grain processing facilities), and certain livestock facilities (for example, dairy facilities). The versatility of a borrower's operation (and in the case of persisting adverse economic conditions, the borrower's ability to switch commodity groups) will more likely result in profitability for the borrower and, consequently, a lower risk of decreased value for the underlying collateral. Producers of agricultural commodities that require highly improved property are less able to adapt their operations when faced with adverse economic conditions. In addition, in the event of a borrower's default, the prospective sale value of the collateral is more likely to decrease and the related loan may become undercollateralized. This analysis is consistent with corresponding commodity analyses, which indicate that Farmer Mac has experienced higher loss and collateral deficiency rates in permanent planting loans and agricultural storage and processing loans, for which the collateral is typically highly improved and specialized.

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The following tables present concentrations of Farm & Ranch loans held and loans underlying LTSPCs and off-balance sheet Farm & Ranch Guaranteed Securities by commodity type within geographic region and cumulative credit losses by origination year and commodity type:

Table 21



	As of December 31, 2015
	Farm & Ranch Concentrations by Commodity Type within Geographic Region
	Crops			Permanent Plantings			Livestock			Part-time Farm			Ag. Storage and Processing			Other			Total
	(dollars in thousands)
By geographic region⁽¹⁾:
Northwest	$	301,112		$	78,724		$	164,056		$	28,397		$	9,838		$	—		$	582,127
	5.3		%	1.4		%	2.9		%	0.5		%	0.1		%	—		%	10.2		%
Southwest	530,069			667,550			467,484			43,108			15,211			3,505			1,726,927
	9.2		%	11.7		%	8.2		%	0.6		%	0.3		%	0.1		%	30.1		%
Mid-North	1,728,115			25,126			186,082			32,106			34,036			4,189			2,009,654
	30.2		%	0.4		%	3.2		%	0.6		%	0.6		%	0.1		%	35.1		%
Mid-South	472,364			27,411			235,598			29,150			4,994			314			769,831
	8.3		%	0.5		%	4.1		%	0.6		%	0.1		%	—		%	13.6		%
Northeast	88,120			19,538			49,894			50,284			7,928			119			215,883
	1.5		%	0.3		%	0.9		%	0.9		%	0.1		%	—		%	3.7		%
Southeast	123,871			123,062			133,667			28,080			9,983			2,214			420,877
	2.2		%	2.1		%	2.3		%	0.5		%	0.2		%	—		%	7.3		%
Total	$	3,243,651		$	941,411		$	1,236,781		$	211,125		$	81,990		$	10,341		$	5,725,299
	56.7		%	16.4		%	21.6		%	3.7		%	1.4		%	0.2		%	100.0		%


⁽¹⁾	Geographic regions: Northwest (AK, ID, MT, OR, WA, WY); Southwest (AZ, CA, CO, HI, NM, NV, UT); Mid-North (IA, IL, IN, MI, MN, NE, ND, SD, WI); Mid-South (AR, KS, LA, MO, OK, TX); Northeast (CT, DE, KY, MA, MD, ME, NH, NJ, NY, OH, PA, RI, VA, VT, WV); Southeast (AL, FL, GA, MS, NC, SC, TN).

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Table 22



	As of December 31, 2015
	Farm & Ranch Cumulative Credit Losses/(Recoveries) by Origination Year and Commodity Type
	Crops			Permanent Plantings			Livestock			Part-time Farm			Ag. Storage and Processing		Total
	(in thousands)
By year of origination:
1995 and Prior	$	277		$	(79	)	$	(107	)	$	—		$	—	$	91
1996	(721		)	2,296			(73		)	—			—		1,502
1997	(397		)	2,785			(131		)	—			—		2,257
1998	(438		)	1,803			1,781			—			—		3,146
1999	(108		)	723			158			296			—		1,069
2000	7			1,907			1,049			(41		)	—		2,922
2001	45			1			132			—			—		178
2002	—			—			—			89			—		89
2003	309			—			—			41			—		350
2004	—			—			162			149			—		311
2005	(87		)	(263		)	—			166			—		(184		)
2006	1,649			—			40			201			7,688		9,578
2007	1,083			11			779			303			2,510		4,686
2008	2,626			—			—			—			621		3,247
2009	98			148			69			—			1,193		1,508
2010	—			—			—			—			—		—
2011	—			—			—			—			3,661		3,661
2012	—			—			—			—			—		—
2013	—			—			—			—			—		—
2014	—			—			—			—			—		—
2015	—			—			—			—			—		—
Total	$	4,343		$	9,332		$	3,859		$	1,204		$	15,673	$	34,411

Farmer Mac regularly conducts detailed, statistical stress tests of its portfolio for credit risk and compares those results to current and historical credit quality metrics and to the various statutory, regulatory, and Farmer Mac's board of directors' capital policy metrics. Farmer Mac's methodologies for pricing its guarantee and commitment fees, managing credit risk, and providing adequate allowances for losses consider all of the foregoing factors and information.

Credit Risk – Institutional. Farmer Mac is exposed to credit risk arising from its business relationships with other institutions including:


•	issuers of AgVantage securities;


•	approved lenders and servicers; and


•	interest rate swap counterparties.

Farmer Mac approves AgVantage counterparties and manages institutional credit risk related to those AgVantage counterparties by requiring them to meet Farmer Mac's standards for creditworthiness for the particular counterparty and transaction. The required collateralization level is established at the time the AgVantage facility is entered into with the counterparty and does not change during the life of the AgVantage securities issued under such facility. In AgVantage transactions, the corporate obligor is required to remove from the pool of pledged collateral any loan that becomes more than 30 days

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delinquent in the payment of principal or interest and to substitute an eligible loan that is current in payment to maintain the minimum required collateralization level. In the event of a default on the general obligation, Farmer Mac would have recourse to the pledged collateral and have rights to the ongoing borrower payments of principal and interest. For Farm Equity AgVantage counterparties, Farmer Mac also requires that the counterparty generally (1) maintain a higher collateralization level, through lower loan-to-value ratio thresholds and higher overcollateralization than required for traditional AgVantage securities and (2) comply with specified financial covenants for the life of the related Farm Equity AgVantage security to avoid default. For a more detailed description of AgVantage securities, see "Business—Farmer Mac Lines of Business—Institutional Credit—AgVantage Securities."

The unpaid principal balance of outstanding on-balance sheet AgVantage securities secured by loans eligible for the Farm & Ranch line of business totaled $3.4 billion as of December 31, 2015 and $3.7 billion as of December 31, 2014. The unpaid principal balance of on-balance sheet AgVantage securities secured by loans eligible for the Rural Utilities line of business totaled $2.1 billion as of December 31, 2015 and $1.7 billion as of December 31, 2014. In addition, the unpaid principal balance of outstanding off-balance sheet AgVantage transactions totaled $1.3 billion and $1.0 billion as of December 31, 2015 and 2014, respectively.

The following table provides information about the issuers of AgVantage securities, as well as the required collateralization levels for those transactions as of December 31, 2015 and 2014:

Table 23



	As of December 31, 2015				As of December 31, 2014
Counterparty	Balance		Credit Rating	Required Collateralization	Balance		Credit Rating	Required Collateralization
	(dollars in thousands)
AgVantage:
MetLife⁽¹⁾	$	2,550,000	AA-	103%	$	2,750,000	AA-	103%
CFC⁽²⁾	2,384,257		A	100%	1,741,601		A	100%
Rabo Agrifinance, Inc.	1,500,000		None	106%	1,700,000		None	106%
Other⁽³⁾	95,716		⁽⁴⁾	102% to 125%	110,387		⁽⁴⁾	102% to 120%
Farm Equity AgVantage⁽⁵⁾	194,281		None	110%	94,953		None	110%
Total outstanding	$	6,724,254			$	6,396,941


⁽¹⁾	As of December 31, 2014, included securities issued by Metropolitan Life Insurance Company and MetLife Insurance Company USA. As of December 31, 2015, includes securities issued by Metropolitan Life Insurance Company.


⁽²⁾	Includes $300.0 million related to a revolving floating rate AgVantage facility. Farmer Mac receives a fixed fee based on the full dollar amount of the facility. This facility had not been drawn upon as of December 31, 2015.


⁽³⁾	Consists of AgVantage securities issued by 6 and 5 different issuers, respectively, as of December 31, 2015 and 2014.


⁽⁴⁾	Includes $25.3 million related to an issuer with a credit rating of BBB- and $70.4 million related to 5 issuers without a credit rating as of December 31, 2015 and $50.2 million related to an issuer with a credit rating of BBB and $60.2 million related to 4 issuers without a credit rating as of December 31, 2014.


⁽⁵⁾	Consists of securities from 2 separate issuers as of both December 31, 2015 and December 31, 2014.

Farmer Mac manages institutional credit risk related to lenders and servicers by requiring those institutions to meet Farmer Mac's standards for creditworthiness. Farmer Mac monitors the financial condition of those institutions by evaluating financial statements and bank credit rating agency reports. For more information about Farmer Mac's lender eligibility requirements, see "Business—Farmer Mac Lines of Business—Farm & Ranch—Approved Lenders" and "Business—Farmer Mac Lines of Business—Rural Utilities—Approved Lenders."

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Farmer Mac manages institutional credit risk related to its interest rate swap counterparties through collateralization provisions contained in each of its swap agreements that varies based on the market value of its swaps portfolio with each counterparty. In addition, Farmer Mac transacts interest rate swaps with multiple counterparties to ensure a more even distribution of institutional credit risk related to its swap transactions. As a result of mandatory clearing rules for certain interest rate derivative transactions enacted under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"), Farmer Mac uses the clearing process for cleared swap transactions as another mechanism for managing its derivative counterparty risk. Credit risk related to interest rate swap contracts is discussed in "—Risk Management—Interest Rate Risk" and Note 6 to the consolidated financial statements.

Credit Risk – Other Investments. As of December 31, 2015, Farmer Mac had $1.2 billion of cash and cash equivalents and $2.8 billion of investment securities. The management of the credit risk inherent in these investments is governed by Farmer Mac's internal policies as well as 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"). In addition to establishing a portfolio of highly liquid investments as an available source of cash, the goals of Farmer Mac's investment policies are designed to minimize Farmer Mac's exposure to financial market volatility, preserve capital, and support Farmer Mac's access to the debt markets.

The Liquidity and Investment Regulations and Farmer Mac's policies generally require each investment or issuer of an investment to be highly rated by a nationally recognized statistical rating organization ("NRSRO"). Investments in mortgage securities and asset-backed securities are required to have a rating in the highest NRSRO category. Corporate debt securities with maturities of no more than five years but more than three years are required to be rated in one of the two highest categories; corporate debt securities with maturities of three years or less are required to be rated in one of the three highest categories. Some investments do not require a rating, such as U.S. Treasury securities and other obligations fully insured by the United States government or a government agency or diversified investment funds regulated under the Investment Company Act of 1940. Investments in diversified investment funds are further limited to those funds that are holding only instruments approved for direct investment by Farmer Mac.

The Liquidity and Investment Regulations and Farmer Mac's policies also establish concentration limits, which are intended to limit exposure to any one counterparty. The Liquidity and Investment Regulations limit Farmer Mac's total credit exposure to any single issuer of securities and uncollateralized financial derivatives to 25 percent of Farmer Mac's regulatory capital (as of December 31, 2015, 25 percent of Farmer Mac's regulatory capital was $142.8 million), though Farmer Mac's current policy, for any investments made after the effective date of this policy, limits this total credit exposure to 5 percent of its regulatory capital (as of December 31, 2015, 5 percent of Farmer Mac's regulatory capital was $28.6 million). These exposure limits do not apply to obligations of the United States or GSEs, though Farmer Mac is restricted by the Liquidity and Investment Regulations and its own policy from investing more than 100 percent of its regulatory capital in any one GSE.

On February 23, 2016, FCA published a proposed rule in the Federal Register to amend the Liquidity and Investment Regulations to comply with Section 939A of the Dodd-Frank Act by removing references and requirements relating to credit ratings and replacing them with other standards of creditworthiness, as well as to revise the eligibility criteria and exposure limits for certain types of investments. Farmer Mac intends to submit comments on this proposed rule to FCA prior to the close of the comment period on April 25, 2016. Farmer Mac expects that it will be able to successfully adapt to FCA's proposed

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amendments of the Liquidity and Investment Regulations.

Interest Rate Risk. Farmer Mac is subject to interest rate risk on all assets retained on its balance sheet because of possible timing differences in the cash flows of the assets and related liabilities. This risk is primarily related to loans held, Farmer Mac Guaranteed Securities, and USDA Securities due to the ability of borrowers to prepay their loans before the scheduled maturities, thereby increasing the risk of asset and liability cash flow mismatches. Cash flow mismatches in a changing interest rate environment can reduce the earnings of Farmer Mac if assets repay sooner than expected and the resulting cash flows must be reinvested in lower-yielding investments when Farmer Mac's funding costs cannot be correspondingly reduced, or if assets repay more slowly than expected and the associated debt must be replaced by higher-cost debt. As discussed below, Farmer Mac manages this interest rate risk by funding assets purchased with liabilities matching the duration and cash flow characteristics of the assets purchased.

The goal of interest rate risk management at Farmer Mac is to create and maintain a portfolio that generates stable earnings and value across a variety of interest rate environments. 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. To match these characteristics, Farmer Mac issues discount notes and both callable and non-callable medium-term notes across a spectrum of maturities. Farmer Mac issues callable debt to offset the prepayment risk associated with some loans. By using a blend of liabilities that includes callable debt, the interest rate sensitivities of the liabilities tend to increase or decrease as interest rates change in a manner similar to changes in the interest rate sensitivities of the assets. Farmer Mac also uses financial derivatives to better match the durations of Farmer Mac's assets and liabilities, thereby reducing overall interest rate sensitivity.

Taking into consideration the prepayment provisions and the default probabilities associated with its loan assets, Farmer Mac uses prepayment models to project and value cash flows associated with these assets. Because borrowers' behaviors in various interest rate environments may change over time, Farmer Mac periodically evaluates the effectiveness of these models compared to actual prepayment experience and adjusts and refines the models as necessary to improve the precision of subsequent prepayment forecasts.

In certain cases, yield maintenance provisions and other prepayment penalties contained in agricultural mortgage loans and rural utilities loans reduce, but do not eliminate, prepayment risk. Those provisions require borrowers to make an additional payment when they prepay their loans, thus compensating Farmer Mac for the shortened duration of the prepaid loan. As of December 31, 2015, less than 1 percent of the total outstanding balance of loans in the Farm & Ranch line of business where Farmer Mac either owned the loan or the beneficial interest in the underlying loan had yield maintenance provisions or other forms of prepayment protection (together covering 2 percent of all loans with fixed interest rates). Of the Farm & Ranch loans purchased in 2015, none had yield maintenance or another form of prepayment protection. As of December 31, 2015, none of Farmer Mac's USDA Securities had yield maintenance provisions; however, 4 percent contained prepayment penalties. Of the USDA Securities purchased in 2015, 5 percent contained various forms of prepayment penalties. As of December 31, 2015, 62 percent of the Rural Utilities loans owned by Farmer Mac had yield maintenance provisions. Of the Rural Utilities loans purchased in 2015, 69 percent contained prepayment penalties.

Farmer Mac's purchases of eligible loan assets expose Farmer Mac to interest rate risk arising primarily from uncertainty as to when the borrowers will repay the outstanding principal balance on the related loans. Generally, the values of Farmer Mac's eligible loan assets, and the debt issued to fund these assets,

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increase when interest rates decline, and their values decrease as interest rates rise. Furthermore, changes in interest rates may affect loan prepayment rates which may, in turn, affect durations and values of the loans. Declining interest rates generally increase prepayment rates, which shortens the duration of these assets, while rising interest rates tend to slow loan prepayments, thereby extending the duration of the loans.

Farmer Mac is also subject to interest rate risk on loans that Farmer Mac has committed to acquire (other than delinquent loans through LTSPCs) but has not yet purchased. When Farmer Mac commits to purchase those loans, it is exposed to interest rate risk between the time it commits to purchase the loans and the time it either:


•	sells Farmer Mac Guaranteed Securities backed by the loans; or


•	issues debt to retain the loans in its portfolio.

Farmer Mac manages the interest rate risk related to these loans, and any related Farmer Mac Guaranteed Securities or debt issuance, through the use of forward sale contracts on the debt securities of other GSEs and futures contracts involving U.S. Treasury securities. Farmer Mac uses forward sale contracts on GSE securities to reduce its interest rate exposure to changes in both U.S. Treasury rates and spreads on Farmer Mac debt and certain Farmer Mac Guaranteed Securities. Issuing debt to fund the loans as investments does not fully eliminate interest rate risk due to the possible timing differences in the cash flows of the assets and related liabilities, as discussed above.

Farmer Mac's $1.2 billion of cash and cash equivalents mature within three months and are funded with discount notes having similar maturities. As of December 31, 2015, $2.769 billion of the $2.776 billion of investment securities (nearly 100 percent) were floating rate securities with rates that adjust within one year or fixed rate securities with original maturities between three months and one year. Those securities are funded with effectively floating rate debt that closely matches the rate adjustment dates of the associated investments. As of December 31, 2015, Farmer Mac had outstanding discount notes of $6.6 billion, medium-term notes that mature within one year of $2.5 billion, and medium-term notes that mature after one year of $5.0 billion.

Recognizing that interest rate sensitivity may change with the passage of time and as interest rates change, Farmer Mac assesses this exposure on a regular basis and, if necessary, readjusts its portfolio of assets and liabilities by:


•	purchasing assets in the ordinary course of business;


•	refinancing existing liabilities; or


•	using financial derivatives to alter the characteristics of existing assets or liabilities.

Farmer Mac regularly stress tests its portfolio for interest rate risk and uses a variety of metrics to quantify and manage its interest rate risk. These metrics include sensitivity to interest rate movements of market value of equity ("MVE") and net interest income ("NII") as well as duration gap analysis. MVE represents management's estimate of the present value of all future cash flows from on- and off-balance sheet assets, liabilities, and financial derivatives, discounted at current interest rates and appropriate spreads. However, MVE is not indicative of the market value of Farmer Mac as a going concern because these market values are theoretical and do not reflect future business activities. MVE sensitivity analysis is used to measure the degree to which the market values of Farmer Mac's assets and liabilities change for a given change in interest rates. Because this analysis evaluates the impact of interest rate movements on

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the value of all future cash flows, this measure provides an evaluation of Farmer Mac's long-term interest rate risk.

Farmer Mac's NII is the difference between the yield on its interest-earning assets and its funding costs. Farmer Mac's NII may be affected by changes in market interest rates resulting from timing differences between maturities and re-pricing characteristics of assets and liabilities. The direction and magnitude of any such effect depends on the direction and magnitude of the change in interest rates as well as the composition of Farmer Mac's portfolio. The NII forecast represents an estimate of the net interest income that Farmer Mac's current portfolio is expected to produce over a twelve-month horizon. As a result, NII sensitivity statistics provide a short-term view of Farmer Mac's interest rate sensitivity.

Duration is a measure of a financial instrument's sensitivity to small changes in interest rates. Duration gap is the difference between the estimated durations of Farmer Mac's assets and liabilities. Because duration is a measure of market value sensitivity, duration gap summarizes the extent to which estimated market value sensitivities for assets and liabilities are matched. Duration gap provides a relatively concise measure of the interest rate risk inherent in Farmer Mac's outstanding book of business.

A positive duration gap denotes that the duration of Farmer Mac's assets is greater than the duration of its liabilities. A positive duration gap indicates that the market value of Farmer Mac's assets is more sensitive to small interest rate movements than is the market value of its liabilities. Conversely, a negative duration gap indicates that Farmer Mac's assets are less sensitive to small interest rate movements than are its liabilities.

Each of the metrics is produced using asset/liability models and is derived based on management's best estimates of such factors as projected interest rates, interest rate volatility, and prepayment speeds. Accordingly, these metrics should be understood as estimates rather than precise measurements. In addition, actual results may differ to the extent there are material changes to Farmer Mac's portfolio or changes in strategies undertaken to mitigate unfavorable sensitivities to interest rate changes.

The following schedule summarizes the results of Farmer Mac's MVE and NII sensitivity analysis as of December 31, 2015 and December 31, 2014 to an immediate and instantaneous uniform or "parallel" shift in the yield curve:

Table 24



	Percentage Change in MVE from Base Case
Interest Rate Scenario	As of December 31, 2015		As of December 31, 2014
+100 basis points	0.7	%	3.2	%
-25 basis points	(1.3	)%	(1.8	)%



	Percentage Change in NII from Base Case
Interest Rate Scenario	As of December 31, 2015		As of December 31, 2014
+100 basis points	4.4	%	4.3	%
-25 basis points	(0.4	)%	(8.7	)%

Farmer Mac's board of directors has established policies and procedures regarding MVE and NII sensitivity. These policies include the measurement of MVE and NII sensitivity to more severe decreasing interest rate scenarios that are consistent in magnitude with the increasing interest rate scenarios.

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However, given the low interest rate environment, such rate scenarios produce negative interest rates, and, as a result, do not produce results that are meaningful. Consequently, Farmer Mac measures and reports MVE and NII sensitivity to a down 25 basis point interest rate shock.

As of December 31, 2015, Farmer Mac's effective duration gap was minus 1.6 months, compared to minus 2.6 months as of December 31, 2014. During 2015, longer term interest rates declined while shorter term LIBOR rates increased. Despite this rate movement, Farmer Mac's overall interest rate sensitivity remained relatively stable and at relatively low levels. NII sensitivity to declining interest rates decreased during fourth quarter 2015 as a result of higher short-term LIBOR rates.

The economic effects of financial derivatives are included in Farmer Mac's MVE, NII, and duration gap analyses. Farmer Mac enters into the following financial derivative transactions principally to protect against risk from the effects of market price or interest rate movements on the value of assets, future cash flows, credit exposure, and debt issuance, not for trading or speculative purposes:


•	"pay-fixed" interest rate swaps, in which Farmer Mac pays fixed rates of interest to, and receives floating rates of interest from, counterparties;


•	"receive-fixed" interest rate swaps, in which Farmer Mac receives fixed rates of interest from, and pays floating rates of interest to, counterparties; and


•	"basis swaps," in which Farmer Mac pays variable rates of interest based on one index to, and receives variable rates of interest based on another index from, counterparties.

As of December 31, 2015, Farmer Mac had $8.4 billion combined notional amount of interest rate swaps, with terms ranging from less than one year to twenty-five years, of which $1.8 billion were pay-fixed interest rate swaps, $5.8 billion were receive-fixed interest rate swaps, and $0.7 billion were basis swaps.

Farmer Mac enters into interest rate swap contracts to adjust the characteristics of its debt to match more closely the cash flow and duration characteristics of its loans and other 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. Specifically, interest rate swaps synthetically convert the variable cash flows related to the forecasted issuance of short-term debt into effectively fixed rate medium-term notes that match the anticipated duration and interest rate characteristics of the corresponding assets. Farmer Mac evaluates the overall cost of using the swap market as a funding alternative and uses interest rate swaps to manage specific interest rate risks for specific transactions. Certain financial derivatives are designated as fair value hedges of fixed rate assets classified as available-for-sale to protect against fair value changes in the assets related to a benchmark interest rate (e.g., LIBOR).

Farmer Mac has used callable interest rate swaps (in conjunction with the issuance of short-term debt) as an alternative to callable medium-term notes with equivalently structured maturities and call options. The call options on the swaps are designed to match the prepayment options on those assets without prepayment protection. The blended durations of the swaps are also designed to match the duration of the related assets over their estimated lives. If the assets prepay, the swaps can be called and the short-term debt repaid; if the assets do not prepay, the swaps remain outstanding and the short-term debt is rolled over, effectively providing fixed rate callable funding over the lives of the related assets. Thus, the economics of the assets are closely matched to the economics of the interest rate swap and funding combination.

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In addition to being exposed to the risk of asset and liability cash flow mismatches, Farmer Mac is exposed to the risk related 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. This exposure 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 debt to fund those assets. Farmer Mac can fund these floating rate assets in several ways, including:


•	issuing short-term discount notes with maturities that match the reset period of the assets;


•	issuing floating rate medium-term notes with maturities that match the maturities of the assets;


•	issuing non-maturity matched, floating rate medium-term notes; or


•	issuing non-maturity matched, fixed-rate discount notes or medium-term notes swapped to match the interest rate reset dates of the assets as an alternative source of effectively floating rate funding.

Farmer Mac typically uses the last option identified in the list above to fund these floating rate assets because this funding strategy is usually the most effective way to provide an interest rate match, maintain a suitable liquidity profile, and lower Farmer Mac’s cost of funds. As funding for these floating rate assets matures, Farmer Mac seeks to refinance the debt associated with these assets in a similar fashion to achieve an appropriate interest rate match for the remaining life of the assets. However, if the rates on Farmer Mac’s discount notes or medium-term notes deteriorate relative to LIBOR during the time between when these floating rate assets were first funded and when Farmer Mac refinances the associated debt, Farmer Mac is exposed to a commensurate reduction in its net effective spread on the associated assets. Conversely, if the rates on Farmer Mac’s discount notes or medium-term notes improve relative to LIBOR during that time, Farmer Mac would benefit from a commensurate increase in its net effective spread on those assets.

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. In these cases, if the rates on Farmer Mac's discount notes or medium-term notes were to deteriorate relative to LIBOR, Farmer Mac would be exposed to a commensurate reduction in its net effective spread. Conversely, if the rates on Farmer Mac's discount notes or medium-term notes were to improve relative to LIBOR, Farmer Mac would benefit from a commensurate increase in its net effective spread.

To mitigate this basis risk, 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. As of December 31, 2015, Farmer Mac held $5.8 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 billion of interest rate swaps outstanding where Farmer Mac pays a fixed rate of interest and receives a floating rate of interest.

During fourth quarter 2015, the levels at which Farmer Mac issued discount notes and medium-term notes deteriorated versus LIBOR. Farmer Mac believes that this deterioration was caused by a significant

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compression of spreads between U.S. Treasury interest rates and corresponding interest rate swap rates, and was not related to any developments specific to Farmer Mac. In response to this deterioration, Farmer Mac has slightly shortened the maturity profile of its effectively floating rate debt and increased its pricing targets on new floating rate and certain fixed rate asset purchases.

As discussed in Note 6 to the consolidated financial statements, 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 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 transaction affects earnings. Any ineffective portion of designated hedge transactions is recognized immediately in "Gains/(losses) on financial derivatives and hedging activities". All of Farmer Mac's financial derivative transactions are conducted under standard collateralized agreements that limit Farmer Mac's potential credit exposure to any counterparty. As of December 31, 2015, Farmer Mac had uncollateralized net exposures of $47,000 to one counterparty. As of December 31, 2014, Farmer Mac had uncollateralized net exposures of $0.4 million to two counterparties.

Liquidity and Capital Resources

Farmer Mac regularly accesses the capital markets for funding, and Farmer Mac has maintained access to the capital markets at favorable rates throughout 2014 and 2015. Assuming continued access to the capital markets, Farmer Mac believes it has sufficient liquidity and capital resources to support its operations for the next 12 months and for the foreseeable future. Farmer Mac also has a liquidity contingency plan to manage unanticipated disruptions in its access to the capital markets. That plan involves borrowing through repurchase agreement arrangements and the sale of liquid assets. Farmer Mac is required to maintain a minimum of 90 days of liquidity under the Liquidity and Investment Regulations. In accordance with the methodology for calculating available days of liquidity prescribed by those regulations, Farmer Mac maintained an average of 171 days of liquidity during 2015 and had 166 days of liquidity as of December 31, 2015.

Debt Issuance. Farmer Mac funds its purchases of eligible loan assets and investment assets and finances its operations primarily by issuing debt obligations of various maturities through a network of dealers in the public capital markets. Farmer Mac works to enhance its funding operations by undertaking extensive debt investor relations initiatives, including conducting non-deal roadshows with institutional investors, making periodic dealer sales force presentations, and speaking at fixed income investor conferences throughout the United States. Debt obligations issued by Farmer Mac include discount notes and fixed and floating rate medium-term notes, including callable notes.

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Mac invests the proceeds of its debt issuances in purchases of loans, USDA Securities, Farmer Mac Guaranteed Securities, and investment assets in accordance with policies established by its board of directors and subject to regulations established by FCA.

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 and December 31, 2014:

Table 25



	As of December 31, 2015		As of December 31, 2014
	(in thousands)
Cash and cash equivalents	$	1,210,084	$	1,363,387
Investment securities:
Guaranteed by U.S. Government and its agencies	1,558,003		1,404,156
Guaranteed by GSEs	1,114,148		398,600
Corporate debt securities	19,985		40,116
Asset-backed securities	83,380		96,316
Total	$	3,985,600	$	3,302,575

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 million as of December 31, 2015, compared to $40.6 million as of December 31, 2014. During 2015, Farmer Mac recognized in earnings $0.1 million of other-than-temporary impairment losses on two ARCs. 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 97 percent of par. The discounted carrying value reflects uncertainty regarding the ability

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to obtain par in the absence of any active market trading. See Note 13 to the consolidated financial statements for more information on the carrying value of ARCs.

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, 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 and 2014, Farmer Mac's Tier 1 capital ratio was 10.5% and 11.3%, respectively. 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, 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."

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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. 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.

Table 26



	One Year or Less		One to Three Years		Three to Five Years		Over Five Years		Total
	(in thousands)
Discount notes⁽¹⁾	$	6,652,547	$	—	$	—	$	—	$	6,652,547
Medium-term notes⁽¹⁾	2,469,650		2,741,000		1,051,255		1,180,052		7,441,957
Interest payments on fixed rate medium-term notes⁽²⁾	93,731		133,901		92,041		175,501		495,174
Interest payments on floating rate medium-term notes⁽³⁾	3,914		5,550		678		1,212		11,354
Operating lease obligations⁽⁴⁾	1,392		2,800		2,812		5,527		12,531
Purchase obligations⁽⁵⁾	997		356		—		—		1,353


⁽¹⁾	Future events, including additional issuance of discount notes and medium-term notes and refinancing of those notes, could cause actual payments to differ significantly from these amounts. For more information regarding discount notes and medium-term notes, see Note 7 to the consolidated financial statements.


⁽²⁾	Interest payments on callable medium-term notes are calculated based on contractual maturity. Future calls of these notes could cause actual interest payments to differ significantly from the amounts presented.


⁽³⁾	Calculated using the effective interest rates as of December 31, 2015. As a result, these amounts do not reflect the effects of changes in the contractual interest rates effective on future interest rate reset dates.


⁽⁴⁾	Includes amounts due under non-cancellable operating leases for office space and office equipment. See Note 12 to the consolidated financial statements for more information regarding Farmer Mac's minimum lease payments for office space.

⁽⁵⁾

Includes minimum amounts due under non-cancellable agreements to purchase goods or services that are enforceable and legally binding and specify all significant terms. These agreements include, among others, agreements for the provision of consulting services, information technology support, equipment maintenance, and financial analysis software and services. The amounts actually paid under these agreements will likely be higher due to the variable components of some of these agreements under which the ultimate obligation owed is determined by reference to actual usage or hours worked. The table does not include amounts due under agreements that are cancellable without penalty or further payment as of December 31, 2015 and therefore do not represent enforceable and legally binding obligations. The table also does not include amounts due under the terms of the employment agreement with Farmer Mac's President and CEO (the only member of senior management with an employment agreement); nor does it include payments that are based on a varying outstanding loan volume (such as servicing fees), as those payments are not known, fixed, and determinable contractual obligations.

Farmer Mac enters into financial derivative 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 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.

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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:

Table 27



	As of December 31,
	2015		2014
	(in thousands)
LTSPCs⁽¹⁾	$	2,776,137	$	2,240,866
Mandatory commitments to purchase loans and USDA Securities	65,416		33,655


⁽¹⁾	Includes $8.8 million related to a one-year loan purchase commitment on which Farmer Mac receives a nominal unused commitment fee.

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

Off-Balance Sheet Arrangements

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.

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

Table 28



Outstanding Balance of LTSPCs and Off-Balance Sheet Farmer Mac Guaranteed Securities
	As of December 31,
	2015		2014
	(in thousands)
Farm & Ranch obligations:
LTSPCs	$	2,253,273	$	2,240,866
Farm & Ranch Guaranteed Securities	514,051		636,086
Total Farm & Ranch obligations	2,767,324		2,876,952
USDA Guarantees obligations:
Farmer Mac Guaranteed USDA Securities	10,272		13,978
Rural Utilities obligations:
LTSPCs⁽¹⁾	522,864		—
Institutional Credit obligations:
AgVantage Securities	984,871		986,528
Revolving floating rate AgVantage facility⁽²⁾	300,000		—
Total Institutional Credit obligations	1,284,871		986,528
Total off-balance sheet	$	4,585,331	$	3,877,458


⁽¹⁾	Includes $8.8 million related to a one-year loan purchase commitment on which Farmer Mac receives a nominal unused commitment fee.


⁽²⁾	As of December 31, 2015, this facility had not been utilized. 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 a spread on the drawn balance.

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.

Regulatory Matters

The Dodd-Frank Act contains a variety of provisions designed to regulate financial markets. Certain provisions of the Dodd-Frank Act, including those regarding derivatives, corporate governance, and executive compensation, apply to Farmer Mac. On October 22, 2015, the Federal Reserve Board, FCA, the Federal Deposit Insurance Corporation, the Federal Housing Finance Agency, and the Office of the Comptroller of the Currency adopted a joint final rule to establish minimum requirements for the exchange of initial and variation margin between swap dealers or major swap participants and their counterparties to non-cleared swaps. This final rule, which will become effective later this year, will establish minimum requirements for the exchange of initial and variation margin between Farmer Mac and its swap dealer counterparties in non-cleared swaps transactions. On February 23, 2016, FCA published a proposed rule in the Federal Register to amend the Liquidity and Investment Regulations to comply with Section 939A of the Dodd-Frank Act by removing references and requirements relating to credit ratings and replacing them with other standards of creditworthiness, as well as to revise the eligibility criteria and exposure limits for certain types of investments. Farmer Mac intends to submit comments on this proposed rule to FCA prior to the close of the comment period on April 25, 2016. Farmer Mac does not expect that any of the final rules that have been passed, including the final rule establishing margin

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requirements for non-cleared swaps, or that are anticipated to be passed, including the FCA's proposed rule that would replace references and requirements related to credit ratings with other standards of creditworthiness, under the Dodd-Frank Act will have a material effect on Farmer Mac's business activities and operations or financial condition. Farmer Mac will continue to monitor all applicable developments in the implementation of the Dodd-Frank Act and expects to be able to adapt successfully to any new applicable legislative and regulatory requirements.

Other Matters

The expected effects of recently issued accounting pronouncements on the consolidated financial statements are presented in Note 2(r) to the consolidated financial statements.

Supplemental Information

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

Table 29



New Business Volume
	Farm & Ranch				USDA Guarantees		Rural Utilities				Institutional Credit
	Loans		LTSPCs		USDA Securities		Loans		LTSPCs		AgVantage		Total
	(in thousands)
For the quarter ended:
December 31, 2015	$	245,252	$	185,919	$	72,442	$	46,082	$	—	$	14,391	$	564,086
September 30, 2015	175,965		79,621		91,374		53,552		522,262		506,602		1,429,376
June 30, 2015	196,927		102,944		123,933		—		—		307,250		731,054
March 31, 2015	130,224		59,311		89,186		8,703		—		214,915		502,339
December 31, 2014	196,058		72,045		86,942		6,972		—		454,490		816,507
September 30, 2014	150,243		77,368		97,275		9,936		—		295,700		630,522
June 30, 2014	159,116		34,850		90,785		4,689		—		300,775		590,215
March 31, 2014	192,407		185,594		67,984		53,903		—		228,690		728,578
December 31, 2013	245,770		75,731		58,438		41,374		—		295,000		716,313

For the year ended:
December 31, 2015	748,368		427,795		376,935		108,337		522,262		1,043,158		3,226,855
December 31, 2014	697,824		369,857		342,986		75,500		—		1,279,655		2,765,822

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Table 30



Repayments of Assets by Line of Business
	Farm & Ranch						USDA Guarantees		Rural Utilities				Institutional Credit
	Loans		Guaranteed Securities		LTSPCs		USDA Securities		Loans		LTSPCs		AgVantage		Total
	(in thousands)
For the quarter ended:
Scheduled	$	6,689	$	16,884	$	26,265	$	18,981	$	11,234	$	4,165	$	15,154	$	99,372
Unscheduled	59,280		22,534		78,250		33,809		—		—		—		193,873
December 31, 2015	$	65,969	$	39,418	$	104,515	$	52,790	$	11,234	$	4,165	$	15,154	$	293,245

Scheduled	$	37,524	$	11,178	$	45,943	$	19,785	$	25,662	$	4,033	$	609,524	$	753,649
Unscheduled	70,242		11,164		61,075		35,394		—		—		—		177,875
September 30, 2015	$	107,766	$	22,342	$	107,018	$	55,179	$	25,662	$	4,033	$	609,524	$	931,524

Scheduled	$	8,687	$	11,126	$	34,064	$	31,064	$	19	$	—	$	9,245	$	94,205
Unscheduled	48,659		11,299		47,714		45,357		13,910		—		—		166,939
June 30, 2015	$	57,346	$	22,425	$	81,778	$	76,421	$	13,929	$	—	$	9,245	$	261,144

Scheduled	$	39,803	$	21,163	$	53,747	$	33,388	$	25,805	$	—	$	81,922	$	255,828
Unscheduled	59,731		16,687		68,330		38,914		390		—		—		184,052
March 31, 2015	$	99,534	$	37,850	$	122,077	$	72,302	$	26,195	$	—	$	81,922	$	439,880

Scheduled	$	7,000	$	19,821	$	28,472	$	16,966	$	—	$	—	$	9,349	$	81,608
Unscheduled	29,284		21,907		58,882		31,890		—		—		—		141,963
December 31, 2014	$	36,284	$	41,728	$	87,354	$	48,856	$	—	$	—	$	9,349	$	223,571

Scheduled	$	37,361	$	11,560	$	45,631	$	18,123	$	43,612	$	—	$	383,130	$	539,417
Unscheduled	59,601		15,002		54,683		29,539		—		—		—		158,825
September 30, 2014	$	96,962	$	26,562	$	100,314	$	47,662	$	43,612	$	—	$	383,130	$	698,242

Scheduled	$	9,813	$	13,623	$	52,622	$	28,681	$	—	$	—	$	361,831	$	466,570
Unscheduled	45,094		13,575		42,550		38,465		19,622		—		—		159,306
June 30, 2014	$	54,907	$	27,198	$	95,172	$	67,146	$	19,622	$	—	$	361,831	$	625,876

Scheduled	$	41,587	$	24,430	$	48,157	$	29,319	$	23,744	$	—	$	176,268	$	343,505
Unscheduled	63,329		9,747		59,856		39,086		55,164		—		—		227,182
March 31, 2014	$	104,916	$	34,177	$	108,013	$	68,405	$	78,908	$	—	$	176,268	$	570,687

Scheduled	$	6,729	$	24,367	$	36,063	$	17,463	$	6,897	$	—	$	303,087	$	394,606
Unscheduled	54,277		11,586		61,147		30,651		—		—		—		157,661
December 31, 2013	$	61,006	$	35,953	$	97,210	$	48,114	$	6,897	$	—	$	303,087	$	552,267

For the year ended:
Scheduled	$	92,703	$	60,351	$	160,019	$	103,218	$	62,720	$	8,198	$	715,845	$	1,203,054
Unscheduled	237,912		61,684		255,369		153,474		14,300		—		—		722,739
December 31, 2015	$	330,615	$	122,035	$	415,388	$	256,692	$	77,020	$	8,198	$	715,845	$	1,925,793

Scheduled	$	95,761	$	69,434	$	174,882	$	93,089	$	67,356	$	—	$	930,578	$	1,431,100
Unscheduled	197,308		60,231		215,971		138,980		74,786		—		—		687,276
December 31, 2014	$	293,069	$	129,665	$	390,853	$	232,069	$	142,142	$	—	$	930,578	$	2,118,376

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Table 31



Lines of Business - Outstanding Business Volume
	Farm & Ranch						USDA Guarantees		Rural Utilities				Institutional Credit
	Loans		Guaranteed Securities		LTSPCs		USDA Securities		Loans		LTSPCs		AgVantage		Total
	(in thousands)
As of:
December 31, 2015	$	2,957,975	$	514,051	$	2,253,273	$	1,918,277	$	1,008,126	$	522,864	$	6,724,254	$	15,898,820
September 30, 2015	2,778,692		553,469		2,171,869		1,898,625		982,078		518,229		6,725,017		15,627,979
June 30, 2015	2,710,493		575,811		2,199,266		1,862,430		954,188		—		6,827,939		15,130,127
March 31, 2015	2,570,912		598,236		2,178,100		1,814,918		968,117		—		6,529,934		14,660,217
December 31, 2014	2,540,222		636,086		2,240,866		1,798,034		985,609		—		6,396,941		14,597,758
September 30, 2014	2,380,448		677,814		2,256,175		1,759,948		978,637		—		5,951,800		14,004,822
June 30, 2014	2,327,167		704,376		2,279,121		1,710,335		1,012,313		—		6,039,230		14,072,542
March 31, 2014	2,222,958		731,574		2,339,443		1,686,696		1,027,246		—		6,100,286		14,108,203
December 31, 2013	2,135,467		765,751		2,261,862		1,687,117		1,052,251		—		6,047,864		13,950,312

Table 32



On-Balance Sheet Outstanding Business Volume
	Fixed Rate		5- to 10-Year ARMs & Resets		1-Month to 3-Year ARMs		Total Held in Portfolio
	(in thousands)
As of:
December 31, 2015	$	4,923,163	$	2,271,960	$	4,118,366	$	11,313,489
September 30, 2015	4,889,894		2,147,916		4,049,361		11,087,171
June 30, 2015	5,136,559		2,118,999		4,102,075		11,357,633
March 31, 2015	5,006,542		2,020,600		3,857,363		10,884,505
December 31, 2014	5,020,085		2,002,943		3,697,272		10,720,300
September 30, 2014	4,823,897		1,919,353		3,324,703		10,067,953
June 30, 2014	4,955,560		1,881,625		3,247,011		10,084,196
March 31, 2014	4,890,979		1,834,352		3,304,094		10,029,425
December 31, 2013	4,980,500		1,827,744		3,113,224		9,921,468

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The following table presents the quarterly net effective spread by segment:

Table 33



	Net Effective Spread by Line of Business
	Farm & Ranch				USDA Guarantees				Rural Utilities				Institutional Credit				Corporate				Net Effective Spread
	Dollars		Yield		Dollars		Yield		Dollars		Yield		Dollars		Yield		Dollars		Yield		Dollars		Yield
	(dollars in thousands)
For the quarter ended:
December 31, 2015	$	9,381	1.72	%	$	4,518	0.96	%	$	2,845	1.14	%	$	10,899	0.80	%	$	2,306	0.26	%	$	29,949	0.85	%
September 30, 2015	9,628		1.80	%	4,630		0.99	%	2,907		1.18	%	11,271		0.81	%	1,951		0.25	%	30,387		0.88	%
June 30, 2015	9,681		1.82	%	4,466		0.98	%	2,838		1.18	%	10,860		0.78	%	1,942		0.25	%	29,787		0.88	%
March 31, 2015⁽¹⁾	10,114		1.97	%	4,225		0.95	%	2,804		1.15	%	10,425		0.77	%	1,689		0.20	%	29,257		0.86	%
December 31, 2014⁽²⁾	8,682		1.71	%	5,250		1.19	%	2,908		1.18	%	9,870		0.78	%	1,732		0.26	%	28,442		0.91	%
September 30, 2014	8,207		1.68	%	5,073		1.18	%	2,890		1.16	%	9,823		0.78	%	3,773		0.59	%	29,766		0.97	%
June 30, 2014	7,820		1.64	%	4,159		0.99	%	2,953		1.16	%	9,957		0.78	%	4,160		0.57	%	29,049		0.92	%
March 31, 2014⁽³⁾	7,114		1.53	%	3,784		0.91	%	1,990		0.73	%	9,406		0.74	%	4,142		0.56	%	26,436		0.84	%
December 31, 2013⁽³⁾	10,113		2.20	%	4,022		0.97	%	2,379		0.89	%	9,088		0.72	%	4,420		0.58	%	30,022		0.94	%

⁽¹⁾

Beginning in first quarter 2015, Farmer Mac revised its methodology for interest expense allocation among the Farm & Ranch, USDA Guarantees, and Rural Utilities lines of business. As a result of this revision, a greater percentage of interest expense has been allocated to the longer-term assets included within the USDA Guarantees and Rural Utilities lines of business. Net effective spread for periods prior to the quarter ended March 31, 2015 does not reflect this revision.


⁽²⁾	On October 1, 2014, $78.5 million of preferred stock issued by CoBank was called, resulting in a loss of net effective spread of $2.1 million or 30 basis points

in the corporate segment. The impact on consolidated net effective spread was 7 basis points.

⁽³⁾

First quarter 2014 includes the impact of spread compression in the Rural Utilities line of business from the early refinancing of loans (41 basis points). Fourth quarter 2013 includes the impact in net effective spread in the Farm & Ranch line of business of one-time adjustments for recovered buyout interest and yield maintenance (40 basis points in aggregate) and the impact of spread compression in the Rural Utilities line of business from the early refinancing of loans (26 basis points).

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The following table presents quarterly core earnings reconciled to net income attributable to common stockholders:

Table 34




	December 2015			September 2015			June 2015			March 2015			December 2014			September 2014			June 2014			March 2014			December 2013
	(in thousands)
Revenues:
Net effective spread⁽¹⁾	$	29,949		$	30,387		$	29,787		$	29,257		$	28,442		$	29,766		$	29,049		$	26,436		$	30,022
Guarantee and commitment fees	4,730			4,328			4,085			4,012			4,097			4,152			4,216			4,315			4,252
Other⁽²⁾	(284		)	(93		)	(24		)	(405		)	(1,285		)	(2,001		)	(520		)	(410		)	427
Total revenues	34,395			34,622			33,848			32,864			31,254			31,917			32,745			30,341			34,701

Credit related (income)/expense:
(Release of)/provision for losses	(49		)	(303		)	1,256			(696		)	(479		)	(804		)	(2,557		)	674			12
REO operating expenses	44			48			—			(1		)	48			1			59			2			3
Losses/(gains) on sale of REO	—			—			—			1			28			—			(168		)	3			(26		)
Total credit related (income)/expense	(5		)	(255		)	1,256			(696		)	(403		)	(803		)	(2,666		)	679			(11		)

Operating expenses:
Compensation and employee benefits	5,385			5,236			5,733			5,693			4,971			4,693			4,889			4,456			4,025
General and administrative	3,238			3,676			3,374			2,823			2,992			3,123			3,288			2,794			3,104
Regulatory fees	613			600			600			600			600			593			594			594			594
Total operating expenses	9,236			9,512			9,707			9,116			8,563			8,409			8,771			7,844			7,723

Net earnings	25,164			25,365			22,885			24,444			23,094			24,311			26,640			21,818			26,989
Income tax expense/(benefit)⁽³⁾	8,855			8,924			8,091			6,692			4,858			6,327			(4,734		)	4,334			5,279
Net (loss)/income attributable to non-controlling interest	(60		)	(36		)	(119		)	5,354			5,414			5,412			5,819			5,547			5,546
Preferred stock dividends	3,296			3,295			3,296			3,295			3,296			3,283			2,308			952			882
Core earnings	$	13,073		$	13,182		$	11,617		$	9,103		$	9,526		$	9,289		$	23,247		$	10,985		$	15,282

Reconciling items (after-tax effects):
Unrealized gains/(losses) on financial derivatives and hedging activities	1,784			(4,489		)	10,388			(582		)	(3,717		)	2,685			(3,053		)	(2,395		)	8,003
Unrealized gains/(losses) on trading assets	452			(5		)	110			236			679			(21		)	(46		)	426			(50		)
Amortization of premiums/discounts and deferred gains on assets consolidated at fair value	(171		)	(76		)	(81		)	(529		)	(811		)	(440		)	(179		)	(8,027		)	(10,864		)
Net effects of settlements on agency forward contracts	(106		)	(253		)	128			(164		)	(30		)	73			236			(176		)	114
Loss on retirement of Farmer Mac II LLC Preferred Stock	—			—			—			(6,246		)	—			—			—			—			—
Net income attributable to common stockholders	$	15,032		$	8,359		$	22,162		$	1,818		$	5,647		$	11,586		$	20,205		$	813		$	12,485


⁽¹⁾	The difference between first quarter 2014 and fourth quarter 2013 net effective spread was due to the impact of one-time adjustments for recovered buyout interest and yield maintenance of $1.8 million in fourth quarter 2013, $0.6 million associated with the early refinancing of AgVantage securities and the recasting of certain Rural Utilities loans, and a lower day count in first quarter 2014.

⁽²⁾

Fourth quarter 2014 and third quarter 2014 include $13.6 million and $17.9 million, respectively, of interest expense related to securities purchased under agreements to resell and securities sold, not yet purchased and $12.8 million and $16.4 million, respectively of gains on securities sold, not yet purchased. First quarter 2014 includes additional hedging costs of $0.6 million. Fourth quarter 2013 includes gains on the repurchase of debt of $1.5 million, partially offset by realized losses on the sale of available-for-sale securities of $0.9 million and additional hedging costs of $0.2 million.

⁽³⁾

Fourth quarter 2014 and second quarter 2014 reflect a reduction of $1.4 million and $11.6 million, respectively, in the tax valuation allowance against capital loss carryforwards related to capital gains on securities sold, not yet purchased. First quarter 2014 and fourth quarter 2013 reflect a reduction in tax valuation allowance of $0.8 million and $2.1 million, respectively, associated with certain gains on investment portfolio assets.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

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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 Farmer Mac's use of financial derivatives and related accounting policies, see Note 2(h) and Note 6 to the consolidated financial statements.

Item 8. Financial Statements

Management's Report on Internal Control over Financial Reporting

The management of Farmer Mac is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f). Internal control over financial reporting is a process designed under the supervision of Farmer Mac's Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of Farmer Mac's financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

Farmer Mac's internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of Farmer Mac; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of Farmer Mac are being made only in accordance with authorizations of management and directors of Farmer Mac; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of Farmer Mac's assets that could have a material effect on the consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of Farmer Mac's Chief Executive Officer and Chief Financial Officer, Farmer Mac's management assessed the effectiveness of Farmer Mac's internal control over financial reporting as of December 31, 2015. In making this assessment, Farmer Mac's management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework (2013). Based on its evaluation under the COSO criteria, management concluded that Farmer Mac's internal control over financial reporting as of December 31, 2015 was effective.

Farmer Mac's independent registered public accounting firm, PricewaterhouseCoopers LLP, has audited the effectiveness of Farmer Mac's internal control over financial reporting as of December 31, 2015, as stated in their report appearing below.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders

of the Federal Agricultural Mortgage Corporation:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of comprehensive income/(loss), of equity, and of cash flows present fairly, in all material respects, the financial position of the Federal Agricultural Mortgage Corporation and its subsidiaries at December 31, 2015 and 2014, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2015 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on these financial statements and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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/s/PricewaterhouseCoopers LLP

McLean, Virginia

March 10, 2016

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FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS



	As of
	December 31, 2015			December 31, 2014
	(in thousands)
Assets:
Cash and cash equivalents	$	1,210,084		$	1,363,387
Investment securities:
Available-for-sale, at fair value	2,775,025			1,938,499
Trading, at fair value	491			689
Total investment securities	2,775,516			1,939,188
Farmer Mac Guaranteed Securities:
Available-for-sale, at fair value	4,152,605			3,659,281
Held-to-maturity, at amortized cost	1,274,016			1,794,620
Total Farmer Mac Guaranteed Securities	5,426,621			5,453,901
USDA Securities:
Available-for-sale, at fair value	1,888,344			1,731,222
Trading, at fair value	28,975			40,310
Total USDA Securities	1,917,319			1,771,532
Loans:
Loans held for investment, at amortized cost	3,258,413			2,833,461
Loans held for investment in consolidated trusts, at amortized cost	708,111			692,478
Allowance for loan losses	(4,480		)	(5,864		)
Total loans, net of allowance	3,962,044			3,520,075
Real estate owned, at lower of cost or fair value	1,369			421
Financial derivatives, at fair value	3,816			4,177
Interest receivable (includes $7,938 and $9,509, respectively, related to consolidated trusts)	112,700			106,874
Guarantee and commitment fees receivable	40,189			39,462
Deferred tax asset, net	42,916			33,391
Prepaid expenses and other assets	47,780			55,413
Total Assets	$	15,540,354		$	14,287,821

Liabilities and Equity:
Liabilities:
Notes payable:
Due within one year	$	9,111,461		$	7,353,953
Due after one year	4,967,036			5,471,186
Total notes payable	14,078,497			12,825,139
Debt securities of consolidated trusts held by third parties	713,536			424,214
Financial derivatives, at fair value	77,199			84,844
Accrued interest payable (includes $6,705 and $5,145, respectively, related to consolidated trusts)	47,621			48,355
Guarantee and commitment obligation	38,609			37,925
Accounts payable and accrued expenses	29,089			81,252
Reserve for losses	2,083			4,263
Total Liabilities	14,986,634			13,505,992
Commitments and Contingencies (Note 12)
Equity:
Preferred stock:
Series A, par value $25 per share, 2,400,000 shares authorized, issued and outstanding	58,333			58,333
Series B, par value $25 per share, 3,000,000 shares authorized, issued and outstanding	73,044			73,044
Series C, par value $25 per share, 3,000,000 shares authorized, issued and outstanding	73,382			73,382
Common stock:
Class A Voting, $1 par value, no maximum authorization, 1,030,780 shares outstanding	1,031			1,031
Class B Voting, $1 par value, no maximum authorization, 500,301 shares outstanding	500			500
Class C Non-Voting, $1 par value, no maximum authorization, 9,155,661 shares and 9,406,267 shares outstanding, respectively	9,156			9,406
Additional paid-in capital	117,862			113,559
Accumulated other comprehensive (loss)/income, net of tax	(11,019		)	15,533
Retained earnings	231,228			201,013
Total Stockholders' Equity	553,517			545,801
Non-controlling interest	203			236,028
Total Equity	553,720			781,829
Total Liabilities and Equity	$	15,540,354		$	14,287,821

The accompanying notes are an integral part of these consolidated financial statements.

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CONSOLIDATED STATEMENTS OF OPERATIONS



	For the Year Ended December 31,
	2015			2014			2013
	(in thousands, except per share amounts)
Interest income:
Investments and cash equivalents	$	13,338		$	17,269		$	21,940
Farmer Mac Guaranteed Securities and USDA Securities	134,443			128,923			139,730
Loans	117,042			94,875			85,059
Total interest income	264,823			241,067			246,729
Total interest expense	139,016			170,720			137,276
Net interest income	125,807			70,347			109,453
(Provision for)/release of allowance for loan losses	(2,388		)	961			481
Net interest income after (provision for)/release of allowance for loan losses	123,419			71,308			109,934
Non-interest income:
Guarantee and commitment fees	14,077			14,694			15,627
Gains/(losses) on financial derivatives and hedging activities	2,531			(21,646		)	31,764
Gains/(losses) on trading securities	1,220			38,629			(819		)
Gains/(losses) on sale of available-for-sale investment securities	9			(238		)	2,113
Gains on repurchase of debt	—			—			1,462
(Losses)/gains on sale of real estate owned	(1		)	137			1,236
Other income	2,305			1,714			3,057
Non-interest income	20,141			33,290			54,440
Non-interest expense:
Compensation and employee benefits	22,047			19,009			17,817
General and administrative	13,111			12,197			11,563
Regulatory fees	2,413			2,381			2,375
Real estate owned operating costs, net	91			110			423
(Release of)/provision for reserve for losses	(2,180		)	(2,205		)	929
Non-interest expense	35,482			31,492			33,107
Income before income taxes	108,078			73,106			131,267
Income tax expense	34,239			2,824			33,752
Net income	73,839			70,282			97,515
Less: Net income attributable to non-controlling interest	(5,139		)	(22,192		)	(22,187		)
Net income attributable to Farmer Mac	68,700			48,090			75,328
Preferred stock dividends	(13,182		)	(9,839		)	(3,495		)
Loss on retirement of preferred stock	(8,147		)	—			—
Net income attributable to common stockholders	$	47,371		$	38,251		$	71,833

Earnings per common share and dividends:
Basic earnings per common share	$	4.33		$	3.50		$	6.64
Diluted earnings per common share	$	4.19		$	3.37		$	6.41

The accompanying notes are an integral part of these consolidated financial statements.

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME



	For the Year Ended December 31,
	2015			2014			2013
	(in thousands)
Net income	$	73,839		$	70,282		$	97,515
Other comprehensive income/(loss) before taxes:
Net unrealized (losses)/gains on available-for sale securities	(30,387		)	39,980			(138,831		)
Net changes in held-to-maturity securities	(9,922		)	9,190			—
Net unrealized (losses)/gains on cash flow hedges	(541		)	(347		)	107
Other comprehensive (loss)/income before tax	(40,850		)	48,823			(138,724		)
Income tax benefit/(expense) related to other comprehensive income	14,298			(17,088		)	48,553
Other comprehensive (loss)/income, net of tax	(26,552		)	31,735			(90,171		)
Comprehensive income	47,287			102,017			7,344
Less: comprehensive income attributable to non-controlling interest	(5,139		)	(22,192		)	(22,187		)
Comprehensive income/(loss) attributable to Farmer Mac	$	42,148		$	79,825		$	(14,843	)

The accompanying notes are an integral part of these consolidated financial statements.

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CONSOLIDATED STATEMENTS OF EQUITY



														Accumulated
											Additional			Other
	Preferred Stock					Common Stock					Paid-In			Comprehensive			Retained			Non-controlling			Total
	Shares		Amount			Shares		Amount			Capital			Income/(Loss)			Earnings			Interest			Equity
	(in thousands)
Balance as of January 1, 2013	58		$	57,578		10,702		$	10,702		$	106,617		$	73,969		$	102,243		$	241,853		$	592,962
Net income attributable to Farmer Mac	—		—			—		—			—			—			75,328			—			75,328
Other comprehensive loss, net of tax	—		—			—		—			—			(90,171		)	—			—			(90,171		)
Cash dividends:
Preferred stock	—		—			—		—			—			—			(3,495		)	—			(3,495		)
Common stock	—		—			—		—			—			—			(5,199		)	—			(5,199		)
Issuance of Series A Preferred Stock	2,400		58,333			—		—			—			—			—			—			58,333
Issuance of Class C Common Stock	—		—			184		184			25			—			—			—			209
Redemption of Series C preferred stock (retired on January 17, 2013)	(58	)	(57,578		)	—		—			—			—			—			—			(57,578		)
Stock-based compensation cost	—		—			—		—			2,966			—			—			—			2,966
Other stock-based award activity	—		—			—		—			1,114			—			—			—			1,114
Balance as of December 31, 2013	2,400		$	58,333		10,886		$	10,886		$	110,722		$	(16,202	)	$	168,877		$	241,853		$	574,469
Net income attributable to Farmer Mac	—		—			—		—			—			—			48,090			—			48,090
Other comprehensive income, net of tax	—		—			—		—			—			31,735			—			—			31,735
Cash dividends:	—
Preferred stock	—		—			—		—			—			—			(9,839		)	—			(9,839		)
Common stock	—		—			—		—			—			—			(6,115		)	—			(6,115		)
Issuance of Series B Preferred Stock	3,000		73,044			—		—			—			—			—			—			73,044
Issuance of Series C Preferred Stock	3,000		73,382			—		—			—			—			—			—			73,382
Issuance of Class C Common Stock	—		—			51		51			19			—			—			—			70
Stock-based compensation cost	—		—			—		—			2,859			—			—			—			2,859
Other stock-based award activity	—		—			—		—			(41		)	—			—			—			(41		)
Investment in subsidiary - non-controlling interest	—		—			—		—			—			—			—			175			175
Purchase of interest - Non-controlling interest - preferred stock	—		—			—		—			—			—			—			(6,000		)	(6,000		)
Balance as of December 31, 2014	8,400		$	204,759		10,937		$	10,937		$	113,559		$	15,533		$	201,013		$	236,028		$	781,829
Net income/(loss):
Attributable to Farmer Mac	—		—			—		—			—			—			68,700			—			68,700
Attributable to non-controlling interest	—		—			—		—			—			—			—			(214		)	(214		)
Other comprehensive loss, net of tax	—		—			—		—			—			(26,552		)	—			—			(26,552		)
Cash dividends:
Preferred stock	—		—			—		—			—			—			(13,182		)	—			(13,182		)
Common stock	—		—			—		—			—			—			(7,000		)	—			(7,000		)
Issuance of Class C Common Stock	—		—			112		112			13			—			—			—			125
Repurchase of Class C Common Stock	—		—			(362	)	(362		)	—			—			(10,156		)	—			(10,518		)
Stock-based compensation cost	—		—			—		—			3,269			—			—			—			3,269
Other stock-based award activity	—		—			—		—			1,021			—			—			—			1,021
Investment in subsidiary - non-controlling interest	—		—			—		—			—			—			—			242			242
Redemption of Farmer Mac II LLC preferred stock	—		—			—		—			—			—			(8,147		)	(235,853		)	(244,000		)
Balance as of December 31, 2015	8,400		$	204,759		10,687		$	10,687		$	117,862		$	(11,019	)	$	231,228		$	203		$	553,720

The accompanying notes are an integral part of these consolidated financial statements.

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FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS



	For the Year Ended December 31,
	2015			2014			2013
	(in thousands)
Cash flows from operating activities:
Net income	$	73,839		$	70,282		$	97,515
Adjustments to reconcile net income to net cash provided by operating activities:
Net amortization of deferred gains, premiums, and discounts on loans, investments, Farmer Mac Guaranteed Securities, and USDA Securities	2,889			18,461			26,217
Amortization of debt premiums, discounts and issuance costs	15,060			9,689			11,839
Net change in fair value of trading securities, hedged assets, and financial derivatives	(12,144		)	8,213			(44,362		)
(Gains)/losses on sale of available-for-sale investment securities	(9		)	238			(2,113		)
Gains on repurchase of debt	—			—			(1,462		)
Losses/(gains) on sale of real estate owned	1			(137		)	(1,236		)
Total provision for/(release of) losses	208			(3,166		)	448
Deferred income taxes	3,992			(6,979		)	6,670
Stock-based compensation expense	3,269			2,859			2,967
Proceeds from repayment of trading investment securities	657			685			774
Proceeds from repayment of loans purchased as held for sale	95,592			98,712			168,589
Net change in:
Interest receivable	(5,826		)	3,007			(4,063		)
Guarantee and commitment fees receivable	(727		)	1,768			(1,887		)
Other assets	8,454			(39,624		)	52,872
Accrued interest payable	(734		)	(5,417		)	1,993
Other liabilities	(166		)	(3,539		)	(771		)
Net cash provided by operating activities	184,355			155,052			313,990
Cash flows from investing activities:
Purchases of available-for-sale investment securities	(2,403,910		)	(1,545,658		)	(1,703,082		)
Purchases of Farmer Mac Guaranteed Securities and USDA Securities	(1,180,570		)	(1,555,272		)	(1,635,394		)
Purchases of loans held for investment	(837,176		)	(749,099		)	(911,846		)
Purchases of defaulted loans	(16,907		)	(705		)	(6,704		)
Proceeds from repayment of available-for-sale investment securities	1,489,074			1,327,044			1,350,491
Proceeds from repayment of Farmer Mac Guaranteed Securities and USDA Securities	967,173			1,154,732			1,125,270
Proceeds from repayment of loans purchased as held for investment	311,136			337,466			265,151
Proceeds from sale of available-for-sale investment securities	83,735			770,149			366,562
Proceeds from sale of Farmer Mac Guaranteed Securities	336,913			175,754			150,417
(Payments)/proceeds from sale of real estate owned	(1		)	1,927			4,042
Net cash used in investing activities	(1,250,533		)	(83,662		)	(995,093		)
Cash flows from financing activities:
Proceeds from issuance of discount notes	97,129,959			38,388,899			64,859,652
Proceeds from issuance of medium-term notes	4,375,368			3,544,818			2,886,783
Payments to redeem discount notes	(95,424,765		)	(38,350,229		)	(64,952,365		)
Payments to redeem medium-term notes	(4,842,281		)	(3,108,000		)	(2,066,602		)
Excess tax benefits related to stock-based awards	154			51			1,160
Payments to third parties on debt securities of consolidated trusts	(47,574		)	(37,512		)	(56,278		)
Proceeds from common stock issuance	1,689			244			1,913
Proceeds from Series A Preferred stock issuance	—			—			58,333
Proceeds from Series B Preferred stock issuance	—			73,044			—
Proceeds from Series C Preferred stock issuance	—			73,382			—
Common stock repurchased	(10,320		)	—			—
Retirement of Series C Preferred stock	—			—			(57,578		)
Investment in Contour	242			175			—
Redemption of Farmer Mac II LLC Preferred Stock	(244,000		)	(6,000		)	—
Dividends paid - Non-controlling interest - preferred stock	(5,415		)	(22,192		)	(22,187		)
Dividends paid on common and preferred stock	(20,182		)	(13,996		)	(7,979		)
Net cash provided by financing activities	912,875			542,684			644,852
Net (decrease)/increase in cash and cash equivalents	(153,303		)	614,074			(36,251		)
Cash and cash equivalents at beginning of period	1,363,387			749,313			785,564
Cash and cash equivalents at end of period	$	1,210,084		$	1,363,387		$	749,313

The accompanying notes are an integral part of these consolidated financial statements.

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FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.	ORGANIZATION

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:


•	purchasing eligible loans directly from lenders;


•	providing advances against eligible loans by purchasing obligations secured by those loans;


•	securitizing assets and guaranteeing the payment of principal and interest on the resulting securities that represent interests in, or obligations secured by, pools of eligible loans; and


•	issuing long-term standby purchase commitments ("LTSPCs") for eligible loans.

As of December 31, 2015 and 2014, the total outstanding balance in all of Farmer Mac's lines of business was $15.9 billion and $14.6 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. 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 and 2014, 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 billion and $5.4 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, 2015 and

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2014, outstanding Farmer Mac Guaranteed USDA Securities and USDA Securities totaled $1.9 billion and $1.8 billion, respectively.

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 and 2014, the aggregate outstanding principal balance of Rural Utilities loans held or subject to LTSPCs was $1.5 billion and $1.0 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 and 2014, outstanding securities held or guaranteed by Farmer Mac in its Institutional Credit line of business totaled $6.7 billion and $6.4 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:


•	interest income earned on assets held on balance sheet, net of related funding costs and interest payments and receipts on financial derivatives; and


•	guarantee and commitment fees received in connection with outstanding Farmer Mac Guaranteed Securities and LTSPCs.

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, Farmer Mac had $6.6 billion of discount notes and $7.4 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").


2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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principles requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities (including, but not limited to, the allowance for loan losses, reserve for losses, other-than-temporary impairment of investment securities, and fair value measurements) as of the date of the consolidated financial statements 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:


(a)	Principles of Consolidation

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, whose principal activity is to appraise agricultural real estate. The consolidated financial statements also include the accounts of variable interest entities ("VIEs") in which Farmer Mac determined itself to be the primary beneficiary. See Note 2(q) for more information on consolidated VIEs.


(b)	Cash and Cash Equivalents and Statements of Cash Flows

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 months. Changes in the balance of cash and cash equivalents are reported in the consolidated statements of cash flows.

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

Table 2.1



	For the Year Ended December 31,
	2015		2014		2013
	(in thousands)
Cash paid during the period for:
Interest	$	108,254	$	171,644	$	114,609
Income taxes	31,000		12,750		23,000
Non-cash activity:
Real estate owned acquired through loan liquidation	—		—		1,443
Loans acquired and securitized as Farmer Mac Guaranteed Securities	336,913		175,754		150,417
Consolidation of Farm & Ranch Guaranteed Securities from off-balance sheet to loans held for investment in consolidated trusts and to debt securities of consolidated trusts held by third parties	336,913		199,906		150,417
Purchases of securities - traded, not yet settled	20,000		70,178		—
Issuance costs on the retirement of Farmer Mac II LLC Preferred Stock	8,147		—		—
Unsettled common stock repurchases	197		—		—
Transfers of loans held for sale to loans held for investment	—		—		673,991
Transfers of available-for-sale Farmer Mac Guaranteed Securities to held-to-maturity	—		1,632,786		—

On January 1, 2014, Farmer Mac transferred $1.6 billion of Farmer Mac Guaranteed Securities from available-for-sale to held-to-maturity because Farmer Mac determined it has the ability and intent to hold these securities until maturity or payoff. Farmer Mac transferred these securities at fair value which reflected an unrealized holding gain of $22.3 million. Farmer Mac accounts for held-to-maturity securities at amortized cost. The unrealized holding gain is being amortized out of accumulated other comprehensive income over the remaining life of the transferred securities.

On January 1, 2013, Farmer Mac transferred $674.0 million of loans from held for sale to held for investment because Farmer Mac either (1) no longer intends to sell these loans in the foreseeable future or (2) securitizes these loans using VIEs that are ultimately consolidated on Farmer Mac's balance sheet and reported as "Loans held for investment in consolidated trusts, at amortized cost." Farmer Mac transferred these loans at the lower of cost or fair value (determined on a pooled basis). Farmer Mac recorded a $5.9 million unamortized discount for loans transferred at fair value. At the time of purchase, loans are classified as either held for sale or held for investment depending upon management's intent and ability to hold the loans for the foreseeable future. Cash receipts from the repayment of loans are classified within the statements of cash flows based on management's intent upon purchase of the loan.


(c)	Transfers of Financial Assets and Liabilities

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

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securities purchased under agreements to resell in the consolidated balance sheets except for securities purchased under agreements to resell on an overnight basis, which are included in cash and cash equivalents in the consolidated balance sheets. Farmer Mac records securities purchased under agreements to resell at the amount loaned in the consolidated balance sheets. The resulting fees for these transactions are included in interest income in the consolidated statements of operations. As of December 31, 2015 and 2014, there were no outstanding securities purchased under agreements to resell.

Securities sold, not yet purchased, represent obligations of Farmer Mac to deliver specified securities at contracted prices, which would thereby require Farmer Mac to purchase the securities in the market at prevailing prices. Farmer Mac records securities sold, not yet purchased in the consolidated balance sheets at fair value with changes in fair value recognized in "Gains/(losses) on trading securities" in the consolidated statements of operations. The resulting interest expense for these transactions is included in interest expense in the consolidated statements of operations. As of December 31, 2015 and 2014, there were no outstanding securities sold, not yet purchased.


(d)	Investment Securities, Farmer Mac Guaranteed Securities, and USDA Securities

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.


(e)	Loans

Loans for which Farmer Mac has the positive intent and ability to hold for the foreseeable future are classified as held for investment and reported at their unpaid principal balance, net of unamortized purchase discounts or premiums. When Farmer Mac consolidates a trust, it recognizes the loans underlying the trust in the consolidated balance sheets as "Loans held for investment in consolidated trusts, at amortized cost." See Note 2(q) for more information on the accounting policy related to consolidation. Loans that Farmer Mac does not intend to hold for the foreseeable future are classified as

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held for sale and reported at the lower of cost or fair value determined on a pooled basis. Farmer Mac does not amortize premiums and discounts related to loans held for sale.

Non-accrual Loans

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.


(f)	Securitization of Loans

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 an 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.


(g)	Real Estate Owned

Real estate owned ("REO") consists of real estate acquired through loan liquidation and is recorded at fair value less estimated selling cost at acquisition. Fair value is determined by appraisal or other appropriate valuation method. Any excess of the recorded investment in the loan over the fair value less estimated selling costs is charged to the allowance for loan losses. Subsequent to the acquisition, management continues to perform periodic valuations of real estate owned. Declines in the net realizable value (fair value less estimated selling costs) are charged through income and presented in "Real estate owned operating costs, net" on the consolidated statements of operations.


(h)	Financial Derivatives

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.

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Accounting for financial derivatives differs depending on whether a derivative is designated in a formal hedging relationship. Derivative instruments designated in fair value hedging relationships mitigate exposure to changes in the fair value of assets or liabilities. Derivative instruments designated in cash flow hedging 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.

Farmer Mac has made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio, consistent with how Farmer Mac previously has been measuring credit risk for these instruments. See Notes 6 and 13 for more information on financial derivatives.


(i)	Notes Payable

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.


(j)	Allowance for Loan Losses and Reserve for Losses

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 losses, net of recoveries. Negative provisions, or releases of allowance for losses, generally 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. In certain circumstances, for example,

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when a defaulted loan is purchased out of a guaranteed security or pursuant to an LTSPC, the related reserve for losses is reclassified as allowance for loan losses and there is a corresponding release from the provision for losses and a charge to the provision for loan losses.

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

Charge-offs

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.

General Allowance for Losses

Farm & Ranch

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:


•	economic conditions;


•	geographic and agricultural commodity/product concentrations in the portfolio;


•	the credit profile of the portfolio;


•	delinquency trends of the portfolio;


•	historical charge-off and recovery activities of the portfolio; and


•	other factors to capture current portfolio trends and characteristics that differ from historical experience.

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.

Rural Utilities

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

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and Farmer Mac's counterparty risk analysis. As of December 31, 2015, there were no delinquencies and no probable losses inherent in Farmer Mac's Rural Utilities loans held or underlying LTSPCs.

Specific Allowance for Impaired Loans

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.

Farmer Mac uses a risk-based approach in determining the necessity of obtaining updated appraisals on impaired loans. For example, larger exposures associated with highly improved and specialized collateral will generally receive updated appraisals once the loans are identified as impaired. In addition, updated appraisals are always obtained during the foreclosure process. Depending on the risk factors associated with the loan and underlying collateral, which can vary widely depending on the circumstances of the loan and collateral, this can occur early in the foreclosure process, while in other instances this may occur just prior to the transfer of title. As part of its routine credit review process, Farmer Mac often will exercise judgment in discounting an appraisal value due to local real estate trends or the condition of the property (e.g., following an inspection by Farmer Mac or the servicer). In addition, a property appraisal value may be discounted based on the market's reaction to Farmer Mac's asking price for sale of the property.

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.

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(k)	Earnings Per Common Share

Basic earnings per common share ("EPS") is based on the weighted-average number of shares of common stock outstanding. Diluted earnings per common share is based on the weighted-average number of shares of common stock outstanding adjusted to include all potentially dilutive common stock options, stock appreciation rights ("SARs"), and non-vested restricted stock awards. The following schedule reconciles basic and diluted EPS for the years ended December 31, 2015, 2014, and 2013:

Table 2.2



	For the Year Ended December 31,
	2015						2014						2013
	Net Income		Weighted-Average Shares	$ per Share			Net Income		Weighted-Average Shares	$ per Share			Net Income		Weighted-Average Shares	$ per Share
	(in thousands, except per share amounts)
Basic EPS
Net income attributable to common stockholders	$	47,371	10,949	$	4.33		$	38,251	10,920	$	3.50		$	71,833	10,816	$	6.64
Effect of dilutive securities⁽¹⁾
Stock options, SARs and restricted stock	—		360	(0.14		)	—		447	(0.13		)	—		393	(0.23		)
Diluted EPS	$	47,371	11,309	$	4.19		$	38,251	11,367	$	3.37		$	71,833	11,209	$	6.41

⁽¹⁾

For the years ended December 31, 2015, 2014, and 2013, stock options and SARs of 304,132, 109,143, and 33,730, respectively, were outstanding but not included in the computation of diluted earnings per share of common stock because they were anti-dilutive. For the years ended December 31, 2015, 2014, and 2013, contingent shares of non-vested restricted stock of 46,303, 36,784, and 26,696, respectively, were outstanding but not included in the computation of diluted earnings per share of common stock because performance conditions had not yet been met.


(l)	Income Taxes

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.

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(m)	Stock-Based Compensation

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 million, and $3.0 million of compensation expense related to stock options, SARs, and non-vested restricted stock awards for 2015, 2014, and 2013, respectively.


(n)	Comprehensive Income

Comprehensive income represents all changes in stockholders' equity except those resulting from investments by or distributions to stockholders, and is comprised of net income and unrealized gains and losses on available-for-sale securities, certain held-to-maturity securities transferred from the available-for-sale classification, and cash flow hedges, net of related taxes.

The following table presents the changes in accumulated other comprehensive income ("AOCI"), net of tax, by component for the years ended December 31, 2015, 2014, and 2013:

Table 2.3



	Available-for-Sale Securities			Held-to-Maturity Securities			Cash Flow Hedges			Total
	(in thousands)
Balance as of January 1, 2013	$	73,969		$	—		$	—		$	73,969
Other comprehensive (loss)/income before reclassifications	(75,465		)	—			63			(75,402		)
Amounts reclassified from AOCI	(14,776		)	—			7			(14,769		)
Net other comprehensive (loss)/income	(90,241		)	—			70			(90,171		)
Balance as of December 31, 2013	$	(16,272	)	$	—		$	70		$	(16,202	)
Other comprehensive income/(loss) before reclassifications	38,927			14,502			(364		)	53,065
Amounts reclassified from AOCI	(12,939		)	(8,529		)	138			(21,330		)
Net other comprehensive income/(loss)	25,988			5,973			(226		)	31,735
Balance as of December 31, 2014	$	9,716		$	5,973		$	(156	)	$	15,533
Other comprehensive (loss)/income before reclassifications	(6,026		)	—			(1,155		)	(7,181		)
Amounts reclassified from AOCI	(13,725		)	(6,449		)	803			(19,371		)
Net other comprehensive (loss)/income	(19,751		)	(6,449		)	(352		)	(26,552		)
Balance as of December 31, 2015	$	(10,035	)	$	(476	)	$	(508	)	$	(11,019	)

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The following table presents other comprehensive income activity, the impact on net income of amounts reclassified from each component of AOCI, and the related tax impact for the years ended December 31, 2015, 2014, and 2013:

Table 2.4



	For the Year Ended December 31,
	2015									2014									2013
	Before Tax			Provision (Benefit)			After Tax			Before Tax			Provision (Benefit)			After Tax			Before Tax			Provision (Benefit)			After Tax
	(in thousands)
Other comprehensive income/(loss):
Available-for-sale-securities:
Unrealized holding (losses)/gains on available-for-sale-securities	$	(9,270	)	$	(3,244	)	$	(6,026	)	$	59,887		$	20,960		$	38,927		$	(116,099	)	$	(40,634	)	$	(75,465	)
Less reclassification adjustments included in:
Gains/(losses) on financial derivatives and hedging activities⁽¹⁾	(20,125		)	(7,044		)	(13,081		)	(19,213		)	(6,725		)	(12,488		)	(19,381		)	(6,783		)	(12,598		)
Gains on sale of available-for-sale investment securities⁽²⁾	(10		)	(4		)	(6		)	239			84			155			(2,114		)	(740		)	(1,374		)
Other income⁽³⁾	(982		)	(344		)	(638		)	(933		)	(327		)	(606		)	(1,237		)	(433		)	(804		)
Total	$	(30,387	)	$	(10,636	)	$	(19,751	)	$	39,980		$	13,992		$	25,988		$	(138,831	)	$	(48,590	)	$	(90,241	)
Held-to-maturity securities:
Change in fair value	$	—		$	—		$	—		$	22,311		$	7,809		$	14,502		$	—		$	—		$	—
Less reclassification adjustments included in:
Net interest income⁽⁴⁾	(9,922		)	(3,473		)	(6,449		)	(13,121		)	(4,592		)	(8,529		)	—			—			—
Total	$	(9,922	)	$	(3,473	)	$	(6,449	)	$	9,190		$	3,217		$	5,973		$	—		$	—		$	—
Cash flow hedges
Unrealized gains/(losses) on cash flow hedges	$	(1,776	)	$	(621	)	$	(1,155	)	$	(559	)	$	(195	)	$	(364	)	$	96		$	33		$	63
Less reclassification adjustments included in:
Net interest income⁽⁵⁾	1,235			432			803			212			74			138			11			4			7
Total	$	(541	)	$	(189	)	$	(352	)	$	(347	)	$	(121	)	$	(226	)	$	107		$	37		$	70
Other comprehensive (loss)/income	$	(40,850	)	$	(14,298	)	$	(26,552	)	$	48,823		$	17,088		$	31,735		$	(138,724	)	$	(48,553	)	$	(90,171	)


⁽¹⁾	Relates to the amortization of unrealized gains on hedged items prior to the application of fair value hedge accounting.


⁽²⁾	Represents unrealized gains on sales of available-for-sale investment securities.


⁽³⁾	Represents amortization of deferred gains related to certain available-for-sale USDA Securities and Farmer Mac Guaranteed USDA Securities.

⁽⁴⁾

Relates to the amortization of unrealized gains or losses prior to the reclassification of these securities from available-for-sale to held-to-maturity. The amortization of unrealized gains or losses reported in AOCI for held-to-maturity securities will be offset by the amortization of the premium or discount created from the transfer into held-to-maturity securities, which occurred at fair value. These unrealized gains or losses will be recorded over the remaining life of the security with no impact on future net income.


⁽⁵⁾	Relates to the recognition of unrealized gains and losses on cash flow hedges recorded in AOCI.


(o)	Long-Term Standby Purchase Commitments

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.

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(p)	Fair Value Measurement

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.


(q)	Consolidation of Variable Interest Entities

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

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"Debt securities of consolidated trusts held by third parties," respectively. These assets can only be used to satisfy the obligations of the related trust.

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:

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Table 2.5



	Consolidation of Variable Interest Entities
	As of December 31, 2015
	Farm & Ranch		USDA Guarantees		Rural Utilities		Institutional Credit		Corporate		Total
	(in thousands)
On-Balance Sheet:
Consolidated VIEs:
Loans held for investment in consolidated trusts, at amortized cost	$	708,111	$	—	$	—	$	—	$	—	$	708,111
Debt securities of consolidated trusts held by third parties ⁽¹⁾	713,536		—		—		—		—		713,536
Unconsolidated VIEs:
Farmer Mac Guaranteed Securities:
Carrying value ⁽²⁾	—		31,360		—		31,400		—		62,760
Maximum exposure to loss ⁽³⁾	—		31,553		—		30,000		—		61,553
Investment securities:
Carrying value ⁽⁴⁾	—		—		—		—		917,292		917,292
Maximum exposure to loss ^{(3) (4)}	—		—		—		—		918,121		918,121
Off-Balance Sheet:
Unconsolidated VIEs:
Farmer Mac Guaranteed Securities:
Maximum exposure to loss ^{(3) (5)}	514,051		10,272		—		970,000		—		1,494,323


⁽¹⁾	Includes borrower remittances of $5.4 million. The borrower remittances have not been passed through to third party investors as of December 31, 2015.


⁽²⁾	Includes $0.2 million of unamortized premiums and discounts and fair value adjustments related to the USDA Guarantees line of business. Includes fair value adjustments related to the Institutional Credit line of business of $1.4 million.


⁽³⁾	Farmer Mac uses unpaid principal balance and outstanding face amount of investment securities to represent maximum exposure to loss.


⁽⁴⁾	Includes auction-rate certificates, asset-backed securities, and government-sponsored enterprise ("GSE")-guaranteed mortgage-backed securities.


⁽⁵⁾	The amount under the Farm & Ranch line of business relates to unconsolidated trusts where Farmer Mac determined it was not the primary beneficiary due to shared power with an unrelated party.

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	Consolidation of Variable Interest Entities
	As of December 31, 2014
	Farm & Ranch		USDA Guarantees		Rural Utilities		Institutional Credit		Corporate		Total
	(in thousands)
On-Balance Sheet:
Consolidated VIEs:
Loans held for investment in consolidated trusts, at amortized cost ⁽¹⁾	$	421,355	$	—	$	271,123	$	—	$	—	$	692,478
Debt securities of consolidated trusts held by third parties ⁽²⁾	424,214		—		—		—		—		424,214
Unconsolidated VIEs:
Farmer Mac Guaranteed Securities:
Carrying value ⁽³⁾	—		27,620		—		32,415		—		60,035
Maximum exposure to loss ⁽⁴⁾	—		27,832		—		30,000		—		57,832
Investment securities:
Carrying value ⁽⁵⁾	—		—		—		—		409,657		409,657
Maximum exposure to loss ^{(4) (5)}	—		—		—		—		412,690		412,690
Off-Balance Sheet:
Unconsolidated VIEs:
Farmer Mac Guaranteed Securities:
Maximum exposure to loss ^{(4) (6)}	636,086		13,978		—		970,000		—		1,620,064


⁽¹⁾	Includes unamortized premiums related to the Rural Utilities line of business of $3.7 million.


⁽²⁾	Includes borrower remittances of $2.9 million, which have not been passed through to third party investors as of December 31, 2014.


⁽³⁾	Includes $0.2 million of unamortized premiums and discounts and fair value adjustments related to the USDA Guarantees line of business. Includes fair value adjustments related to the Institutional Credit line of business of $2.4 million.


⁽⁴⁾	Farmer Mac uses unpaid principal balance and the outstanding face amount of investment securities to represent maximum exposure to loss.


⁽⁵⁾	Includes auction-rate certificates, asset-backed securities, and GSE-guaranteed mortgage-backed securities.


⁽⁶⁾	The amount under the Farm & Ranch line of business relates to unconsolidated trusts where Farmer Mac determined it was not the primary beneficiary due to shared power with an unrelated party.

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(r) New Accounting Standards

In February 2015, the FASB issued ASU 2015-02, "Amendments to the Consolidation Analysis." This update modifies the evaluation of whether limited partnerships and similar legal entities are VIEs or voting interest entities and eliminates the presumption that a general partner should consolidate 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 2015-02 is effective for interim and annual periods beginning after December 15, 2015. The adoption of the new guidance will not have a material effect on Farmer Mac's financial position, results of operations, or cash flows.

In January 2016, the FASB issued ASU 2016-01, 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 adoption of the new guidance will not have a material effect on Farmer 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 adoption of the new guidance will not have a material effect on Farmer Mac's financial position, results of operations, or cash flows.


(s)	Reclassifications

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


3.	RELATED PARTY TRANSACTIONS

Farmer Mac considers an entity to be a related party if (1) the entity holds at least five percent of a class of Farmer Mac voting common stock or (2) the institution has an affiliation with a Farmer Mac director and conducts material business with Farmer Mac. 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 Farm Credit System may hold Farmer Mac's Class B voting common stock. Farmer Mac's statutory charter also provides that Class A stockholders elect five members of Farmer Mac's 15-member board of directors and that Class B stockholders elect five members of the board of directors. Additionally, in order to participate in the Farm & Ranch program, a financial institution must own a requisite amount of Farmer Mac's common stock, based on the size and type of institution. As a result of these requirements, Farmer Mac conducts business with related parties in the normal course of Farmer Mac's business. All related party transactions were conducted with terms and conditions comparable to those available to any other participant in Farmer Mac's lines of business not related to Farmer Mac.

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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 2015, 2014, and 2013:

Table 3.1



	For the Year Ended December 31,
	2015		2014		2013
	(in thousands)
Unpaid Principal Balance:
Purchases:
Loans	$	178,890	$	155,808	$	210,088
USDA Securities	13,718		42,637		13,153
On-balance sheet AgVantage Securities	—		50,237		—
Sales of Farmer Mac Guaranteed Securities	255,338		147,234		120,409

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

Zions retained servicing fees of $9.3 million, $8.4 million, 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 and 2013. The related commissions Farmer Mac paid to Zions for these services were immaterial.

The National Rural Utilities Cooperative Financial Corporation:

Farmer Mac considers the National Rural Utilities Cooperative Financial Corporation ("CFC") a related party due to its ownership of approximately 7.9 percent of Class A voting common stock. The following transactions occurred between Farmer Mac and CFC during 2015, 2014, and 2013:

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Table 3.2



Farmer Mac Loan Purchases and Guarantees
	For the Year Ended December 31,
	2015		2014		2013
	(in thousands)
Unpaid Principal Balance:
Loans	$	108,337	$	75,500	$	86,965
LTSPCs	522,262		—		—
On-balance sheet AgVantage Securities	380,000		820,775		820,000
Off-balance sheet AgVantage Securities	—		7,190		—
Off-balance sheet Revolving floating rate AgVantage facility	300,000		—		—
Total purchases and guarantees	$	1,310,599	$	903,465	$	906,965

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

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

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

CFC retained servicing fees of $3.3 million for 2015 and $3.4 million in both 2014 and 2013 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 $28.5 million, $19.7 million, and $8.1 million of LTSPC transactions in 2015, 2014, and 2013, respectively, and the aggregate balance of LTSPCs outstanding as of December 31, 2015 and 2014 was $112.7 million and $112.8 million, respectively. Farmer Mac received from AgFirst $0.4 million, $0.6 million, and $0.7 million in commitment fees in 2015, 2014, and 2013, respectively, and had $0.1 million of commitment fees receivable as of both December 31, 2015 and 2014.

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 and 2014, the outstanding balance of those securities owned by AgFirst was $24.6 million and $28.9 million, respectively. Farmer Mac received

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guarantee fees of $0.1 million, $0.1 million, and $0.5 million in 2015, 2014, and 2013, respectively, on those securities.

Farm Credit Bank of Texas:

Farmer Mac has a related party relationship with Farm Credit Bank of Texas resulting from the bank being a holder of approximately 7.7 percent of Farmer Mac Class B voting common stock and because a member of Farmer Mac's board of directors has an affiliation with that entity. Farmer Mac received from Farm Credit Bank of Texas commitment fees of $0.1 million, $0.2 million, and $0.2 million in 2015, 2014, and 2013, respectively. The aggregate amount of LTSPCs outstanding with Farm Credit Bank of Texas as of December 31, 2015 and 2014 was $43.3 million and $51.5 million, respectively. In 2015, 2014, and 2013, Farm Credit Bank of Texas retained $0.3 million, $0.4 million, and $0.5 million, respectively, in servicing fees for its work as a Farmer Mac central servicer.

Other Related Party Transactions:

Farmer Mac purchased $21.1 million, $35.1 million, and $61.6 million in loans from First Dakota National Bank in 2015, 2014, and 2013, respectively. Farmer Mac entered into $7.8 million of new LTSPCs in 2015, none for 2014, and $1.0 million in 2013, respectively with First Dakota National Bank. First Dakota National Bank retained servicing fees of $1.0 million, $0.8 million, and $0.6 million in 2015, 2014, and 2013, respectively, for its work as a Farmer Mac servicer. Farmer Mac purchased $2.1 million, $4.5 million, and $9.3 million in USDA Securities from Bath State Bank in 2015, 2014, and 2013, respectively. These institutions had a related party relationship with Farmer Mac because a member of Farmer Mac's board of directors is affiliated with each of those entities.

Farmer Mac had a related party relationship with AgGeorgia during 2014 because a former member of Farmer Mac's board of directors had an affiliation with that entity while he served on Farmer Mac's board of directors during 2014. Effective June 2014, AgGeorgia was no longer a related party because this individual ceased his service on Farmer Mac's board of directors at that time. Amounts, where presented in 2014, represent activity for the entire year. Farmer Mac entered into $20.2 million and $27.5 million of new LTSPCs with AgGeorgia and received $0.1 million of commitment fees during 2014 and 2013, respectively.

Farmer Mac owned $70.0 million of subordinated debt issued by CoBank as of December 31, 2015 and 2014, respectively. Farmer Mac has a related party relationship with CoBank because CoBank is a major holder (32.6 percent) of Farmer Mac Class B voting common stock and because a member of Farmer Mac's board of directors has an affiliation with that entity.

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4.	INVESTMENT SECURITIES

The following tables set forth information about Farmer Mac's investment securities as of December 31, 2015 and 2014:

Table 4.1



	As of December 31, 2015
	Amount Outstanding		Unamortized Premium/(Discount)			Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
	(in thousands)
Available-for-sale:
Floating rate auction-rate certificates backed by Government guaranteed student loans	$	46,500	$	—		$	46,500	$	—	$	(1,576	)	$	44,924
Floating rate asset-backed securities	74,744		(253		)	74,491		14		(776		)	73,729
Floating rate corporate debt securities	10,000		—			10,000		—		(9		)	9,991
Fixed rate corporate debt securities	10,000		(1		)	9,999		—		(5		)	9,994
Floating rate Government/GSE guaranteed mortgage-backed securities	1,353,495		3,515			1,357,010		2,768		(4,319		)	1,355,459
Fixed rate GSE guaranteed mortgage-backed securities⁽¹⁾	692		3,117			3,809		4,095		—			7,904
Floating rate GSE subordinated debt	70,000		—			70,000		—		(3,751		)	66,249
Fixed rate senior agency debt	214,000		(25		)	213,975		12		—			213,987
Fixed rate U.S. Treasuries	993,680		(417		)	993,263		2		(477		)	992,788
Total available-for-sale	2,773,111		5,936			2,779,047		6,891		(10,913		)	2,775,025
Trading:
Floating rate asset-backed securities	2,211		—			2,211		—		(1,720		)	491
Total investment securities	$	2,775,322	$	5,936		$	2,781,258	$	6,891	$	(12,633	)	$	2,775,516


⁽¹⁾	Fair value includes $7.2 million of an interest-only security with a notional amount of $148.5 million.

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	As of December 31, 2014
	Amount Outstanding		Unamortized Premium/(Discount)			Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
	(in thousands)
Available-for-sale:
Floating rate auction-rate certificates backed by Government guaranteed student loans	$	46,600	$	—		$	46,600	$	—	$	(6,024	)	$	40,576
Floating rate asset-backed securities	100,730		(74		)	100,656		283		(37		)	100,902
Floating rate corporate debt securities	10,000		—			10,000		91		—			10,091
Fixed rate corporate debt securities	30,000		(10		)	29,990		35		—			30,025
Floating rate Government/GSE guaranteed mortgage-backed securities	605,053		3,431			608,484		4,712		(443		)	612,753
Fixed rate GSE guaranteed mortgage-backed securities⁽¹⁾	853		3,542			4,395		3,807		—			8,202
Floating rate GSE subordinated debt	70,000		—			70,000		—		(3,680		)	66,320
Fixed rate senior agency debt	18,806		130			18,936		3		—			18,939
Floating rate U.S. Treasuries	75,000		(10		)	74,990		—		(11		)	74,979
Fixed rate U.S. Treasuries	975,194		462			975,656		72		(16		)	975,712
Total available-for-sale	1,932,236		7,471			1,939,707		9,003		(10,211		)	1,938,499
Trading:
Floating rate asset-backed securities	2,868		—			2,868		—		(2,179		)	689
Total investment securities	$	1,935,104	$	7,471		$	1,942,575	$	9,003	$	(12,390	)	$	1,939,188


⁽¹⁾	Fair value includes $7.3 million of an interest-only security with a notional amount of $152.4 million.

During 2015, Farmer Mac received proceeds of $83.7 million from the sale of securities from its available-for-sale investment portfolio, resulting in gross realized gains of $0.1 million. During 2014, Farmer Mac received proceeds of $770.1 million from the sale of securities from its available-for-sale investment portfolio, resulting in gross realized losses of $0.8 million and gross realized gains of $0.6 million. During 2013, Farmer Mac received proceeds of $366.6 million from the sale of securities from its available-for-sale investment portfolio, resulting in gross realized gains of $3.1 million and gross realized losses of $1.0 million. Farmer Mac also recognized $0.1 million in losses during 2015 related to other-than-temporary impairment on two auction-rate certificate securities.

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As of December 31, 2015 and 2014, unrealized losses on available-for-sale investment securities were as follows:

Table 4.2



	As of December 31, 2015
	Available-for-Sale Securities
	Unrealized loss position for less than 12 months					Unrealized loss position for more than 12 months
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
	(in thousands)
Floating rate auction-rate certificates backed by Government guaranteed student loans	$	—	$	—		$	18,124	$	(1,576	)
Floating rate asset-backed securities	44,552		(464		)	9,975		(312		)
Floating rate corporate debt securities	4,991		(9		)	—		—
Fixed rate corporate debt securities	9,994		(5		)	—		—
Floating rate Government/GSE guaranteed mortgage-backed securities	794,959		(3,408		)	100,192		(911		)
Floating rate GSE subordinated debt	—		—			66,249		(3,751		)
Fixed rate U.S. Treasuries	944,842		(477		)	—		—
Total	$	1,799,338	$	(4,363	)	$	194,540	$	(6,550	)



	As of December 31, 2014
	Available-for-Sale Securities
	Unrealized loss position for less than 12 months					Unrealized loss position for more than 12 months
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
	(in thousands)
Floating rate auction-rate certificates backed by Government guaranteed student loans	$	—	$	—		$	40,576	$	(6,024	)
Floating rate asset-backed securities	19,388		(37		)	—		—
Floating rate Government/GSE guaranteed mortgage-backed securities	76,100		(164		)	76,867		(279		)
Floating rate GSE subordinated debt	—		—			66,320		(3,680		)
Floating rate U.S. Treasuries	74,980		(11		)	—		—
Fixed rate U.S. Treasuries	325,033		(16		)	—		—
Total	$	495,501	$	(228	)	$	183,763	$	(9,983	)

The unrealized losses presented above are principally due to a general widening of credit spreads from the dates of acquisition to December 31, 2015 and 2014, as applicable. The resulting decrease in fair values reflects an increase in the perceived risk by the financial markets related to those securities. As of December 31, 2015, all of the investment securities in an unrealized loss position either were backed by the full faith and credit of the U.S. government or had credit ratings of at least "AA+," except three that were rated "A-." As of December 31, 2014 , all of the investment securities in an unrealized loss position either were backed by the full faith and credit of the U.S. government or had credit ratings of at least "AA+," except one that was rated "A-." The unrealized losses were on 69 and 35 individual investment securities as of December 31, 2015 and 2014, respectively.

As of December 31, 2015, 17 of the securities in loss positions had been in loss positions for more than 12 months and had a total unrealized loss of $6.6 million. As of December 31, 2014, 15 of the securities

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in loss positions had been in loss positions for more than 12 months and had a total unrealized loss of $10.0 million. Securities in unrealized loss positions for 12 months or longer have a fair value as of December 31, 2015 that is, on average, approximately 97 percent of their amortized cost basis. Farmer Mac believes that all of these unrealized losses are recoverable within a reasonable period of time by way of maturity or changes in credit spreads. Accordingly, Farmer Mac has concluded that none of the unrealized losses on these available-for-sale investment securities represents other-than-temporary impairment as of December 31, 2015 and 2014.

Farmer Mac did not own any held-to-maturity investment securities as of December 31, 2015 and 2014. As of December 31, 2015, Farmer Mac owned trading investment securities with an amortized cost of $2.2 million, a fair value of $0.5 million, and a weighted average yield of 4.41 percent. As of December 31, 2014, Farmer Mac owned trading investment securities with an amortized cost of $2.9 million, a fair value of $0.7 million, and a weighted average yield of 4.24 percent.

The amortized cost, fair value, and weighted average yield of available-for-sale investment securities by remaining contractual maturity as of December 31, 2015 are set forth below. Asset-backed and mortgage-backed securities are included based on their final maturities, although the actual maturities may differ due to prepayments of the underlying assets.

Table 4.3



	As of December 31, 2015
	Available-for-Sale Securities
	Amortized Cost		Fair Value		Weighted- Average Yield
	(dollars in thousands)
Due within one year	$	1,222,236	$	1,221,760	0.43%
Due after one year through five years	146,389		147,101		1.10%
Due after five years through ten years	575,023		573,082		0.86%
Due after ten years	835,399		833,082		0.90%
Total	$	2,779,047	$	2,775,025	0.70%

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5.	FARMER MAC GUARANTEED SECURITIES AND USDA SECURITIES

The following tables set forth information about on-balance sheet Farmer Mac Guaranteed Securities and USDA Securities as of December 31, 2015 and 2014:

Table 5.1



	As of December 31, 2015
	Unpaid Principal Balance		Unamortized Premium/(Discount)			Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
	(in thousands)
Held-to-maturity:
AgVantage	$	1,274,431	$	(415	)	$	1,274,016	$	7,801	$	—		$	1,281,817
Available-for-sale:
AgVantage	$	4,164,952	$	—		$	4,164,952	$	26,831	$	(70,539	)	$	4,121,244
Farmer Mac Guaranteed USDA Securities	31,554		(333		)	31,221		140		—			31,361
Total Farmer Mac Guaranteed Securities	4,196,506		(333		)	4,196,173		26,971		(70,539		)	4,152,605
USDA Securities	1,849,322		1,890			1,851,212		37,160		(28		)	1,888,344
Total available-for-sale	$	6,045,828	$	1,557		$	6,047,385	$	64,131	$	(70,567	)	$	6,040,949
Trading:
USDA Securities	$	27,129	$	1,934		$	29,063	$	125	$	(213	)	$	28,975



	As of December 31, 2014
	Unpaid Principal Balance		Unamortized Premium/(Discount)			Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
	(in thousands)
Held-to-maturity:
AgVantage	$	1,785,340	$	9,280		$	1,794,620	$	6,211	$	(255	)	$	1,800,576
Available-for-sale:
AgVantage	$	3,625,073	$	—		$	3,625,073	$	36,442	$	(29,853	)	$	3,631,662
Farmer Mac Guaranteed USDA Securities	27,831		(442		)	27,389		237		(7		)	27,619
Total Farmer Mac Guaranteed Securities	3,652,904		(442		)	3,652,462		36,679		(29,860		)	3,659,281
USDA Securities	1,717,813		3,162			1,720,975		11,850		(1,603		)	1,731,222
Total available-for-sale	$	5,370,717	$	2,720		$	5,373,437	$	48,529	$	(31,463	)	$	5,390,503
Trading:
USDA Securities	$	38,412	$	2,748		$	41,160	$	114	$	(964	)	$	40,310

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As of December 31, 2015 and 2014, unrealized losses on held-to-maturity and available-for-sale on-balance sheet Farmer Mac Guaranteed Securities and USDA Securities were as follows:

Table 5.2



	As of December 31, 2015
	Available-for-Sale Securities
	Unrealized loss position for less than 12 months					Unrealized loss position for more than 12 months
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
	(in thousands)
Available-for-sale:
AgVantage	$	1,193,866	$	(41,835	)	$	1,104,981	$	(28,704	)
USDA Securities	—		—			103,010		(28		)
Total available-for-sale	$	1,193,866	$	(41,835	)	$	1,207,991	$	(28,732	)



	As of December 31, 2014
	Held-to-Maturity and Available-for-Sale Securities
	Unrealized loss position for less than 12 months					Unrealized loss position for more than 12 months
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
	(in thousands)
Held-to-maturity:
AgVantage	$	547	$	(1	)	$	49,745	$	(254	)

Available-for-sale:
AgVantage	$	685,131	$	(13,115	)	$	1,460,089	$	(16,738	)
Farmer Mac Guaranteed USDA Securities	3,720		(7		)	—		—
USDA Securities	264,375		(1,549		)	97,817		(54		)
Total available-for-sale	$	953,226	$	(14,671	)	$	1,557,906	$	(16,792	)

The unrealized losses presented above are principally due to higher interest rates from the date of acquisition to December 31, 2015 and 2014, as applicable. The credit exposure related to Farmer Mac's USDA Guarantees line of business is covered by the full faith and credit guarantee of the United States. The unrealized losses from AgVantage securities were on 22 available-for-sale securities as of December 31, 2015. There were no unrealized losses from held-to-maturity AgVantage securities as of December 31, 2015. The unrealized losses from AgVantage securities were on 2 held-to-maturity securities and 23 available-for-sale securities as of December 31, 2014. As of December 31, 2015, 8 available-for-sale AgVantage securities had been in a loss position for more than 12 months with a total unrealized loss of $28.7 million. As of December 31, 2014, 15 available-for-sale AgVantage securities had been in a loss position for more than 12 months with a total unrealized loss of $16.7 million. Farmer Mac has concluded that none of the unrealized losses on its held-to-maturity Farmer Mac Guaranteed Securities and available-for-sale Farmer Mac Guaranteed Securities and USDA Securities are other-than-temporary impairment as of either December 31, 2015 or 2014. 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.

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During 2015, 2014, and 2013, Farmer Mac realized no gains or losses from the sale of 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 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.

Table 5.3



	As of December 31, 2015
	Available-for-Sale Securities
	Amortized Cost		Fair Value		Weighted- Average Yield
	(dollars in thousands)
Due within one year	$	667,704	$	668,996	2.54	%
Due after one year through five years	1,593,602		1,597,710		1.42	%
Due after five years through ten years	1,292,198		1,299,302		1.97	%
Due after ten years	2,493,881		2,474,941		2.52	%
Total	$	6,047,385	$	6,040,949	2.11	%



	As of December 31, 2015
	Held-to-Maturity Securities
	Amortized Cost		Fair Value		Weighted- Average Yield
	(dollars in thousands)
Due within one year	$	680,330	$	680,956	2.27	%
Due after one year through five years	593,686		600,861		2.23	%
Total	$	1,274,016	$	1,281,817	2.25	%

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.


6.	FINANCIAL DERIVATIVES

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

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contracts involving U.S. Treasury securities. Farmer Mac uses forward sale contracts on GSE securities to reduce its interest rate exposure to changes in both U.S. Treasury rates and spreads on Farmer Mac debt. The notional amounts of these contracts are determined based on a duration-matched hedge ratio between the hedged item and the hedge instrument. Gains or losses generated by these hedge transactions are expected to offset changes in funding costs.

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, 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 relationships are recorded in "Total interest income" in the consolidated statements of operations. For the years ended December 31, 2015, 2014, and 2013, the amount of interest income recognized on those derivatives was $22.6 million, $19.7 million, and $18.0 million, respectively. For financial derivatives designated in cash flow hedging relationships, the effective portion of the derivative gain/loss is recorded in other comprehensive income and any ineffective portion is recognized immediately 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 other comprehensive income are reclassified to "Total interest expense" in conjunction with the recognition of interest expense on the debt. During 2015 and 2014, $1.2 million and $0.2 million, respectively, was reclassified out of other comprehensive income into interest expense. The amount for 2013 was not material. As of December 31, 2015, Farmer Mac expects to reclassify $1.4 million pretax or $0.9 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. During the years ended December 31, 2015, 2014, and 2013, 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.

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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 and 2014 and the effects of financial derivatives on the consolidated statements of operations for the year ended December 31, 2015, 2014, and 2013:

Table 6.1



	As of December 31, 2015
			Fair Value						Weighted- Average Pay Rate	Weighted- Average Receive Rate	Weighted- Average Forward Price	Weighted- Average Remaining Life (in years)
	Notional Amount		Asset			(Liability)			Weighted- Average Pay Rate	Weighted- Average Receive Rate	Weighted- Average Forward Price	Weighted- Average Remaining Life (in years)
	(dollars in thousands)
Fair value hedges:
Interest rate swaps:
Pay fixed non-callable	$	1,276,285	$	949		$	(26,703	)	2.35%	0.37%		4.16
Cash flow hedges:
Interest rate swaps:
Pay fixed non-callable	119,000		8			(1,381		)	2.25%	0.64%		7.03
No hedge designation:
Interest rate swaps:
Pay fixed non-callable	454,041		229			(44,528		)	3.73%	0.33%		6.02
Receive fixed non-callable	5,590,638		2,384			(4,205		)	0.31%	0.47%		0.57
Receive fixed callable	230,000		—			(421		)	0.41%	0.91%		2.26
Basis swaps	725,000		232			(131		)	0.22%	0.38%		2.33
Treasury futures	35,000		19			—					125.96
Credit valuation adjustment			(5		)	170
Total financial derivatives	$	8,429,964	$	3,816		$	(77,199	)
Collateral pledged			—			37,986
Net amount			$	3,816		$	(39,213	)

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	As of December 31, 2014
			Fair Value						Weighted- Average Pay Rate	Weighted- Average Receive Rate	Weighted- Average Forward Price	Weighted- Average Remaining Life (in years)
	Notional Amount		Asset			(Liability)			Weighted- Average Pay Rate	Weighted- Average Receive Rate	Weighted- Average Forward Price	Weighted- Average Remaining Life (in years)
	(dollars in thousands)
Fair value hedges:
Interest rate swaps:
Pay fixed non-callable	$	1,000,000	$	—		$	(31,718	)	2.47%	0.23%		3.98
Cash flow hedges:
Interest rate swaps:
Pay fixed non-callable	15,000		—			(289		)	2.43%	0.51%		6.23
No hedge designation:
Interest rate swaps:
Pay fixed non-callable	490,183		537			(51,224		)	4.23%	0.23%		7.05
Receive fixed non-callable	3,829,355		3,414			(461		)	0.14%	0.27%		0.55
Receive fixed callable	383,565		1			(877		)	0.12%	1.34%		3.47
Basis swaps	1,105,000		247			(406		)	0.11%	0.31%		2.42
Agency forwards	12,768		—			(53		)			101.00
Treasury futures	1,700		—			(3		)			126.60
Credit valuation adjustment			(22		)	187
Total financial derivatives	$	6,837,571	$	4,177		$	(84,844	)
Collateral pledged			—			46,627
Net amount			$	4,177		$	(38,217	)

Table 6.2



	Gains/(losses) on financial derivatives and hedging activities
	For the Year Ended December 31,
	2015			2014			2013
	(in thousands)
Fair value hedges:
Interest rate swaps⁽¹⁾	$	5,965		$	(2,729	)	$	29,538
Hedged items	3,100			14,520			(18,230		)
Gains on fair value hedges	9,065			11,791			11,308
Cash flow hedges:
Loss recognized (ineffective portion)	(551		)	(10		)	(39		)
Losses on cash flow hedges	(551		)	(10		)	(39		)
No hedge designation:
Interest rate swaps	(3,204		)	(31,101		)	21,394
Agency forwards	(2,440		)	(1,842		)	(1,002		)
Treasury futures	(339		)	(484		)	103
(Losses)/gains on financial derivatives not designated in hedging relationships	(5,983		)	(33,427		)	20,495
Gains/(losses) on financial derivatives and hedging activities	$	2,531		$	(21,646	)	$	31,764

⁽¹⁾

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Market risk is the risk of an adverse effect resulting from changes in interest rates or spreads on the value of a financial instrument. Farmer Mac manages market risk associated with financial derivatives by establishing and monitoring limits as to the degree of risk that may be undertaken. This risk is periodically measured as part of Farmer Mac's overall risk monitoring processes, which include market value of equity measurements, net interest income modeling, and other measures.

As of December 31, 2015 and 2014, 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 million and $6.1 million, respectively; however, including netting arrangements and accrued interest, Farmer Mac's credit exposure was $47,000 and $0.4 million as of December 31, 2015 and 2014, respectively. As of December 31, 2015 and 2014, 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.

As of December 31, 2015 and 2014, the fair value of Farmer Mac's derivatives in a net liability position including accrued interest but excluding netting arrangements and any adjustment for nonperformance risk, was $90.1 million and $99.4 million, respectively; however, including netting arrangements and accrued interest, the fair value of Farmer Mac's derivatives in a net liability position at the counterparty level, was $83.2 million and $93.4 million as of December 31, 2015 and 2014, respectively. Farmer Mac posted cash of $38.0 million and no investment securities as of December 31, 2015 and posted cash of $46.6 million and no investment securities as of December 31, 2014. Farmer Mac records posted cash as a reduction in the outstanding balance of cash and cash equivalents and an increase in the balance of prepaid expenses and other assets. The investment securities posted as collateral are included in the investment securities balances on the consolidated balance sheets. If Farmer Mac had breached certain provisions of the derivative contracts as of December 31, 2015 and 2014, it could have been required to settle its obligations under the agreements or post additional collateral of $45.2 million and $46.8 million, respectively. As of December 31, 2015 and 2014, there were no financial derivatives in a net payable position where Farmer Mac was required to pledge collateral which the counterparty had the right to sell or repledge.

For certain derivatives, Farmer Mac clears interest rate swaps through a clearinghouse. Farmer Mac posts initial and variation margin to the clearinghouses 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 $8.4 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.

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7.	NOTES PAYABLE

Farmer Mac's borrowings consist of discount notes and medium-term notes, both of which are unsecured general obligations of Farmer Mac. Discount notes generally have original maturities of 1 year or less, whereas medium-term notes generally have maturities of 0.5 years to 15 years.

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

Table 7.1



	December 31, 2015
	Outstanding as of December 31				Average Outstanding During the Year
	Amount		Weighted- Average Rate		Amount		Weighted- Average Rate
	(dollars in thousands)
Due within one year:
Discount notes	$	6,642,560	0.32	%	$	5,251,081	0.22	%
Medium-term notes	595,991		0.38	%	761,998		0.25	%
Current portion of long-term notes	1,872,910		1.05	%
Total due within one year	$	9,111,461	0.48	%
Due after one year:
Medium-term notes due in:
2017	$	1,200,558	1.02	%
2018	1,539,264		0.85	%
2019	520,284		1.73	%
2020	529,567		1.68	%
Thereafter	1,177,363		3.05	%
Total due after one year	4,967,036		1.59	%
Total	$	14,078,497	0.87	%

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	December 31, 2014
	Outstanding as of December 31				Average Outstanding During the Year
	Amount		Weighted- Average Rate		Amount		Weighted- Average Rate
	(dollars in thousands)
Due within one year:
Discount notes	$	4,925,828	0.11	%	$	4,059,708	0.15	%
Medium-term notes	754,988		0.17	%	532,621		0.15	%
Current portion of long-term notes	1,673,137		0.98	%
	$	7,353,953	0.32	%
Due after one year:
Medium-term notes due in:
2016	$	1,569,961	1.16	%
2017	1,219,192		0.90	%
2018	682,224		1.28	%
2019	872,576		1.42	%
Thereafter	1,127,233		3.09	%
Total due after one year	5,471,186		1.56	%
Total	$	12,825,139	0.85	%

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

Table 7.2



Debt Callable in 2016 as of December 31, 2015
	Amount		Weighted-Average Rate
	(dollars in thousands)
Maturity:
2017	$	103,977	0.77	%
2018	801,930		0.43	%
2019	—		—	%
2020	179,803		1.90	%
Thereafter	219,333		2.59	%
Total	$	1,305,043	1.02	%

The following schedule summarizes the earliest interest rate reset date of total borrowings outstanding as of December 31, 2015, including callable and non-callable medium-term notes, assuming callable notes are redeemed at the initial call date:

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Table 7.3



	Earliest Interest Rate Reset Date of Borrowings Outstanding
	Amount		Weighted-Average Rate
	(dollars in thousands)
Debt with interest rate resets in:
2016	$	10,560,504	0.55%
2017	1,071,581		1.06%
2018	737,333		1.32%
2019	520,284		1.73%
2020	298,764		1.76%
Thereafter	890,031		3.34%
Total	$	14,078,497	0.87%

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

Authority to Borrow from the U.S. Treasury

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, Farmer Mac had not used this borrowing authority and does not expect to use this borrowing authority in the future.

Gains on Repurchase of Outstanding Debt

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

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8.	LOANS AND ALLOWANCE FOR LOSSES

Loans

Farmer Mac classifies loans as either held for investment or held for sale. Loans held for investment are recorded at the unpaid principal balance, net of unamortized premium or discount and other cost adjustments. Loans held for sale are reported at the lower of cost or fair value determined on a pooled basis. As of December 31, 2015 and 2014, Farmer Mac had no loans held for sale. The following table displays the composition of the loan balances as of December 31, 2015 and 2014:

Table 8.1



	As of December 31, 2015									As of December 31, 2014
	Unsecuritized			In Consolidated Trusts			Total			Unsecuritized			In Consolidated Trusts			Total
	(in thousands)
Farm & Ranch	$	2,249,864		$	708,111		$	2,957,975		$	2,118,867		$	421,355		$	2,540,222
Rural Utilities	1,008,126			—			1,008,126			718,213			267,396			985,609
Total unpaid principal balance⁽¹⁾	3,257,990			708,111			3,966,101			2,837,080			688,751			3,525,831
Unamortized premiums, discounts and other cost basis adjustments	423			—			423			(3,619		)	3,727			108
Total loans	3,258,413			708,111			3,966,524			2,833,461			692,478			3,525,939
Allowance for loan losses	(3,736		)	(744		)	(4,480		)	(5,324		)	(540		)	(5,864		)
Total loans, net of allowance	$	3,254,677		$	707,367		$	3,962,044		$	2,828,137		$	691,938		$	3,520,075


⁽¹⁾	Unpaid principal balance is the basis of presentation in disclosures of outstanding balances for Farmer Mac's lines of business.

Allowance for Losses

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. As of December 31, 2015 and 2014, Farmer Mac reported total allowances for losses of $6.6 million and $10.1 million, respectively. See Note 5 and Note 12 for more information about off-balance sheet Farmer Mac Guaranteed Securities and LTSPCs.

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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, 2015:

Table 8.2



	Allowance for Loan Losses			Reserve for Losses			Total Allowance for Losses
	(in thousands)
Balance as of January 1, 2013	$	11,351		$	5,539		$	16,890
(Release of)/provision for losses	(481		)	929			448
Charge-offs	(4,004		)	—			(4,004		)
Balance as of December 31, 2013	$	6,866		$	6,468		$	13,334
Release of losses	(961		)	(2,205		)	(3,166		)
Charge-offs	(86		)	—			(86		)
Recoveries	45			—			45
Balance as of December 31, 2014	$	5,864		$	4,263		$	10,127
Provision for/(release of) losses	2,388			(2,180		)	208
Charge-offs	(3,772		)	—			(3,772		)
Balance as of December 31, 2015	$	4,480		$	2,083		$	6,563

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 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 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.

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

Table 8.3



	December 31, 2015
	Crops		Permanent Plantings			Livestock		Part-time Farm			Ag. Storage and Processing			Other			Total
	(in thousands)
For the Year Ended:
Beginning Balance	$	2,519	$	2,159		$	1,423	$	467		$	3,552		$	7		$	10,127
Provision for/(release of) losses	272		(1,228		)	358		52			758			(4		)	208
Charge-offs	—		—			—		(111		)	(3,661		)	—			(3,772		)
Ending Balance	$	2,791	$	931		$	1,781	$	408		$	649		$	3		$	6,563



	December 31, 2014
	Crops		Permanent Plantings			Livestock			Part-time Farm			Ag. Storage and Processing			Other		Total
	(in thousands)

For the Year Ended:
Beginning Balance	$	2,124	$	2,186		$	1,271		$	454		$	7,292		$	7	$	13,334
Provision for/(release of) losses	395		(72		)	209			42			(3,740		)	—		(3,166		)
Charge-offs	—		—			(57		)	(29		)	—			—		(86		)
Recoveries	—		45			—			—			—			—		45
Ending Balance	$	2,519	$	2,159		$	1,423		$	467		$	3,552		$	7	$	10,127

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

Table 8.4



	As of December 31, 2015
	Crops		Permanent Plantings		Livestock		Part-time Farm		Ag. Storage and Processing		Other		Total
	(in thousands)
Ending Balance:
Collectively evaluated for impairment:
On-balance sheet	$	1,911,039	$	433,654	$	444,320	$	92,712	$	15,944	$	3,199	$	2,900,868
Off-balance sheet	1,313,872		483,473		777,663		110,378		56,208		7,142		2,748,736
Total	$	3,224,911	$	917,127	$	1,221,983	$	203,090	$	72,152	$	10,341	$	5,649,604
Individually evaluated for impairment:
On-balance sheet	$	12,803	$	21,247	$	5,958	$	7,261	$	9,838	$	—	$	57,107
Off-balance sheet	5,937		3,037		8,840		774		—		—		18,588
Total	$	18,740	$	24,284	$	14,798	$	8,035	$	9,838	$	—	$	75,695
Total Farm & Ranch loans:
On-balance sheet	$	1,923,842	$	454,901	$	450,278	$	99,973	$	25,782	$	3,199	$	2,957,975
Off-balance sheet	1,319,809		486,510		786,503		111,152		56,208		7,142		2,767,324
Total	$	3,243,651	$	941,411	$	1,236,781	$	211,125	$	81,990	$	10,341	$	5,725,299
Allowance for Losses:
Collectively evaluated for impairment:
On-balance sheet	$	1,968	$	434	$	702	$	116	$	167	$	—	$	3,387
Off-balance sheet	347		137		292		65		482		3		1,326
Total	$	2,315	$	571	$	994	$	181	$	649	$	3	$	4,713
Individually evaluated for impairment:
On-balance sheet	$	290	$	218	$	384	$	201	$	—	$	—	$	1,093
Off-balance sheet	186		142		403		26		—		—		757
Total	$	476	$	360	$	787	$	227	$	—	$	—	$	1,850
Total Farm & Ranch loans:
On-balance sheet	$	2,258	$	652	$	1,086	$	317	$	167	$	—	$	4,480
Off-balance sheet	533		279		695		91		482		3		2,083
Total	$	2,791	$	931	$	1,781	$	408	$	649	$	3	$	6,563

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	As of December 31, 2014
	Crops		Permanent Plantings		Livestock		Part-time Farm		Ag. Storage and Processing		Other		Total
	(in thousands)
Ending Balance:
Collectively evaluated for impairment:
On-balance sheet	$	1,621,360	$	359,517	$	406,049	$	57,851	$	29,003	$	—	$	2,473,780
Off-balance sheet	1,305,141		521,535		839,286		102,857		85,357		6,781		2,860,957
Total	$	2,926,501	$	881,052	$	1,245,335	$	160,708	$	114,360	$	6,781	$	5,334,737
Individually evaluated for impairment:
On-balance sheet	$	12,307	$	35,904	$	6,571	$	11,660	$	—	$	—	$	66,442
Off-balance sheet	2,458		3,239		8,712		1,586		—		—		15,995
Total	$	14,765	$	39,143	$	15,283	$	13,246	$	—	$	—	$	82,437
Total Farm & Ranch loans:
On-balance sheet	$	1,633,667	$	395,421	$	412,620	$	69,511	$	29,003	$	—	$	2,540,222
Off-balance sheet	1,307,599		524,774		847,998		104,443		85,357		6,781		2,876,952
Total	$	2,941,266	$	920,195	$	1,260,618	$	173,954	$	114,360	$	6,781	$	5,417,174
Allowance for Losses:
Collectively evaluated for impairment:
On-balance sheet	$	1,824	$	495	$	658	$	51	$	503	$	—	$	3,531
Off-balance sheet	298		149		404		52		3,049		7		3,959
Total	$	2,122	$	644	$	1,062	$	103	$	3,552	$	7	$	7,490
Individually evaluated for impairment:
On-balance sheet	$	283	$	1,410	$	328	$	312	$	—	$	—	$	2,333
Off-balance sheet	114		105		33		52		—		—		304
Total	$	397	$	1,515	$	361	$	364	$	—	$	—	$	2,637
Total Farm & Ranch loans:
On-balance sheet	$	2,107	$	1,905	$	986	$	363	$	503	$	—	$	5,864
Off-balance sheet	412		254		437		104		3,049		7		4,263
Total	$	2,519	$	2,159	$	1,423	$	467	$	3,552	$	7	$	10,127

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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 and 2014:

Table 8.5



	As of December 31, 2015
	Crops		Permanent Plantings		Livestock		Part-time Farm		Ag. Storage and Processing		Other		Total
	(in thousands)
Impaired Loans:
With no specific allowance:
Recorded investment	$	3,772	$	12,340	$	5,644	$	1,851	$	—	$	—	$	23,607
Unpaid principal balance	3,720		12,346		5,645		1,851		—		—		23,562
With a specific allowance:
Recorded investment⁽¹⁾	15,103		11,939		9,050		6,185		9,838		—		52,115
Unpaid principal balance	15,020		11,938		9,153		6,184		9,838		—		52,133
Associated allowance	476		360		787		227		—		—		1,850
Total:
Recorded investment	18,875		24,279		14,694		8,036		9,838		—		75,722
Unpaid principal balance	18,740		24,284		14,798		8,035		9,838		—		75,695
Associated allowance	476		360		787		227		—		—		1,850

Recorded investment of loans on nonaccrual status⁽²⁾	$	5,105	$	16,546	$	4,313	$	5,870	$	9,838	$	—	$	41,672


⁽¹⁾	Impairment analysis was performed in the aggregate in consideration of similar risk characteristics of the assets and historical statistics on $46.4 million (61 percent) of impaired loans as of December 31, 2015, which resulted in a specific reserve of $1.0 million.


⁽²⁾	Includes $14.7 million of loans that are less than 90 days delinquent but which have not met Farmer Mac's performance criteria for returning to accrual status.



	As of December 31, 2014
	Crops		Permanent Plantings		Livestock		Part-time Farm		Ag. Storage and Processing		Other		Total
	(in thousands)
Impaired Loans:
With no specific allowance:
Recorded investment	$	4,877	$	5,837	$	9,576	$	2,001	$	—	$	—	$	22,291
Unpaid principal balance	4,723		5,750		9,386		1,981		—		—		21,840
With a specific allowance:
Recorded investment⁽¹⁾	10,753		33,690		5,979		11,350		—		—		61,772
Unpaid principal balance	10,042		33,393		5,897		11,265		—		—		60,597
Associated allowance	397		1,515		361		364		—		—		2,637
Total:
Recorded investment	15,630		39,527		15,555		13,351		—		—		84,063
Unpaid principal balance	14,765		39,143		15,283		13,246		—		—		82,437
Associated allowance	397		1,515		361		364		—		—		2,637

Recorded investment of loans on nonaccrual status⁽²⁾	$	5,168	$	14,413	$	4,438	$	6,133	$	—	$	—	$	30,152


⁽¹⁾	Impairment analysis was performed in the aggregate in consideration of similar risk characteristics of the assets and historical statistics on $54.4 million (65 percent) of impaired loans as of December 31, 2014, which resulted in a specific reserve of $1.2 million.


⁽²⁾	Includes $11.7 million of loans that are less than 90 days delinquent but which have not met Farmer Mac's performance criteria for returning to accrual status.

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

Table 8.6



	December 31, 2015
	Crops		Permanent Plantings		Livestock		Part-time Farm		Ag. Storage and Processing		Other		Total
	(in thousands)
For the Year Ended:
Average recorded investment in impaired loans	$	22,315	$	36,326	$	14,077	$	10,605	$	7,368	$	—	$	90,691
Income recognized on impaired loans	381		472		353		308		—		—		1,514



	December 31, 2014
	Crops		Permanent Plantings		Livestock		Part-time Farm		Ag. Storage and Processing		Other		Total
	(in thousands)
For the Year Ended:
Average recorded investment in impaired loans	$	20,625	$	43,221	$	13,543	$	12,596	$	—	$	24	$	90,009
Income recognized on impaired loans	373		474		327		359		—		—		1,533

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, 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 and 2014, 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 ended December 31, 2015 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.

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

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applicable agreement) upon the request of the counterparty. Subsequent to the purchase, these defaulted 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 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. During 2014, Farmer Mac purchased two defaulted 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 December 31, 2015, 2014, and 2013 and the outstanding balances and carrying amounts of all such loans as of December 31, 2015, 2014, and 2013:

Table 8.7



	For the Year Ended December 31,
	2015		2014		2013
	(in thousands)
Unpaid principal balance at acquisition date:
Loans underlying LTSPCs	$	13,500	$	705	$	37
Loans underlying off-balance sheet Farmer Mac Guaranteed Securities	3,407		—		6,667
Total unpaid principal balance at acquisition date	16,907		705		6,704
Contractually required payments receivable	17,036		705		6,907
Impairment recognized subsequent to acquisition	3,772		69		477
Recovery/release of allowance for defaulted loans	1,019		233		949



	As of December 31,
	2015		2014		2013
	(in thousands)
Outstanding balance	$	36,195	$	24,921	$	32,838
Carrying amount	34,015		22,149		29,613

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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, 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.

Table 8.8



	90-Day Delinquencies⁽¹⁾				Net Credit Losses
	As of December 31,				For the Year Ended December 31,
	2015		2014		2015		2014			2013
	(in thousands)
On-balance sheet assets:
Farm & Ranch:
Loans	$	26,935	$	18,427	$	3,853	$	(6	)	$	2,975
Total on-balance sheet	$	26,935	$	18,427	$	3,853	$	(6	)	$	2,975
Off-balance sheet assets:
Farm & Ranch:
LTSPCs	$	5,201	$	490	$	—	$	—		$	—
Total off-balance sheet	$	5,201	$	490	$	—	$	—		$	—
Total	$	32,136	$	18,917	$	3,853	$	(6	)	$	2,975


⁽¹⁾	Includes loans and loans underlying off-balance sheet Farm & Ranch Guaranteed Securities and LTSPCs that are 90 days or more past due, in foreclosure, or in bankruptcy, excluding loans performing under either their original loan terms or a court-approved bankruptcy plan.

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

Credit Quality Indicators

Farmer Mac analyzes credit risk related to loans held and loans underlying LTSPCs and off-balance sheet Farm & Ranch Guaranteed Securities based on internally assigned loan scores (i.e., risk ratings) that are derived by taking into consideration such factors as historical repayment performance, indicators of current financial condition, loan seasoning, loan size, and loan-to-value ratio. Loans are then classified into one of the following asset categories based on their underlying risk rating: acceptable; other assets especially mentioned; and substandard. Farmer Mac believes this analysis provides meaningful information regarding the credit risk profile of its Farm & Ranch portfolio as of each quarterly reporting period end date.

Farmer Mac also uses 90-day delinquency information to evaluate its credit risk exposure on these assets because historically it has been the best measure of borrower credit quality deterioration. Most of the loans held and underlying LTSPCs and off-balance sheet Farm & Ranch Guaranteed Securities have annual (January 1) or semi-annual (January 1 and July 1) payment dates and are supported by less frequent and less predictable revenue sources, such as the cash flows generated from the maturation of crops, sales of livestock, and government farm support programs. Taking into account the reduced frequency of payment due dates and revenue sources, Farmer Mac considers 90-day delinquency to be the most significant observation point when evaluating delinquency information.

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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 and 2014:

Table 8.9



	As of December 31, 2015
	Crops		Permanent Plantings		Livestock		Part-time Farm		Ag. Storage and Processing		Other		Total
	(in thousands)
Credit risk profile by internally assigned grade⁽¹⁾
On-balance sheet:
Acceptable	$	1,888,762	$	431,038	$	409,003	$	89,541	$	15,944	$	3,199	$	2,837,487
Special mention⁽²⁾	22,255		2,616		35,317		2,918		—		—		63,106
Substandard⁽³⁾	12,825		21,247		5,958		7,514		9,838		—		57,382
Total on-balance sheet	$	1,923,842	$	454,901	$	450,278	$	99,973	$	25,782	$	3,199	$	2,957,975
Off-Balance Sheet:
Acceptable	$	1,279,454	$	473,335	$	753,472	$	102,990	$	56,208	$	6,517	$	2,671,976
Special mention⁽²⁾	24,422		7,226		13,121		2,938		—		523		48,230
Substandard⁽³⁾	15,933		5,949		19,910		5,224		—		102		47,118
Total off-balance sheet	$	1,319,809	$	486,510	$	786,503	$	111,152	$	56,208	$	7,142	$	2,767,324
Total Ending Balance:
Acceptable	$	3,168,216	$	904,373	$	1,162,475	$	192,531	$	72,152	$	9,716	$	5,509,463
Special mention⁽²⁾	46,677		9,842		48,438		5,856		—		523		111,336
Substandard⁽³⁾	28,758		27,196		25,868		12,738		9,838		102		104,500
Total	$	3,243,651	$	941,411	$	1,236,781	$	211,125	$	81,990	$	10,341	$	5,725,299

Commodity analysis of past due loans⁽¹⁾
On-balance sheet	$	4,656	$	7,405	$	2,517	$	2,519	$	9,838	$	—	$	26,935
Off-balance sheet	511		—		4,542		148		—		—		5,201
90 days or more past due	$	5,167	$	7,405	$	7,059	$	2,667	$	9,838	$	—	$	32,136


⁽¹⁾	Amounts represent unpaid principal balance of risk-rated loans, which is the basis Farmer Mac uses to analyze its portfolio, and recorded investment of past due loans.


⁽²⁾	Assets in the "Special mention" category generally have potential weaknesses due to performance issues but are currently considered to be adequately secured.


⁽³⁾	Substandard assets have a well-defined weakness or weaknesses and there is a distinct possibility that some loss will be sustained if deficiencies are not corrected.

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	As of December 31, 2014
	Crops		Permanent Plantings		Livestock		Part-time Farm		Ag. Storage and Processing		Other		Total
	(in thousands)
Credit risk profile by internally assigned grade⁽¹⁾
On-balance sheet:
Acceptable	$	1,604,546	$	353,487	$	375,010	$	57,239	$	29,003	$	—	$	2,419,285
Special mention⁽²⁾	16,814		6,030		31,039		612		—		—		54,495
Substandard⁽³⁾	12,307		35,904		6,571		11,660		—		—		66,442
Total on-balance sheet	$	1,633,667	$	395,421	$	412,620	$	69,511	$	29,003	$	—	$	2,540,222
Off-Balance Sheet
Acceptable	$	1,282,773	$	503,414	$	799,047	$	97,692	$	64,363	$	6,117	$	2,753,406
Special mention⁽²⁾	13,603		12,150		30,281		1,351		—		8		57,393
Substandard⁽³⁾	11,223		9,210		18,670		5,400		20,994		656		66,153
Total off-balance sheet	$	1,307,599	$	524,774	$	847,998	$	104,443	$	85,357	$	6,781	$	2,876,952
Total Ending Balance:
Acceptable	$	2,887,319	$	856,901	$	1,174,057	$	154,931	$	93,366	$	6,117	$	5,172,691
Special mention⁽²⁾	30,417		18,180		61,320		1,963		—		8		111,888
Substandard⁽³⁾	23,530		45,114		25,241		17,060		20,994		656		132,595
Total	$	2,941,266	$	920,195	$	1,260,618	$	173,954	$	114,360	$	6,781	$	5,417,174

Commodity analysis of past due loans⁽¹⁾
On-balance sheet	$	4,175	$	6,869	$	4,555	$	2,828	$	—	$	—	$	18,427
Off-balance sheet	—		—		490		—		—		—		490
90 days or more past due	$	4,175	$	6,869	$	5,045	$	2,828	$	—	$	—	$	18,917


⁽¹⁾	Amounts represent unpaid principal balance of risk-rated loans, which is the basis Farmer Mac uses to analyze its portfolio, and recorded investment of past due loans.


⁽²⁾	Assets in the "Special mention" category generally have potential weaknesses due to performance issues but are currently considered to be adequately secured.


⁽³⁾	Substandard assets have a well-defined weakness or weaknesses and there is a distinct possibility that some loss will be sustained if deficiencies are not corrected.

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Concentrations of Credit Risk

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 and December 31, 2014:

Table 8.10



	As of
	December 31, 2015		December 31, 2014
	(in thousands)
By commodity/collateral type:
Crops	$	3,243,651	$	2,941,266
Permanent plantings	941,411		920,195
Livestock	1,236,781		1,260,618
Part-time farm	211,125		173,954
Ag. Storage and Processing	81,990		114,360
Other	10,341		6,781
Total	$	5,725,299	$	5,417,174
By geographic region⁽¹⁾:
Northwest	$	582,127	$	573,135
Southwest	1,726,927		1,753,606
Mid-North	2,009,654		1,873,041
Mid-South	769,831		627,615
Northeast	215,883		214,402
Southeast	420,877		375,375
Total	$	5,725,299	$	5,417,174
By original loan-to-value ratio:
0.00% to 40.00%	$	1,594,818	$	1,503,076
40.01% to 50.00%	1,279,321		1,191,804
50.01% to 60.00%	1,593,025		1,491,502
60.01% to 70.00%	1,107,710		1,091,759
70.01% to 80.00%	126,860		115,645
80.01% to 90.00%	23,565		23,388
Total	$	5,725,299	$	5,417,174


⁽¹⁾	Geographic regions: Northwest (AK, ID, MT, OR, WA, WY); Southwest (AZ, CA, CO, HI, NM, NV, UT); Mid-North (IA, IL, IN, MI, MN, NE, ND, SD, WI); Mid-South (AR, KS, LA, MO, OK, TX); Northeast (CT, DE, KY, MA, MD, ME, NH, NJ, NY, OH, PA, RI, VA, VT, WV); Southeast (AL, FL, GA, MS, NC, SC, TN).

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.

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9.	EQUITY

Common Stock

Farmer Mac has three classes of common stock outstanding:


•	Class A voting common stock, which may be held only by banks, insurance companies, and other financial institutions or similar entities that are not institutions of the Farm Credit System. By federal statute, 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.


•	Class B voting common stock, which may be held only by institutions of the Farm Credit System. There are no restrictions on the maximum holdings of Class B voting common stock.


•	Class C non-voting common stock, which has no ownership restrictions.

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

Preferred Stock

On June 20, 2014, Farmer Mac issued 3.0 million shares of 6.000 percent Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series C (the "Series C 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, Farmer Mac issued 2.4 million shares of 5.875 percent Non-Cumulative Preferred Stock, Series A (the "Series A 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

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$1.9 million related to the issuance of the Series B Preferred Stock, and direct costs of $1.6 million related to the issuance of the Series C Preferred Stock. Farmer Mac used the proceeds from the sale of the Series A Preferred Stock to redeem and retire on January 17, 2013 its then-outstanding shares of Series C Non-Voting Cumulative Preferred Stock, which is different from the Series C Preferred Stock that is currently outstanding, and which had a par value and liquidation preference of $1,000 per share and had been issued in 2008 and 2009. As of December 31, 2015, Farmer Mac had 2.4 million shares of Series A Preferred Stock outstanding, 3.0 million shares of Series B Preferred Stock outstanding, and 3.0 million of Series C Preferred Stock outstanding.

Farmer Mac's ability to declare and pay dividends on its preferred stock could be restricted if it fails to comply with applicable capital requirements. Farmer Mac's preferred stock is included as a component of core capital for regulatory and statutory capital compliance measurements.

Non-Controlling Interest in Farmer Mac II LLC

On January 25, 2010, Farmer Mac completed a private offering of $250.0 million of securities issued by a newly formed Delaware statutory trust. The trust securities, called Farm Asset-Linked Capital Securities or "FALConS," represented undivided beneficial ownership interests in 250,000 shares of non-cumulative perpetual preferred stock (the "Farmer Mac II LLC Preferred Stock") of Farmer Mac's subsidiary, Farmer Mac II LLC, a Delaware limited liability company. The Farmer Mac II LLC Preferred Stock had a liquidation preference of $1,000 per share. On May 14, 2014, Farmer Mac purchased $6.0 million of FALConS from certain holders. 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 on that same day. Farmer Mac recognized an expense of $8.1 million in deferred issuance costs upon the retirement of the Farmer Mac II LLC Preferred Stock.

Equity-Based Incentive Compensation Plans

Farmer Mac's 2008 Omnibus Incentive Compensation Plan authorizes the grants of restricted stock, stock options, and SARs, among other alternative forms of equity-based compensation, to directors, officers and other employees. SARs awarded to officers and employees vest annually in thirds. Farmer Mac has not granted SARs to directors since 2008. If not exercised or terminated earlier due to the termination of employment or service on the Board, SARs granted to officers or employees expire after 10 years. For all SARs granted, the exercise price is equal to the closing price of the Class C non-voting common stock on the date of grant. SARs granted during 2015 have exercise prices ranging from $28.17 to $32.39 per share, SARs granted during 2014 have exercise prices ranging from $29.37 to $35.60 per share, and SARs granted during 2013 have exercise prices ranging from $30.20 to $37.17 per share. During 2015, 2014, and 2013, restricted stock awards were granted to directors with a vesting period of one year, to officers vesting in three years provided certain performance targets are met, and to officers and employees vesting annually in thirds.

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The following tables summarize stock options, SARs, and non-vested restricted stock activity for the years ended December 31, 2015, 2014, and 2013:

Table 9.1



	For the Year Ended December 31,
	2015				2014				2013
	Stock Options and SARs		Weighted- Average Exercise Price		Stock Options and SARs		Weighted- Average Exercise Price		Stock Options and SARs		Weighted- Average Exercise Price
Outstanding, beginning of year	718,143		$	25.12	664,245		$	23.78	788,748		$	20.89
Granted	119,110		32.25		87,600		34.92		94,017		31.24
Exercised	(86,680	)	21.32		(23,035	)	20.83		(208,877	)	16.24
Canceled	(3,000	)	30.05		(10,667	)	31.16		(9,643	)	23.02
Outstanding, end of year	747,573		26.68		718,143		25.12		664,245		23.78
Exercisable at end of year	543,698		24.34		548,180		23.12		483,216		22.83

	For the Year Ended December 31,
	2015				2014				2013
	Non-vested Restricted Stock		Weighted- Average Grant Date Fair Value		Non-vested Restricted Stock		Weighted- Average Grant Date Fair Value		Non-vested Restricted Stock		Weighted- Average Grant Date Fair Value
Outstanding, beginning of year	103,772		$	31.24	98,285		$	27.66	91,311		$	18.75
Granted	76,616		32.14		57,590		33.88		73,985		30.27
Canceled	—		—		(8,360	)	21.72		(1,000	)	31.42
Vested and issued	(47,737	)	30.25		(43,743	)	28.48		(66,011	)	18.21
Outstanding, end of year	132,651		32.12		103,772		31.24		98,285		27.66

The cancellations of stock options, SARs, and non-vested restricted stock during 2015, 2014, and 2013 were due either to unvested awards terminating in accordance with the provisions of the applicable stock option plans upon directors' or employees' departures from Farmer Mac or failure to meet specified performance goals, or vested awards terminating unexercised on their expiration date.

Farmer Mac receives cash when stock options are exercised. Cash is not received from exercises of SARs or the vesting and issuance of restricted stock. Farmer Mac received $1.7 million from the exercise of stock options during 2015, $0.2 million during 2014, and $1.9 million during 2013. During 2015, 2014, and 2013, the reduction of income taxes payable as a result of the deduction for the exercise of stock options and SARs and the vesting or accelerated tax elections of restricted stock was $0.8 million, $0.6 million, and $2.1 million, respectively.

During 2015, Farmer Mac recorded a net increase to additional paid-in capital of $1.0 million related to stock-based compensation awards. During 2014, Farmer Mac recorded a net decrease to additional paid-in capital of $41,000 related to stock-based compensation awards. During 2013, Farmer Mac recorded a net increase to additional paid-in capital of $1.1 million related to stock-based compensation awards.

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Farmer Mac has a policy that permits directors of Farmer Mac to elect to receive shares of Class C non-voting common stock in lieu of cash retainers. During 2015, Farmer Mac issued 491 shares of Class C non-voting common stock with a fair value of $14,000 to the 4 directors who made that election. During 2014, Farmer Mac issued 604 shares of Class C non-voting common stock with a fair value of $20,000 to the 5 directors who made that election. During 2013, Farmer Mac issued 842 shares of Class C non-voting common stock with a fair value of $26,000 to the 7 directors who made that election.

The following tables summarize information regarding stock options, SARs, and non-vested restricted stock outstanding as of December 31, 2015:

Table 9.2



	Outstanding		Exercisable		Vested or Expected to Vest
Range of Exercise Prices	Stock Options and SARs	Weighted- Average Remaining Contractual Life	Stock Options and SARs	Weighted- Average Remaining Contractual Life	Stock Options and SARs	Weighted- Average Remaining Contractual Life
$5.00 - $9.99	18,666	3.3 years	18,666	3.3 years	18,666	3.3 years
10.00 - 14.99	66,665	4.4 years	66,665	4.4 years	66,665	4.4 years
15.00 - 19.99	62,000	5.4 years	62,000	5.4 years	62,000	5.4 years
20.00 - 24.99	100,500	5.1 years	100,500	5.1 years	100,500	5.1 years
25.00 - 29.99	191,009	1.9 years	187,009	1.7 years	190,809	1.9 years
30.00 - 34.99	250,733	7.8 years	90,864	6.1 years	241,931	7.8 years
35.00 - 39.99	58,000	8.2 years	17,994	8.3 years	56,280	8.2 years
	747,573		543,698		736,851

	Outstanding		Expected to Vest
Weighted- Average Grant-Date Fair Value	Non-vested Restricted Stock	Weighted-Average Remaining Contractual Life	Non-vested Restricted Stock	Weighted-Average Remaining Contractual Life
$25.00 - $29.99	6,778	2.1 years	6,439	2.1 years
30.00 - 34.99	124,324	1.2 years	117,990	1.2 years
35.00 - 39.99	1,549	1.2 years	1,487	1.2 years
	132,651		125,916

The weighted average exercise price of the 736,851 options and SARs vested or expected to vest as of December 31, 2015 was $26.59.

As of December 31, 2015 and 2014, the intrinsic value of options, SARs, and non-vested restricted stock outstanding, exercisable, and vested or expected to vest was $8.1 million and $7.2 million, respectively. During 2015, 2014, and 2013, the total intrinsic value of options and SARs exercised was $0.9 million, $0.3 million, and $3.8 million, respectively. As of December 31, 2015, there was $3.2 million of total unrecognized compensation cost related to non-vested stock options, SARs, and restricted stock awards. This cost is expected to be recognized over a weighted-average period of 1.7 years.

The weighted-average grant date fair values of options, SARs, and restricted stock awards granted in 2015, 2014, and 2013 were $17.97, $21.11, and $23.12 per share, respectively. Under the fair value-based

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method of accounting for stock-based compensation cost, Farmer Mac recognized compensation expense of $3.3 million, $2.9 million, and $3.0 million during 2015, 2014, and 2013, respectively.

The fair values of stock options and SARs were estimated using the Black-Scholes option pricing model based on the following assumptions:

Table 9.3



	For the Year Ended December 31,
	2015	2014	2013
Risk-free interest rate	1.2%	1.5%	0.6%
Expected years until exercise	4 years	4 years	4 years
Expected stock volatility	38.0%	49.7%	83.4%
Dividend yield	2.0%	1.6%	1.5%

The risk-free interest rates used in the model were based on the U.S. Treasury yield curve in effect at the grant date. Farmer Mac used historical data to estimate the timing of option exercises and stock option cancellation rates used in the model. Expected volatilities were based on historical volatility of Farmer Mac's Class C non-voting common stock. The dividend yields were based on the expected dividends as a percentage of the value of Farmer Mac's Class C non-voting common stock on the grant date.

Because restricted stock awards will be issued upon vesting regardless of the stock price, expected stock volatility is not considered in determining grant date fair value. Restricted stock awards also accrue dividends which are paid at vesting. The weighted-average grant date fair value of the restricted stock awarded in 2015, 2014, and 2013 was $32.14, $33.88, and $30.27 per share, respectively, which is based on the closing price of the stock on the date granted.

Capital Requirements

Farmer Mac is subject to the following capital requirements:

•

Statutory minimum capital requirement – Farmer Mac's statutory minimum capital level is an amount of core capital (stockholders' equity less accumulated other comprehensive income) equal to the sum of 2.75 percent of Farmer Mac's aggregate on-balance sheet assets, as calculated for regulatory purposes, plus 0.75 percent of the aggregate off-balance sheet obligations of Farmer Mac, specifically including:


◦	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


◦	other off-balance sheet obligations of Farmer Mac.


•	Statutory critical capital requirement – Farmer Mac's critical capital level is an amount of core capital equal to 50 percent of the total minimum capital requirement at that time.


•	Risk-based capital requirement – Farmer Mac's charter directs FCA to establish a risk-based capital stress test for Farmer Mac, using specified stress-test parameters.

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Farmer Mac is required to comply with the higher of the minimum capital requirement and the risk-based capital requirement. As of December 31, 2015 and 2014, the minimum capital requirement was greater than the risk-based capital requirement. Farmer Mac's ability to declare and pay dividends could be restricted if it fails to comply with applicable capital requirements.

As of December 31, 2015, Farmer Mac's minimum capital requirement was $462.1 million and its actual core capital level was $564.5 million, which was $102.4 million above the minimum capital requirement as of that date. As of December 31, 2014, Farmer Mac's minimum capital requirement was $421.3 million and its actual core capital level was $766.3 million, which was $345.0 million above the minimum capital requirement as of that date.

In accordance with FCA's rule on Farmer Mac's capital planning, and as part of Farmer Mac's capital plan, Farmer Mac 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) and imposing restrictions on Tier 1-eligible dividends and any discretionary bonus payments in the event that this capital falls below specified thresholds.


10.	INCOME TAXES

Farmer Mac is subject to federal income taxes but is exempt from state and local income taxes. The components of the federal income tax expense for the years ended December 31, 2015, 2014, and 2013 were as follows:

Table 10.1



	For the Year Ended December 31,
	2015		2014			2013
	(in thousands)
Current income tax expense	$	30,247	$	9,803		$	27,082
Deferred income tax (benefit)/expense	3,992		(6,979		)	6,670
Income tax expense	$	34,239	$	2,824		$	33,752

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A reconciliation of tax at the statutory federal tax rate to the income tax expense for the years ended December 31, 2015, 2014, and 2013 is as follows:

Table 10.2



	For the Year Ended December 31,
	2015			2014			2013
	(dollars in thousands)
Tax expense at statutory rate	$	37,827		$	25,587		$	45,943
Non-taxable dividend income	—			(1,587		)	(2,116		)
Income from non-controlling interest	(1,874		)	(7,766		)	(7,766		)
Loss on retirement of preferred stock	(1,901		)	—			—
Valuation allowance	33			(13,542		)	(2,693		)
Other	154			132			384
Income tax expense	$	34,239		$	2,824		$	33,752
Statutory tax rate	35.0		%	35.0		%	35.0		%

The components of the deferred tax assets and liabilities as of December 31, 2015 and 2014 were as follows:

Table 10.3



	As of December 31,
	2015			2014
	(in thousands)
Deferred tax assets:
Basis differences related to financial derivatives	$	28,395		$	30,921
Basis differences related to securities	2,866			4,218
Unrealized losses on available-for-sale securities	5,660			—
Allowance for losses	2,297			3,545
Stock-based compensation	2,833			2,443
Capital loss carryforwards and other than temporary impairment	2,099			2,105
Valuation allowance	(2,099		)	(2,105		)
Other	1,444			1,205
Total deferred tax assets	43,495			42,332
Deferred tax liability:
Unrealized gains on available-for-sale securities	—			8,448
Basis difference in subsidiary	300			195
Other	279			298
Total deferred tax liability	579			8,941
Net deferred tax asset	$	42,916		$	33,391

A valuation allowance is required to reduce a deferred tax asset to an amount that is more likely than not to be realized. Future realization of the tax benefit from a deferred tax asset depends on the existence of sufficient taxable income of the appropriate character. After the evaluation of both positive and negative objective evidence regarding the likelihood that its deferred tax assets will be realized, Farmer Mac established a valuation allowance of $2.1 million as of December 31, 2015 and 2014, which was attributable to capital loss carryforwards on investment securities. Farmer Mac did not establish a

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valuation allowance for the remainder of its deferred tax assets because it believes it is more likely than not that those deferred tax assets will be realized. In determining its deferred tax asset valuation allowance, Farmer Mac considered its taxable income of the appropriate character (for example, ordinary income or capital gain) within the carryback and carryforward periods available under the tax law and the impact of possible tax planning strategies. During 2014, Farmer Mac reduced its deferred tax valuation allowance by $13.5 million upon utilizing capital loss carryforwards. In addition, $0.1 million and $63.7 million of capital loss carryforwards expired on December 31, 2015 and 2014, respectively, and Farmer Mac removed $39,000 and $22.3 million, respectively, of corresponding deferred tax assets and the related deferred tax asset valuation allowance. Deferred tax assets are measured at rates in effect when they arise. To the extent rates change, the deferred tax asset will be adjusted to reflect the new rate. A reduction in corporate tax rates would result in a reduction in the value of the deferred tax asset. As of December 31, 2015, the amount of capital loss carryforwards was $5.9 million. These capital loss carryforwards will expire in 2016.

As of December 31, 2015 and 2014, Farmer Mac did not identify any uncertain tax positions.

The following table presents the changes in unrecognized tax benefits for the years ended December 31, 2015, 2014, and 2013:

Table 10.4



	For the Year Ended December 31,
	2015		2014			2013
	(in thousands)
Beginning balance	$	—	$	1,148		$	1,046
Decreases based on tax positions related to prior years	—		(1,148		)	—
Increases based on tax positions related to current year	—		—			102
Ending balance	$	—	$	—		$	1,148

The resolution of the unrecognized tax benefits presented above represented temporary differences and, therefore, would not result in a change to Farmer Mac's effective tax rate. As of December 31, 2013, accrued interest payable and the associated interest expense related to unrecognized tax benefits was immaterial and was presented as a component of income taxes. Farmer Mac does not expect to be subject to, and has not recorded tax penalties. During 2014, the IRS examined Farmer Mac's uncertain tax positions reported in its 2011 tax return; as a result of the examination, Farmer Mac concluded it does not currently have any uncertain tax positions. Tax years 2013 through 2015 remain subject to examination.


11.	EMPLOYEE BENEFITS

Farmer Mac makes contributions to a defined contribution retirement plan for all of its employees. Farmer Mac contributed 13.2 percent of the lesser of an employee's gross salary and the maximum compensation permitted under the Economic Growth and Tax Relief Reconciliation Act of 2001 ("EGTRRA") ($265,000 for 2015, $260,000 for 2014, and $255,000 for 2013), plus 5.7 percent of the difference between: (1) the lesser of the gross salary and the amount established under EGTRRA; and (2) the Social Security Taxable Wage Base. Employees are fully vested after having been employed for approximately 3 years. Expense for this plan for the years ended December 31, 2015, 2014, and 2013 was $1.2 million, $1.2 million, and $1.1 million, respectively.

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12.	OFF-BALANCE SHEET GUARANTEES AND LONG-TERM STANDBY PURCHASE COMMITMENTS

Farmer Mac offers two credit enhancement alternatives to direct loan purchases that allow approved lenders the ability to retain the cash flow benefits of their loans and increase their liquidity and lending capacity: (1) Farmer Mac Guaranteed Securities, which are available through the Farm & Ranch, the USDA Guarantees, or the Rural Utilities lines of business, and (2) LTSPCs, which are available through the Farm & Ranch or the Rural Utilities lines of business. Farmer Mac records, at the inception of a guarantee, a liability for the fair value of its obligation to stand ready to perform under the terms of each guarantee and an asset that is equal to the fair value of the fees that will be received over the life of each guarantee. The fair values of the guarantee obligation and asset at inception are based on the present value of expected cash flows using management's best estimate of certain key assumptions, which include prepayment speeds, forward yield curves, and discount rates commensurate with the risks involved. Because the cash flows of these instruments may be interest rate path dependent, these values and projected discount rates are derived using a Monte Carlo simulation model. The guarantee obligation and corresponding asset are subsequently amortized into guarantee and commitment fee income in relation to the decline in the unpaid principal balance on the underlying agricultural real estate mortgage and rural utilities loans.

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The contractual terms of Farmer Mac's guarantees range from less than 1 year to 30 years. However, the actual term of each guarantee may be significantly less than the contractual term based on the prepayment characteristics of the related agricultural real estate mortgage loans. Farmer Mac's maximum potential exposure under these guarantees is comprised of the unpaid principal balance of the underlying agricultural real estate mortgage loans. Guarantees issued or modified on or after January 1, 2003 are recorded in the consolidated balance sheets. Farmer Mac's maximum potential exposure was $4.5 billion and $3.8 billion as of December 31, 2015 and 2014, respectively. Farmer Mac's maximum potential exposure for guarantees issued prior to January 1, 2003, which are not recorded on the consolidated balance sheets, was $56.2 million and $70.6 million as of December 31, 2015 and 2014, respectively. The maximum exposure from these guarantees is not representative of the actual loss Farmer Mac is likely to incur, based on historical loss experience. In the event Farmer Mac was required to make payments under its guarantees, Farmer Mac would have the right to enforce the terms of the loans, and in the event of default, would have access to the underlying collateral. For information on Farmer Mac's methodology for determining the reserve for losses for its financial guarantees, see Note 2(j) and Note 8. The following table presents changes in Farmer Mac's guarantee and commitment obligations in the consolidated balance sheets for the years ended December 31, 2015, 2014, and 2013:

Table 12.1



	For the Year Ended December 31,
	2015			2014			2013
	(in thousands)
Beginning balance, January 1	$	37,925		$	39,667		$	37,803
Additions to the guarantee and commitment obligation⁽¹⁾	8,207			4,966			8,414
Amortization of the guarantee and commitment obligation	(7,523		)	(6,708		)	(6,550		)
Ending balance, December 31	$	38,609		$	37,925		$	39,667


⁽¹⁾	Represents the fair value of the guarantee and commitment obligation at inception.

Off-Balance Sheet Farmer Mac Guaranteed Securities

Agricultural real estate mortgage loans, rural utilities loans, and other related assets may be placed into trusts that are used as vehicles for the securitization of the transferred assets and the Farmer Mac-guaranteed beneficial interests in the trusts are sold to investors. Farmer Mac is obligated under its guarantee to ensure that the investors receive timely payments of principal and interest based on the underlying loans, regardless of whether the trust has actually received such scheduled loan payments. As consideration for Farmer Mac's assumption of the credit risk on these securities, Farmer Mac receives guarantee fees that are recognized as earned on an accrual basis over the life of the loans and based upon the outstanding balance of the Farmer Mac Guaranteed Security.

Farmer Mac is required to perform under its obligation when the underlying loans for the off-balance sheet Farmer Mac Guaranteed Securities do not make their scheduled installment payments. When a loan underlying a Farm & Ranch Guaranteed Security becomes 90 days or more past due, Farmer Mac may, in its sole discretion, repurchase the loan from the trust and generally does repurchase such loans, thereby reducing the principal balance of the outstanding Farm & Ranch Guaranteed Security.

The following table presents the maximum principal amount of potential undiscounted future payments that Farmer Mac could be required to make under all off-balance sheet Farmer Mac Guaranteed Securities as of December 31, 2015 and 2014, not including offsets provided by any recourse provisions, recoveries from third parties, or collateral for the underlying loans:

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Table 12.2



Outstanding Balance of Off-Balance Sheet Farmer Mac Guaranteed Securities
	As of December 31, 2015		As of December 31, 2014
	(in thousands)
Farm & Ranch:
Guaranteed Securities	$	514,051	$	636,086
USDA Guarantees:
Farmer Mac Guaranteed USDA Securities	10,272		13,978
Institutional Credit:
AgVantage Securities	984,871		986,528
Revolving floating rate AgVantage facility⁽¹⁾	300,000		—
Total off-balance sheet Farmer Mac Guaranteed Securities	$	1,809,194	$	1,636,592


⁽¹⁾	Relates to a revolving floating rate AgVantage facility subject to specified contractual terms. Farmer Mac receives a fixed fee based on the full dollar amount of the facility.

If Farmer Mac repurchases a loan that is collateral for a Farmer Mac Guaranteed Security, Farmer Mac would have the right to enforce the terms of the loan, and in the event of a default, would have access to the underlying collateral. Farmer Mac typically recovers its investment in the defaulted loans purchased either through borrower payments, loan payoffs, payments by third parties, or foreclosure and sale of the property securing the loans.

Farmer Mac has recourse to the USDA for any amounts advanced for the timely payment of principal and interest on Farmer Mac Guaranteed USDA Securities. That recourse is the USDA guarantee, a full faith and credit obligation of the United States that becomes enforceable if a lender fails to repurchase the USDA-guaranteed portion from its owner within 30 days after written demand from the owner when (a) the borrower under the guaranteed loan is in default not less than 60 days in the payment of any principal or interest due on the USDA-guaranteed portion, or (b) the lender has failed to remit to the owner the payment made by the borrower on the USDA-guaranteed portion or any related loan subsidy within 30 days after the lender's receipt of the payment.

Eligible loans and other eligible assets may be placed into trusts that are used as vehicles for the securitization of the transferred assets and the Farmer Mac-guaranteed beneficial interests in the trusts are sold to investors. The following table summarizes the significant cash flows received from and paid to trusts used for Farmer Mac securitizations:

Table 12.3



	For the Year Ended December 31,
	2015			2014		2013
	(in thousands)
Proceeds from new securitizations	$	336,913		$	175,754	$	150,417
Guarantee fees received	4,028			4,612		5,182
Purchases of assets from the trusts	(3,407		)	—		(6,667		)

Farmer Mac has recorded a liability for its obligation to stand ready under the guarantee in the guarantee and commitment obligation on the consolidated balance sheets. This liability approximated $8.3 million as of December 31, 2015 and $11.1 million as of December 31, 2014. As of December 31, 2015 and 2014, the weighted-average remaining maturity of all loans underlying off-balance sheet Farmer Mac

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Guaranteed Securities, excluding AgVantage securities, was 11.3 years and 12.0 years, respectively. As of December 31, 2015 and December 31, 2014, the weighted-average remaining maturity of the off-balance sheet AgVantage securities was 1.7 years and 2.4 years, respectively.

Long-Term Standby Purchase Commitments

An LTSPC is a commitment by Farmer Mac to purchase eligible loans from an identified pool of loans under specified circumstances set forth in the applicable agreement, either for cash or in exchange for Farmer Mac Guaranteed Securities, on one or more undetermined future dates. As consideration for its assumption of the credit risk on loans underlying an LTSPC, Farmer Mac receives a commitment fee payable monthly in arrears in an amount approximating what would have been the guarantee fee if the transaction were structured as a swap for Farmer Mac Guaranteed Securities.

An LTSPC permits a lender to nominate from its portfolio an identified pool of loans for participation in the Farm & Ranch or the Rural Utilities line of business, which are retained in the lender's portfolio and serviced by the lender. Farmer Mac reviews the loan pool to confirm that it conforms to Farmer Mac's underwriting standards. Upon Farmer Mac's approval of the eligible loans, the lender effectively transfers the credit risk on those loans to Farmer Mac, thereby reducing the lender's credit and concentration risk exposures and, consequently, its regulatory capital requirements and its loss reserve requirements. Credit risk is transferred through Farmer Mac's commitment to purchase the identified loans from the counterparty based on Farmer Mac's original credit review and acceptance of the credit risk on the loans.

The specific events or circumstances that would require Farmer Mac to purchase some or all of the loans subject to LTSPCs include: (1) the failure of the borrower under any loan to make installment payments under that loan for a period of either 90 days or 120 days (depending on the provisions of the applicable agreement); or (2) the determination by the holder of the LTSPC to sell or exchange some or all of the loans under the LTSPC to Farmer Mac.

Farmer Mac purchases loans subject to an LTSPC at:


•	par if the loans become delinquent for either 90 days or 120 days (depending on the agreement) or are in material non-monetary default, with accrued and unpaid interest on the defaulted loans payable out of any future loan payments or liquidation proceeds; or


•	fair value or in exchange for Farm & Ranch Guaranteed Securities (in the Farm & Ranch line of business, if the loans are not delinquent), in accordance with the terms of the applicable agreement.

The maximum principal amount of potential undiscounted future payments that Farmer Mac could be requested to make under all LTSPCs, not including offsets provided by any recourse provisions, recoveries from third parties, or collateral for the underlying loans, was $2.8 billion as of December 31, 2015 and $2.2 billion as of December 31, 2014.

As of December 31, 2015 and 2014, the weighted-average remaining maturity of all loans underlying LTSPCs was 14.6 years and 14.3 years, respectively. For those LTSPCs issued or modified on or after January 1, 2003, Farmer Mac has recorded a liability for its obligation to stand ready under the commitment in the guarantee and commitment obligation on the consolidated balance sheets. This liability approximated $30.3 million as of December 31, 2015 and $26.8 million as of December 31, 2014.

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Commitments

Farmer Mac enters into mandatory and optional delivery commitments to purchase loans. Most loan purchase commitments entered into by Farmer Mac are mandatory commitments, in which Farmer Mac charges a fee to extend or cancel the commitment. As of December 31, 2015 and 2014, commitments to purchase Farm & Ranch loans and USDA Guarantees totaled $60.9 million and $29.7 million, respectively, all of which were mandatory commitments. As of December 31, 2015 and 2014, commitments to purchase Rural Utilities loans totaled $4.0 million. Any optional loan purchase commitments are sold forward under optional commitments to deliver Farmer Mac Guaranteed Securities that may be canceled by Farmer Mac without penalty.

Rental expense for Farmer Mac's office space for each of the years ended December 31, 2015, 2014, and 2013 was $1.3 million. The future minimum lease payments under Farmer Mac's non-cancellable leases for its office space and other contractual obligations as of December 31, 2015 are as follows:

Table 12.4



	Future Minimum Lease Payments		Other Contractual Obligations
	(in thousands)
2016	$	1,392	$	996
2017	1,412		356
2018	1,388		—
2019	1,389		—
2020	1,423		—
Thereafter	5,527		—
Total	$	12,531	$	1,352

Other contractual obligations in the table above include minimum amounts due under non-cancellable agreements to purchase goods or services that are enforceable and legally binding and specify all significant terms. These agreements include, among others, agreements for the provision of consulting services, information technology support, equipment maintenance, and financial analysis software and services. The amounts actually paid under these agreements will likely be higher due to the variable components of some of these agreements under which the ultimate obligation owed is determined by reference to actual usage or hours worked.


13.	FAIR VALUE DISCLOSURES

Fair Value Measurement

Fair value is defined 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 (also referred to as an exit price). In determining fair value, Farmer Mac uses various valuation approaches, including market and income based 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. Farmer Mac's accounting policies for fair value measurement are discussed in Note 2(p).

Fair value measurements related to financial instruments that are reported at fair value in the consolidated financial statements each period are referred to as recurring fair value measurements. Fair value measurements related to financial instruments that are not reported at fair value each period but are subject to fair value adjustments in certain circumstances are referred to as nonrecurring fair value measurements.

Fair Value Classification and Transfers

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 following three levels are used to classify fair value measurements:


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.

Farmer Mac performs a detailed analysis of the assets and liabilities carried at fair value to determine the appropriate level based on the transparency of the inputs used in the valuation techniques. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an instrument's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Farmer Mac's assessment of the significance of a particular input to the fair value measurement of an instrument requires judgment and consideration of factors specific to the instrument. While Farmer Mac believes its valuation methods are appropriate and consistent with those of other market participants, using different methodologies or assumptions to determine fair value could result in a materially different estimate of fair value for some financial instruments.

The following is a description of the fair value techniques used for instruments measured at fair value as well as the general classification of such instruments pursuant to the valuation hierarchy described above. Fair value measurements related to financial instruments that are reported at fair value in the consolidated financial statements each period are referred to as recurring fair value measurements. Fair value

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measurements related to financial instruments that are not reported at fair value each period but are subject to fair value adjustments in certain circumstances are referred to as nonrecurring fair value measurements.

Recurring Fair Value Measurements and Classification

Available-for-Sale and Trading Investment Securities

The fair value of investments in U.S. Treasuries is based on unadjusted quoted prices in active markets. Farmer Mac classifies these fair value measurements as level 1.

For a significant portion of Farmer Mac's investment portfolio, including most asset-backed securities, corporate debt securities, senior agency debt securities, Government/GSE guaranteed mortgage-backed securities, municipal bonds, and preferred stock issued by GSEs, fair value is primarily determined using a reputable and nationally recognized third party pricing service. The prices obtained are non-binding and generally representative of recent market trades. The fair value of certain asset-backed and Government guaranteed mortgage-backed securities are estimated based on quotations from brokers or dealers. Farmer Mac corroborates its primary valuation source by obtaining a secondary price from another independent third party pricing service. Farmer Mac classifies these fair value measurements as level 2.

For certain investment securities that are thinly traded or not quoted, Farmer Mac estimates fair value using internally-developed models that employ a discounted cash flow approach. Farmer Mac maximizes the use of observable market data, including prices of financial instruments with similar maturities and characteristics, interest rate yield curves, measures of volatility and prepayment rates. Farmer Mac generally considers a market to be thinly traded or not quoted if the following conditions exist: (1) there are few transactions for the financial instruments; (2) the prices in the market are not current; (3) the price quotes vary significantly either over time or among independent pricing services or dealers; or (4) there is limited availability of public market information. Farmer Mac classifies these fair value measurements as level 3.

Farmer Mac's 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 also 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 classifies its estimates of fair value for ARCs as level 3 measurements. Farmer Mac uses unadjusted quotes from a broker specializing in these types of securities to determine the estimated fair value of these investments as of each quarter end. Through periodic discussions with the broker, Farmer Mac gained an understanding of the assumptions underlying the broker quotes and independently benchmarked those quotes against other dealer price indications. Farmer Mac believes the broker quotes are the best indication of fair value as of the measurement date although there is uncertainty regarding the ability to transact at such levels. Considering there is no active secondary market for these securities, although limited

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observable transactions do occasionally occur, price quotes vary significantly among dealers or independent pricing services, if provided at all, and there is little transparency in the price determination, Farmer Mac believes these measurements are appropriately classified as level 3.

Available-for-Sale and Trading Farmer Mac Guaranteed Securities and USDA Securities

Farmer Mac estimates the fair value of its Farmer Mac Guaranteed Securities and USDA Securities by discounting the projected cash flows of these instruments at projected interest rates. The fair values are based on the present value of expected cash flows using management's best estimate of certain key assumptions, which include prepayment speeds, forward yield curves, and discount rates commensurate with the risks involved. Farmer Mac classifies these fair value measurements as level 3 because there is limited market activity and therefore little or no price transparency. On a sample basis, Farmer Mac corroborates the fair value of its Farmer Mac Guaranteed Securities and USDA Securities by obtaining a secondary valuation from an independent third party service.

Financial Derivatives

The fair value of exchange-traded U.S. Treasury futures is based on unadjusted quoted prices for identical financial instruments. Farmer Mac classifies these fair value measurements as level 1.

Farmer Mac's derivative portfolio consists primarily of interest rate swaps and forward sales contracts on the debt of other GSEs. Farmer Mac estimates the fair value of these financial instruments primarily based upon the counterparty valuations. Farmer Mac internally values its derivative portfolio using a discounted cash flow valuation technique and obtains a secondary valuation for certain interest rate swaps to corroborate the counterparty valuations. Farmer Mac also regularly reviews the counterparty valuations as part of the collateral exchange process. Farmer Mac classifies these fair value measurements as level 2.

Certain basis swaps are nonstandard interest rate swap structures and are therefore internally modeled using significant assumptions and unobservable inputs, resulting in level 3 classification. Farmer Mac uses a discounted cash flow valuation technique, using management's best estimate of certain key assumptions, which include prepayment speeds, forward yield curves, and discount rates commensurate with the risks involved.

As of December 31, 2015 and 2014, the consideration of Farmer Mac's and the counterparties' credit risk resulted in an adjustment of $0.2 million to the valuations of Farmer Mac's derivative portfolio. See Note 2(h) and Note 6 for more information about Farmer Mac's derivative portfolio.

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Nonrecurring Fair Value Measurements and Classification

Loans Held for Investment

Certain loans in Farmer Mac's held for investment loan portfolio are measured at fair value when they are determined to be impaired. For these impaired loans, the fair value of the loan generally is based on the fair value of the underlying property, which is determined by recent third-party appraisals. Farmer Mac uses net realizable value (fair value less estimated costs to sell) as a reasonable estimate of fair value and classifies the fair values as level 3 measurements in the tables below.

When recent third-party appraisals are not available, Farmer Mac measures loan impairment in the aggregate in consideration of the similar risk characteristics of the assets and historical statistics, and does not include these impaired loans in the tables below.

Real Estate Owned

Farmer Mac initially records REO properties at net realizable value and subsequently records them at the lower of carrying value or net realizable value. The fair value of the REO generally is based on third-party appraisals. Farmer Mac classifies the REO fair values as level 3 measurements. Farmer Mac uses net realizable value as a reasonable estimate of fair value in the tables below.

Fair Value Classification and Transfers

As of December 31, 2015, Farmer Mac's assets and liabilities recorded at fair value included financial instruments valued at $6.1 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 39 percent of total assets and 69 percent of financial instruments measured at fair value as of December 31, 2015. As of December 31, 2014, Farmer Mac's assets and liabilities recorded at fair value included financial instruments valued at $5.5 billion whose fair values were estimated by management in the absence of readily determinable fair values. These financial instruments measured as level 3 represented 38 percent of total assets and 73 percent of financial instruments measured at fair value as of December 31, 2014.

Net transfers in and/or out of the different levels within the fair value hierarchy are based on the fair values of the assets and liabilities as of the beginning of the reporting period. There were no transfers within the fair value hierarchy for fair value measurements of Farmer Mac's investment securities, Farmer Mac Guaranteed Securities, USDA Securities, and financial derivatives during 2015, 2014, and 2013. See Note 2(b) for information about the transfer of available-for-sale Farmer Mac Guaranteed Securities to held-to-maturity as of January 1, 2014.

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The following tables present information about Farmer Mac's assets and liabilities measured at fair value on a recurring and nonrecurring basis as of December 31, 2015 and 2014, respectively, and indicate the fair value hierarchy of the valuation techniques used by Farmer Mac to determine such fair value:

Table 13.1



Assets and Liabilities Measured at Fair Value as of December 31, 2015
	Level 1		Level 2		Level 3		Total
	(in thousands)
Recurring:
Assets:
Investment Securities:
Available-for-sale:
Floating rate auction-rate certificates backed by Government guaranteed student loans	$	—	$	—	$	44,924	$	44,924
Floating rate asset-backed securities	—		73,729		—		73,729
Floating rate corporate debt securities	—		9,991		—		9,991
Fixed rate corporate debt securities	—		9,994		—		9,994
Floating rate Government/GSE guaranteed mortgage-backed securities	—		1,355,459		—		1,355,459
Fixed rate GSE guaranteed mortgage-backed securities	—		7,904		—		7,904
Floating rate GSE subordinated debt	—		66,249		—		66,249
Fixed rate senior agency debt	—		213,987		—		213,987
Fixed rate U.S. Treasuries	992,788		—		—		992,788
Total available-for-sale	992,788		1,737,313		44,924		2,775,025
Trading:
Floating rate asset-backed securities	—		—		491		491
Total trading	—		—		491		491
Total Investment Securities	992,788		1,737,313		45,415		2,775,516
Farmer Mac Guaranteed Securities:
Available-for-sale:
AgVantage	—		—		4,121,244		4,121,244
Farmer Mac Guaranteed USDA Securities	—		—		31,361		31,361
Total Farmer Mac Guaranteed Securities	—		—		4,152,605		4,152,605
USDA Securities:
Available-for-sale	—		—		1,888,344		1,888,344
Trading	—		—		28,975		28,975
Total USDA Securities	—		—		1,917,319		1,917,319
Financial derivatives	19		3,797		—		3,816
Total Assets at fair value	$	992,807	$	1,741,110	$	6,115,339	$	8,849,256
Liabilities:
Financial derivatives	$	—	$	77,199	$	—	$	77,199
Total Liabilities at fair value	$	—	$	77,199	$	—	$	77,199
Nonrecurring:
Assets:
Loans held for investment	$	—	$	—	$	11,443	$	11,443
REO	—		—		388		388
Total Nonrecurring Assets at fair value	$	—	$	—	$	11,831	$	11,831

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Assets and Liabilities Measured at Fair Value as of December 31, 2014
	Level 1		Level 2		Level 3		Total
	(in thousands)
Recurring:
Assets:
Investment Securities:
Available-for-sale:
Floating rate auction-rate certificates backed by Government guaranteed student loans	$	—	$	—	$	40,576	$	40,576
Floating rate asset-backed securities	—		100,902		—		100,902
Floating rate corporate debt securities	—		10,091		—		10,091
Fixed rate corporate debt	—		30,025		—		30,025
Floating rate Government/GSE guaranteed mortgage-backed securities	—		612,753		—		612,753
Fixed rate GSE guaranteed mortgage-backed securities	—		8,202		—		8,202
Floating rate GSE subordinated debt	—		66,320		—		66,320
Fixed rate senior agency debt	—		18,939		—		18,939
Floating rate U.S. Treasuries	74,979		—		—		74,979
Fixed rate U.S. Treasuries	975,712		—		—		975,712
Total available-for-sale	1,050,691		847,232		40,576		1,938,499
Trading:
Floating rate asset-backed securities	—		—		689		689
Total trading	—		—		689		689
Total Investment Securities	1,050,691		847,232		41,265		1,939,188
Farmer Mac Guaranteed Securities:
Available-for-sale:
AgVantage	—		—		3,631,662		3,631,662
Farmer Mac Guaranteed USDA Securities	—		—		27,619		27,619
Total Farmer Mac Guaranteed Securities	—		—		3,659,281		3,659,281
USDA Securities:
Available-for-sale	—		—		1,731,222		1,731,222
Trading	—		—		40,310		40,310
Total USDA Guaranteed Securities	—		—		1,771,532		1,771,532
Financial derivatives	—		4,177		—		4,177
Total Assets at fair value	$	1,050,691	$	851,409	$	5,472,078	$	7,374,178
Liabilities:
Financial derivatives	$	3	$	84,841	$	—	$	84,844
Total Liabilities at fair value	$	3	$	84,841	$	—	$	84,844
Nonrecurring:
Assets:
Loans held for investment	$	—	$	—	$	5,973	$	5,973
Total Nonrecurring Assets at fair value	$	—	$	—	$	5,973	$	5,973

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The following tables present additional information about assets and liabilities measured at fair value on a recurring basis for which Farmer Mac has used significant unobservable inputs to determine fair value. Net transfers in and/or out of level 3 are based on the fair values of the assets and liabilities as of the beginning of the reporting period. There were no liabilities measured at fair value using significant unobservable inputs during the year ended December 31, 2015.

Table 13.2



Level 3 Assets and Liabilities Measured at Fair Value for the Year Ended December 31, 2015
	Beginning Balance		Purchases		Sales		Settlements			Realized and Unrealized Gains/(Losses) included in Income			Unrealized Gains/(Losses) included in Other Comprehen-sive Income			Ending Balance
	(in thousands)
Recurring:
Assets:
Investment Securities:
Available-for-sale:
Floating rate auction-rate certificates backed by Government guaranteed student loans	$	40,576	$	—	$	—	$	—		$	(100	)	$	4,448		$	44,924
Total available-for-sale	40,576		—		—		—			(100		)	4,448			44,924
Trading:
Floating rate asset-backed securities⁽¹⁾	689		—		—		(657		)	459			—			491
Total trading	689		—		—		(657		)	459			—			491
Total Investment Securities	41,265		—		—		(657		)	359			4,448			45,415
Farmer Mac Guaranteed Securities:
Available-for-sale:
AgVantage	3,631,662		678,566		—		(138,687		)	3,090			(53,387		)	4,121,244
Farmer Mac Guaranteed USDA Securities	27,619		13,314		—		(9,482		)	—			(90		)	31,361
Total Farmer Mac Guaranteed Securities	3,659,281		691,880		—		(148,169		)	3,090			(53,477		)	4,152,605
USDA Securities:
Available-for-sale	1,731,222		363,621		—		(233,385		)	—			26,886			1,888,344
Trading⁽²⁾	40,310		—		—		(12,096		)	761			—			28,975
Total USDA Securities	1,771,532		363,621		—		(245,481		)	761			26,886			1,917,319
Total Assets at fair value	$	5,472,078	$	1,055,501	$	—	$	(394,307	)	$	4,210		$	(22,143	)	$	6,115,339


⁽¹⁾	Unrealized gains are attributable to assets still held as of December 31, 2015 and are recorded in "Gains/(losses) on trading securities."


⁽²⁾	Includes unrealized gains of $0.9 million attributable to assets still held as of December 31, 2015 that are recorded in "Gains/(losses) on trading securities."

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Level 3 Assets and Liabilities Measured at Fair Value for the Year Ended December 31, 2014
	Beginning Balance			Purchases		Sales			Settlements			Realized and Unrealized Gains/(Losses) included in Income			Unrealized Gains/(Losses) included in Other Comprehen-sive Income			Transfers Out			Ending Balance
	(in thousands)
Recurring:
Assets:
Investment Securities:
Available-for-sale:
Floating rate auction-rate certificates backed by Government guaranteed student loans	$	65,285		$	—	$	(26,675	)	$	—		$	(825	)	$	2,791		$	—		$	40,576
Floating rate Government/GSE guaranteed mortgage-backed securities	205			—		—			(205		)	—			—			—			—
Total available-for-sale	65,490			—		(26,675		)	(205		)	(825		)	2,791			—			40,576
Trading:
Floating rate asset-backed securities⁽¹⁾	928			—		—			(685		)	446			—			—			689
Total trading	928			—		—			(685		)	446			—			—			689
Total Investment Securities	66,418			—		(26,675		)	(890		)	(379		)	2,791			—			41,265
Farmer Mac Guaranteed Securities:
Available-for-sale:
AgVantage⁽²⁾	5,070,366			1,091,475		—			(922,908		)	14,520			10,995			(1,632,786		)	3,631,662
Farmer Mac Guaranteed USDA Securities	21,234			7,627		—			(808		)	—			(434		)	—			27,619
Total Farmer Mac Guaranteed Securities	5,091,600			1,099,102		—			(923,716		)	14,520			10,561			(1,632,786		)	3,659,281
USDA Securities:
Available-for-sale	1,553,669			335,359		—			(209,400		)	—			51,594			—			1,731,222
Trading⁽³⁾	58,344			—		—			(19,185		)	1,151			—			—			40,310
Total USDA Securities	1,612,013			335,359		—			(228,585		)	1,151			51,594			—			1,771,532
Total Assets at fair value	$	6,770,031		$	1,434,461	$	(26,675	)	$	(1,153,191	)	$	15,292		$	64,946		$	(1,632,786	)	$	5,472,078
Liabilities:
Financial derivatives	$	(235	)	$	—	$	—		$	—		$	235		$	—		$	—		$	—
	$	(235	)	$	—	$	—		$	—		$	235		$	—		$	—		$	—


⁽¹⁾	Unrealized gains are attributable to assets still held as of December 31, 2014 and are recorded in "Gains/(losses) on trading securities."


⁽²⁾	Includes $1.6 billion of AgVantage securities transferred from available-for-sale to held-to-maturity on January 1, 2014 and $20.7 million of AgVantage securities purchased during 2014 transferred from available-for-sale to held-to-maturity.


⁽³⁾	Includes unrealized gains of $1.8 million attributable to assets still held as of December 31, 2014 that are recorded in "Gains/(losses) on trading securities."

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Level 3 Assets and Liabilities Measured at Fair Value for the the Year Ended December 31, 2013
	Beginning Balance			Purchases		Sales		Settlements			Realized and Unrealized Gains/(Losses) included in Income			Unrealized Gains/(Losses) included in Other Comprehen-sive Income			Ending Balance
	(in thousands)
Recurring:
Assets:
Investment Securities:
Available-for-sale:
Floating rate auction-rate certificates backed by Government guaranteed student loans	$	63,159		$	—	$	—	$	—		$	—		$	2,126		$	65,285
Floating rate Government/GSE guaranteed mortgage-backed securities	—			233		—		(24		)	—			(4		)	205
Total available-for-sale	63,159			233		—		(24		)	—			2,122			65,490
Trading:
Floating rate asset-backed securities⁽¹⁾	1,247			—		—		(774		)	455			—			928
Total trading	1,247			—		—		(774		)	455			—			928
Total Investment Securities	64,406			233		—		(798		)	455			2,122			66,418
Farmer Mac Guaranteed Securities:
Available-for-sale:
AgVantage	4,739,577			1,273,500		—		(844,437		)	(18,230		)	(80,044		)	5,070,366
Farmer Mac Guaranteed USDA Securities	26,681			—		—		(5,214		)	—			(233		)	21,234
Total Farmer Mac Guaranteed Securities	4,766,258			1,273,500		—		(849,651		)	(18,230		)	(80,277		)	5,091,600
USDA Securities:
Available-for-sale	1,486,595			361,894		—		(234,035		)	—			(60,785		)	1,553,669
Trading⁽²⁾	104,188			—		—		(44,570		)	(1,274		)	—			58,344
Total USDA Securities	1,590,783			361,894		—		(278,605		)	(1,274		)	(60,785		)	1,612,013
Total Assets at fair value	$	6,421,447		$	1,635,627	$	—	$	(1,129,054	)	$	(19,049	)	$	(138,940	)	$	6,770,031
Liabilities:
Financial derivatives⁽³⁾	$	(691	)	$	—	$	—	$	—		$	456		$	—		$	(235	)
Total Liabilities at fair value	$	(691	)	$	—	$	—	$	—		$	456		$	—		$	(235	)


⁽¹⁾	Unrealized gains are attributable to assets still held as of December 31, 2013 and are recorded in "Gains/(losses) on trading securities."


⁽²⁾	Includes unrealized gains of $0.5 million attributable to assets still held as of December 31, 2013 that are recorded in "Gains/(losses) on trading securities."


⁽³⁾	Unrealized gains are attributable to liabilities still held as of December 31, 2013 and are recorded in "Gains/(losses) on financial derivatives and hedging activities."

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The following tables present additional information about the significant unobservable inputs, such as discount rates and constant prepayment rates ("CPR"), used in the fair value measurements categorized in level 3 of the fair value hierarchy as of December 31, 2015 and 2014.

Table 13.3



	As of December 31, 2015
Financial Instruments	Fair Value		Valuation Technique	Unobservable Input	Range (Weighted-Average)
	(in thousands)
Assets:
Investment securities:
Floating rate auction-rate certificates backed by Government guaranteed student loans	$	44,924	Indicative bids	Range of broker quotes	92.0% - 99.6% (96.6%)
Floating rate asset-backed securities	$	491	Discounted cash flow	Discount rate	18.3% - 23.9% (21.5%)
				CPR	10.0%
Farmer Mac Guaranteed Securities:
AgVantage	$	4,121,244	Discounted cash flow	Discount rate	1.1% - 3.3% (1.8%)
Farmer Mac Guaranteed USDA Securities	$	31,361	Discounted cash flow	Discount rate	1.0% - 3.9% (1.8%)
				CPR	9% - 20% (10.0%)
USDA Securities	$	1,917,319	Discounted cash flow	Discount rate	1.3% - 5.1% (3.1%)
				CPR	0% - 19% (7.0%)



	As of December 31, 2014
Financial Instruments	Fair Value		Valuation Technique	Unobservable Input	Range (Weighted-Average)
	(in thousands)
Assets:
Investment securities:
Floating rate auction-rate certificates backed by Government guaranteed student loans	$	40,576	Indicative bids	Range of broker quotes	82.0% - 94.0% (87.1%)
Floating rate asset-backed securities	$	689	Discounted cash flow	Discount rate	14.3% - 23.9% (19.1%)
				CPR	10.0%
Farmer Mac Guaranteed Securities:
AgVantage	$	3,631,662	Discounted cash flow	Discount rate	0.7% - 2.7% (1.3%)
Farmer Mac Guaranteed USDA Securities	$	27,619	Discounted cash flow	Discount rate	0.8% - 3.6% (1.9%)
				CPR	0% - 21% (9.0%)
USDA Securities	$	1,771,532	Discounted cash flow	Discount rate	1.1% - 5.3% (3.2%)
				CPR	0% - 20% (8.0%)

The significant unobservable inputs used in the fair value measurements of Farmer Mac Guaranteed Securities and USDA Securities are prepayment rates and discount rates commensurate with the risks involved. Typically, significant increases (decreases) in any of these inputs in isolation may result in materially lower (higher) fair value measurements. Generally, in a rising interest rate environment, Farmer Mac would expect average discount rates to increase and would likely expect a corresponding decrease in forecasted prepayment rates. Conversely, in a declining interest rate environment, Farmer Mac would expect average discount rates to decrease and would likely expect a corresponding increase in forecasted prepayment rates. Prepayment rates are not presented in the table above for AgVantage securities because they generally do not pay down principal based on amortization schedules but instead typically have fixed maturity dates when the secured general obligations are due.

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Disclosures on Fair Value of Financial Instruments

The following table sets forth the estimated fair values and carrying values for financial assets, liabilities, and guarantees and commitments as of December 31, 2015 and 2014:

Table 13.4



	As of December 31, 2015				As of December 31, 2014
	Fair Value		Carrying Amount		Fair Value		Carrying Amount
	(in thousands)
Financial assets:
Cash and cash equivalents	$	1,210,084	$	1,210,084	$	1,363,387	$	1,363,387
Investment securities	2,775,516		2,775,516		1,939,188		1,939,188
Farmer Mac Guaranteed Securities	5,434,422		5,426,621		5,459,857		5,453,901
USDA Securities	1,917,319		1,917,319		1,771,532		1,771,532
Loans	4,027,660		3,962,044		3,547,424		3,520,075
Financial derivatives	3,816		3,816		4,177		4,177
Guarantee and commitment fees receivable:
LTSPCs	31,953		31,240		29,095		27,807
Farmer Mac Guaranteed Securities	8,872		8,949		11,876		11,655
Financial liabilities:
Notes payable:
Due within one year	9,108,468		9,111,461		7,357,770		7,353,953
Due after one year	5,009,310		4,967,036		5,556,570		5,471,186
Debt securities of consolidated trusts held by third parties	713,316		713,536		423,085		424,214
Financial derivatives	77,199		77,199		84,844		84,844
Guarantee and commitment obligations:
LTSPCs	31,015		30,301		28,130		26,843
Farmer Mac Guaranteed Securities	8,230		8,308		11,303		11,082

The carrying value of cash and cash equivalents is a reasonable estimate of their approximate fair value and is classified as level 1 within the fair value hierarchy. Investment securities primarily are valued based on unadjusted quoted prices in active markets and are classified as level 2 within the fair value hierarchy. Farmer Mac internally models the fair value of its loan portfolio, including loans held for sale, loans held for investment and loans held for investment in consolidated trusts, Farmer Mac Guaranteed Securities, and USDA Securities by discounting the projected cash flows of these instruments at projected interest rates. The fair values are based on the present value of expected cash flows using management's best estimate of certain key assumptions, which include prepayment speeds, forward yield curves and discount rates commensurate with the risks involved. These fair value measurements do not take into consideration the fair value of the underlying property and are classified as level 3 within the fair value hierarchy. Financial derivatives primarily are valued using unadjusted counterparty valuations and are classified as level 2 within the fair value hierarchy. The fair value of the guarantee fees receivable/obligation and debt securities of consolidated trusts are estimated based on the present value of expected future cash flows of the underlying mortgage assets using management's best estimate of certain key assumptions, which include prepayments speeds, forward yield curves, and discount rates commensurate with the risks involved and are classified as level 3 within the fair value hierarchy. Notes payable are valued by discounting the expected cash flows of these instruments using a yield curve derived from market prices observed for similar agency securities and are

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also classified as level 3 within the fair value hierarchy. Because the cash flows of Farmer Mac's financial instruments may be interest rate path dependent, estimated fair values and projected discount rates for level 3 financial instruments are derived using a Monte Carlo simulation model. Different market assumptions and estimation methodologies could significantly affect estimated fair value amounts.


14.	BUSINESS SEGMENT REPORTING

Farmer Mac's operations consist of four reportable operating segments – Farm & Ranch, USDA Guarantees, Rural Utilities, and Institutional Credit. The Institutional Credit segment comprises Farmer Mac's purchases and guarantees of AgVantage securities related to general obligations of lenders that are secured by pools of eligible loans.

Farmer Mac uses these four segments to manage business risk, and each segment is based on distinct products and distinct business activities. In addition to these four operating segments, a corporate segment is presented. That segment represents activity in Farmer Mac's investment portfolio and other corporate activities. The operating segment financial results include directly attributable revenues and expenses. Corporate charges for administrative expenses that are not directly attributable to an operating segment are allocated based on headcount.

Farmer Mac uses core earnings to measure corporate economic performance and develop financial plans because, in management's view, core earnings is a useful alternative measure in understanding Farmer Mac's economic performance, transaction economics, and business trends. Core earnings principally differs from net income attributable to common stockholders by excluding the effects of fair value fluctuations, which are not expected to have a cumulative net impact on financial condition or results of operations reported in accordance with generally accepted accounting principles ("GAAP") if the related financial instruments are held to maturity, as is generally expected. Core earnings also differs from net income attributable to common stockholders 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. This non-GAAP financial measure may not be comparable to similarly labeled non-GAAP financial measures disclosed by other companies. Farmer Mac's disclosure of this non-GAAP measure is intended to be supplemental in nature and is not meant to be considered in isolation from, as a substitute for, or as more important than, the related financial information prepared in accordance with GAAP.

The financial information presented below reflects the accounts of Farmer Mac and its subsidiaries on a consolidated basis. Accordingly, the core earnings for Farmer Mac's reportable operating segments will differ from the stand-alone financial statements of Farmer Mac's subsidiaries. These differences will be due to various factors, including the reversal of unrealized gains and losses related to fair value changes of trading assets and financial derivatives, as well as the allocation of certain expenses such as dividends and interest expense related to the issuance of capital and the incurrence of indebtedness managed at the corporate level. The allocation of general and administrative expenses that are not directly attributable to an operating segment may also result in differences.

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The following tables present core earnings for Farmer Mac's reportable operating segments and a reconciliation to consolidated net income for the years ended December 31, 2015, 2014, and 2013:

Table 14.1



Core Earnings by Business Segment
For the Year Ended December 31, 2015
	Farm & Ranch			USDA Guarantees			Rural Utilities			Institutional Credit			Corporate			Reconciling Adjustments				Consolidated Net Income
	(in thousands)
Interest income⁽¹⁾	$	90,578		$	59,902		$	26,819		$	76,487		$	13,338		$	(2,301	)		$	264,823
Interest income related to consolidated trusts owned by third parties reclassified to guarantee fee income	(3,078		)	—			—			—			—			3,078				—
Interest expense⁽²⁾	(48,696		)	(42,063		)	(15,425		)	(33,032		)	(5,450		)	5,650				(139,016		)
Net effective spread	38,804			17,839			11,394			43,455			7,888			6,427				125,807
Guarantee and commitment fees	15,076			17			397			1,665			—			(3,078		)		14,077
Other income/(expense)⁽³⁾	1,040			100			25			—			(1,972		)	6,871				6,064
Non-interest income/(loss)	16,116			117			422			1,665			(1,972		)	3,793				20,141

Provision for loan losses	(2,388		)	—			—			—			—			—				(2,388		)

Release of Losses	2,180			—			—			—			—			—				2,180
Other non-interest expense	(16,876		)	(3,449		)	(3,364		)	(2,109		)	(11,864		)	—				(37,662		)
Non-interest expense⁽⁴⁾	(14,696		)	(3,449		)	(3,364		)	(2,109		)	(11,864		)	—				(35,482		)
Core earnings before income taxes	37,836			14,507			8,452			43,011			(5,948		)	10,220			⁽⁵⁾	108,078
Income tax (expense)/benefit	(13,188		)	(5,176		)	(2,947		)	(15,054		)	3,803			(1,677		)		(34,239		)
Core earnings before preferred stock dividends and attribution of income to non-controlling interest	24,648			9,331			5,505			27,957			(2,145		)	8,543			⁽⁵⁾	73,839
Preferred stock dividends	—			—			—			—			(13,182		)	—				(13,182		)
Non-controlling interest	—			—			—			—			(5,139		)	—				(5,139		)
Loss on retirement of preferred stock	—			—			—			—			—			(8,147		)		(8,147		)
Segment core earnings/(losses)	$	24,648		$	9,331		$	5,505		$	27,957		$	(20,466	)	$	396		⁽⁵⁾	$	47,371

Total assets at carrying value	$	3,041,386		$	1,977,609		$	1,019,279		$	5,420,195		$	4,081,885		$	—			$	15,540,354
Total on- and off-balance sheet program assets at principal balance	5,725,299			1,918,277			1,530,990			6,724,254						—				15,898,820


⁽¹⁾	Includes reconciling adjustments for the amortization of premiums and discounts on assets consolidated at fair value to reflect core earnings amounts.


⁽²⁾	Based on effective funding cost determined for each operating segment, including expenses related to interest rate swaps not designated as hedges, which are included in "Gains/(losses) on financial derivatives and hedging activities" on the consolidated financial statements.


⁽³⁾	Includes reconciling adjustments for the reclassification of expenses related to interest rate swaps not designated as hedges and fair value adjustments on financial derivatives and trading assets. Also includes a reconciling adjustment related to the recognition of deferred gains over the estimated lives of certain Farmer Mac Guaranteed Securities and USDA Securities.


⁽⁴⁾	Includes directly attributable costs and an allocation of indirectly attributable costs based on headcount.


⁽⁵⁾	Net adjustments to reconcile core earnings before income taxes; core earnings before preferred stock dividends and attribution of income to non-controlling interest; and segment core earnings to corresponding income measures: income before income taxes, net income, and net income attributable to common stockholders, respectively.

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Core Earnings by Business Segment
For the Year Ended December 31, 2014
	Farm & Ranch			USDA Guarantees			Rural Utilities			Institutional Credit			Corporate			Reconciling Adjustments				Consolidated Net Income
	(in thousands)
Interest income⁽¹⁾	$	78,934		$	54,955		$	27,879		$	77,512		$	17,637		$	(15,850	)		$	241,067
Interest income related to consolidated trusts owned by third parties reclassified to guarantee fee income	(2,086		)	—			—			—			—			2,086				—
Interest expense⁽²⁾	(45,025		)	(36,689		)	(17,138		)	(38,456		)	(3,830		)	(29,582		)		(170,720		)
Net effective spread	31,823			18,266			10,741			39,056			13,807			(43,346		)		70,347
Guarantee and commitment fees	15,107			134			—			1,539			—			(2,086		)		14,694
Other income/(expense)⁽³⁾	762			63			9			—			(4,913		)	22,675				18,596
Non-interest income/(loss)	15,869			197			9			1,539			(4,913		)	20,589				33,290

Release of allowance for loan losses	961			—			—			—			—			—				961

Release of reserve for losses	2,205			—			—			—			—			—				2,205
Other non-interest expense	(15,180		)	(2,955		)	(3,130		)	(1,891		)	(10,541		)	—				(33,697		)
Non-interest expense⁽⁴⁾	(12,975		)	(2,955		)	(3,130		)	(1,891		)	(10,541		)	—				(31,492		)
Core earnings before income taxes	35,678			15,508			7,620			38,704			(1,647		)	(22,757		)	⁽⁵⁾	73,106
Income tax (expense)/benefit	(12,486		)	(5,430		)	(2,668		)	(13,548		)	23,347			7,961				(2,824		)
Core earnings before preferred stock dividends and attribution of income to non-controlling interest - preferred stock dividends	23,192			10,078			4,952			25,156			21,700			(14,796		)	⁽⁵⁾	70,282
Preferred stock dividends	—			—			—			—			(9,839		)	—				(9,839		)
Non-controlling interest - preferred stock dividends	—			—			—			—			(22,192		)	—				(22,192		)
Segment core earnings/(losses)	$	23,192		$	10,078		$	4,952		$	25,156		$	(10,331	)	$	(14,796	)	⁽⁵⁾	$	38,251

Total assets at carrying value	$	2,611,401		$	1,825,210		$	995,082		$	5,459,296		$	3,396,832		$	—			$	14,287,821
Total on- and off-balance sheet program assets at principal balance	5,417,174			1,798,034			985,609			6,396,941						—				14,597,758


⁽¹⁾	Includes reconciling adjustments for the amortization of premiums and discounts on assets consolidated at fair value to reflect core earnings amounts and interest income related to securities purchased under agreements to resell.


⁽²⁾	Based on effective funding cost determined for each operating segment, including expenses related to interest rate swaps not designated as hedges, which are included in "Gains/(losses) on financial derivatives and hedging activities" on the consolidated financial statements. Includes reconciling adjustments for interest expense related to securities sold, not yet purchased.

⁽³⁾

Includes interest income and interest expense related to securities purchased under agreements to resell and securities sold, not yet purchased, respectively; reconciling adjustments for the reclassification of expenses related to interest rate swaps not designated as hedges and fair value adjustments on financial derivatives and trading assets; and a reconciling adjustment related to the recognition of deferred gains over the estimated lives of certain Farmer Mac Guaranteed Securities and USDA Securities.


⁽⁴⁾	Includes directly attributable costs and an allocation of indirectly attributable costs based on headcount.


⁽⁵⁾	Net adjustments to reconcile core earnings before income taxes; core earnings before preferred stock dividends and attribution of income to non-controlling interest; and segment core earnings to corresponding income measures: income before income taxes, net income, and net income attributable to common stockholders, respectively.

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Core Earnings by Business Segment
For the Year Ended December 31, 2013
	Farm & Ranch			USDA Guarantees			Rural Utilities			Institutional Credit			Corporate			Reconciling Adjustments				Consolidated Net Income
	(in thousands)
Interest income⁽¹⁾	$	67,429		$	53,384		$	35,194		$	89,199		$	21,940		$	(20,417	)		$	246,729
Interest income related to consolidated trusts owned by third parties reclassified to guarantee fee income	(964		)	—			—			—			—			964				—
Interest expense⁽²⁾	(32,062		)	(35,656		)	(23,601		)	(53,613		)	(4,668		)	12,324				(137,276		)
Net effective spread	34,403			17,728			11,593			35,586			17,272			(7,129		)		109,453
Guarantee and commitment fees	14,944			132			—			1,515			—			(964		)		15,627
Other income/(expense)⁽³⁾	2,244			791			—			—			1,622			34,156				38,813
Non-interest income/(loss)	17,188			923			—			1,515			1,622			33,192				54,440

Release of allowance for loan losses	481			—			—			—			—			—				481

Provision for losses	(929		)	—			—			—			—			—				(929		)
Other non-interest expense	(14,649		)	(2,904		)	(3,100		)	(1,774		)	(9,751		)	—				(32,178		)
Non-interest expense⁽⁴⁾	(15,578		)	(2,904		)	(3,100		)	(1,774		)	(9,751		)	—				(33,107		)
Core earnings before income taxes	36,494			15,747			8,493			35,327			9,143			26,063			⁽⁵⁾	131,267
Income tax (expense)/benefit	(12,773		)	(5,511		)	(2,973		)	(12,364		)	8,991			(9,122		)		(33,752		)
Core earnings before preferred stock dividends and attribution of income to non-controlling interest - preferred stock dividends	23,721			10,236			5,520			22,963			18,134			16,941			⁽⁵⁾	97,515
Preferred stock dividends	—			—			—			—			(3,495		)	—				(3,495		)
Non-controlling interest - preferred stock dividends	—			—			—			—			(22,187		)	—				(22,187		)
Segment core earnings/(losses)	$	23,721		$	10,236		$	5,520		$	22,963		$	(7,548	)	$	16,941		⁽⁵⁾	$	71,833

Total assets at carrying value	$	2,190,224		$	1,656,688		$	1,076,298		$	5,121,666		$	3,316,904		$	—			$	13,361,780
Total on- and off-balance sheet program assets at principal balance	5,163,080			1,687,117			1,052,251			6,047,864						—				13,950,312


⁽¹⁾	Includes reconciling adjustments for the amortization of premiums and discounts on assets consolidated at fair value to reflect core earnings amounts.


⁽²⁾	Based on effective funding cost determined for each operating segment, including expenses related to interest rate swaps not designated as hedges, which are included in "Gains/(losses) on financial derivatives and hedging activities" on the consolidated financial statements.


⁽³⁾	Includes reconciling adjustments for the reclassification of expenses related to interest rate swaps not designated as hedges and fair value adjustments on financial derivatives and trading assets. Also includes a reconciling adjustment related to the recognition of deferred gains over the estimated lives of certain Farmer Mac Guaranteed Securities and USDA Securities.


⁽⁴⁾	Includes directly attributable costs and an allocation of indirectly attributable costs based on headcount.


⁽⁵⁾	Net adjustments to reconcile core earnings before income taxes; core earnings before preferred stock dividends and attribution of income to non-controlling interest; and segment core earnings to corresponding income measures: income before income taxes, net income, and net income attributable to common stockholders, respectively.

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15.	QUARTERLY FINANCIAL INFORMATION (Unaudited)

Table 15.1



	2015 Quarter Ended
	Dec. 31			Sept. 30			June 30			Mar. 31
	(in thousands, except per share amounts)
Interest income:
Interest income	$	67,562		$	66,918		$	66,392		$	63,951
Interest expense	36,591			34,735			34,528			33,162
Net interest income	30,971			32,183			31,864			30,789
(Provision for)/release of loan losses	(3,366		)	1,164			(110		)	(76		)
Net interest income after (provision for)/release of loan losses	27,605			33,347			31,754			30,713
Non-interest income/(loss):
Guarantee and commitment fees	3,780			3,532			3,388			3,377
Gains/(losses) on financial derivatives and hedging activities	1,592			(9,568		)	14,389			(3,882		)
Gains/(losses) on trading assets	696			(8		)	170			362
Gains on sale of available-for-sale investment securities	—			3			—			6
Losses on sale of real estate owned	—			—			—			(1		)
Other income	372			1,060			260			613
Non-interest income/(loss)	6,440			(4,981		)	18,207			475
Non-interest expense	5,865			10,421			10,853			8,343
Income before income taxes	28,180			17,945			39,108			22,845
Income tax expense	9,912			6,327			13,769			4,231
Net income	18,268			11,618			25,339			18,614
Less: Net loss/(income) attributable to non-controlling interest	60			36			119			(5,354		)
Net income attributable to Farmer Mac	18,328			11,654			25,458			13,260
Preferred stock dividends	(3,296		)	(3,295		)	(3,296		)	(3,295		)
Loss on retirement of preferred stock	—			—			—			(8,147		)
Net income attributable to common stockholders	$	15,032		$	8,359		$	22,162		$	1,818

Earnings per common share:
Basic earnings per common share	$	1.39		$	0.76		$	2.01		$	0.17
Diluted earnings per common share	$	1.35		$	0.74		$	1.94		$	0.16

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	2014 Quarter Ended
	Dec. 31			Sept. 30			June 30			Mar. 31
	(in thousands, except per share amounts)
Interest income:
Interest income	$	60,730		$	63,410		$	64,475		$	52,452
Interest expense	44,606			48,886			42,502			34,726
Net interest income	16,124			14,524			21,973			17,726
Release of/(provision for) loan losses	462			(511		)	1,583			(573		)
Net interest income after release of/(provision for) loan losses	16,586			14,013			23,556			17,153
Non-interest income:
Guarantee and commitment fees	3,563			3,644			3,703			3,784
(Losses)/gains on financial derivatives and hedging activities	(9,178		)	808			(5,698		)	(7,578		)
Gains on trading assets	13,857			16,369			7,748			655
(Losses)/gains on sale of available-for-sale investment securities	—			(396		)	143			15
(Losses)/gains on sale of real estate owned	(28		)	—			168			(3		)
Other income	920			502			200			92
Non-interest income/(loss)	9,134			20,927			6,264			(3,035		)
Non-interest expense	8,594			7,095			7,856			7,947
Income before income taxes	17,126			27,845			21,964			6,171
Income tax expense/(benefit)	2,769			7,564			(6,368		)	(1,141		)
Net income	14,357			20,281			28,332			7,312
Less: Net income attributable to non-controlling interest	(5,414		)	(5,412		)	(5,819		)	(5,547		)
Net income attributable to Farmer Mac	8,943			14,869			22,513			1,765
Preferred stock dividends	(3,296		)	(3,283		)	(2,308		)	(952		)
Net income attributable to common stockholders	$	5,647		$	11,586		$	20,205		$	813

Earnings per common share:
Basic earnings per common share	$	0.52		$	1.06		$	1.85		$	0.07
Diluted earnings per common share	$	0.50		$	1.02		$	1.78		$	0.07


Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Management's Evaluation of Disclosure Controls and Procedures. Farmer Mac maintains disclosure controls and procedures designed to ensure that information required to be disclosed in its periodic filings under the Securities Exchange Act of 1934 (the “Exchange Act”), including this Annual Report on Form 10-K, is recorded, processed, summarized and reported on a timely basis. These disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed under the Exchange Act is accumulated and communicated to Farmer Mac's management on a timely basis to allow decisions regarding required disclosure. Management, including Farmer Mac's Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of Farmer Mac's disclosure controls and procedures (as defined under Rules 13a‑15(e) and 15d‑15(e) of the Exchange Act) as of December 31, 2015.

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Farmer Mac carried out the evaluation of the effectiveness of its disclosure controls and procedures, required by paragraph (b) of Exchange Act Rules 13a-15 and 15d-15, under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer. Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that Farmer Mac's disclosure controls and procedures were effective as of December 31, 2015.

Management's Report on Internal Control Over Financial Reporting. See "Financial Statements—Management's Report on Internal Control Over Financial Reporting" in Item 8 of this Annual Report on Form 10-K.

Attestation Report of Independent Registered Public Accounting Firm. See "Financial Statements—Report of Independent Registered Public Accounting Firm" in Item 8 of this Annual Report on Form 10-K.

Changes in Internal Control Over Financial Reporting. There were no changes in Farmer Mac's internal control over financial reporting during the three months ended December 31, 2015 that have materially affected, or are reasonably likely to materially affect, Farmer Mac's internal control over financial reporting.

Item 9B. Other Information

None.

PART III

Item 10. Directors, Executive Officers, and Corporate Governance

Farmer Mac has adopted a Code of Business Conduct and Ethics (the "Code") that applies to all directors, officers, employees, and agents of Farmer Mac, including Farmer Mac's principal executive officer, principal financial officer, principal accounting officer, and other senior financial officers. A copy of the Code is available in the "Investors—Corporate Governance" section of Farmer Mac's internet website (www.farmermac.com). Farmer Mac will post any amendment to, or waiver from, a provision of the Code in that same section of its internet website. The Code was most recently amended in April 2014. A print copy of the Code is available free of charge upon written request to Farmer Mac's Secretary.

Additional information required by this item is incorporated by reference to Farmer Mac's definitive proxy statement to be filed on or about April 1, 2016.


Item 11.	Executive Compensation

The information required by this item is incorporated by reference to Farmer Mac's definitive proxy statement to be filed on or about April 1, 2016.


Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

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The information required by this item is incorporated by reference to Farmer Mac's definitive proxy statement to be filed on or about April 1, 2016.


Item 13.	Certain Relationships and Related Transactions, and Director Independence

The information required by this item is incorporated by reference to Farmer Mac's definitive proxy statement to be filed on or about April 1, 2016.


Item 14.	Principal Accountant Fees and Services

The information required by this item is incorporated by reference to Farmer Mac's definitive proxy statement to be filed on or about April 1, 2016.

PART IV

Item 15. Exhibits and Financial Statement Schedules


(a)	(1) Financial Statements.

Refer to Item 8 above.

(2) Financial Statement Schedules.

All schedules are omitted since they are not applicable, not required, or the information required to be set forth therein is included in the consolidated financial statements or in notes thereto.

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*	3.1	—	Title VIII of the Farm Credit Act of 1971, as most recently amended by the Food, Conservation and Energy Act of 2008 (Previously filed as Exhibit to Form 10-Q filed August 12, 2008).
*	3.2	—	Amended and Restated By-Laws of the Registrant (Previously filed as Exhibit 3.1 to Form 8-K filed June 9, 2014).
*	4.1	—	Specimen Certificate for Farmer Mac Class A Voting Common Stock (Previously filed as Exhibit 4.1 to Form 10-Q filed May 15, 2003).
*	4.2	—	Specimen Certificate for Farmer Mac Class B Voting Common Stock (Previously filed as Exhibit 4.2 to Form 10-Q filed May 15, 2003).
*	4.3	—	Specimen Certificate for Farmer Mac Class C Non-Voting Common Stock (Previously filed as Exhibit 4.3 to Form 10-Q filed May 15, 2003).
*	4.4	—	Specimen Certificate for 5.875% Non-Cumulative Preferred Stock, Series A (Previously filed as Exhibit 4.4.1 to Form 10-Q filed May 9, 2013).
*	4.4.1	—	Certificate of Designation of Terms and Conditions of 5.875% Non-Cumulative Preferred Stock, Series A (Previously filed as Exhibit 4.1 to Form 8-A filed January 17, 2013).
*	4.5	—	Specimen Certificate for 6.875% Non-Cumulative Preferred Stock, Series B (Previously filed as Exhibit 4.5 to Form 10-Q filed May 12, 2014).
*	4.5.1	—	Certificate of Designation of Terms and Conditions of 6.875% Non-Cumulative Preferred Stock, Series B (Previously filed as Exhibit 4.1 to Form 8-A filed March 25, 2014).
*	4.6	—	Specimen Certificate for 6.000% Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series C (Previously filed as Exhibit 4.6 to Form 10-Q filed August 11, 2014).
*	4.6.1	—	Certificate of Designation of Terms and Conditions of 6.000% Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series C (Previously filed as Exhibit 4.1 to Form 8-A filed June 20, 2014).
†*	10.1	—	Amended and Restated 1997 Incentive Plan (Previously filed as Exhibit 10.1.3 to Form 10-Q filed November 14, 2003).
†*	10.1.1	—	Form of stock option award agreement under 1997 Incentive Plan (Previously filed as Exhibit 10.1.4 to Form 10-K filed March 16, 2005).
†*	10.2	—	2008 Omnibus Incentive Plan (Previously filed as Exhibit 10.1.2 to Form 10-Q filed August 12, 2008).
†*	10.2.1	—	Form of SARs Award Agreement under the 2008 Omnibus Incentive Plan for grants made prior to April 1, 2012 (Previously filed as Exhibit 10 to Form 8-K filed June 11, 2008).
†*	10.2.2	—	Form of SARs Award Agreement under the 2008 Omnibus Incentive Plan for grants made from April 1, 2012 to March 31, 2013 (Previously filed as Exhibit 10.1 to Form 8-K filed April 6, 2012).
†*	10.2.3	—	Form of SARs Award Agreement under the 2008 Omnibus Incentive Plan for grants made after April 1, 2013 (Previously filed as Exhibit 10.1 to Form 8-K filed April 5, 2013).
†*	10.2.4	—	Form of SARs Award Agreement under the 2008 Omnibus Incentive Plan for grants made on or after April 1, 2015 (Previously filed as Exhibit 10.1 to Form 8-K filed on April 3, 2015).
†*	10.2.5	—	Form of Restricted Stock Agreement (Officers) under the 2008 Omnibus Incentive Plan for grants made prior to April 1, 2012 (Previously filed as Exhibit 10.1 to Form 8-K filed June 10, 2009).
†*	10.2.6	—	Form of Restricted Stock Agreement (Officers) under the 2008 Omnibus Incentive Plan for grants made on and after April 1, 2012 (Previously filed as Exhibit 10.2 to Form 8-K filed April 6, 2012).
†*	10.2.7	—	Form of Restricted Stock Agreement (Directors) under the 2008 Omnibus Incentive Plan (Previously filed as Exhibit 10.3 to Form 8-K filed April 6, 2012).
†*	10.2.8	—	Form of Time-Based Restricted Stock Award Agreement for grants made to non-directors after April 1, 2013 (Previously filed as Exhibit 10.2 to Form 8-K filed April 5, 2013).



*	Incorporated by reference to the indicated prior filing.
**	Filed with this report.
#	Portions of this exhibit have been omitted pursuant to a request for confidential treatment.
†	Management contract or compensatory plan.

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†*	10.2.9	—	Form of Time-Based Restricted Stock Award Agreement for grants made to non-directors on or after April 1, 2015 (Previously filed as Exhibit 10.3 to Form 8-K filed on April 3, 2015).
†*	10.2.10	—	Form of Performance-Based Restricted Stock Award Agreement for grants made to non-directors after April 1, 2013 (Previously filed as Exhibit 10.2 to Form 8-K filed April 5, 2013).
†*	10.2.11	—	Form of Performance-Based Restricted Stock Award Agreement for grants made to non-directors on or after April 1, 2015 (Previously filed as Exhibit 10.2 to Form 8-K filed on April 3, 2015).
†*	10.3	—	Federal Agricultural Mortgage Corporation Executive Officer Severance Plan (Previously filed as Exhibit 10.1 to Form 8-K filed June 13, 2012).
†*	10.4	—	Form of Participation Agreement to the Federal Agricultural Mortgage Corporation Executive Officer Severance Plan (Previously filed as Exhibit 10.2 to Form 8-K filed June 13, 2012).
†*	10.5	—	Employment Agreement dated December 3, 2014 between Timothy L. Buzby and the Registrant (Previously filed as Exhibit 10.1 to Form 8-K filed December 8, 2014).
†*	10.6	—	Form of Indemnification Agreement for Directors (Previously filed as Exhibit 10.1 to Form 8-K filed April 9, 2008).
†*	10.7		Description of compensation agreement between the Registrant and its directors, effective July 1, 2015 (Previously filed as Exhibit 10.5 to Form 10-Q filed November 9, 2015).
*#	10.8	—	Amended and Restated Master Central Servicing Agreement dated as of May 1, 2004 between Zions First National Bank and the Registrant (Previously filed as Exhibit 10.11.2 to Form 10-Q filed August 9, 2004).
*#	10.8.1	—	Amendment No. 1 to Amended and Restated Master Central Servicing Agreement between Zions First National Bank and the Registrant, dated as of June 1, 2009 (Previously filed as Exhibit 10.11.1 to Form 10-Q filed August 10, 2009).
*#	10.8.2	—	Amendment No. 2 to Amended and Restated Master Central Servicing Agreement between Zions First National Bank and the Registrant, dated as of August 25, 2010 (Previously filed as Exhibit 10.11.2 to Form 10-Q filed November 9, 2010).
*#	10.9	—	Loan Closing File Review Agreement dated as of August 2, 2005 between Zions First National Bank and the Registrant (Previously filed as Exhibit 10.12 to Form 10-Q filed November 9, 2005).
*	10.10	—	Sublease Agreement dated as of December 6, 2010 between Mayer Brown LLP and the Registrant (Previously filed as Exhibit 10.43 to Form 10-K/A filed June 1, 2011).
*	10.11	—	Master Trust, Sale and Servicing Agreement dated as of October 20, 2006 between CFC Advantage, LLC, National Rural Utilities Cooperative Finance Corporation, U.S. Bank National Association, and the Registrant (Previously filed as Exhibit 10.22 to Form 10-Q filed August 9, 2010).
*	10.12	—	Registration Rights Agreement Series 2007-1 dated as of February 15, 2007 between CFC Advantage, LLC, National Rural Utilities Cooperative Finance Corporation, and the Registrant (Previously filed as Exhibit 10.23 to Form 10-Q filed August 9, 2010).
*	10.13	—	Registration Rights Agreement Series 2007-2 dated as of August 10, 2007 between CFC Advantage, LLC, National Rural Utilities Cooperative Finance Corporation and the Registrant (Previously filed as Exhibit 10.24 to Form 10-Q filed August 9, 2010).
*	10.14	—	Amended and Restated Note Purchase Agreement dated as of March 24, 2011 between Farmer Mac Mortgage Securities Corporation, National Rural Utilities Cooperative Finance Corporation, and the Registrant (Previously filed as Exhibit 10.22 to Form 10-Q filed May 10, 2011).
*	10.14.1	—	Amended and Restated First Supplemental Note Purchase Agreement dated as of January 8, 2015, between Farmer Mac Mortgage Securities Corporation, National Rural Utilities Cooperative Finance Corporation, and the Registrant (Previously filed as Exhibit 10.1 to Form 8-K filed January 13, 2015).
*	10.15	—	Setoff Rights Letter Agreement dated as of March 24, 2011 between National Rural Utilities Cooperative Finance Corporation, Farmer Mac Mortgage Securities Corporation, and the Registrant (Previously filed as Exhibit 10.24 to Form 10-Q filed May 10, 2011).



*	Incorporated by reference to the indicated prior filing.
**	Filed with this report.
†	Management contract or compensatory plan.
#	Portions of this exhibit have been omitted pursuant to a request for confidential treatment.

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*	10.16	—	Amended and Restated Master Sale and Servicing Agreement dated as of August 12, 2011 between National Rural Utilities Cooperative Finance Corporation and the Registrant (Previously filed as Exhibit 10.26 to Form 10-Q filed November 9, 2011).
*#	10.17	—	Credit Support Agreement dated as of September 1, 2009 between National Rural Utilities Cooperative Finance Corporation and the Registrant (Previously filed as Exhibit 10.38 to Form 10-Q filed August 9, 2010).
*	10.18	—	Indenture dated as of September 1, 2009 between National Rural Utilities Cooperative Finance Corporation, U.S. Bank National Association and the Registrant (Previously filed as Exhibit 10.39 to Form 10-Q filed August 9, 2010).
*	10.19	—	Master Note Purchase Agreement dated as of July 31, 2015 between Farmer Mac Mortgage Securities Corporation, National Rural Utilities Cooperative Finance Corporation, and the Registrant (Previously filed as Exhibit 10.1 to Form 10-Q filed November 9, 2015).
*#	10.20	—	First Supplemental Note Purchase Agreement dated as of July 31, 2015 between Farmer Mac Mortgage Securities Corporation, National Rural Utilities Cooperative Finance Corporation, and the Registrant (Previously filed as Exhibit 10.2 to Form 10-Q filed November 9, 2015).
*	10.21	—	Second Amended, Restated and Consolidated Pledge Agreement dated as of July 31, 2015 between Farmer Mac Mortgage Securities Corporation, National Rural Utilities Cooperative Finance Corporation, U.S. Bank National Association, and the Registrant (Previously filed as Exhibit 10.3 to Form 10-Q filed November 9, 2015).
*	10.22	—	Long Term Standby Commitment to Purchase dated as of August 31, 2015, between National Rural Utilities Cooperative Finance Corporation and the Registrant (Previously filed as Exhibit 10.4 to Form 10-Q filed November 9, 2015).
*	21	—	List of the Registrant's subsidiaries (Previously filed as Exhibit 21 to Form 10-K filed March 16, 2015).
**	31.1	—	Certification of Registrant's principal executive officer relating to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2015, pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
**	31.2	—	Certification of Registrant's principal financial officer relating to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2015, pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
**	32	—	Certification of Registrant's principal executive officer and principal financial officer relating to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2015, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



*	Incorporated by reference to the indicated prior filing.
**	Filed with this report.
†	Management contract or compensatory plan.
#	Portions of this exhibit have been omitted pursuant to a request for confidential treatment.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

FEDERAL AGRICULTURAL MORTGAGE CORPORATION



/s/ Timothy L. Buzby		March 10, 2016
By:	Timothy L. Buzby	Date
	President and
	Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.



Name	Title	Date


/s/ Lowell L. Junkins	Chairman of the Board and Director	March 10, 2016
Lowell L. Junkins

/s/ Timothy L. Buzby	President and Chief Executive Officer	March 10, 2016
Timothy L. Buzby	(Principal Executive Officer)

/s/ R. Dale Lynch	Executive Vice President – Chief Financial	March 10, 2016
R. Dale Lynch	Officer and Treasurer (Principal Financial Officer)

/s/ Gregory N. Ramsey	Controller	March 10, 2016
Gregory N. Ramsey	(Principal Accounting Officer)

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Name	Title	Date



/s/ Dennis L. Brack	Director	March 10, 2016
Dennis L. Brack


/s/ Chester J. Culver	Director	March 10, 2016
Chester J. Culver


/s/ Richard H. Davidson	Director	March 10, 2016
Richard H. Davidson


/s/ James R. Engebretsen	Director	March 10, 2016
James R. Engebretsen


/s/ Dennis A. Everson	Director	March 10, 2016
Dennis A. Everson


/s/ Sara L. Faivre-Davis	Director	March 10, 2016
Sara L. Faivre-Davis


/s/ Douglas L. Flory	Director	March 10, 2016
Douglas L. Flory


/s/ Thomas W. Hill	Director	March 10, 2016
Thomas W. Hill


/s/ Mitchell A. Johnson	Director	March 10, 2016
Mitchell A. Johnson


/s/ Clark B. Maxwell	Director	March 10, 2016
Clark B. Maxwell


/s/ James B. McElroy	Director	March 10, 2016
James B. McElroy


/s/ Bruce J. Sherrick	Director	March 10, 2016
Bruce J. Sherrick


/s/ Myles J. Watts	Director	March 10, 2016
Myles J. Watts


/s/ Douglas E. Wilhelm	Director	March 10, 2016
Douglas E. Wilhelm

214