Here For You. Here For Good.

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1 Here For You. Here For Good. Through good times and bad, we ve been your trusted partner for 100 years. Third Quarter Report to Shareholders As of September 30, 2016 (unaudited)

2 NOTICE TO STOCKHOLDERS The shareholders investment in Farm Credit of Southern Colorado, ACA is materially affected by the financial condition and results of operations of CoBank, ACB (CoBank). The 2015 CoBank Annual Report to Shareholders, and the CoBank quarterly shareholders reports are available free of charge by accessing CoBank s website, or may be obtained at no charge by contacting us at: Farm Credit of Southern Colorado, ACA 5110 Edison Avenue, PO Box Colorado Springs, Colorado Phone Number:

3 MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollars in Thousands, Except as Noted) (Unaudited) The following discussion summarizes the financial position and results of operations of Farm Credit of Southern Colorado, ACA for the nine months ended September 30, 2016, with comparisons to prior periods. You should read these comments along with the accompanying financial statements and footnotes and the 2015 Annual Report to Shareholders. The accompanying financial statements were prepared under the oversight of our Audit Committee. We are now halfway through the second half of 2016, and our territory is being impacted by our global economy. Significant events have unfolded in the global economy with the following highlights: The value of the US dollar will continue to remain under upward pressure as the US begins to address economic imbalances. China s rapidly rising debt levels pose a threat to its political economic growth. Negotiations over the United Kingdom s exit from the European Union (EU), upcoming elections in France and Germany, the growing immigrant migration pressures, and the continuing debt issues in other EU countries will generate significant political and economic instability in Europe. Coupled with all this global turmoil, record high yields for wheat and corn have disrupted the market dynamics for the 2016/2017 crops. Global demand for agricultural commodities continues to be higher, but the weak global environment and strong US dollar will limit US export potential and result in significant increases in carry over supply of wheat and corn. Our territory was braced for unexpected weather patterns and fears of La Nina crimping crop yields. Fortunately the growing season experienced minimal weather stress and allowed for a record wheat crop and now a record corn crop on the horizon. In our territory, the healthy wheat harvest now occupies a substantial amount of grain storage space. From interviews with directors on our Board, two large grain coops, specifically Flagler and Cheyenne have bagged $1.0MM bushels and $2.0MM bushels of wheat, respectively at their elevators. Record wheat yields typically experience a drop in wheat quality which has been true this year. Many area farmers wheat crop did not meet minimum protein standards and thus priced at feed grade prices. On the heels of this large wheat crop, farmers will harvest a large corn crop of 15.1 million bushels, achieving a bushels/acre yield in the US and our producers are no exception in generating a large corn crop. Fortunately, a portion of our borrower s corn crop is contracted for silage corn with local feedlots and dairies. Also many farmers with excess cash in prior years invested in on-farm storage to allow them to store grain to benefit from the carry over basis in the futures market and capture higher prices later. Amidst the record supply abundance, end users of wheat and corn crop have responded to low prices by expanding usage. Ethanol producers have ramped up production to record or near-record levels with cheap grain bolstering their bottom lines and as drivers increase fuel consumption. Livestock producers, meanwhile, are also responding to affordably priced grain by expanding their herds. Fortunately large feedlots in our surrounding territory have invested in flakers that allow the flaking of wheat and can absorb some of this over abundant wheat supply. There are a few options available to help with these low prices. First, there is the safety net provided by the 2014 Farm Bill. US agriculture and our producers will likely test the effectiveness of the safety net and US growers will find the next year or two to be even more challenging than the previous two years. The next three years are expected to be more of the same-low commodity prices. Additionally, the Farm Service Agency (FSA) offers Marketing Assistance Loans. To help with price volatility, the Colorado FSA released a memo reminding producers that FSA Marketing Assistance Loans can help meet cash flow needs without selling commodities when market prices are at harvest-time lows. This same program will apply for corn in the fall. Reports from the Burlington Branch indicated planted wheat acres were down this year, while the Limon Branch reported no change in wheat acres planted for Corn harvest numbers are not in yet. The Monte Visa region is seeing normal rain fall for this time of year. Potato prices are down but most of our producers have adjusted to the low prices in their cash flow management.

4 La Nina weather patterns are expected in eastern Colorado which signals a normal wet weather pattern. Our borrowers are focused on reducing input costs to curb these low commodity prices. All this volatility means our loan growth and credit quality will be challenged going into the remainder of FY LOAN PORTFOLIO Loans outstanding at September 30, 2016 totaled $947.2 million, an increase of $16.7 million, or 1.8%, from loans of $930.5 million at December 31, The increase was due to increases in both our core loan portfolio and capital markets portfolio. OTHER PROPERTY OWNED Other property owned is real or personal property that has been acquired through foreclosure, deed in lieu of foreclosure or other means. We had other property owned of $1.8 million at September 30, 2016 which is unchanged from December 31, RESULTS OF OPERATIONS Net income for the nine months ended September 30, 2016 was $10.3 million, an increase of $1.7 million, or 20.1%, from the same period ended one year ago. The increase was the result of an increase in net interest income and decreases in provision for credit losses. Net interest income for the nine months ended September 30, 2016 was $19.0 million, an increase of $1.2 million, or 6.9%, compared with September 30, Net interest income increased primarily as a result of higher average accrual loan volume. The provision for credit losses for the nine months ended September 30, 2016 was $793 thousand, a decrease of $411 thousand, or 34.1%, from the provision for credit losses for the same period ended one year ago. During 2016, the provision recorded was a result of increases in our general reserve and management reserve, offset by a decrease in our specific reserve. The adoption of new probability of default percentages coupled with an increase in loan volume lead to the increases in the general and management reserve. Specific reserves are based on a loan by loan credit risk evaluation of impaired loans. The decrease in the specific reserves is primarily due to increased collateral values of one loan complex. For 2015, the provision for loan losses was larger primarily as a result of $1.0 million in specific reserves. Noninterest income decreased $312 thousand during the first nine months of 2016 compared with the first nine months in 2015 primarily due to decreases in our mineral income, partially offset by an increase in patronage refunds from Farm Credit Institutions. Mineral income is distributed to us quarterly. We received mineral income of $473 thousand during the first nine months of 2016, compared to $918 thousand received for the same period in Our patronage income from Farm Credit Institutions increased $127 thousand, or 5.1% from last year primarily due to an increase in our average note payable balance to CoBank. During the first nine months of 2016, noninterest expense decreased $410 thousand to $11.6 million, primarily due to a decrease in losses on other property owned, offset by increases in purchased services from AgVantis and Farm Credit Insurance Fund premiums. The decrease in losses on other property owned is due to net losses of $1.0 million recognized on one acquired property in The net loss was made up of $757 thousand loss on the sale of the property and $264 thousand in holding costs and attorney fees. CAPITAL RESOURCES Our shareholders equity at September 30, 2016 was $231.3 million, an increase from $220.8 million at December 31, This increase is due to net income and net increases in capital and preferred stock. REGULATORY MATTERS On March 10, 2016, the FCA approved new rules ( New Capital Regulations ) relating to regulatory capital requirements for System Banks, including CoBank, and Associations. The New Capital Regulations are scheduled to become effective January 1, The date the New Capital Regulations become effective is referred to herein as the Effective Date. The stated objectives of the New Capital Regulations are as follows: To modernize capital requirements while ensuring that System institutions continue to hold sufficient regulatory capital to fulfill the System s mission as a government sponsored enterprise; To ensure that the System s capital requirements are comparable to the Basel III framework and the standardized approach that the federal banking regulatory agencies have adopted, but also to ensure that the rules recognize the cooperative structure and the organization of the System;

5 To make System regulatory capital requirements more transparent; and To meet certain requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act ( Dodd- Frank Act ). The New Capital Regulations, among other things, replace existing core surplus and total surplus requirements with common equity tier 1 ( CET1 ), tier 1 and total capital (tier 1 plus tier 2) risk-based capital ratio requirements. The New Capital Regulations also add a tier 1 leverage ratio for all System institutions, which replaces the existing net collateral ratio for System Banks. In addition, the New Capital Regulations establish a capital conservation buffer and a leverage buffer; enhance the sensitivity of risk weightings; and, for System Banks only, require additional public disclosures. The revisions to the risk weightings include alternatives to the use of credit ratings, as required by the Dodd-Frank Act. The New Capital Regulations set the following minimum risk-based requirements: A CET1 capital ratio of 4.5 percent; A tier 1 capital ratio (CET1 capital plus additional tier 1 capital) of 6 percent; and A total capital ratio (tier 1 plus tier 2) of 8 percent. The New Capital Regulations also set a minimum tier 1 leverage ratio (tier 1 divided by total assets) of 4 percent, of which at least 1.5 percent must consist of unallocated retained earnings ( URE ) and URE equivalents, which are nonqualified allocated equities with certain characteristics of URE. The New Capital Regulations establish a capital cushion (capital conservation buffer) of 2.5 percent above the riskbased CET1, tier 1 and total capital requirements. In addition, the New Capital Regulations establish a leverage capital cushion (leverage buffer) of 1 percent above the tier 1 leverage ratio requirements. If capital ratios fall below these buffer amounts, capital distributions (equity redemptions, cash dividend payments, and cash patronage payments) and discretionary senior executive bonuses are restricted or prohibited without prior FCA approval. The New Capital Regulations establish a three-year phase-in of the capital conservation buffer, expected to begin on January 1, There will be no phase-in of the leverage buffer. OTHER MATTERS Russ Tomky retired as CEO effective September 30, 2016, and Alan Woodard was appointed CEO effective October 1, Mr. Woodard started his employment August 1, 2016, allowing for a two month transition. Mr. Woodard previously served in a role for CoBank as Regional Vice-President in the Regional Agri-Business Group in the Southern Region. The undersigned certify they have reviewed this report, this report has been prepared in accordance with all applicable statutory or regulatory requirements and the information contained herein is true, accurate, and complete to the best of his or her knowledge and belief. _//signed// //signed// Gary Pautler Alan R Woodard Chairman of the Board CEO November 4, 2016 November 4, 2016 _//signed// Shawna R Neppl CFO November 4, 2016

6 Farm Credit of Southern Colorado, ACA Consolidated Statement of Condition (Dollars in Thousands) September 30 December UNAUDITED AUDITED ASSETS Loans $ 947,211 $ 930,505 Less allowance for loan losses 2,259 1,474 Net loans 944, ,031 Cash 1,153 5,691 Accrued interest receivable 17,693 13,309 Investment in CoBank, ACB 29,970 29,954 Premises and equipment, net 12,817 13,254 Other property owned 1,752 1,752 Prepaid benefit expense Other assets 5,953 4,298 Total assets $ 1,014,495 $ 997,722 LIABILITIES Note payable to CoBank, ACB $ 772,745 $ 761,665 Advance conditional payments 6,014 7,108 Accrued interest payable 1,129 1,182 Patronage distributions payable - 3,000 Accrued benefits liability Reserve for unfunded commitments Other liabilities 2,505 3,261 Total liabilities 783, ,875 Commitments and Contingencies SHAREHOLDERS' EQUITY Preferred stock 1,902 1,761 Capital stock 1,414 1,375 Unallocated retained earnings 228, ,711 Total shareholders' equity 231, ,847 Total liabilities and shareholders' equity $ 1,014,495 $ 997,722 The accompanying notes are an integral part of these consolidated financial statements.

7 Farm Credit of Southern Colorado, ACA Consolidated Statement of Comprehensive Income (Dollars in Thousands) For the three months For the nine months ended September 30 ended September 30 UNAUDITED INTEREST INCOME Loans $ 10,386 $ 9,913 $ 30,630 $ 28,882 Total interest income 10,386 9,913 30,630 28,882 INTEREST EXPENSE Note payable to CoBank 3,889 3,802 11,610 11,085 Other Total interest expense 3,891 3,803 11,616 11,088 Net interest income 6,495 6,110 19,014 17,794 Provision for credit losses ,204 Net interest income after provision for credit losses 6,259 6,079 18,221 16,590 NONINTEREST INCOME Financially related services income Loan fees Patronage refund from Farm Credit Institutions ,636 2,509 Mineral income Other noninterest income Total noninterest income 1,288 1,346 3,693 4,005 NONINTEREST EXPENSE Salaries and employee benefits 2,047 2,175 6,388 6,411 Occupancy and equipment Purchased services from AgVantis, Inc , Losses on other property owned, net ,021 Farm Credit Insurance Fund premium Supervisory and examination costs Other noninterest expense ,855 1,808 Total noninterest expense 3,807 4,453 11,592 12,002 Income before income taxes 3,740 2,972 10,322 8,593 Provision for income taxes Net income/comprehensive income $ 3,739 $ 2,971 $ 10,317 $ 8,588 The accompanying notes are an integral part of these consolidated financial statements.

8 Farm Credit of Southern Colorado, ACA Consolidated Statement of Changes in Shareholders' Equity (Dollars in Thousands) Protected Unallocated Total Borrower Preferred Capital Retained Shareholders' UNAUDITED Stock Stock Stock Earnings Equity Balance at December 31, 2014 $ 2 $ 2,863 $ 1,328 $ 207,319 $ 211,512 Comprehensive income 8,588 8,588 Stock issued Stock retired - (1,445) (112) (1,557) Preferred stock dividends 7 (7) - Balance at September 30, 2015 $ 2 $ 1,900 $ 1,365 $ 215,900 $ 219,167 Balance at December 31, 2015 $ - $ 1,761 $ 1,375 $ 217,711 $ 220,847 Comprehensive income 10,317 10,317 Stock issued Stock retired - (91) (95) (186) Preferred stock dividends 7 (7) - Balance at September 30, 2016 $ - $ 1,902 $ 1,414 $ 228,021 $ 231,337 The accompanying notes are an integral part of these consolidated financial statements.

9 NOTES TO FINANCIAL STATEMENTS (Dollars in Thousands, Except as Noted) (Unaudited) NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES A description of the organization and operations of Farm Credit of Southern Colorado (the Association), the significant accounting policies followed, and the financial condition and results of operations as of and for the year ended December 31, 2015, are contained in the 2015 Annual Report to Shareholders. These unaudited third quarter 2016 financial statements should be read in conjunction with the 2015 Annual Report to Shareholders. The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (GAAP) for interim financial information. Accordingly, they do not include all of the disclosures required by GAAP for annual financial statements and should be read in conjunction with the audited financial statements as of and for the year ended December 31, 2015 as contained in the 2015 Annual Report to Shareholders. In the opinion of management, the unaudited financial information is complete and reflects all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of results for the interim periods. The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year ending December 31, Descriptions of the significant accounting policies are included in the 2015 Annual Report to Shareholders. In the opinion of management, these policies and the presentation of the interim financial condition and results of operations conform with GAAP and prevailing practices within the banking industry. In August 2016, the Financial Accounting Standards Board (FASB) issued guidance entitled Classification of Certain Cash Receipts and Cash Payments. The guidance addresses specific cash flow issues with the objective of reducing the diversity in the classification of these cash flows. Included in the cash flow issues are debt prepayment or debt extinguishment costs and settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing. This guidance becomes effective for interim and annual periods beginning after December 15, The adoption of this guidance is not expected to impact the Association s financial condition or its results of operations but could change the classification of certain items in the statement of cash flows. In June 2016, the FASB issued guidance entitled Measurement of Credit Losses on Financial Instruments. The guidance replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. Credit losses relating to available-for-sale securities would also be recorded through an allowance for credit losses. For public business entities that are not U.S. Securities and Exchange Commission filers this guidance becomes effective for interim and annual periods beginning after December 15, 2020, with early application permitted. The Association is currently evaluating the impact of adoption on its financial condition and results of operations. In February 2016, the Financial Accounting Standards Board (FASB) issued guidance entitled Leases. The guidance requires the recognition by lessees of lease assets and lease liabilities on the balance sheet for the rights and obligations created by those leases. Leases with lease terms of more than 12 months are impacted by this guidance. This guidance becomes effective for interim and annual periods beginning after December 15, 2018, with early application permitted. The Association is currently evaluating the impact of adoption on its financial condition and results of operations. In January 2016, the FASB issued guidance entitled Recognition and Measurement of Financial Assets and Liabilities. The guidance affects, among other things, the presentation and disclosure requirements for financial instruments. For public entities, the guidance eliminates the requirement to disclose the methods and significant assumptions used to estimate the fair value of financial instruments carried at amortized cost. This guidance becomes effective for interim and annual periods beginning after December 15, The adoption of this guidance is not expected to impact the Association s financial condition or its results of operations. In August 2014, the FASB issued guidance entitled Presentation of Financial Statements Going Concern. The guidance governs management s responsibility to evaluate whether there is substantial doubt about an entity s ability to continue as a going concern and to provide related footnote disclosures. This guidance requires management to perform interim and annual assessments of an entity s ability to continue as a going concern within one year after the

10 date the financial statements are issued or within one year after the financial statements are available to be issued, when applicable. Substantial doubt exists if it is probable that the entity will be unable to meet its obligations for the assessed period. This guidance becomes effective for interim and annual periods ending after December 15, 2016, and early application is permitted. Management will be required to make its initial assessment as of December 31, In May 2014, the FASB issued guidance entitled, Revenue from Contracts with Customers. The guidance governs revenue recognition from contracts with customers and requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Financial instruments and other contractual rights within the scope of other guidance issued by the FASB are excluded from the scope of this new revenue recognition guidance. In this regard, a majority of our contracts would be excluded from the scope of this new guidance. In August 2015, the FASB issued an update that defers this guidance by one year, which results in the new revenue standard becoming effective for interim and annual reporting periods beginning after December 15, The Association is in the process of reviewing contracts to determine the effect, if any, on its financial condition or results of operations. NOTE 2 - LOANS AND ALLOWANCE FOR LOAN LOSSES A summary of loans follows: September 30, 2016 December 31, 2015 Real estate mortgage $ 552,069 $ 546,271 Production and intermediate-term 172, ,406 Agribusiness: Loans to cooperatives 40,011 16,553 Processing and marketing 94, ,038 Farm-related business 14,316 11,418 Rural infrastructure: Communication 16,819 24,064 Energy 46,336 42,711 Water and waste water 160 4,120 Rural residential real estate Mission-related 1,238 1,275 Agricultural export finance 8,511 8,528 Total loans $ 947,211 $ 930,505 The Association purchases or sells participation interests with other parties in order to diversify risk, manage loan volume and comply with Farm Credit Administration regulations. The following table presents information regarding the balances of participations purchased and sold at September 30, 2016: Other Farm Credit Institutions Non-Farm Credit Institutions Total Purchased Sold Purchased Sold Purchased Sold Real estate mortgage $ 29,102 $ 16,169 $ 2,165 $ $ 31,267 $ 16,169 Production and intermediate-term 10,496 1,089 10,496 1,089 Agribusiness 140, ,421 Rural infrastructure 63,315 63,315 Agricultural export finance 8,511 8,511 Total $ 251,845 $ 17,258 $ 2,165 $ $ 254,010 $ 17,258

11 The following table shows loans and related accrued interest classified under the Farm Credit Administration Uniform Loan Classification System as a percentage of total loans and related accrued interest receivable by loan type as of: September 30, 2016 December 31, 2015 Real estate mortgage Acceptable 91.99% 94.36% OAEM 4.04% 3.60% Substandard 3.97% 2.04% Total % % Production and intermediate-term Acceptable 87.78% 96.13% OAEM 6.89% 2.57% Substandard 5.33% 1.30% Total % % Agribusiness Acceptable 97.26% 95.96% OAEM 1.26% 2.56% Substandard 1.48% 1.48% Total % % Rural infrastructure Acceptable 96.61% 93.77% OAEM 3.39% 4.35% Substandard 1.88% Total % % Rural residential real estate Acceptable % % Total % % Mission-related Acceptable % % Total % % Agricultural export finance Acceptable % % Total % % Total Loans Acceptable 92.42% 94.93% OAEM 4.05% 3.28% Substandard 3.53% 1.79% Total % %

12 High risk assets consist of impaired loans and other property owned. These nonperforming assets (including related accrued interest) and related credit quality are as follows: (dollars in thousands) September 30, 2016 December 31, 2015 Nonaccrual loans Real estate mortgage $ 8,264 $ 4,503 Production and intermediate-term 3,443 1,907 Rural infrastructure 1,333 Total nonaccrual loans 11,707 7,743 Accruing restructured loans Real estate mortgage Production and intermediate-term 124 Rural infrastructure 1,278 Total accruing restructured loans 1, Accruing loans 90 days past due Real estate mortgage Total accruing loans 90 days past due Total impaired loans 13,667 8,424 Other property owned 1,752 1,752 Total high risk assets $ 15,419 $ 10,176 Additional impaired loan information is as follows: Recorded Investment September 30, 2016 December 31, 2015 Unpaid Unpaid Principal Related Recorded Principal Balance Allowance Investment Balance Related Allowance Impaired loans with a related allowance for credit losses: Real estate mortgage $ $ $ $ 254 $ 592 $ 76 Production and intermediate-term 2,003 2, Total $ 2,003 $ 2,131 $ 630 $ 264 $ 603 $ 76 Impaired loans with no related allowance for credit losses: Real estate mortgage $ 8,946 $ 9,355 $ 4,806 $ 4,776 Production and intermediate-term 1,440 5,773 2,021 6,582 Rural infrastructure 1,278 1,617 1,333 1,666 Total $ 11,664 $ 16,745 $ 8,160 $ 13,024 Total impaired loans: Real estate mortgage $ 8,946 $ 9,355 $ $ 5,060 $ 5,368 $ 76 Production and intermediate-term 3,443 7, ,031 6,593 Rural infrastructure 1,278 1,617 1,333 1,666 Total $ 13,667 $ 18,876 $ 630 $ 8,424 $ 13,627 $ 76 Note: The recorded investment in the receivable is the face amount increased or decreased by applicable accrued interest and unamortized premium, discount, finance charges, or acquisition costs and may also reflect a previous direct write-down of the investment.

13 For the Three Months Ended September 30, 2016 Average Interest Income Impaired Loans Recognized For the Three Months Ended September 30, 2015 Average Impaired Loans Interest Income Recognized Impaired loans with a related allowance for credit losses: Real estate mortgage $ 169 $ $ 260 $ Production and intermediate-term 1,503 2,356 Total $ 1,672 $ $ 2,616 $ Impaired loans with no related allowance for credit losses: Real estate mortgage $ 8,657 $ 31 $ 11,708 $ 14 Production and intermediate-term 1, Rural infrastructure 1, ,375 Total $ 11,836 $ 59 $ 13,323 $ 63 Total impaired loans: Real estate mortgage $ 8,826 $ 31 $ 11,968 $ 14 Production and intermediate-term 3, , Rural infrastructure 1, ,375 Total $ 13,508 $ 59 $ 15,939 $ 63 For the Nine Months Ended September 30, 2016 Average Interest Income Impaired Loans Recognized For the Nine Months Ended September 30, 2015 Average Impaired Loans Interest Income Recognized Impaired loans with a related allowance for credit losses: Real estate mortgage $ 224 $ $ 145 $ Production and intermediate-term 1,285 2,399 Total $ 1,509 $ $ 2,544 $ Impaired loans with no related allowance for credit losses: Real estate mortgage $ 9,954 $ 133 $ 11,145 $ 108 Production and intermediate-term 1, Agribusiness Rural infrastructure 1, ,388 Total $ 13,141 $ 197 $ 13,165 $ 179 Total impaired loans: Real estate mortgage $ 10,178 $ 133 $ 11,290 $ 108 Production and intermediate-term 3, , Agribusiness Rural infrastructure 1, ,388 Total $ 14,650 $ 197 $ 15,709 $ 179

14 The following tables provide an age analysis of past due loans (including accrued interest). September 30, Days Past Due 90 Days or More Past Due Total Past Due Not Past Due or less than 30 Days Past Due Recorded Investment in Loans Recorded Investment Accruing Loans 90 Days or More Past Due Real estate mortgage $ 3,819 $ 1,798 $ 5,617 $ 559,379 $ 564,996 $ 587 Production and intermediate-term 861 1,869 2, , ,663 Agribusiness 1,284 1, , ,872 Rural infrastructure 63,476 63,476 Rural residential real estate Mission-related 1,240 1,240 Agricultural export finance 8,537 8,537 Total $ 5,964 $ 3,667 $ 9,631 $ 955,273 $ 964,904 $ 587 December 31, Days Past Due 90 Days or More Past Due Total Past Due Not Past Due or less than 30 Days Past Due Recorded Investment in Loans Recorded Investment Accruing Loans 90 Days or More Past Due Real estate mortgage $ 3,773 $ 991 $ 4,764 $ 550,760 $ 555,524 $ 457 Production and intermediate-term 2, , , ,557 Agribusiness , ,733 Rural infrastructure 71,026 71,026 Rural residential real estate Mission-related 1,278 1,278 Agricultural export finance 8,574 8,574 Total $ 6,768 $ 1,037 $ 7,805 $ 936,009 $ 943,814 $ 457 A summary of changes in the allowance for loan losses is as follows: Balance at June 30, 2016 Charge-offs Recoveries Provision for Loan Losses/ (Loan Loss Reversals) Balance at September 30, 2016 Real estate mortgage $ 605 $ $ $ (219) $ 386 Production and intermediate-term ,087 Agribusiness Rural infrastructure 309 (9) 300 Mission-related 5 5 Agricultural export finance 14 (7) 7 Total $ 2,063 $ 9 $ 32 $ 173 $ 2,259

15 Balance at December 31, 2015 Charge-offs Recoveries Provision for Loan Losses/ (Loan Loss Reversals) Balance at September 30, 2016 Real estate mortgage $ 446 $ $ $ (60) $ 386 Production and intermediate-term ,087 Agribusiness Rural infrastructure 301 (1) 300 Mission-related Agricultural export finance 7 7 Total $ 1,474 $ 32 $ 141 $ 676 $ 2,259 Balance at June 30, 2015 Charge-offs Recoveries Provision for Loan Losses/ (Loan Loss Reversals) Balance at September 30, 2015 Real estate mortgage $ 318 $ 1 $ $ 35 $ 352 Production and intermediate-term 1, (64) 1,221 Agribusiness Rural infrastructure Mission-related 3 3 Agricultural export finance 5 5 Total $ 2,081 $ 11 $ 1 $ 2 $ 2,073 Balance at December 31, 2014 Charge-offs Recoveries Provision for Loan Losses/ (Loan Loss Reversals) Balance at September 30, 2015 Real estate mortgage $ 252 $ 318 $ $ 418 $ 352 Production and intermediate-term ,221 Agribusiness 449 (178) 271 Rural infrastructure 283 (62) 221 Mission-related 3 3 Agricultural export finance 5 5 Total $ 1,413 $ 393 $ 165 $ 888 $ 2,073 The Association maintains a separate reserve for unfunded commitments, which is included in Liabilities on the Association s Consolidated Statement of Condition. The related provision for the reserve for unfunded commitments is included as part of the provision for credit losses on the Consolidated Statement of Comprehensive income, along with the provision for loan losses. A summary of changes in the reserve for unfunded commitments follows: For the Three Months Ended September 30 For the Nine Months Ended September Balance at beginning of period $ 511 $ 287 $ 457 $ Provision for unfunded commitments Total $ 573 $ 316 $ 573 $ 316

16 Recorded Investments in Allowance for Credit Losses Loans Outstanding Ending Balance at September 30, 2016 Ending Balance at September 30, 2016 Individually evaluated for impairment Collectively evaluated for impairment Individually evaluated for impairment Collectively evaluated for impairment Real estate mortgage $ $ 386 $ 9,215 $ 555,781 Production and intermediate-term , ,220 Agribusiness ,872 Rural infrastructure ,476 Rural residential real estate 120 Mission-related 5 1,240 Agricultural export finance 7 8,537 Total $ 630 $ 1,629 $ 12,658 $ 952,246 Recorded Investments in Allowance for Credit Losses Loans Outstanding Ending Balance at December 31, 2015 Ending Balance at December 31, 2015 Individually evaluated for impairment Collectively evaluated for impairment Individually evaluated for impairment Collectively evaluated for impairment Real estate mortgage $ 76 $ 370 $ 5,060 $ 550,464 Production and intermediate-term 335 2, ,526 Agribusiness ,733 Rural infrastructure 301 1,333 69,693 Rural residential real estate 122 Mission-related 4 1,278 Agricultural export finance 7 8,574 Total $ 76 $ 1,398 $ 8,424 $ 935,390 A restructuring of a debt constitutes a troubled debt restructuring (TDR) if the creditor, for economic or legal reasons related to the debtor s financial difficulties, grants a concession to the debtor that it would not otherwise consider The following tables present additional information regarding troubled debt restructurings that occurred during the periods. For the Three Months Ended September 30, 2016 Pre-modification Outstanding Recorded Investment* Post-modification Outstanding Recorded Investment* Troubled debt restructurings: Real estate mortgage $ 443 $ 443 Total $ 443 $ 443 For the Three Months Ended September 30, 2015 Pre-modification Outstanding Recorded Investment* Post-modification Outstanding Recorded Investment* Troubled debt restructurings: Real estate mortgage $ $ Total $ $ For the Nine Months Ended September 30, 2016 Pre-modification Outstanding Recorded Investment* Post-modification Outstanding Recorded Investment* Troubled debt restructurings: Real estate mortgage $ 443 $ 443 Total $ 443 $ 443

17 For the Nine Months Ended September 30, 2015 Pre-modification Outstanding Recorded Investment* Post-modification Outstanding Recorded Investment* Troubled debt restructurings: Real estate mortgage $ $ Total $ $ * Pre-modification represents the recorded investment in the loan receivable just prior to restructuring and post-modification represents the recorded investment in the loan receivable immediately following the restructuring. The recorded investment is the face amount of the loan receivable increased or decreased by applicable accrued interest and unamortized premium, discount, finance charges, or acquisition costs and may also reflect a previous direct write-down of the investment. The Association had no TDRs within the previous 12 months for which there were subsequent payment defaults during the period. There were no additional commitments to lend to borrowers whose loans have been modified in troubled debt restructuring at September 30, The following table provides information on outstanding loans restructured in troubled debt restructurings at period end. These loans are included as impaired loans in the impaired loan table. Loans modified as TDRs September 30, 2016 December 31, 2015 TDRs in Nonaccrual Status* September 30, 2016 December 31, 2015 Real estate mortgage $ 539 $ 100 $ 443 $ Production and intermediate-term 1,106 1,439 1,106 1,316 Rural infrastructure 1,333 1,333 Total $ 1,645 $ 2,872 $ 1,549 $ 2,649 * Represents the portion of loans modified as TDRs (first column) that are in nonaccrual status. NOTE 3 - FAIR VALUE MEASUREMENTS Accounting guidance defines fair value as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability. See Note 2 to the 2015 Annual Report to Shareholders for a more complete description. The Association had no assets or liabilities measured at fair value on a recurring basis at September 30, 2016 or December 31, Assets measured at fair value on a non-recurring basis for each of the fair value hierarchy values are summarized below Fair Value Measurement Using Total Fair Total Level 1 Level 2 Level 3 Value Gains/(Losses) September 30, 2016 Loans $ $ $ 1,634 $ 1,634 $ (445) Other property owned $ $ $ 2,071 $ 2,071 $ December 31, 2015 Loans $ $ $ 3,387 $ 3,387 $ (83) Other property owned $ $ $ 2,071 $ 2,071 $ With regard to impaired loans and other property owned, it is not practicable to provide specific information on inputs as each collateral property is unique. System institutions utilize appraisals to value these loans and other property owned and takes into account unobservable inputs such as income and expense, comparable sales, replacement cost and comparability adjustments. The Association had no liabilities measured at fair value on a non-recurring basis at September 30, 2016 or December 31, Financial assets and financial liabilities measured at carrying amounts and not measured at fair value on the Consolidated Statement of Condition for each of the fair value hierarchy values are summarized as follows:

18 Valuation Techniques As more fully discussed in Note 2 to the 2015 Annual Report to Shareholders, accounting guidance establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The following presents a brief summary of the valuation techniques used by the Association for assets and liabilities, subject to fair value measurement. Loans For impaired loans measured on a non-recurring basis, the fair value is based upon the underlying real estate collateral since the loans are collateral dependent. The fair value measurement process uses independent appraisals and other market-based information, but in many cases it also requires significant input based on management s knowledge of and judgment about current market conditions, specific issues relating to the collateral and other matters. As a result, these fair value measurements fall within Level 3 of the hierarchy. When the value of the real estate, less estimated costs to sell, is less than the principal balance of the loan, a specific reserve is established and the net loan is reported at its fair value. Other Property Owned Other property owned measured on a non-recurring basis is generally classified as Level 3. The process for measuring the fair value of other property owned involves the use of appraisals or other market-based information. Costs to sell represent transaction costs and are not included as a component of the asset s fair value. NOTE 4 - SUBSEQUENT EVENTS The Association has evaluated subsequent events through November 4, 2016, which is the date the financial statements were issued, and no material subsequent events were identified.