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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 2019 CoBank Annual Report to Shareholders, and the CoBank quarterly shareholders’ reports are available free of charge by accessing CoBank’s website, www.cobank.com, or may be obtained at no charge by contacting us at:

Farm Credit of Southern Colorado, ACA 5110 Edison Avenue, PO Box 75640 Colorado Springs, Colorado 80970-5640 Phone Number: 800-815-8559

MANAGEMENTâ€™S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Unaudited)

The following discussion summarizes the financial position and results of operations of Farm Credit of Southern Colorado, ACA (the Association) for the nine months ended September 30, 2020, with comparisons to prior periods. You should read these comments along with the accompanying financial statements and footnotes and the 2019 Annual Report to Shareholders. The accompanying financial statements were prepared under the oversight of our Audit Committee. Economic and industry factors influencing agriculture and our territory during the third quarter of 2020 are drought, COVID-19 related industry disruptions, and challenging commodity prices. Our lending territory spans over a very diverse region of southern and eastern Colorado through the southern front range and down into the San Luis Valley. The various commodities produced range from cattle, corn, wheat, and potatoes, which represent the top four commodity concentrations for our Association. Cattle is our largest commodity concentration made up primarily of cow/calf, fed cattle and stockers. Prices for various classes of beef cattle have largely recovered from the COVID-19 related market challenges. The biggest challenge for beef producers has now shifted to drought conditions limiting the availability of forage. Drought designations and lack of forage available for purchase has resulted in the early sale of lightweight calves and feeders this fall. The first round of Coronavirus Food Assistance Program (CFAP) payments were a benefit for both crop and livestock producers in our territory. Producers are currently receiving the second round of CFAP payments. With drought designations throughout most of our territory, the Livestock Forage Disaster Program (LFP) is also coming in to play and will support the livestock operations throughout our territory. Price Loss Coverage (PLC) program and Agriculture Risk Coverage (ARC) program payments for 2019 are also being received. These United States Department of Agriculture (USDA) programs will help producers to weather this challenging year. On a positive note, grain and hay markets have responded favorably to poor yields in our territory and basis has generally strengthened throughout our trade area. The stronger basis bids are especially prevalent in corn, milo and millet. This is a benefit to anyone with inventory in the bin. We have also seen some recent positive news in the grain markets on the futures board, which appears to be a result of trade agreements coming to fruition on the international level. Potatoes are grown in the San Luis Valley, which is in the southwest region of our territory. Harvest is proceeding ahead of average. The potato cash price of $10 - $12/cwt is a profitable level for local producers. Dry conditions also favor the irrigated potato producers since they can more accurately control the moisture to the plants. Overall, conditions are favorable and it is expected to be another good year for this sector of our portfolio. The biggest risk to this industry in the San Luis Valley is decreasing aquifer levels. Long term, continued stress on commodity prices is challenging all of our producers. Forecasted lower yields for most crops in our territory will compound the gross revenue challenge during 2020. USDA has offered renewal of contracts for the Conservation Reserve Program (CRP), but at reduced levels that appear to favor keeping the ground in production for many cases. Real estate values in our territory have remained stable to increasing. We continue to compete with cash for recreational mountain ranch properties. Dry crop, pasture and irrigated land throughout our territory continue to trade at stable values. The effects of the COVID-19 pandemic could have a material adverse effect on our Associationâ€™s business, results of operations and financial condition. The COVID-19 pandemic rapidly evolved from a global public health crisis into a global economic crisis. Actions by government authorities to stem the spread of the disease shut down entire sectors of the global economy, forcing millions of people out of work, and precipitated a contraction in economic output. In the United States, the Federal Reserve deployed a full range of emergency monetary stimulus tools to ensure the financial system continued to function. The administration and Congress have also passed aggressive fiscal stimulus measures. As states and cities have re-opened, certain areas of the country have experienced a substantial increase in cases. It remains to be seen how effective these policy responses will be given the unique attributes of the continuing pandemic. The COVID-19 pandemic has heightened many risks, including credit risk, liquidity risk, market risk, and operational risk. The effectiveness of our mitigation efforts and the extent to which COVID-19 affects our business, results of operations and financial condition may depend on factors beyond our control.

The U.S. government has initiated various programs in support of the COVID-19 economic recovery. In late March 2020, Congress passed the Coronavirus Aid, Relief and Economic Security (CARES) Act. Among other provisions, the CARES Act made funds available for small businesses under the Paycheck Protection Program (PPP), which is a guaranteed loan program administered by the Small Business Administration (SBA). Our Association obtained approval from the SBA to participate as a lender in the PPP and successfully processed 52 loans for a total of $1.1 million in PPP loans for customers. Congress also provided additional funding for small business disaster loans and direct payments to farmers and ranchers as a result of the COVID-19 pandemic as well as making purchases of agriculture products. The impact of these and other U.S. government support programs and stimulus on the broader agricultural economy and our customers in particular is uncertain at this time. LOAN PORTFOLIO Loans outstanding at September 30, 2020, totaled $1.13 billion, an increase of $91.1 million, or 8.79%, from loans of $1.04 billion at December 31, 2019. The increase was primarily due to growth in our core portfolio, especially in the Real Estate Mortgage loan segment. This growth was partially offset by a decrease in our capital markets portfolio. Although the overall credit quality of our loan portfolio remained strong during the first nine months of 2020, economic conditions in the broader economy deteriorated rapidly beginning in March 2020 and continue to be uncertain. The spread of COVID-19 around the world, particularly in the U.S., has caused volatility and unfavorable conditions in the U.S. and international markets. There is significant uncertainty around the magnitude and duration of business disruptions related to COVID-19, as well as its impact on the U.S. and international economies. As such, it is uncertain the level of impact COVID-19 will have on our credit quality. If the effects of COVID-19 result in repayment shortfalls on loans in our portfolio, we could incur credit losses. At this time, we believe the credit quality impacts within our loan portfolio resulting from the COVID-19 business disruptions will be mixed with certain industries negatively impacted. RESULTS OF OPERATIONS Net income for the nine months ended September 30, 2020, was $8.9 million, a decrease of $3.1 million, or 25.84%, from the same period ended one year ago. The decrease is due to decreases in net interest income and noninterest income as well as an increase in noninterest expense, partially offset by a decrease in our provision for credit losses. Net interest income for the nine months ended September 30, 2020, was $21.8 million, a decrease of $365 thousand, or 1.65%, compared with the nine months ended September 30, 2019. Net interest income decreased as a result of a decrease in the return on our loanable funds, partially offset by an increase in average accrual loan volume. The provision for credit losses for the nine months ended September 30, 2020, was $646 thousand, a decrease of $72 thousand, or 10.03%, from the same period ended one year ago. The provision expense for 2020 is due to loan downgrades during the year, an increase in specific reserve as a result of a capital markets loan requiring additional specific reserve, and updates to our assumptions that include a revised loss emergence period and utilization of the Combined System Risk Rating Guidance published in August 2020. The provision for credit losses in 2020 also includes an additional level of reserves to reflect inherent losses in our loan portfolio resulting from deterioration in the economic environment and business disruptions related to COVID-19 as well as weather related impacts. The provision expense for 2019 was due to loan downgrades during the year and an increase in specific reserves as a result of four additional core loans and one additional capital markets loan being identified as needing specific reserves. Noninterest income decreased $267 thousand during the first nine months of 2020 compared with the first nine months in 2019 primarily due to a decrease in both mineral and CoBank patronage income. Also included in noninterest income is a refund of $227 thousand from Farm Credit System Insurance Corporation (FCSIC), a decrease of $20 thousand compared with the refund in 2019. The refunds are our portion of excess funds above the secure base amount in the FCSIC Allocated Insurance Reserve Accounts. Refer to the 2019 Annual Report to Shareholders for additional information. We received mineral income of $435 thousand during the first nine months of 2020, a decrease of $208 thousand or 32.35% from the same period ended one year ago. Mineral income is distributed to us quarterly by CoBank. The decrease is primarily the result of a significant drop in crude oil and natural gas prices and production volumes in the third quarter of 2020.

During the first nine months of 2020, noninterest expense increased $2.5 million to $15.9 million. We recorded prepayment fee expense of $2.4 million during the first nine months of 2020 due to prepayment fees charged by CoBank. These fees are related to loan prepayments, primarily loan conversions that resulted from the current low interest rate environment in the wake of the COVID-19 pandemic. Other noninterest expense increased $424 thousand over the same period in 2019 primarily due to an increase in purchased services, this was partially offset by the decrease in salaries and benefits of $274 thousand. CAPITAL RESOURCES Our shareholdersâ€™ equity at September 30, 2020, was $269.6 million, an increase from $261.0 million at December 31, 2019. This increase is due to net income and the amortization of pension costs included in the net periodic benefit cost, offset by net stock reductions. OTHER MATTERS In 2017, the United Kingdomâ€™s Financial Conduct Authority announced its intention to stop persuading or compelling the group of major banks that sustains LIBOR to submit rate quotations after 2021. As a result, it is uncertain whether LIBOR will continue to be quoted after 2021. We continue to analyze potential risks associated with the LIBOR transition, including financial, operational, legal, tax reputational and compliance risks. At this time, we are unable to predict whether or when LIBOR will cease to be available or if SOFR or any other alternative reference rate will become the benchmark to replace LIBOR. Refer to the 2019 Annual Report for further information.

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// Mark Peterson Chairman of the Board November 3, 2020

//signed// Jeremy M Anderson CEO November 3, 2020

//signed// Shawna R Neppl CFO November 3, 2020

Farm Credit Southern Colorado, ACA

Consolidated Statement of Condition (Dollars in Thousands)

ASSETS Loans Less allowance for loan losses Net loans Cash Accrued interest receivable Investment in CoBank, ACB Investment in AgDirect Premises and equipment, net Prepaid benefit expense Other assets Total assets LIABILITIES Note payable to CoBank, ACB Advance conditional payments Accrued interest payable Patronage distributions payable Accrued benefits liability Reserve for unfunded commitments Other liabilities

September 30 2020

December 31 2019

UNAUDITED

AUDITED

1,127,342 4,013 1,123,329 1,251 19,266 32,844 925 12,841 4,259 3,662

1,036,258 3,440 1,032,818 5,283 16,370 32,839 632 11,919 3,598 4,641

1,198,377

1,108,100

906,988 15,129 1,085 160 539 4,886

823,591 9,334 1,631 6,500 450 437 5,149

Total liabilities

928,787

847,092

1,923 1,591 266,153 (77)

2,557 1,487 257,254 (290)

Commitments and Contingencies SHAREHOLDERS' EQUITY Preferred stock Capital stock Unallocated retained earnings Accumulated other comprehensive income/(loss) Total shareholders' equity

269,590

Total liabilities and shareholders' equity

1,198,377

261,008 $

1,108,100

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

Farm Credit Southern Colorado, ACA

Consolidated Statement of Comprehensive Income (Dollars in Thousands)

UNAUDITED

For the three months ended September 30 2020 2019

For the nine months ended September 30 2020 2019

INTEREST INCOME Loans

$ 11,531

$ 13,499

$ 36,031

$ 40,656

11,531

13,499

36,031

40,656

4,170 4

6,079 52

14,208 38

18,360 146

4,174 7,357 441

6,131 7,368 (309)

14,246 21,785 646

18,506 22,150 718

6,916

7,677

21,139

21,432

70 62 862 92 6

47 175 818 196 16

110 355 2,371 227 435 132

94 375 2,456 247 643 82

1,092

1,252

3,630

3,897

2,167 274 571 231 103 2,413 913

2,413 333 536 172 118 824

7,172 892 1,713 544 318 2,413 2,799

7,446 1,022 1,608 518 343 2,375

6,672 1,336 -

4,396 4,533 -

15,851 8,918 9

13,312 12,017 4

1,336

4,533

8,909

12,013

213

201

9,122

$ 12,214

Total interest income INTEREST EXPENSE Note payable to CoBank, ACB Other Total interest expense Net interest income Provision for credit losses/(Credit loss reversal) Net interest income after provision for credit losses/credit loss reversal NONINTEREST INCOME Financially related services income Loan fees Patronage distribution from Farm Credit institutions Farm Credit Insurance Fund distribution Mineral income Other noninterest income Total noninterest income NONINTEREST EXPENSE Salaries and employee benefits Occupancy and equipment Purchased services from AgVantis, Inc. Farm Credit Insurance Fund premium Supervisory and examination costs Prepayment Fee expense Other noninterest expense Total noninterest expense Income before income taxes Provision for income taxes Net income COMPREHENSIVE INCOME Amortization of retirement costs Total comprehensive income

1,407

4,600

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

Farm Credit Southern Colorado, ACA

Consolidated Statement of Changes in Shareholders' Equity (Dollars in Thousands)

Preferred Stock

Capital Stock

Balance at December 31, 2018 Comprehensive income Stock issued Stock retired Preferred stock dividends Balance at September 30, 2019

$ 2,826

$ 1,454

1,170 (1,196) 45 $ 2,845

$ 1,475

Balance at December 31, 2019 Comprehensive income Stock issued Stock retired Preferred stock dividends Balance at September 30, 2020

$ 2,557

$ 1,487

UNAUDITED

20 (673) 19 $ 1,923

Unallocated Retained Earnings $ 249,624 12,013

Accumulated Other Total Comprehensive Shareholders' Income/(Loss) Equity $

(567) 201

(366)

(290) 213

(77)

117 (96) (47) $ 261,590

$ 257,254 8,909

212 (108) $ 1,591

(10) $ 266,153

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

$ 253,337 12,214 1,287 (1,292) (2) $ 265,544

$ 261,008 9,122 232 (781) 9 $ 269,590

NOTES TO FINANCIAL STATEMENTS (Unaudited)

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES A description of the organization and operations of Farm Credit of Southern Colorado, ACA (the Association), the significant accounting policies followed, and the financial condition and results of operations as of and for the year ended December 31, 2019, are contained in the 2019 Annual Report to Shareholders. These unaudited third quarter 2020 financial statements should be read in conjunction with the 2019 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, 2019, as contained in the 2019 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, 2020. Descriptions of the significant accounting policies are included in the 2019 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. Recently Adopted or Issued Accounting Pronouncements In March 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which provides relief from certain requirements under GAAP, was signed into law. Section 4013 of the CARES Act gives entities temporary relief from the accounting and disclosure requirements for troubled debt restructurings (TDRs) and if certain criteria are met these loan modifications may not need to be classified as TDRs. The Association has adopted this relief for qualifying loan modifications. In March 2020, the Financial Accounting Standards Board (FASB) issued guidance entitled “Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform. The guidance simplifies the accounting evaluation of contract modifications that replace a reference rate affected by reference rate reform and contemporaneous modifications of other contracts related to the replacement of the reference rate. The optional amendments are effective as of March 12, 2020, through December 31, 2022. The Association is evaluating the impact of adoption on its financial condition and its results of operations. In December 2019, the Financial Accounting Standards Board (FASB) issued guidance entitled “Simplifying the Accounting for Income Taxes.” This guidance eliminates certain intra period tax allocations, foreign deferred tax recognition and interim period tax calculations. In addition, the guidance simplifies disclosure regarding capital and franchise taxes, the allocation of goodwill in business combinations, subsidiary financial statements and other disclosures. The new guidance is intended to eliminate and/or simplify certain aspects of income tax accounting that are complex or that require significant judgment in application or presentation. The guidance becomes effective for fiscal years beginning after December 15, 2021. Early adoption of the guidance is permitted and the institution adopted this guidance on January 1, 2020. The adoption of this guidance did not materially impact the Association’s financial condition or results of operations, nor will the guidance impact the presentation of taxes for prior periods in the 2020 interim or year-end financial statements. In August 2018, the Financial Accounting Standards Board (FASB) issued guidance entitled “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Cost.” The guidance aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by this guidance. This guidance became effective for interim and annual periods beginning after December 15, 2019. The guidance also requires an entity (customer) to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement. It further specifies where to present expense and payments in the financial statements. The

guidance is to be applied on a retrospective or prospective basis to all implementation costs incurred after the date of adoption. The adoption of this guidance did not materially impact the Association’s financial condition or its results of operations. In August 2018, the FASB issued guidance entitled “Disclosure Framework — Changes to the Disclosure Requirements for Defined Benefit Plans.” The guidance modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. This guidance becomes effective for fiscal years ending after December 15, 2020. Early adoption is permitted. The guidance is to be applied on a retrospective basis for all periods. The adoption of this guidance will not impact the Association’s financial condition or its results of operations, but will impact the employee benefit plan disclosures. In August 2018, the FASB issued guidance entitled “Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement.” The guidance modifies the requirements on fair value measurements by removing, modifying or adding to the disclosures. This guidance became effective for interim and annual periods beginning after December 15, 2019. Early adoption was permitted and an entity was permitted to early adopt any removal or modified disclosures and delay adoption of the additional disclosures until their effective date. The Association early adopted the removal and modified disclosures during the fourth quarter of 2018. The adoption of this guidance did not impact the Association’s financial condition or its results of operations, but will impact the fair value measurements disclosures. 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 was to become effective for interim and annual periods beginning after December 15, 2020, with early application permitted. On October 16, 2019, the FASB approved deferral of the effective date for certain entities for this guidance by two years, which will result in the new credit loss standard becoming effective for interim and annual reporting periods beginning after December 15, 2022. The Association qualifies for the delay in the adoption date. The Association continues to evaluate the impact of adoption on its financial condition and its results of operations. NOTE 2 - LOANS AND ALLOWANCE FOR LOAN LOSSES A summary of loans follows. September 30, 2020

(dollars in thousands) Real estate mortgage Production and intermediate-term Agribusiness Rural infrastructure Rural residential real estate Mission-related Agricultural export finance Total loans

703,009 188,808 154,515 71,606 29 854 8,521

1,127,342

December 31, 2019 $

614,626 185,943 152,092 74,130 30 920 8,517

$ 1,036,258

The Association purchases and 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, 2020:

(dollars in thousands) Real estate mortgage Production and intermediate-term Agribusiness Rural infrastructure Agricultural export finance Total

Other Farm Credit Institutions Purchased Sold $ 34,556 $ 59,601 – 26,255 – 149,308 – 71,606 – 8,521 $ 290,246 $ 59,601

Non-Farm Credit Institutions Purchased Sold $ – $ 1,450 – – – – – – – – $ – $ 1,450

Total Purchased Sold $ 36,006 $ 59,601 – 26,255 – 149,308 – 71,606 – 8,521 $ 291,696 $ 59,601

One credit quality indicator utilized by the Association is the Farm Credit Administration Uniform Loan Classification System that categorizes loans into five categories. The categories are defined as follows:     

Acceptable – assets are expected to be fully collectible and represent the highest quality. Other assets especially mentioned (OAEM) – assets are currently collectible but exhibit some potential weakness. Substandard – assets exhibit some serious weakness in repayment capacity, equity and/or collateral pledged on the loan. Doubtful – assets exhibit similar weaknesses to substandard assets; however, doubtful assets have additional weaknesses in existing factors, conditions and values that make collection in full highly questionable. Loss – assets are considered uncollectible.

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, 2020 Real estate mortgage Acceptable OAEM Substandard Doubtful Total Production and intermediate-term Acceptable OAEM Substandard Total Agribusiness Acceptable OAEM Substandard Total Rural infrastructure Acceptable OAEM Substandard Total Rural residential real estate Acceptable Total Mission-related Substandard Total Agricultural export finance Acceptable Total Total Loans Acceptable OAEM Substandard Doubtful Total

December 31, 2019

89.75% 6.70% 3.47% 0.08% 100.00%

88.56% 6.49% 4.85% 0.10% 100.00%

94.33% 3.20% 2.47% 100.00%

93.98% 3.00% 3.02% 100.00%

96.04% 3.14% 0.82% 100.00%

93.81% 4.42% 1.77% 100.00%

92.88% 1.68% 5.44% 100.00%

90.70% 6.00% 3.30% 100.00%

100.00% 100.00%

91.58% 5.26% 3.11% 0.05% 100.00%

90.47% 5.46% 4.01% 0.06% 100.00%

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: September 30, 2020

(dollars in thousands) Nonaccrual loans Real estate mortgage Production and intermediate-term Agribusiness Mission-related Total nonaccrual loans Accruing restructured loans Real estate mortgage Production and intermediate-term Total accruing restructured loans Accruing loans 90 days past due Real estate mortgage

December 31, 2019

7,881 6 – 854

8,136 97 3 920

8,741

9,156

418 250

403 804

668

1,207

–

1,458

Total accruing loans 90 days past due

–

1,458

Total impaired loans and high risk assets

9,409

11,821

The Association had no other property owned for the periods presented. Additional impaired loan information is as follows:

(dollars in thousands) Impaired loans with a related allowance for loan losses: Real estate mortgage Agribusiness Mission-related Total Impaired loans with no related allowance for loan losses: Real estate mortgage Production and intermediate-term Agribusiness Total Total impaired loans: Real estate mortgage Production and intermediate-term Agribusiness Mission-related Total

September 30, 2020 Unpaid Recorded Principal Related Investment Balance Allowance

573 – 854 $ 1,427

$ 7,726 256 – $ 7,982

$ 8,299 256 – 854 $ 9,409

623 – 947 1,570

1 – 600 601

9,238 243 119 9,600

9,861 243 119 947 $ 11,170

1 – – 600 601

December 31, 2019 Unpaid Recorded Principal Related Investment Balance Allowance

603 3 920 1,526

623 45 982 1,650

9,395 900 – $ 10,295

$ 10,868 862 96 $ 11,826

$ 11,491 862 141 982 $ 13,476

9,998 900 3 920 $ 11,821

1 3 550 554

1 – 3 550 554

Note: The recorded investment in the loan 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 loan receivable.

(dollars in thousands) Impaired loans with a related allowance for loan losses: Real estate mortgage Production and intermediate-term Agribusiness Mission-related Total Impaired loans with no related allowance for loan losses: Real estate mortgage Production and intermediate-term Agribusiness Total Total impaired loans: Real estate mortgage Production and intermediate-term Agribusiness Mission-related Total

For the Three Months Ended September 30, 2020 Average Interest Income Impaired Loans Recognized

For the Three Months Ended September 30, 2019 Average Interest Income Impaired Loans Recognized

598 – 870

– – –

639 54 1,057

– – –

1,468

–

1,750

–

8,011 171 –

16 2 –

8,545 1,229 116

6 63 1

8,182

9,890

8,609 171 – 870

16 2 – –

9,184 1,229 170 1,057

6 63 1 –

9,650

11,640

For the Nine Months Ended September 30, 2020 Average Interest Income Impaired Loans Recognized

For the Nine Months Ended September 30, 2019 Average Interest Income Impaired Loans Recognized

603 – – 896

– – – –

649 231 239 737

– 4 – –

1,499

–

1,856

8,300 434 –

52 24 ––

9,815 940 40

255 90 1

8,734

10,795

346

8,903 434 – 896

52 24 – –

10,464 1,171 279 737

255 94 1 –

10,233

12,651

350

The following tables provide an age analysis of past due loans (including accrued interest).

September 30, 2020 (dollars in thousands) Real estate mortgage Production and intermediate-term Agribusiness Rural infrastructure Rural residential real estate Mission-related Agricultural export finance Total

December 31, 2019 (dollars in thousands) Real estate mortgage Production and intermediate-term Agribusiness Rural infrastructure Rural residential real estate Mission-related Agricultural export finance Total

30-89 Days Past Due $ 8,039 179 – – – – –

90 Days or More Past Due $ 4,529 – – – – – –

Total Past Due $ 12,568 179 – – – – –

Not Past Due or less than 30 Days Past Due $ 705,283 192,531 154,921 71,709 30 854 8,533

$ 8,218

$ 4,529

$ 12,747

$ 1,133,861

30-89 Days Past Due $ 41 568 – – – – – $

609

90 Days or More Past Due $ 1,725 – 3 – – – –

Total Past Due $ 1,766 568 3 – – – –

Not Past Due or less than 30 Days Past Due $ 623,978 189,814 152,649 74,360 31 920 8,539

$ 1,728

$ 2,337

$ 1,050,291

Recorded Investment in Loans Outstanding $ 717,851 192,710 154,921 71,709 30 854 8,533 $1,146,608

Recorded Investment Accruing Loans 90 Days or More Past Due $ – – – – – – – –

Recorded Investment in Loans Outstanding $ 625,744 190,382 152,652 74,360 31 920 8,539

Recorded Investment Accruing Loans 90 Days or More Past Due $ 1,458 – – – – – –

$ 1,052,628

1,458

A summary of changes in the allowance for loan losses is as follows:

(dollars in thousands) Real estate mortgage Production and intermediate-term Agribusiness Rural infrastructure Mission-related Agricultural export finance Total

Balance at June 30, 2020

Charge-offs

Recoveries

Provision for Loan Losses/ (Loan Loss Reversals)

Balance at September 30, 2020

834 697 940 569 600 7

– – – – – –

189 152 60 (36) – 1

$ 1,023 849 1,000 533 600 8

$ 3,647

–

366

$ 4,013

(dollars in thousands) Real estate mortgage Production and intermediate-term Agribusiness Rural infrastructure Mission-related Agricultural export finance Total

Provision for Loan Losses/ (Loan Loss Reversals)

Balance at December 31, 2019 Charge-offs Recoveries

Balance at September 30, 2020

861 629 912 481 550 7

– – – – – –

– – 29 – – –

162 220 59 52 50 1

$ 1,023 849 1,000 533 600 8

$ 3,440

–

544

$ 4,013

Balance at June 30, 2019

Charge-offs

Recoveries

Provision for Loan Losses/ (Loan Loss Reversals)

Balance at September 30, 2019

836 1,026 1,029 451 550 7

– – 117 – – –

– – – – – –

19 (331) (56) 49 – 1

$ 3,899

117

–

(318)

$ 3,464

Balance at December 31, 2018 Charge-offs

Recoveries

Provision for Loan Losses/ (Loan Loss Reversals)

855 695 856 500 550 8

Balance at September 30, 2019

710 668 932 330 216 7

– 2 117 – – –

– – 14 – – –

145 29 27 170 334 1

$ 2,863

119

706

$ 3,464

855 695 856 500 550 8

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 2020 2019

(dollars in thousands) Balance at beginning of period Provision for reserves for unfunded commitments Total

464

539

For the Nine Months Ended September 30 2020 2019

414

423

411

423

102

437

539

Additional information on the allowance for loan losses follows:

(dollars in thousands)

Allowance for Loan Losses Ending Balance at September 30, 2020 Individually Collectively evaluated for evaluated for impairment impairment

Real estate mortgage Production and intermediate-term Agribusiness Rural infrastructure Rural residential real estate Mission-related Agricultural export finance Total

(dollars in thousands)

1 – – – – 600 –

1,022 849 1,000 533 – – 8

8,299 256 – – – 854 –

601

3,412

9,409

$ 1,137,199

Allowance for Loan Losses Ending Balance at December 31, 2019 Individually Collectively evaluated for evaluated for impairment impairment

Real estate mortgage Production and intermediate-term Agribusiness Rural infrastructure Rural residential real estate Mission-related Agricultural export finance Total

Recorded Investments in Loans Outstanding Ending Balance at September 30, 2020 Individually Collectively evaluated for evaluated for impairment impairment

1 – 3 – – 550 –

860 629 909 481 – – 7

554

2,886

709,552 192,454 154,921 71,709 30 – 8,533

Recorded Investments in Loans Outstanding Ending Balance at December 31, 2019 Individually Collectively evaluated for evaluated for impairment impairment $

9,998 900 3 – – 920 –

$ 11,821

615,746 189,482 152,649 74,360 31 – 8,539

$ 1,040,807

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 Association recorded no new TDRs during the nine months ended September 30, 2020 and September 30, 2019. The Association had no TDRs within the previous 12 months and for which there were subsequent payment defaults during the first nine months of 2020 and 2019. Additional commitments to lend to borrowers whose loans have been modified in troubled debt restructurings were $994 thousand at September 30, 2020 and $471 thousand at December 31, 2019. 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 (dollars in thousands) Real estate mortgage Production and intermediate-term Total

September 30, 2020

December 31, 2019

TDRs in Nonaccrual Status* September 30, 2020

December 31, 2019

418 248

403 804

– –

666

1,207

–

* Represents the portion of loans modified as TDRs (first column) that are in nonaccrual status.

NOTE 3 - CAPITAL A summary of select capital ratios based on a three-month average and minimums set by the Farm Credit Administration follows. As of September 30, 2020 Risk Adjusted: Common equity tier 1 ratio Tier 1 capital ratio Total capital ratio Permanent capital ratio Non-risk-adjusted: Tier 1 leverage ratio Unallocated retained earnings and equivalents leverage ratio

As of December 31, 2019

Regulatory Minimums

Capital Conservation Buffer

Total

19.35% 19.35% 19.70% 19.57%

20.36% 20.36% 20.70% 20.65%

4.5% 6.0% 8.0% 7.0%

2.5% 2.5% 2.5% â€“

7.0% 8.5% 10.5% 7.0%

20.25%

21.47%

4.0%

1.0%

5.0%

20.93%

22.18%

1.5%

â€“

1.5%

If capital ratios fall below the regulatory minimum plus 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 following tables present the activity in the accumulated other comprehensive income/loss, net of tax by component: For the Three Months Ended September 30 2020 2019

(dollars in thousands) Pension and other benefit plans: Beginning balance Amounts reclassified from accumulated other comprehensive income/loss Net current period other comprehensive income/(loss)

$ (148) 71 71 $

Ending balance

$ (433)

(77)

For the Nine Months Ended September 30 2020 2019 $ (290) 213 213

67 67 $ (366)

(77)

$ (567) 201 201 $ (366)

The following table represents reclassifications out of accumulated other comprehensive income/loss.

(dollars in thousands) Pension and other benefit plans: Net actuarial loss Total reclassifications

Amount Reclassified from Accumulated Other Comprehensive Loss For the Three Months Ended September 30 2020 2019 $

Amount Reclassified from Accumulated Other Comprehensive Loss For the Nine Months Ended September 30 2020 2019 $ 213

$ 201

$ 213

$ 201

Location of Gain/Loss Recognized in Statement of Income Salaries and employee benefits

NOTE 4 - 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 of the 2019 Annual Report to Shareholders for a more complete description. Assets measured at fair value on a recurring basis are summarized below:

(dollars in thousands) Assets held in nonqualified benefits trusts September 30, 2020 December 31, 2019

Fair Value Measurement Using Level 1 Level 2 Level 3 $ $

25 15

$ $

– –

$ $

– –

Total Fair Value $ $

25 15

The Association had no liabilities measured at fair value on a recurring basis at September 30, 2020 or December 31, 2019. 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 Level 1 Level 2 Level 3 Value (dollars in thousands) September 30, 2020 Loans

─

828

December 31, 2019 Loans

─

978

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, 2020 or December 31, 2019. Valuation Techniques As more fully discussed in Note 2 of the 2019 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. Assets Held in Non-Qualified Benefits Trusts Assets held in trust funds related to deferred compensation and supplemental retirement plans are classified within Level 1. The trust funds include investments that are actively traded and have quoted net asset values that are observable in the marketplace. Loans Evaluated for Impairment For impaired loans measured on a non-recurring basis, the fair value is based upon the underlying collateral since the loans are collateral dependent loans for which real estate is the collateral. 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. The fair value of these loans would fall under Level 2 hierarchy if the process uses independent appraisals and other market-based information. NOTE 5 - SUBSEQUENT EVENTS The Association has evaluated subsequent events through November 3, 2020, which is the date the financial statements were issued, and no material subsequent events were identified.