AgriBank, FCB and Affiliated Associations

Quarterly Report June 30, 2007 Copies of quarterly and annual reports are available upon request by contacting AgriBank, FCB, 375 Jackson Street, St. Paul, Minnesota 55101-1810 or by calling (651) 282-8800. Reports are also available at www.agribank.com. MANAGEMENT'S DISCUSSION AND ANALYSIS The following discussion is a review of the combined financial position and results of operations of AgriBank, FCB and Affiliated Associations. This information should be read in conjunction with the accompanying financial statements, the notes to the financial statements and the 2006 annual report. We serve customers in states across America s heartland. AgriBank provides funding to and is owned by its affiliated Associations and other financial institutions. AgriBank and its affiliated Associations are collectively referred to as the District. The Associations are chartered to service customers in substantially all of Arkansas, Illinois, Indiana, Iowa, Kentucky, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, Tennessee, Wisconsin and Wyoming. The Associations provide credit and services to farmers, ranchers, rural residents and agribusinesses. RESULTS OF OPERATIONS Our net income for the six months ended June 30, 2007 totaled $359.3 million compared to $303.9 million for the same period in 2006. The return on average assets decreased to 1.30% for the six months ended June 30, 2007 from 1.33% for the comparable period in 2006. The following table illustrates changes in the significant components of net income (in millions): Increase (decrease) in net income 2007 vs Six months ended June 30 2006 Net interest income $74.3 Provision for loan losses (7.2) Non-interest income 12.5 Operating expenses (18.5) Income taxes (5.7) Total change in net income $55.4 Net interest income for the six months ended June 30, 2007 increased $74.3 million or 13.2% compared to the six months ended June 30, 2006. The increase in net interest income was due to the effects of changes in volume of $69.9 million and changes in rates of $4.8 million and a $0.1 million increase in nonaccrual income. Information regarding the year-to-date average daily balances (ADBs) and annualized average rates earned and paid on our portfolio follows (dollars in millions): Six months ended June 30, 2007 ADB Rate Earning assets: Accrual loans $43,012.0 6.96% Nonaccrual loans 161.1 13.22% Investments and federal funds 10,484.9 5.33% Other earning assets 340.6 5.50% Total earning assets 53,998.6 6.65% Total interest bearing liabilities 45,854.8 5.06% Total interest rate spread 1.59% Impact of equity financing $8,143.8 0.77% Net interest margin 2.36% Six months ended June 30, 2006 ADB Rate Earning assets: Accrual loans $37,255.5 6.57% Nonaccrual loans 148.1 14.55% Investments and federal funds 8,822.6 4.76% Other earning assets 305.7 5.42% Total earning assets 46,531.9 6.25% Total interest bearing liabilities 38,922.6 4.58% Total interest rate spread 1.67% Impact of equity financing $7,609.3 0.75% Net interest margin 2.42% Net interest margin has decreased by 6 basis points compared to the same period last year due to a 8 basis point decline in interest rate spread partially offset by a 2 basis point increase in the impact of equity financing. Equity financing represents the benefit of noninterest bearing funding. Equity financing is positively impacted by an increase in interest rates and increased volume of equity; accordingly, the impact of equity financing in 2007 is greater than in 2006. The average interest rate spread on earning assets was 1.59% for the first six months of 2007, compared to 1.67% during the same period in 2006. The decreased interest rate spread was primarily due to the decline in accrual spreads, reflecting the increasingly competitive market. The competition is resulting from increased liquidity in the large loan market, active insurance company competition and strong competition from large international banks. Investment spreads also declined, further reducing the overall interest rate spread. Net interest income has been positively impacted by the increased volume of our investment portfolio. Changes in loan volumes are discussed in the Loan Portfolio section of this discussion. Other significant changes in net income are as follows: The increase in non-interest income was primarily due to increased financially related services income reflecting an increase in multi-peril crop insurance income. This increase reflects a combination of additional emphasis on marketing and sales of the related services and the higher value of key commodities insured. The increase in operating expenses is due primarily to the increased salaries and benefits resulting from increased staffing at the associations. The increase in operating expenses is also due to an increase in Farm Credit System Insurance Corporation premiums, reflecting increased loan volume. The increase in income taxes is related to an increase in income at the taxable entities. 1

LOAN PORTFOLIO The following table presents the components of loan volume at June 30, 2007 and December 31, 2006 (in millions): 2007 2006 Production agriculture: Real estate mortgage $25,298.0 $24,124.0 Short and intermediate term 11,889.2 10,950.2 Agribusiness 4,459.8 3,857.7 Rural home loans 1,672.1 1,592.0 Finance leases 453.7 446.9 Other 881.1 844.2 Nonaccrual 164.5 172.1 Total loan volume $44,818.4 $41,987.1 District loan volume totaled $44.8 billion at June 30, 2007, a $2.8 billion increase from December 31, 2006. This growth is resulting from strong marketing activities, competitive rates and products, and participation activity. The components of risk asset volume follow (in millions): 2007 2006 Nonaccrual $164.5 $172.1 Accruing restructured 20.4 19.7 Past due 90 days or more still accruing 21.2 8.3 Total risk loans $206.1 $200.1 Other property owned 6.7 3.2 Total risk assets $212.8 $203.3 Risk loans as % of total loans 0.45% 0.48% Delinquencies as a % of total loans 0.60% 0.56% The District s total risk assets have increased since December 31, 2006, but remain at acceptable levels. Loans 90 days or more past due and still accruing interest were adequately secured and in the process of collection. The increase in loans 90 days or more past due and still accruing interest is reflective of the seasonal payment patterns. Loans 90 days or more past due and still accruing interest at June 30, 2006 were $19.4 million. At June 30, 2007, 53.6% of nonaccrual volume was current in payment. Comparative allowance coverage of various loan categories follows: Allowance as a percentage of: 2007 2006 Loans 0.22% 0.22% Nonaccrual loans 58.73% 52.67% Total risk loans 46.86% 45.31% The District s allowance for loan losses is an estimate of losses on loans in the AgriBank and Association portfolios as of the financial statement date. AgriBank and Association managements determine the appropriate allowance levels based on periodic evaluation of factors such as loan loss history, portfolio quality and current economic and environmental conditions. AgriBank and Association managements consider the allowance for loan losses at June 30, 2007 to be reasonable in relation to the risk in the loan portfolios. lives. However, in the event a security is downgraded, we may be required by our regulator to dispose of the security. AGRICULTURAL CONDITIONS Net farm income for 2007 is forecasted by USDA to increase over 2006 net farm income by 10%. USDA reported 2006 net farm income of $60.6 billion, down significantly from 2005 levels, but slightly above the 10-year average. The 2005 and 2004 years were the two highest net farm income years on record. Strong agricultural economic conditions were the result of generally favorable prices and the continued positive impact of government programs. In addition, the interest rate environment in recent years allowed many District borrowers to lower their borrowing costs, which improves their profitability. The six year Farm Security and Rural Investment Act of 2002 completed its fifth year. The Act includes significant federal financial support for wheat, feed grains, cotton, rice, and oilseeds, and expanded assistance to certain specialty crops and certain livestock operations (particularly smaller dairy farms). The Act provides a high degree of income support for major crops, which helps support credit quality and decreases the volatility of overall farm income over the term of the program. The U.S. House and Senate are currently working on their respective versions of the Farm Bill. It is expected the new Farm Bill may reduce government support. FUNDING, LIQUIDITY AND MEMBERS EQUITY AgriBank is responsible for meeting the District's funding, liquidity and asset/liability management needs. Association funding is provided through loans from AgriBank. Total members equity at June 30, 2007 was $8.7 billion, compared to $8.4 billion at December 31, 2006. The increase in members equity of $347.3 million primarily reflects net income for the first six months of 2007. At June 30, 2007, AgriBank and each Association exceeded the regulatory minimum capital ratios, which are further discussed in Note 3 to the financial statements. The undersigned certify that the June 30, 2007 quarterly report of has been prepared under the oversight of the audit committee and in accordance with all applicable statutory or regulatory requirements and that the information contained herein is true, accurate, and complete to the best of our knowledge and belief. Roy Tiarks L. William York Chairperson of the Board Chief Executive Officer AgriBank, FCB AgriBank, FCB July 31, 2007 July 31, 2007 INVESTMENT PORTFOLIO At June 30, 2007, AgriBank s investment portfolio included $1.1 billion of asset-backed securities supported by first and second lien home equity mortgages. In view of the recent economic conditions and volatility related to these types of securities, the Bank is actively monitoring the creditworthiness of these securities, which are all currently rated AAA. These securities are supported by credit enhancements including insurance wraps, favorable priority of payments, and over collateralization. Based on our evaluations, we believe these securities do not pose a significant risk of loss given the credit enhancements and their relatively short expected average 2

COMBINED STATEMENT OF CONDITION (Dollars in thousands) (Unaudited) 2007 2006 Assets Loans $44,818,355 $41,987,120 Allowance for loan losses 96,604 90,655 Net loans 44,721,751 41,896,465 Investment securities - AgriBank, FCB 8,494,031 8,624,856 Investment securities - Associations 764,069 349,917 Other earning assets 354,632 376,081 Cash 29,155 174,569 Federal funds 434,700 661,200 Accrued interest receivable 740,143 728,182 Premises and equipment, net 227,906 223,538 Assets held for lease, net 296,165 289,361 Derivative assets 1,927 4,561 Deferred tax assets, net 75 635 Other assets 193,905 177,067 Total assets $56,258,459 $53,506,432 Liabilities Bonds and notes $46,617,607 $44,152,111 Accrued interest payable 456,408 419,087 Derivative liabilities 70,579 84,140 Deferred tax liabilities, net 50,522 56,420 Other liabilities 316,394 395,053 Total liabilities 47,511,510 45,106,811 Contingent liabilities Members' equity Protected capital stock and participation certificates 5,670 6,380 Capital stock and participation certificates 206,857 200,937 Allocated surplus 173,343 166,621 Unallocated surplus 8,367,275 8,045,527 Accumulated other comprehensive loss (6,196) (19,844) Total members' equity 8,746,949 8,399,621 Total liabilities and members' equity $56,258,459 $53,506,432 The accompanying notes are an integral part of these combined financial statements. 3

COMBINED STATEMENT OF INCOME (Dollars in thousands) (Unaudited) Three months Six months Period ended June 30, 2007 2006 2007 2006 Interest income Loans $769,468 $641,844 $1,506,873 $1,235,285 Other earning assets 4,762 4,530 9,363 8,288 Investment securities and federal funds 141,062 110,729 279,607 210,018 Total interest income 915,292 757,103 1,795,843 1,453,591 Interest expense 591,985 470,778 1,159,625 891,657 Net interest income 323,307 286,325 636,218 561,934 Provision for loan losses 9,752 2,279 11,636 4,387 Net interest income after provision for loan losses 313,555 284,046 624,582 557,547 Non-interest income Financially related services 20,682 14,344 36,976 26,772 Loan prepayment fee income 957 686 1,655 2,194 Miscellaneous income and other gains, net 7,085 7,310 19,434 16,613 Total non-interest income 28,724 22,340 58,065 45,579 Non-interest expense Salaries and employee benefits 91,450 87,841 181,062 172,363 Other operating 62,962 57,539 124,022 114,379 Total non-interest expense 154,412 145,380 305,084 286,742 Income before income taxes 187,867 161,006 377,563 316,384 Provision for income taxes 8,035 5,638 18,228 12,495 Net income $179,832 $155,368 $359,335 $303,889 The accompanying notes are an integral part of these combined financial statements. 4

COMBINED STATEMENT OF CHANGES IN MEMBERS' EQUITY (Dollars in thousands) (Unaudited) Capital Stock and Accumulated Other Comprehensive Comprehensive Protected Participation Allocated Unallocated Income (Loss) Income Capital Certificates Surplus Surplus Investments Derivatives Total Balance at December 31, 2005 $8,335 $192,352 $137,023 $7,499,212 $(28,252) $10,808 $7,819,478 Comprehensive income Net income $303,889 303,889 303,889 Other comprehensive loss, net of tax: Change in net unrealized losses on investment securities, net of reclassification adjustment of $0 (34,166) (34,166) (34,166) Change in net unrealized gains on cash flow hedges, net of reclassification adjustment of $(584) 17,398 17,398 17,398 Other comprehensive loss, net of tax (16,768) Total comprehensive income $287,121 Patronage reserve (22,828) (22,828) Surplus allocated under patronage programs 12,191 (12,191) -- Distribution of allocated surplus (11) (11) Capital stock/participation certificates issued 14,014 14,014 Capital stock/participation certificates retired (1,314) (9,383) (10,697) Balance at June 30, 2006 $7,021 $196,983 $149,203 $7,768,082 $(62,418) $28,206 $8,087,077 Balance at December 31, 2006 $6,380 $200,937 $166,621 $8,045,527 $(30,059) $10,215 $8,399,621 Comprehensive income Net income $359,335 359,335 359,335 Other comprehensive income, net of tax: Change in net unrealized losses on investment securities, net of reclassification adjustment of $0 11,515 11,515 11,515 Change in net unrealized gains on cash flow hedges, net of reclassification adjustment of $2,226 2,133 2,133 2,133 Other comprehensive income, net of tax 13,648 Total comprehensive income $372,983 Patronage reserve (23,058) (23,058) Surplus allocated under patronage programs 14,529 (14,529) -- Distribution of allocated surplus (7,807) (7,807) Capital stock/participation certificates issued 13,167 13,167 Capital stock/participation certificates retired (710) (7,247) (7,957) Balance at June 30, 2007 $5,670 $206,857 $173,343 $8,367,275 $(18,544) $12,348 $8,746,949 The accompanying notes are an integral part of these combined financial statements. 5

COMBINED STATEMENT OF CASH FLOWS (Dollars in thousands) (Unaudited) Six months ended June 30 2007 2006 Cash flows from operating activities Net income $359,335 $303,889 Adjustments to reconcile net income to cash flow from operating activities: Depreciation on premises and equipment 13,431 12,887 Depreciation on assets held for lease 27,117 25,336 Provision for loan losses 11,636 4,387 Increase in accrued interest receivable (11,961) (51,820) Increase in other assets (12,780) (11,226) Increase in accrued interest payable 37,321 56,705 Decrease in other liabilities (20,397) (45,339) Gain on derivative activities (2,332) (1,026) Loss on sale of premises and equipment 192 269 Loss (gain) on sale of other property owned 88 (382) Gain on disposal of assets held for lease (487) (512) Total adjustments 41,828 (10,721) Net cash provided by operating activities 401,163 293,168 Cash flows from investing activities Increase in loans, net (2,460,308) (2,652,383) Decrease (increase) in other earning assets 21,449 (118,400) Proceeds from sale of other property owned 2,030 3,460 Increase in investment securities (653,963) (1,729,824) Purchases of assets held for lease, net (33,434) (34,074) Purchases of premises and equipment, net (17,991) (15,027) Net cash used in investing activities (3,142,217) (4,546,248) Cash flows from financing activities Consolidated bonds and notes issued, net 2,458,956 4,214,656 Cash patronage paid (95,026) (92,681) Capital stock/participation certificates issued, net 5,210 3,317 Net cash provided by financing activities 2,369,140 4,125,292 Net decrease in cash and federal funds (371,914) (127,788) Cash and federal funds at beginning of year 835,769 1,069,189 Cash and federal funds at end of period $463,855 $941,401 Supplemental schedule of non-cash activities Decrease (increase) in derivative assets $2,634 $(2,140) (Decrease) increase in derivative liabilities (13,561) 24,833 Increase (decrease) in bonds and notes related to hedging activities 6,540 (41,400) Increase in members' equity from cash flow derivatives 2,134 17,398 Increase (decrease) in members' equity from investments 11,515 (34,166) Loans transferred to other property owned 5,616 839 Patronage distributions payable to members 30,701 23,503 Loans securitized to investments 382,151 -- Supplemental information Interest paid $1,122,304 $834,952 Taxes paid 30,089 21,805 The accompanying notes are an integral part of these combined financial statements. 6

NOTES TO COMBINED FINANCIAL STATEMENTS NOTE 1 ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES A description of the organization and operation of the District, significant accounting policies followed, and combined financial condition and results of operations as of and for the year ended December 31, 2006 are contained in the 2006 annual report. These unaudited second quarter 2007 combined financial statements should be read in conjunction with the annual report. The accompanying combined financial statements include the accounts of AgriBank combined with its 18 affiliated Associations. All significant transactions and balances between AgriBank and the Associations have been eliminated in combination. The accompanying combined financial statements contain all adjustments necessary for a fair presentation of the interim financial condition and results of operations and conform to generally accepted accounting principles and prevailing practices within the banking industry. NOTE 2 ALLOWANCE FOR LOAN LOSSES A summary of changes in the combined allowance for loan losses is presented in the following table (in thousands): Six months ended June 30 2007 2006 Balance at beginning of period $90,655 $85,361 Provision for loan losses 11,636 4,387 Charge-offs (8,095) (3,528) Recoveries 2,408 1,809 Balance at end of period $96,604 $88,029 NOTE 3 CAPITAL Farm Credit Administration's capital adequacy regulations require AgriBank and the Associations to maintain permanent capital of at least 7% of risk-adjusted assets. In addition, each System institution is required to maintain a total surplus to risk-adjusted assets ratio of at least 7% and a core surplus to risk-adjusted assets ratio of at least 3.5%. At June 30, 2007, AgriBank exceeded these requirements with a 19.69% permanent capital ratio, 19.60% total surplus ratio, and 11.78% core surplus ratio. All District Associations exceeded the regulatory minimums at June 30, 2007. Farm Credit Administration regulations also require AgriBank to maintain a net collateral ratio of at least 103.0%. At June 30, 2007 this requirement was exceeded with a net collateral ratio of 104.76%. NOTE 4 EMPLOYEE BENEFIT PLANS Net periodic benefit costs included the following components (in thousands): Pension Other Six months ended June 30, 2007 Benefits Benefits Components of net periodic benefit cost Service cost $9,859 $295 Interest cost 17,441 1,106 Expected return on plan assets (20,690) (207) Amortization of prior service cost 424 (312) Amortization of loss or (gain) 5,174 (63) Net periodic benefit cost $12,208 $819 The amount of employer contributions expected to be paid during 2007 is $10.5 for pension benefits and $1.5 million for other postretirement benefits. On September 30, 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 158 Employers Accounting for Defined Benefit Pension and Other Postretirement Plans. The Standard requires an employer to recognize the overfunded or underfunded status of a defined benefit pension or other postretirement plan as an asset or liability in its statement of financial position and recognize changes in that funded status in the year in which the changes occur through other comprehensive income. The Standard is effective for employers with publicly traded securities for the fiscal year ending after December 15, 2006 and for employers without publicly traded securities for the fiscal year ending after June 15, 2007. We will be required to implement the Standard for the year ended December 31, 2007. In addition, this Standard requires that the funded status of a plan be measured as of the date of the year-end financial statements. Currently, we use a measurement date of September 30th. The requirement to measure the funded status as of the fiscal year-end is effective for fiscal years ending after December 15, 2008. The implementation of this Standard will have no impact on the Combined Statement of Income. Based on the current funded status of the defined benefit and other postretirement benefit plans, implementation of this Standard will reverse our prepaid pension asset and record a prepaid pension liability in the amount of the underfunded status of the plans. The offset to this transaction will be a decrease to equity (through other comprehensive income) by approximately $155.2 million at December 31, 2007. Regulatory capital ratios will not be impacted by the implementation of this standard as other comprehensive income does not impact the calculation of these ratios. NOTE 5 CONTINGENT LIABILITIES AND LITIGATION Actions are pending against certain Associations in which claims for money damages are asserted. Based on current information, management and legal counsels are of the opinion that resulting liability, if any, would be immaterial in relation to the combined financial position of AgriBank, FCB and the affiliated Associations. 7

NOTE 6 INCOME TAXES In June 2006, the Financial Accounting Standards Board released Interpretation No. 48 Accounting for Uncertainty in Income Taxes. This Interpretation clarifies the accounting for uncertainty in income tax positions recognized in an enterprise s financial statements in accordance with Statement of Financial Accounting Standard No. 109 Accounting for Income Taxes. This Interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition of an uncertain tax position taken or expected to be taken in a tax return. Our election under this Interpretation is to recognize interest and penalty accruals in the provision for income taxes. This Interpretation is effective for the 2007 calendar year. Upon adoption of this Interpretation during the first quarter of 2007, we had no uncertain income tax positions for which a contingency reserve had not already been established in our financial statements. Prior to adoption of this Interpretation one District Association had recognized a $1.6 million contingency reserve related to uncertainty around cost allocations. A second District Association had recognized a $5.9 million contingency reserve related to uncertainty around the deductibility of certain patronage accruals. NOTE 7 AGRIBANK ONLY DATA (in thousands) Statement of Condition 2007 2006 Loans, net $40,046,604 $37,087,054 Other assets 9,540,487 9,920,317 Total assets $49,587,091 $47,007,371 Liabilities $47,224,133 $44,754,393 Members' equity 2,362,958 2,252,978 Total liabilities and members' equity $49,587,091 $47,007,371 Six months ended June 30 Statement of Income 2007 2006 Interest income $1,250,568 $970,572 Interest expense 1,159,325 891,577 Net interest income 91,243 78,995 Other, net (8,887) (3,259) Net income $82,356 $75,736 Patronage $51,697 $42,252 Substantially all patronage is paid to the Associations and is eliminated in combination. 375 Jackson Street St. Paul, Minnesota 55101-1810 (651) 282-8800 Visit us at www.agribank.com