FARM CREDIT SYSTEM INSURANCE CORPORATION

NOTES TO FINANCIAL STATEMENTS
As of and for the Years Ended December 31, 2014 and 2013

NOTE 4 - Premiums, the Secure Base Amount and Excess Insurance Fund Balances (cont.)

The Farm Credit Act sets a base amount for the Insurance Fund to achieve. The statutory SBA is
equivalent to 2.0 percent of the aggregate outstanding insured obligations of all insured System banks
(adjusted downward by a percentage of the guaranteed portions of principal outstanding on certain
government-guaranteed loans and investments) or such other percentage as determined by the
Corporation, in its sole discretion, to be actuarially sound. When the assets in the Insurance Fund for
which no specific use has been designated exceed the SBA, the Corporation is required to reduce the
premiums, but it still must ensure that reduced premiums are sufficient to maintain at the SBA the assets
in the Insurance Fund for which no specific use has been designated (the unallocated Insurance Fund).

Insurance premium rates are reviewed semiannually. For 2014, the Board of Directors set premium rates
at its January 23, 2014, meeting at 12 basis points on average adjusted insured debt and continued the
assessment of the 10 basis point surcharge on the average principal balance outstanding for nonaccrual
loans and other-than-temporarily impaired investments. The Board of Directors again reviewed premiums
at its June 12, 2014 meeting. The Board of Directors voted to maintain the premium accrual rate on
average adjusted insured debt at 12 basis points and continued the assessment of the 10 basis point
surcharge on the average principal balance outstanding for nonaccrual loans and other-than-temporarily
impaired investments for the remainder of 2014. In 2014, outstanding insured obligations increased by
$18 billion (9 percent). At December 31, 2014, both of the unallocated Insurance Fund and the total
Insurance Fund were 1.90 percent of adjusted insured obligations.

For 2013, the Board of Directors set premium rates at its January 24, 2013, meeting at 10 basis points on
average adjusted insured debt and continued the assessment of the 10 basis point surcharge on the
average principal balance outstanding for nonaccrual loans and other-than-temporarily impaired
investments. The Board of Directors again reviewed premiums at its June 13, 2013 meeting. The Board
of Directors voted to maintain the premium accrual rate on average adjusted insured debt at 10 basis
points and continued the assessment of the 10 basis point surcharge on the average principal balance
outstanding for nonaccrual loans and other-than-temporarily impaired investments for the remainder of
2013. In 2013, outstanding insured obligations increased by $10 billion (5.1 percent). At December 31,
2013, both of the unallocated Insurance Fund and the total Insurance Fund were 1.94 percent of adjusted
insured obligations.

A 1996 amendment to the Farm Credit Act requires the Corporation to establish AIRAs for each System
bank and an account for the stockholders of the FAC. If at the end of any calendar year the unallocated
Insurance Fund is at the SBA, the Corporation is to segregate any excess balances into these AIRAs. In
2011, the Corporation's Board of Directors revised the Policy Statement on the Secure Base Amount and
Allocated Insurance Reserves Accounts which provides guidelines for implementing this statutory
authority. If at the end of any calendar year, the aggregate of the amounts in the Insurance Fund exceeds
the SBA, the Corporation shall allocate to the AIRAs the excess amount less the amount that the
Corporation, in its sole discretion, determines to be the sum of the estimated operating expenses and
estimated insurance obligations of the Corporation for the immediately succeeding calendar year.

The AIRAs' balances are recorded as part of the Insurance Fund until approved for payment by the
Corporation's Board of Directors. AIRAs balances may be used to absorb any insurance losses and
claims. Furthermore, the Board of Directors has discretion to limit or restrict the AIRAs payments. In
accordance with the Corporation's policy statement, any AIRAs' balances do not count in measuring the
Insurance Fund's compliance with the SBA.

At year end 2014, the Insurance Fund was below the SBA by $207 million. Consequently no funds were
available to transfer to the AIRAs.

F12


s

BAKER TILLY

Baker Tilly Virchow Krause, LLP
777 E Wisconsin Ave, 32nd Floor
Milwaukee, WI 53202-5313

vel 414777 5500

fax 414.777 5555

bakertilly.com

Independent Auditors’ Report on Internal Control over Financial Reporting and on Compliance
And Other Matters Based on an Audit of Financial Statements Performed in Accordance with U.S.
Government Auditing Standards

To the Board of Directors
Farm Credit System Insurance Corporation
McLean, Virginia

We have audited, in accordance with auditing standards generally accepted in the United States of America
and the standards applicable to financial audits contained in U.S. Government Auditing Standards issued by the
Comptroller General of the United States, the financial statements of the Farm Credit System Insurance
Corporation ("FCSIC"), which comprise the statement of financial condition as of December 31, 2014, and the
related statements of income and expenses and changes in insurance fund and cash flows for the year then
ended, and related notes to the financial statements, and have issued our report thereon dated February 10,
2015.

Internal Control Over Financial Reporting

In planning and performing our audit of the financial statements we considered FCSIC's internal control over
financial reporting ("internal control") to determine the audit procedures that are appropriate in the
circumstances for the purpose of expressing an opinion on the financial statements, but not for the purpose of
expressing an opinion on the effectiveness of FCSIC's internal control. Accordingly, we do not express an
opinion on the effectiveness of FCSIC's internal control.

A deficiency in internal control exists when the design or operation of a control does not allow management or
employees, in the normal course of performing their assigned functions, to prevent, or detect and correct,
misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in
internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial
statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a
deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet
important enough to merit attention by those charged with governance.

Our consideration of internal control was for the limited purpose described in the first paragraph of this section
and was not designed to identify all deficiencies in internal control that might be material weaknesses or
significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal
control that we consider to be material weaknesses. However, material weaknesses may exist that have not
been identified.

BAKER TILLY
INTERNATIONAL ‘An Affirmative Action Equal Opportunity Employer


FARM CREDIT SYSTEM INSURANCE CORPORATION

NOTES TO FINANCIAL STATEMENTS
As of and for the Years Ended December 31, 2014 and 2013

NOTE 1 - Farm Credit Insurance Fund (Insurance Fund): Statutory Framework

The Agricultural Credit Act of 1987 established the Farm Credit System Insurance Corporation (the
Corporation or FCSIC) for the purpose of ensuring the timely payment of principal and interest on notes,
bonds, debentures, and other obligations issued under subsection (c) or (d) of section 4.2 of the Farm
Credit Act of 1971, as amended (the Farm Credit Act), (insured obligations). Each bank in the Farm Credit
System (System) participating in insured obligations is an insured System bank. At December 31, 2014,
there were four insured System banks and 77 direct lender associations.

The Corporation is managed by a Board of Directors consisting of the same individuals as the Farm
Credit Administration (FCA) Board except that the Chairman of the FCA Board may not serve as the
Chairman of the Corporation's Board of Directors.

The Corporation must spend the amounts necessary to:

1. Ensure the timely payment of interest and principal on insured obligations in the event of default
by an insured System bank; and

2. Ensure the retirement of eligible borrower stock at par value under section 4.9A of the Farm
Credit Act.

The Corporation, in its sole discretion, is authorized to expend amounts to provide financial assistance to
certain insured institutions.

As of December 31, 2014, there were $225.7 billion of insured obligations and $1 million of eligible
borrower stock outstanding.

If the Corporation does not have sufficient funds to ensure payment on insured obligations, System banks
will be required to make payments under joint and several liability, as required by section 4.4 (a)(2) of the
Farm Credit Act.

Under section 5.63 of the Farm Credit Act, the Corporation is exempt from all Federal, state, and local
taxes with the exception of real property taxes.

NOTE 2 - Summary of Significant Accounting Policies

Basis of Accounting—The accounting and reporting policies of the Corporation conform to accounting
principles generally accepted in the United States of America (GAAP) and, as such, the financial
statements have been prepared using the accrual basis of accounting.

Cash and Cash Equivalents—Cash and cash equivalents include investments in U.S. Treasury
obligations with original maturities of 90 days or less. At December 31, 2014, the Corporation held
$135.1 million in overnight Treasury Certificates maturing on January 2, 2015, with an investment rate of
0.03 percent, and $100,196 in cash. At December 31, 2013, the Corporation held $249.1 million in
overnight Treasury Certificates maturing on January 2, 2014, with an investment rate of 0.01 percent, and
$200,896 in cash.

F8


FARM CREDIT SYSTEM INSURANCE CORPORATION
STATEMENTS OF FINANCIAL CONDITION
As of December 31, 2014 and 2013
(Dollars in thousands)

2014 2013
Assets
Cash and cash equivalents $ 135,176 $ 249,285
Investments in U.S. Treasury obligations 3,378,139 3,060,465
Premiums receivable 223,258 173,639
Accrued interest receivable 13,524 12,601
Total assets $__ 3,750,097 $ 3,495,990
Liabilities and Insurance Fund
Accounts payable and accrued expenses $ 348 $ 341
Total liabilities 348 341
Farm Credit Insurance Fund
Allocated Insurance Reserves Accounts . =
Unallocated Insurance Fund 3,749,749 3,495,649
Total Insurance Fund 3,749,749 3,495,649
Total liabilities and Insurance Fund $3,750,097 $ 3,495,990

FS


Compliance and Other Matters

As part of obtaining reasonable assurance about whether FCSIC's financial statements are free from material
misstatement, we also performed tests of its compliance with certain provisions of laws, regulations, and
contracts, noncompliance with which could have a direct and material effect on the determination of financial
statement amounts. However, providing an opinion on compliance with those provisions was not an objective
of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no
instances of noncompliance or other matters that are required to be reported herein under U.S. Government
Auditing Standards.

Purpose of this Report

The purpose of this report is solely to describe the scope of our testing of internal control and compliance and
the result of that testing, and not to provide an opinion on the effectiveness of FCSIC’s internal control or on
compliance. This report is an integral part of an audit performed in accordance with U.S. Government Auditing

Standards in considering FCSIC's internal control and compliance. Accordingly, this report is not suitable for
any other purpose.

“Baker THU, \Jvelew Krewe , LP

Milwaukee, Wisconsin
February 10, 2015

F4


FARM CREDIT SYSTEM INSURANCE CORPORATION
STATEMENTS OF CASH FLOWS.
For the Years Ended December 31, 2014 and 2013
(Dollars in thousands)

Net income

expenses

2014 2013
Cash flows from operating activities
$ 254,100 197,713
Adjustments to reconcile net income to net cash
provided by operating activities:
(Increase) decrease in premiums receivable (49,619) (89,373)
(Increase) decrease in accrued interest receivable (923) 66
Net amortization and accretion of investments 37,941 36,944
Increase (decrease) in accounts payable and accrued
7 54
Net cash provided by operating activities 241,506 145,404
Cash flows from investing activities
Payments for purchase of U. S. Treasury obligations (1,076,820) (525,559)
Proceeds from maturity of U.S. Treasury obligations 721,205 624,361
Net cash provided by investing activities (355,615) 98,802
Cash flows from financing activities
Payment to AIRAs Accountholders - -
Net cash used in financing activities - -
Net change in cash and cash equivalents (114,109) 244,206
Cash and cash equivalents, beginning of year 249,285 5,079
Cash and cash equivalents, end of year $ 135,176 249,285

F7


FARM CREDIT SYSTEM INSURANCE

CORPORATION
McLean, VA

FINANCIAL STATEMENTS
Including Independent Auditors' Report
As of and for the Years Ended December 31, 2014 and 2013


FARM CREDIT SYSTEM INSURANCE CORPORATION

NOTES TO FINANCIAL STATEMENTS
As of and for the Years Ended December 31, 2014 and 2013

NOTE 3 - Investments in U.S. Treasury Obligations

In addition to the amounts referenced in Note 2, Cash and Cash Equivalents, at December 31, 2014 and
2013, investments in U.S. Treasury obligations which are carried at amortized cost consisted of the
following:

Gross Gross Estimated
Amortized Unrealized Unrealized Market
(Dollars in thousands) Cost Gains Losses Value
December 31, 2014
U.S. Treasury obligations $ 3,378,139 $ 7,577 $ (10,129) $ 3,375,587

December 31, 2013
U.S. Treasury obligations $ 3,060,465 $ 11,437 $ (13,206) $ 3,058,696

The amortized cost and estimated market value of U.S. Treasury obligations at December 31, 2014, by
contractual maturity, are shown below.

(Dollars in thousands) Amortized Cost Estimated Market Value

Due in one year or less $ 807,895 $ 808,892

Due after one year through five years 2,294,031 2,294,020

Due after five years through ten years 276,213 272,675
$_3,378,139 $__3,375,587

The Corporation follows GAAP for measuring, reporting, and disclosing fair value. These standards apply
to all assets and liabilities that are measured, reported, and/or disclosed on a fair value basis.

As defined in the accounting standards, fair value is the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The fair value hierarchy ranks the quality and reliability of the information used to determine fair values.
Assets and liabilities measured, reported and/or disclosed at fair value will be classified and disclosed in
one of the following three categories:

Level 1 - Inputs to the valuation methodology are unadjusted quoted market prices for identical
assets in active markets that the plan has the ability to access.

F10


FARM CREDIT SYSTEM INSURANCE CORPORATION

NOTES TO FINANCIAL STATEMENTS
As of and for the Years Ended December 31, 2014 and 2013

NOTE 2 - Summary of Significant Accounting Policies (cont.)

Investments in U.S. Treasury Obligations—Section 5.62 of the Farm Credit Act requires that funds of the
Corporation, not otherwise employed, shall be invested in obligations of the United States or in
obligations guaranteed as to principal and interest by the United States. The Corporation has classified its
investments as held to maturity in accordance with Financial Accounting Standards Board Accounting
Standards Codification 320, Investments - Debt and Equity Securities (formerly Statement of Financial
Accounting Standard No. 115) and carries them at amortized cost. Amortization of premium and
accretion of discount on investments has been computed under the interest method since 2002. Fair
value of investments is estimated based on quoted market prices for those or similar instruments.

Liability for Estimated Insurance Obligations—The liability for estimated insurance obligations is the
present value of estimated probable insurance payments to be made in the future based on the
Corporation's analysis of economic conditions of insured System banks.

The insured System banks' primary lending markets are borrowers engaged in farming, ranching, and
producing or harvesting of aquatic products, and their cooperatives. Financial weaknesses in these
market segments and the effect of general market conditions on the System's borrowers could adversely
affect the banks' financial condition and profitability. Insured System banks also face risks from changing
interest rate environments and the need to maintain ongoing access to financial markets. Adverse
changes in the financial condition and profitability of insured System banks resulting from increased levels
of credit, financial, or other risks could occur in the future which would require a liability for estimated
insurance obligations to be recorded.

The Corporation actively monitors the creditworthiness and financial position of the insured System
banks. Management is not aware of any events or circumstances at this time which would require a
liability for estimated insurance obligations to be recorded.

Premiums—Annual premiums are recorded as revenue during the period on which the premiums are
based. All premiums are due on or before January 31 of the year subsequent to the year in which they
are earned.

Use of Estimates—The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amount of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amount of revenues and expenses during the reporting period. Actual results could differ from those
estimates.

F9


FARM CREDIT SYSTEM INSURANCE CORPORATION
STATEMENTS OF INCOME AND EXPENSES AND CHANGES IN INSURANCE FUND
For the Years Ended December 31, 2014 and 2013

(Dollars in thousands)

Income

Premiums

Interest income

Total income

Expenses

Administrative operating expenses
Total Expenses
Net Income
Farm Credit Insurance Fund — beginning of year
Payments to AIRAs Accountholders

Farm Credit Insurance Fund — end of year

2014 2013
$ 223,145 $ 172,164
_____ 34,090 28,768
257,235 200,932
3,135 3,219
3,135 3,219
254,100 197,713
3,495,649 3,297,936
$3,749,749 $3,495,649

F6


We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial
position of the Farm Credit System Insurance Corporation as of December 31, 2014 and 2013, and the results
of its operations and its cash flows for the years then ended in accordance with accounting principles generally
accepted in the United States of America.

Other Reporting Required by U.S. Government Auditing Standards

In accordance with U.S. Government Auditing Standards, we have also issued our report dated February 10,
2015 on our consideration of FCSIC’s internal control over financial reporting and on our tests of its compliance
with certain provisions of laws, regulations and contracts and other matters. The purpose of that report is to
describe the scope of our testing of internal control over financial reporting and compliance and the results of
that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That
report is an integral part of an audit performed in accordance with U.S. Government Auditing Standards in
considering FCSIC’s internal control over financial reporting and compliance.

“Baker “RU, \Jirelew Kroue , LP

Milwaukee, Wisconsin
February 10, 2015

F2


FARM CREDIT SYSTEM INSURANCE CORPORATION

NOTES TO FINANCIAL STATEMENTS
As of and for the Years Ended December 31, 2014 and 2013

NOTE 5 - Operating Lease

On November 30, 2009, the Corporation executed a six-year lease with the FCS Building Association for
office space. The terms of the lease provide for an annual minimum base rent for office space for the
remaining term of $155,440 for 2015. The Corporation recorded lease expense (including operating cost
assessments) of $152,408 and $148,025 for 2014 and 2013, respectively.

NOTE 6 — Line of Credit

On September 24, 2013, the Corporation entered into an agreement with the Federal Financing Bank (the
FFB), a federal instrumentality subject to the supervision and direction of the U.S. Treasury. Pursuant to
this agreement, the FFB may advance funds to the Corporation when exigent market circumstances
threaten an insured System Bank's ability to pay maturing debt obligations. The Corporation will in turn
use the funds advanced by the FFB to provide assistance to the System banks until market conditions
improve. The agreement provides for a short-term revolving credit facility of up to $10 billion, is renewable
annually and terminates on September 30, 2015, unless otherwise further extended.

Under the agreement, each provision of funds by the FFB is subject to certain terms and conditions. The
interest rate for each advance will be established by the FFB at the time the respective advance is made.
Each advance cannot have a maturity date longer than twelve months and the maturity date cannot be
later than the final termination date of the agreement.

The Corporation paid no commitment fee to secure this line of credit. There were no amounts drawn on
this line of credit during 2014.

NOTE 7 - Retirement Plan

All permanent Corporation employees are covered by the Civil Service Retirement System (CSRS) or the
Federal Employees Retirement System (FERS). The Corporation's contribution during 2014 to the CSRS
plan was 7 percent of base pay. For those employees covered by FERS, the Corporation's contribution
was 11.9 percent of base pay from January 1 through September 30, 2014. The rate increased on
October 1, 2014 to 13.2 percent. In addition, for FERS-covered employees, the Corporation
automatically contributes 1 percent of base pay to the employee's Thrift Savings Plan account, matches
the first 3 percent contributed by the employee, and matches one-half of the next 2 percent contributed by
the employee. Retirement plan expenses amounted to $257,717 in 2014 and $256,420 in 2013.

NOTE 8 - Related Parties

The Corporation purchases services from the FCA under an Interagency Agreement. These include
examination and administrative support services. The intention of the parties as stated in the agreement
is that specified rates and fees will reimburse the party providing services for all reasonable costs
associated with provision of the services. The Corporation had zero payables due to the FCA at
December 31, 2014 and 2013. The Corporation purchased services for 2014 which totaled $319,336
compared with $366,920 for 2013.

The Corporation may also provide assistance to the FCA under the same Interagency Agreement,
however the Corporation provided no services and recognized no revenue for 2014 and 2013. At
December 31, 2014, and 2013, the Corporation did not have any receivables from the FCA.

F13


ss

BAKER TILLY

Baker Tilly Virchow Krause, LLP
777 E Wisconsin Ave, 32nd Floor
Milwaukee, WI 53202-5313

tel 414.777 5500,

fax 414777 5555

bakertilly.com

Independent Auditors’ Report

February 10, 2015

To the Board of Directors
Farm Credit System Insurance Corporation
McLean, Virginia

Report on the Financial Statements

We have audited the accompanying financial statements of the Farm Credit System Insurance Corporation
("FCSIC"), which comprise the statement of financial condition as of December 31, 2014 and 2013, and the
related statements of income and expenses and changes in insurance fund and cash flows for the years then
ended, and related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in
accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"); this
includes the design, implementation, and maintenance of internal control relevant to the preparation and fair
presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on the financial statements based on our audits. We conducted our
audits in accordance with auditing standards generally accepted in the United States of America; the standards
applicable to financial audits contained in U.S. Government Auditing Standards issued by the Comptroller
General of the United States; and Office of Management and Budget Bulletin No. 14-02, Audit Requirements for
Federal Financial Statements. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of
the risks of material misstatement of the financial statements, whether due to fraud or error. In making those
risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation
of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we
express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used
and the reasonableness of significant estimates made by management, as well as evaluating the overall
presentation of the financial statements.

> ent member of F1

BAKER TILLY
INTERNATIONAL ‘An Affirmative Action Equal Opportunity Employer


TABLE OF CONTENTS

Independent Auditors’ Report F1-F2

Independent Auditors’ Report on Internal Control over Financial Reporting

and on Compliance And Other Matters Based on an Audit of Financial

Statements Performed in Accordance with U.S. Government Auditing

Standards F3-F4

Financial Statements

Statements of Financial Condition FS
Statements of Income and Expenses and Changes in Insurance Fund F6
Statements of Cash Flows F7

Notes to Financial Statements F8-—F14


FARM CREDIT SYSTEM INSURANCE CORPORATION

NOTES TO FINANCIAL STATEMENTS
As of and for the Years Ended December 31, 2014 and 2013

NOTE 3 - Investments in U.S. Treasury Obligations (cont.)

Level 2- Observable market based inputs or unobservable inputs that are corroborated by
market data. Inputs to the valuation methodology include

© quoted prices for similar assets or liabilities in active markets;

* quoted prices for identical or similar assets or liabilities in inactive markets;

e inputs other than quoted prices that are observable for the asset or liability;

¢ inputs that are derived principally from or corroborated by observable market
data by correlation or other means.

Level 3 - Unobservable inputs that are unobservable and not corroborated by market data.
The asset's or liability’s fair value measurement level within the fair value hierarchy is based on the lowest
level of any input that is significant to the fair value measurement. Valuation techniques used need to
maximize the use of observable inputs and minimize the use of unobservable inputs.

The fair values of FCSIC's investments in U.S. Treasury obligations are estimated based on quoted
market prices for those instruments; accordingly these are classified as Level 1 assets.

NOTE 4 - Premiums, the Secure Base Amount and Excess Insurance Fund Balances

Each System bank which issues insured obligations under subsection (c) or (d) of section 4.2 of the Farm
Credit Act is an insured System bank and may be required to pay premiums to the Corporation.

The Food, Conservation, and Energy Act of 2008 amended the Farm Credit Act of 1971 (12 U.S.C. §
2001 et seq.) to generally assess premiums based on each bank's pro rata share of insured debt (rather
than on loans), aligning premiums with what FCSIC insures. The changes were implemented beginning
July 1, 2008. Now FCSIC may collect from 0 to 20 basis points annually on adjusted insured debt
outstanding. The amendments also authorize a risk surcharge of up to 10 basis points on non-accrual
loans and on other-than-temporarily impaired investments. The amendments reduce the total insured
debt on which premiums are assessed by 90 percent of Federal government-guaranteed loans and
investments and 80 percent of state government-guaranteed loans and investments, and deduct similar
percentages of such guaranteed loans and investments when calculating the secure base amount (SBA).
The amendments clarify that FCSIC may collect premiums more frequently than annually.

In addition, the Farm Credit Act no longer specifies how the System banks pass premiums to associations
and other financing institutions, although it will require that the banks do so in an equitable manner. This
change allows the banks flexibility in allocating premium costs to associations. The amendments clarify
that, in addition to FCSIC's regulatory authority under Title V of the Farm Credit Act, FCSIC has the
authority to adopt rules and regulations concerning provisions in Title | of the Farm Credit Act related to
banks passing along the cost of insurance premiums. Finally, the amendments change the Farm Credit
Act provisions regarding certified statements and simplify the formula for payments from the Farm Credit
Insurance Fund Allocated Insurance Reserves Accounts (AIRAs) to allow more immediate distribution of
excess Insurance Fund balances to insured banks and the System Financial Assistance Corporation (the
FAC) stockholders.

Fil


FARM CREDIT SYSTEM INSURANCE CORPORATION

NOTES TO FINANCIAL STATEMENTS
As of and for the Years Ended December 31, 2014 and 2013

NOTE 9 - Subsequent Events

Management evaluated subsequent events through February 10, 2015, the date the financial statements
were available to be issued. Events or transactions occurring after the balance sheet date but prior to the
date the financial statements were available to be issued, that provide additional evidence about
conditions that existed at the balance sheet date, are recognized in the financial statements. Events or
transactions that provide evidence about conditions that did not exist at the balance sheet date but arose
before the financial statements were available to be issued are not recognized in the financial statements.

The financial statements for the year ended December 31, 2014 have not been adjusted for any events or
transactions occurring after the balance sheet date.

F14