<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>f10k_031504.txt
<TEXT>




             As filed with the Securities and Exchange Commission on
                                 March 15, 2004
--------------------------------------------------------------------------------

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
--------------------------------------------------------------------------------

                                    FORM 10-K
(Mark One)
[X]  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934

For the fiscal year ended December 31, 2003.

                                       OR

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

For the transition period from _____ to _____.

                         Commission File Number 0-17440
    -----------------------------------------------------------------------

                    FEDERAL AGRICULTURAL MORTGAGE CORPORATION
      ----------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

        Federally chartered
          instrumentality
       of the United States                         52-1578738
 ----------------------------------   ---------------------------------------
  (State or other jurisdiction of     (I.R.S. employer identification number)
  incorporation or organization)

   1133 21st Street, N.W., Suite  600,
              Washington, D.C.                            20036
 ----------------------------------------   ---------------------------------
 (Address of principal executive offices)               (Zip code)



                                 (202) 872-7700
               ---------------------------------------------------
              (Registrant's telephone number, including area code)



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

      Title of Each Class                     Exchange on Which Registered
      -------------------                     ----------------------------
Class A voting common stock                     New York Stock Exchange
Class C non-voting common stock                 New York Stock Exchange

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



<PAGE>



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

Yes   [X]               No    [  ]

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

     Indicate by check mark whether the registrant is an  accelerated  filer (as
defined in Rule 12b-2 of the Act).

Yes   [X]               No    [  ]

     The aggregate  market values of the Class A voting common stock and Class C
non-voting   common  stock  held  by   non-affiliates  of  the  registrant  were
$17,214,026  and  $229,287,264  respectively  as of the last business day of the
registrant's  most  recently  completed  second fiscal  quarter,  based upon the
closing prices for the  respective  classes on June 30, 2003 reported by the New
York Stock  Exchange.  The  aggregate  market value of the Class B voting common
stock is not ascertainable due to the absence of publicly  available  quotations
or prices for the Class B voting common stock as a result of the limited  market
for, and infrequency of trades in, Class B voting common stock and the fact that
any such trades are privately negotiated transactions.

     As of March 1, 2004,  the registrant had  outstanding  1,030,780  shares of
Class A voting common stock,  500,301  shares of Class B voting common stock and
10,539,131 shares of Class C non-voting common stock.

                       DOCUMENTS INCORPORATED BY REFERENCE

     Proxy  Statement to be filed on or about April 19, 2004 in connection  with
the Annual Meeting of Stockholders to be held on June 3, 2004 (portions of which
are incorporated by reference into Part II and Part III of this Annual Report on
Form 10-K).


   --------------------------------------------------------------------------



<PAGE>



                                Table of Contents

PART I.......................................................................5
   Item 1.  Business.........................................................5
            General..........................................................5
            FARMER MAC PROGRAMS..............................................7
            Farmer Mac I.....................................................7
               Loan Eligibility..............................................7
               Purchases.....................................................8
               Off-Balance Sheet Guarantees and Commitments..................9
               Underwriting and Appraisal Standards.........................10
               Sellers......................................................13
               Servicing....................................................13
               Farmer Mac I Guaranteed Securities...........................13
               Farmer Mac I Transactions....................................15
               Funding of Guarantee and Purchase Commitment Obligations.....16
               Portfolio Diversification....................................16
            Farmer Mac II...................................................17
               General......................................................17
               United States Department of Agriculture Guaranteed
                   Loan Programs............................................17
               Farmer Mac II Guaranteed Securities..........................18
               Farmer Mac II Transactions...................................18
            Financing.......................................................19
               Debt Issuance................................................19
               Equity Issuance..............................................20
            Farmer Mac's Authority to Borrow from the U.S. Treasury.........21
            Government Regulation of Farmer Mac.............................21
   Item 2.   Properties.....................................................24
   Item 3.  Legal Proceedings...............................................25
   Item 4.  Submission of Matters to a Vote of Security Holders.............25
PART II.....................................................................26
   Item 5.  Market for Registrant's Common Equity and Related Stockholder
                   Matters..................................................26
   Item 6.  Selected Financial Data.........................................27
   Item 7.  Management's Discussion and Analysis of Financial Condition
            and Results of Operations.......................................28
            Forward-Looking Statements......................................28
            Critical Accounting Policy and Estimates........................29
            Results of Operations...........................................31
            Balance Sheet Review............................................45
            Risk Management.................................................47
            Liquidity and Capital Resources.................................63
            Other Matters...................................................70
   Item 7A. Quantitative and Qualitative Disclosures About Market Risk......70
   Item 8.  Financial Statements............................................71
            Reports of Independent Auditors.................................71.
            Consolidated Balance Sheets.....................................73
            Consolidated Statements OF Operations...........................74
            Consolidated Statements OF Changes in Stockholders' Equity......75
            Consolidated Statements OF Cash Flows...........................76
            Notes in Consolidated Financial Statements......................77
   Item 9.  Changes in and Disagreements With Accountants on Accounting
            and Financial Disclosure.......................................117
   Item 9A. Controls and Procedures........................................117
PART III...................................................................119
   Item 10. Directors and Executive Officers of the Registrant.............119
   Item 11. Executive Compensation.........................................119
   Item 12. Security Ownership of Certain Beneficial Owners and Management.119
   Item 13. Certain Relationships and Related Transactions.................119
   Item 14. Principal Accounting Fees and Services.........................119
PART IV....................................................................120
   Item 15. Exhibits, Financial Statement Schedules, and Reports on
                   Form 8-K................................................120




<PAGE>


                                     PART I
Item 1.  Business

General

     The  Federal  Agricultural   Mortgage  Corporation  ("Farmer  Mac"  or  the
"Corporation") was chartered by the U.S. Congress in the Agricultural Credit Act
of 1987 (12 U.S.C.  ss.ss. 2279aa et seq.), which amended the Farm Credit Act of
1971 (collectively,  as amended,  the "Act").  Farmer Mac is a stockholder-owned
instrumentality  of the United  States that was created to establish a secondary
market for  agricultural  real estate and rural  housing  mortgage  loans and to
increase  the  availability  of  long-term  credit at stable  interest  rates to
American farmers, ranchers and rural homeowners. The Farmer Mac secondary market
for agricultural mortgage loans accomplishes that mission by providing liquidity
and lending capacity to agricultural mortgage lenders by:

     o    purchasing  newly originated and  pre-existing  ("seasoned")  eligible
          mortgage  loans  directly  from lenders  through its "cash window" and
          seasoned  eligible mortgage loans from lenders and other third parties
          in negotiated transactions;
     o    exchanging  newly  issued  agricultural   mortgage-backed   securities
          guaranteed  by Farmer Mac ("Farmer  Mac  Guaranteed  Securities")  for
          newly originated and seasoned  eligible mortgage loans that back those
          securities in "swap" transactions;
     o    issuing  long-term standby purchase  commitments  ("LTSPCs") for newly
          originated and seasoned eligible mortgage loans; and
     o    purchasing and guaranteeing  mortgage-backed bonds secured by eligible
          mortgage loans, which are referred to as AgVantage bonds.

     Farmer Mac conducts these activities through two programs--Farmer Mac I and
Farmer Mac II. Under the Farmer Mac I program, Farmer Mac:

     o    purchases eligible mortgage loans;
     o    securitizes  eligible  mortgage  loans  purchased and  guarantees  the
          timely   payment  of  principal  and  interest  on  the   agricultural
          mortgage-backed securities backed by such loans; and
     o    commits to purchase  eligible  mortgage  loans  under  LTSPCs for such
          loans.

To be  eligible  for the  Farmer Mac I program,  loans  must meet  Farmer  Mac's
underwriting,  appraisal,  documentation and other specified  standards that are
discussed in "Business--Farmer Mac Programs--Farmer Mac I."

     Under the  Farmer  Mac II  program,  Farmer Mac  purchases  the  guaranteed
portions of loans guaranteed by the United States Department of Agriculture (the
"USDA-guaranteed   portions")  pursuant  to  the  Consolidated  Farm  and  Rural
Development Act (7 U.S.C. ss.ss. 1921 et seq.) and guarantees  securities backed
by those USDA-guaranteed portions purchased by Farmer Mac.

     Farmer Mac may retain Farmer Mac Guaranteed  Securities in its portfolio or
sell them to third parties.

     As of December  31,  2003,  outstanding  loans held by Farmer Mac and loans
that  either  back  Farmer Mac  Guaranteed  Securities  or are subject to LTSPCs
totaled $5.8 billion. For more information about Farmer Mac's securities and its
financial  performance,  see "Management's  Discussion and Analysis of Financial
Condition and Results of Operations."

      Farmer Mac's two principal sources of revenue are:

     o    fees received in connection  with  outstanding  Farmer Mac  Guaranteed
          Securities and LTSPCs; and
     o    net interest  income earned on its portfolio of Farmer Mac  Guaranteed
          Securities, mortgage loans, AgVantage bonds and investments.

     Farmer  Mac  funds  its  program   purchases   primarily  by  issuing  debt
obligations  of various  maturities.  As of December  31,  2003,  Farmer Mac had
outstanding  $2.6  billion of  discount  notes and $1.3  billion of  medium-term
notes. During 2003, the Corporation  continued its strategy of regularly issuing
debt to increase  its  presence  in the  capital  markets in order to reduce the
rates it pays on its debt,  which  allows  Farmer Mac to accept  lower  rates on
mortgages it purchases from lenders to farmers,  ranchers and rural  homeowners.
To the extent the  proceeds of the debt  issuances  exceed  Farmer Mac's need to
fund program  assets,  those  proceeds are invested in high quality  non-program
assets.

     Farmer Mac is an institution  of the Farm Credit System,  but is not liable
for any debt or obligation of any other  institution  of the Farm Credit System.
Likewise, neither the Farm Credit System nor any other individual institution of
the Farm Credit System is liable for any debt or obligation of Farmer Mac.

     The Farm  Credit  Administration  ("FCA"),  acting  through  its  Office of
Secondary Market  Oversight,  has general  regulatory and enforcement  authority
over Farmer Mac,  including the authority to  promulgate  rules and  regulations
governing the  activities  of Farmer Mac and to apply FCA's general  enforcement
powers  to Farmer  Mac and its  activities.  For a  discussion  of Farmer  Mac's
statutory capital requirements and its capital levels, see "Business--Government
Regulation  of  Farmer  Mac--Regulation--Capital  Standards"  and  "Management's
Discussion    and   Analysis   of   Financial    Condition    and   Results   of
Operations--Balance   Sheet   Review--Capital"   and  "--Liquidity  and  Capital
Resources--Capital Requirements."

     Farmer Mac has three classes of common stock  outstanding--Class  A voting,
Class B voting and Class C  non-voting.  See  "Market  for  Registrant's  Common
Equity and Related Stockholder  Matters" for information  regarding Farmer Mac's
common  stock.  Farmer Mac has one class of  preferred  stock.  See  "Farmer Mac
Programs--Financing--Equity Issuance."

     As of December 31, 2003, Farmer Mac employed 36 persons,  located primarily
at its principal executive offices at 1133 Twenty-First Street, N.W., Suite 600,
Washington, D.C. 20036. Farmer Mac's main telephone number is (202) 872-7700.

     Farmer  Mac  makes  available  free of charge on its  Internet  website  at
www.farmermac.com  (in the  "Investors"  section)  copies of  materials it files
with,  or furnishes to, the U.S.  Securities  and Exchange  Commission  ("SEC"),
including Annual Reports on Form 10-K,  Quarterly Reports on Form 10-Q,  Current
Reports on Form 8-K, and  amendments  to those  reports,  as soon as  reasonably
practicable  after  electronically  filing of such materials with, or furnishing
to, the SEC. Please note that all references to www.farmermac.com in this report
are  inactive  textual  references  only and that the  information  contained on
Farmer Mac's website is not incorporated by reference into this report.


                               FARMER MAC PROGRAMS

Farmer Mac I

      Loan Eligibility

     Under the  Farmer  Mac I  program,  Farmer  Mac  purchases,  or  commits to
purchase, eligible mortgage loans and guarantees the timely payment of principal
and interest on securities  backed by, or  representing  interests in,  eligible
mortgage loans. A loan is eligible for the Farmer Mac I program if it is:

     o    secured by a fee simple  mortgage or a long-term  leasehold  mortgage,
          with  status  as a first  lien on  agricultural  real  estate or rural
          housing (as defined below) located within the United States;
     o    an obligation of a citizen or national of the United States,  an alien
          lawfully  admitted for  permanent  residence in the United States or a
          private  corporation or  partnership  that is  majority-owned  by U.S.
          citizens, nationals or legal resident aliens;
     o    an obligation of a person,  corporation or partnership having training
          or  farming  experience  that is  sufficient  to  ensure a  reasonable
          likelihood that the loan will be repaid according to its terms; and
     o    in   conformance   with   Farmer   Mac's   underwriting,    appraisal,
          documentation  and  other  specified  standards  to  be  eligible  for
          participation  in the Farmer Mac I program.  See  "--Underwriting  and
          Appraisal  Standards"  and  "--Sellers"  for a  description  of  these
          standards.

     For purposes of the Farmer Mac I program,  agricultural  real estate is one
or more parcels of land, which may be improved by permanently  affixed buildings
or other structures, that:

     o    is used for the production of one or more agricultural  commodities or
          products; and
     o    consists  of a  minimum  of five  acres or  generates  minimum  annual
          receipts of $5,000.

Currently,  the  maximum  principal  amount  of  an  eligible  loan  secured  by
agricultural  real estate is $5.0 million,  as adjusted  annually for inflation,
for loans  secured by more than 1,000 acres of land and $12.0  million for loans
secured by 1,000 acres or less.

     For  purposes  of the  Farmer  Mac I  program,  rural  housing is a one- to
four-family, owner-occupied,  moderately priced principal residence located in a
community  with a population of 2,500 or less.  Since October 2003,  the maximum
purchase price or current appraised value for a dwelling,  excluding the land to
which the  dwelling  is  affixed,  that  secures a rural  housing  loan has been
$197,807,  as adjusted for  inflation.  In addition to the dwelling  itself,  an
eligible rural housing loan can be secured by land  associated with the dwelling
having an  appraised  value of no more than 50  percent  of the total  appraised
value of the combined property.  To date, loans meeting the eligibility criteria
under  the  rural  housing  segment  of  Farmer  Mac's   requirements  have  not
represented a significant part of Farmer Mac's business.

      Purchases

     Loan  Purchases.  Farmer Mac offers  credit  products  that are intended to
increase the secondary market  liquidity of agricultural  mortgage loans and the
lending capacity of financial  institutions that originate agricultural mortgage
loans, while permitting Farmer Mac to efficiently  securitize  eligible mortgage
loans acquired through its secondary market  activities.  Farmer Mac enters into
mandatory and optional  delivery  commitments  to purchase loans and prices such
commitments daily through its cash window.  Because the  securitization  process
requires the grouping of loans into uniform  pools,  Farmer Mac  emphasizes  the
importance  of conformity  to its program  requirements,  including the interest
rate, amortization,  maturity and payment frequency  specifications.  Farmer Mac
also purchases portfolios of newly originated and seasoned loans on a negotiated
basis through its cash window.  Farmer Mac purchases fixed- and  adjustable-rate
loans  primarily,  but  also  may  purchase  other  types  of  loans,  including
convertible  mortgage  loans.  Loans  purchased  by Farmer Mac have a variety of
maturities and often include  balloon  payments.  Loans  purchased or subject to
purchase   commitments  also  may  include   provisions  that  require  a  yield
maintenance  payment  or some other  form of  prepayment  penalty in the event a
borrower  prepays a loan (depending upon the level of interest rates at the time
of prepayment).

     During 2003,  Farmer Mac purchased $192.6 million of loans through its cash
window. Of the loans purchased during 2003, 74 percent included balloon payments
and 11 percent included yield maintenance prepayment protection.  By comparison,
during  2002,  Farmer Mac  purchased  $747.9  million of loans  through its cash
window, including a $489.5 million loan portfolio in second quarter 2002. Of the
loans purchased during 2002, 76 percent included balloon payments and 54 percent
included yield maintenance prepayment protection.  During 2003, Farmer Mac's top
ten sellers  generated  80.8  percent of the total Farmer Mac I cash window loan
purchase  volume,  of which Zions First  National  Bank,  Farmer  Mac's  largest
combined Class A and Class C stockholder,  accounted for 38.7 percent. Including
the second quarter loan portfolio purchase  transaction,  the top ten sellers in
2002  generated 90.0 percent of the total Farmer Mac I cash window loan purchase
volume, of which Zions First National Bank accounted for 10.3 percent.  For more
information regarding loan volume, see "Management's  Discussion and Analysis of
Financial Condition and Results of Operations--Results  of  Operations--Business
Volume."

     Mortgage-Backed Bond Purchases.  Farmer Mac purchases and guarantees timely
payment of  principal  and  interest on  mortgage-backed  bonds,  referred to as
AgVantage  bonds,  issued by  institutions  approved by Farmer  Mac.  Farmer Mac
assesses  an  institution's   agricultural   loan   underwriting  and  servicing
capabilities  as well as its  creditworthiness  in approving an institution  for
AgVantage bond sales to Farmer Mac.

     Each AgVantage bond is a general obligation of the issuing  institution and
is secured by eligible  collateral in an amount  ranging from 120 percent to 150
percent of the bond's outstanding principal amount. Eligible collateral consists
of loans that meet the same loan  eligibility  criteria applied by Farmer Mac in
its loan purchases and commitments and have an outstanding  aggregate  principal
balance equal to at least 100 percent of the bond's outstanding principal amount
plus cash or securities  issued by the U.S.  Treasury or guaranteed by an agency
or  instrumentality  of the United  States that make up any  remaining  required
collateral.   During  2003,  Farmer  Mac  purchased  six  AgVantage  bonds  with
maturities ranging from one month to five years from five institutions resulting
in Farmer  Mac  guarantees  of $13.1  million.  As of  December  31,  2003,  the
outstanding  principal  amount of AgVantage  bonds was $25.2  million.  To date,
Farmer Mac has  experienced  no losses,  nor has it been  called  upon to make a
guarantee payment, on any of its AgVantage bonds.


      Off-Balance Sheet Guarantees and Commitments

     Farmer Mac offers two  Farmer Mac I credit  enhancement  alternatives  that
allow  approved  agricultural  and rural  residential  mortgage  lenders both to
retain the cash flow  benefits of their loans and increase  their  liquidity and
lending capacity. These alternatives are:

     o    a swap  transaction,  in which Farmer Mac acquires eligible loans from
          sellers in exchange  for Farmer Mac  Guaranteed  Securities  backed by
          those loans. As consideration for its assumption of the credit risk on
          loans  underlying  the Farmer Mac  Guaranteed  Securities,  Farmer Mac
          receives  guarantee  fees payable in arrears out of the periodic  loan
          interest  payments and based on the outstanding  balance of the Farmer
          Mac Guaranteed Securities.

     o    an  LTSPC,  which is not a  guarantee  of loans or  securities,  but a
          Farmer Mac  commitment  to purchase  loans from a  segregated  pool of
          loans on one or more  undetermined  future dates. As consideration for
          its assumption of the credit risk on loans underlying an LTSPC, Farmer
          Mac receives  commitment fees payable monthly in arrears, in an amount
          approximating   what  would  have  been  the  guarantee  fees  if  the
          transaction were structured as a swap transaction.

     A swap transaction or an LTSPC may involve loans with payment, maturity and
interest rate  characteristics that differ from those purchased through the cash
window.  A swap  transaction  or an LTSPC  permits a seller to nominate from its
portfolio  a  segregated  pool of loans,  subject  to  review by Farmer  Mac for
conformance  with its underwriting  and appraisal  standards.  Upon Farmer Mac's
acceptance of the eligible loans,  whether under a swap transaction or an LTSPC,
the seller  effectively  transfers the credit risk on those loans to Farmer Mac,
thereby  reducing the seller's  credit and  concentration  risk  exposures  and,
consequently, its regulatory capital and its loss reserve requirements. Only the
LTSPC  structure  permits the seller to retain the  segregated  loan pool in its
portfolio  until such time, if ever,  as the seller  delivers some or all of the
segregated  loans to Farmer Mac for purchase  under the LTSPC.  An LTSPC commits
Farmer Mac to a future  purchase  of loans that met  Farmer  Mac's  underwriting
standards at the time the loans first became subject to the LTSPC and Farmer Mac
assumed the credit risk on loans.

     Farmer Mac generally purchases loans subject to an LTSPC:

     o    At  par  plus  accrued  interest,  if the  loans  become  four  months
          delinquent;
     o    At a  mark-to-market  price,  if the loans are not  delinquent and are
          standard  Farmer Mac cash window  loan  products;  or in exchange  for
          Farmer Mac I Guaranteed Securities.
     o    If  the  loans   are  not  four   months   delinquent,   either  at  a
          mark-to-market  negotiated  price for all (but not some)  loans in the
          pool,  based on the sale of Farmer Mac I Guaranteed  Securities in the
          capital  markets or the  funding  obtained  by Farmer Mac  through the
          issuance of matching debt in the capital  markets;  or in exchange for
          Farmer Mac I Guaranteed Securities.


     In 2003, Farmer Mac entered into $763.3 million of LTSPCs, compared to $1.2
billion  in  2002.  During  2003,  LTSPCs  continued  as  the  preferred  credit
enhancement  alternative  for new non-cash  transactions  and were a significant
portion of the Farmer Mac I program.  However,  during third quarter 2003,  Farm
Credit West, ACA, a related party program participant,  exercised the conversion
feature  incorporated  in all  existing  LTSPCs and Farmer  Mac  converted  that
participant's  $722.3 million LTSPC into a Farmer Mac I Guaranteed Security in a
swap  transaction.  No  similar  transactions  took  place in 2002.  Net of this
transaction, as of December 31, 2003, Farmer Mac had committed to purchase under
LTSPCs a cumulative  total of 12,771  eligible  mortgage loans with an aggregate
principal  balance of $2.3 billion.  As of December 31, 2003,  off-balance sheet
Farmer Mac I Guaranteed  Securities  included  1,623  mortgage loans and totaled
$952.1 million.  For more information  regarding guarantee and LTSPC volume, see
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations--Results of Operations--Business Volume."


      Underwriting and Appraisal Standards

     Farmer  Mac  has  established  underwriting  and  appraisal  standards  for
agricultural  mortgage loans to mitigate the risk of loss from borrower defaults
and to provide guidance concerning the management, administration and conduct of
underwriting and appraisals to all  participating  sellers and potential sellers
in its programs.  These  standards were developed on the basis of industry norms
for agricultural  mortgage loans and are designed to assess the creditworthiness
of the borrower,  as well as the value of the mortgaged property relative to the
amount of the mortgage loan. Farmer Mac requires sellers to make representations
and  warranties  regarding the  conformity of eligible  mortgage  loans to these
standards and other requirements it may impose from time to time.

     Farmer Mac I credit  underwriting  standards require that the loan-to-value
ratio ("LTV") for any loan not exceed 70 percent,  except that a loan secured by
a livestock  facility and supported by a contract with an integrator may have an
LTV of up to 75 percent,  a part-time  farm loan  supported by private  mortgage
insurance may have an LTV of up to 85 percent and a rural housing loan supported
by private  mortgage  insurance may have an LTV of up to 97 percent.  Farmer Mac
also has a loan product for  borrowers  with high credit  scores whose loans are
secured by collateral  with low LTVs. For those  borrowers,  loan processing has
been simplified and  documentation  of the credit ratios  described above is not
necessary.

     In the  case  of  newly  originated  loans  that  are not  part-time  farm,
facility,  low-documentation,  or rural  housing  loans,  borrowers on the loans
must,  among other  criteria set forth in Farmer Mac's  underwriting  standards,
also meet the following standard underwriting ratios on a pro forma basis (i.e.,
giving effect to the new loan):

     o    debt-to-asset ratio of 50 percent or less;
     o    cash flow debt service coverage ratio on the mortgaged property of not
          less than 1:1;
     o    total debt service coverage ratio, including farm and non-farm income,
          of not less than 1.25:1; and
     o    ratio of current assets to current liabilities of not less than 1:1.

     Farmer Mac's underwriting standards provide for acceptance of loans that do
not conform to one or more of the standard  underwriting ratios, other than LTV,
when those loans:

     o    exceed  minimum  requirements  for  one or  more  of the  underwriting
          standards to a degree that compensates for  noncompliance  with one or
          more other standards, referred to as compensating strengths; and
     o    are made to  producers of  particular  agricultural  commodities  in a
          segment  of  agriculture  in which  such  compensating  strengths  are
          typical of the financial condition of sound borrowers in that segment.

Farmer  Mac's use of  compensating  strengths is not intended to provide a basis
for waiving or lessening the requirement that eligible  mortgage loans under the
Farmer Mac I program be of consistently high quality. In fact, loans approved on
the  basis of  compensating  strengths  have not  demonstrated  a  significantly
different  rate of default than that of loans that were approved on the basis of
conformance  with all of the standard credit ratios.  As of December 31, 2003, a
total of $1.8 billion (36 percent) of the outstanding  balance of loans held and
loans underlying LTSPCs and Farmer Mac I Guaranteed  Securities issued after the
enactment  of the Farm  Credit  System  Reform Act of 1996 (the "1996 Act") were
approved based upon compensating  strengths ($63.4 million of which had original
loan-to-value  ratios of greater  than 70 percent).  The original  loan-to-value
ratio is  calculated  by  dividing  the loan  principal  balance  at the time of
guarantee,  purchase or commitment  by the  appraised  value at the date of loan
origination  or,  when  available,  updated  appraised  value  at  the  time  of
guarantee,  purchase or commitment.  During 2003, $351.0 million (37 percent) of
the loans purchased or added under LTSPCs were approved based upon  compensating
strengths ($14.9 million of which had original  loan-to-value  ratios of greater
than 70 percent).


     In the case of a seasoned loan, Farmer Mac considers sustained  performance
to be a reliable  alternative  indicator of a borrower's ability to pay the loan
according to its terms.  A seasoned  loan  generally  will be deemed an eligible
loan if:

     o    it  has  been   outstanding   for  at  least  five  years  and  has  a
          loan-to-value ratio of 60 percent or less;

     o    there  have been no  payments  more than 30 days past due  during  the
          previous three years; and

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

     A seasoned loan that has been  outstanding  for more than one year but less
than five years must  substantially  comply with the underwriting  standards for
newly originated loans as of the date the loan was originated by the lender. The
loan must also have a payment  history  that shows no payment  more than 30 days
past due during the three-year period  immediately prior to the date the loan is
either  purchased  by  Farmer  Mac or made  subject  to an  LTSPC.  As with  the
secondary  market for residential  mortgages,  there is no requirement that each
loan's compliance with the underwriting  standards be re-evaluated  after Farmer
Mac accepts the loan into its program.

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

     o    evaluation of loan database information to determine conformity to the
          criteria set forth in the preceding paragraphs;

     o    confirmation  that loan file data  conform  to  database  information;
          validation of supporting credit information in the loan files; and

     o    review of loan collateral appraisals.

All of the foregoing are performed  through  methods that give due regard to the
size, age, leverage and nature of the collateral for the loans.

     In the case of rural  housing and  part-time  farm loans,  the borrower may
finance up to 97 percent and 85 percent, respectively, of the appraised value of
the  property  if the amount  above 80  percent  is covered by private  mortgage
insurance. For newly originated part-time farm loans, the borrower must generate
sufficient income from all sources to repay all creditors. A borrower's capacity
to repay debt obligations is determined by two tests:

     o    the borrower's monthly mortgage  payment-to-income  ratio should be 28
          percent or less; and
     o    the  borrower's  monthly  debt  payment-to-income  ratio  should be 36
          percent or less.

     Farmer Mac's appraisal standards for newly originated loans require,  among
other things,  that the  appraisal  function be performed  independently  of the
credit  decision-making   process  and  conform  to  the  Uniform  Standards  of
Professional  Appraisal Practice  promulgated by the Appraisal  Standards Board.
Farmer Mac's appraisal  standards require the appraisal function to be conducted
or administered by an individual  meeting specific  qualification and competence
criteria and who:

     o    is not  associated,  except by the engagement for the appraisal,  with
          the credit  underwriters  making the loan  decision,  though  both the
          appraiser  and the credit  underwriter  may be directly or  indirectly
          employed by a common employer;
     o    receives no financial or professional benefit of any kind by virtue of
          the report content,  valuation or credit decision made or based on the
          appraisal product; and
     o    has no present or contemplated  future direct or indirect  interest in
          the appraised property.

The appraisal  standards also require uniform reporting of reliable and credible
opinions   of  the  market   value,   market  rent  and   property   net  income
characteristics of the mortgaged property and the relative market forces.

     Farmer Mac requires current  collateral  valuations in conformance with the
Uniform Standards of Professional  Appraisal Practice for newly originated loans
purchased  or placed  under a Farmer Mac I  Guaranteed  Security  or LTSPC.  For
seasoned loans, Farmer Mac obtains appraisal updates as considered  necessary by
its assessment of collateral risk determined in the due diligence process.

     Farmer Mac personnel include experienced  agricultural credit underwriters,
appraisers and servicers who perform those  functions with respect to many loans
that come into the Farmer Mac I program.  In addition,  those personnel  oversee
the  activities of several  servicing  centers to which Farmer Mac  outsources a
significant amount of its underwriting function in order to access the expertise
and specialized  knowledge of several  industry-recognized  third-party  service
providers throughout the country.  The outsourcing  agreements afford Farmer Mac
the benefits of those servicing centers at fees based upon marginal costs, which
allows  Farmer Mac to avoid the fixed  costs  associated  with such  operations.
Farmer Mac supervises and monitors the performance of the outsourced  functions.
Farmer Mac believes  that the combined  expertise of those  third-party  service
providers and its own internal  staff  provides the  Corporation  with access to
adequate  resources for  performing  the necessary  underwriting,  appraisal and
servicing functions.

      Sellers

     As of December 31, 2003, there were 142 approved loan sellers in the Farmer
Mac I program ranging from single-office to multi-branch institutions,  spanning
community banks,  Farm Credit System  associations,  mortgage  companies,  large
multi-state Farm Credit System banks,  commercial banks and insurance companies,
of which 81 were active  participants  in the program.  As of December 31, 2002,
there were 219  approved  sellers in the Farmer Mac I program,  of which 79 were
active participants in the program. In addition to participating directly in the
Farmer Mac I program,  some of the approved loan sellers enable other lenders to
participate  indirectly  in the Farmer Mac I program by  managing  correspondent
networks of lenders from which they purchase  loans to sell to Farmer Mac. As of
December 31, 2003,  more than 75 lenders were  participating  in those networks,
bringing  the total  Farmer  Mac I program  participants  to more than 200 as of
December 31, 2003.

     To be  considered  for  approval  as a Farmer  Mac I  seller,  a  financial
institution must meet the criteria that Farmer Mac establishes, including:

     o    owning a  requisite  amount  of  Farmer  Mac Class A or Class B voting
          common stock according to a schedule  prescribed for the size and type
          of institution;
     o    having  the  ability  and  experience  to make or  purchase  and  sell
          agricultural mortgage loans of the type that will qualify for purchase
          by Farmer Mac and service such mortgage  loans in accordance  with the
          Farmer  Mac  requirements  either  through  its own  staff or  through
          contractors and originators;
     o    maintaining a minimum adjusted net worth of $1.0 million;
     o    maintaining  a  fidelity  bond  and  errors  and  omissions  insurance
          coverage (or acceptable substitute insurance coverage) in a prescribed
          amount according to the size of the institution; and
     o    entering into a Seller/Servicer  agreement to comply with the terms of
          the Farmer Mac Seller/Servicer  Guide,  including  representations and
          warranties regarding the eligibility of the loans and accuracy of loan
          data provided to Farmer Mac.

      Servicing

     Farmer Mac generally does not directly service loans held in its portfolio,
although  it does  act as  "master  servicer"  for  pools  of  loans  and  loans
underlying Farmer Mac Guaranteed  Securities and may assume direct servicing for
certain  impaired loans.  Farmer Mac's loans and the loans underlying its Farmer
Mac  Guaranteed  Securities  are serviced only by Farmer  Mac-approved  entities
designated  as "central  servicers"  that have entered  into  central  servicing
contracts  with Farmer Mac.  Sellers of  eligible  mortgage  loans sold into the
Farmer Mac I program have a right to retain certain "field servicing"  functions
(typically  direct  borrower  contacts) and may enter into contracts with Farmer
Mac's central servicers that specify such servicing functions.

      Farmer Mac I Guaranteed Securities

     Farmer Mac  guarantees  the timely  payment of  principal  and  interest on
Farmer Mac Guaranteed  Securities.  Farmer Mac Guaranteed  Securities  backed by
mortgage  loans eligible for the Farmer Mac I program are referred to as "Farmer
Mac I Guaranteed Securities."

     By  statute,  public  offerings  of Farmer Mac  Guaranteed  Securities  are
required  to be  registered  with the SEC under  the  federal  securities  laws.
Accordingly,  Farmer Mac, through its subsidiary Farmer Mac Mortgage  Securities
Corporation, maintains a shelf registration statement with the SEC through which
Farmer Mac  Guaranteed  Securities  may be publicly  offered  from time to time.
Farmer  Mac  also  may  offer  Farmer  Mac  Guaranteed  Securities  in  private,
unregistered  offerings.  U.S. Bank  National  Association,  a national  banking
association based in Minneapolis, Minnesota, or Farmer Mac serves as trustee for
the  trusts  that  acquire  eligible  loans  and  issue  Farmer  Mac  Guaranteed
Securities.

     Farmer Mac I Guaranteed  Securities are agricultural  mortgage pass-through
certificates  guaranteed by Farmer Mac that  represent  beneficial  interests in
pools of loans or in  obligations  backed by pools of loans.  All  Farmer  Mac I
Guaranteed  Securities  issued  during and since 1996 have been single  class or
multiclass "grantor trust" pass-through  certificates.  These securities entitle
each  investor in a class of  securities to receive a portion of the payments of
principal  and  interest  on the related  underlying  pool of loans equal to the
investor's proportionate interest in the pool. These securities also may support
other  Farmer  Mac I  Guaranteed  Securities,  including  real  estate  mortgage
investment  conduit  securities,  commonly  referred  to as  REMICs,  and  other
agricultural  mortgage-backed  securities.  Farmer Mac I  Guaranteed  Securities
issued prior to the  enactment of changes to Farmer Mac's  statutory  charter in
1996 are  supported  by  unguaranteed  first-loss  subordinated  interests  that
represented ten percent of the balance of the loans underlying the securities at
issuance.

     Farmer Mac I  Guaranteed  Securities  are not assets of Farmer Mac,  except
when  acquired  for  investment  purposes,  nor  are  Farmer  Mac  I  Guaranteed
Securities  recorded  as  liabilities  on Farmer  Mac's  consolidated  financial
statements. Farmer Mac, however, is liable under its guarantee on the securities
to make timely payments to investors of principal  (including  balloon payments)
and interest based on the scheduled payments on the underlying loans, regardless
of whether the grantor  trust has actually  received  such  scheduled  payments.
Because it  guarantees  timely  payments on Farmer Mac I Guaranteed  Securities,
Farmer  Mac  assumes  the  ultimate  credit  risk of  borrower  defaults  on the
underlying  loans,  which are  subject to Farmer  Mac's  Underwriting  Standards
described  above  in   "--Underwriting   and  Appraisal   Standards."  See  also
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations--Risk Management--Credit Risk - Loans."

     Farmer Mac receives guarantee fees in return for its guarantee  obligations
on Farmer Mac I Guaranteed  Securities.  These fees are collected as installment
payments are made on the underlying  loans until those loans have been repaid or
otherwise liquidated (generally as a result of default). The aggregate amount of
guarantee fees received on Farmer Mac I Guaranteed  Securities  depends upon the
amount of such securities  outstanding  and on the guarantee fee rate,  which is
capped by statute at 50 basis points (0.50 percent) per annum.  The Farmer Mac I
guarantee  fee rate  typically  ranges from 40 to 50 basis  points (0.40 to 0.50
percent)  per  annum,  depending  on the credit  quality  of and other  criteria
regarding  the  loans.  The  amount  of  Farmer  Mac  I  Guaranteed   Securities
outstanding is influenced by the repayment rates on the underlying  loans and by
the rate at which Farmer Mac issues new Farmer Mac I Guaranteed  Securities.  In
general,  when the level of  interest  rates  declines  significantly  below the
interest rates on loans underlying Farmer Mac I Guaranteed Securities,  the rate
of prepayments is likely to increase; conversely, when interest rates rise above
the interest rates on the loans underlying  Farmer Mac I Guaranteed  Securities,
the rate of  prepayments  is likely to  decrease.  In  addition  to  changes  in
interest  rates,  the rate of  principal  payments  on Farmer  Mac I  Guaranteed
Securities is also  influenced by a variety of economic,  demographic  and other
considerations,  including yield maintenance provisions that are associated with
many of the  loans  underlying  Farmer  Mac I  Guaranteed  Securities.  For more
information regarding yield maintenance provisions, see "Management's Discussion
and   Analysis  of   Financial   Condition   and  Results  of   Operations--Risk
Management--Interest Rate Risk."

     For each of the years ended  December  31,  2003 and 2002,  Farmer Mac sold
SEC-registered Farmer Mac Guaranteed Securities at no gain or loss in the amount
of $78.3  million  and $47.7  million,  respectively,  principally  to a related
party.  See  "Management's  Discussion  and Analysis of Financial  Condition and
Results of Operations--Results of Operations--Business Volume."

      Farmer Mac I Transactions

     During the year ended  December  31, 2003,  Farmer Mac  purchased or placed
under  guarantee  or LTSPC $1.0 billion of loans under the Farmer Mac I program.
As of December 31, 2003, loans held and loans underlying Farmer Mac I Guaranteed
Securities  and LTSPCs  totaled $5.0 billion.  The 1996 Act revised Farmer Mac's
statutory  charter to eliminate  the  requirement  of a first-loss  subordinated
interest in Farmer Mac I Guaranteed  Securities.  As of December 31, 2003, $24.7
million  of Farmer  Mac I  Guaranteed  Securities  issued  prior to the 1996 Act
remained outstanding.


     The  following  table  summarizes  loans  purchased  or newly  placed under
guarantees  or LTSPCs under the Farmer Mac I program for each of the years ended
December 31, 2003, 2002 and 2001.

<TABLE>
<CAPTION>


                                             For the Year Ended December 31,
                                      ----------------------------------------------
                                           2003           2002            2001
                                      --------------- -------------- ---------------
                                                      (in thousands)

<S>                                       <C>            <C>             <C>
   Loans and Guaranteed Securities         $ 192,577      $ 747,881       $ 272,127
   LTSPCs                                    763,342      1,155,479       1,032,967
                                      --------------- -------------- ---------------
    Total                                  $ 955,919     $1,903,360      $1,305,094
                                      --------------- -------------- ---------------
</TABLE>

     The following table presents the outstanding balances of Farmer Mac I loans
and loans  underlying  Farmer Mac I Guaranteed  Securities  and LTSPCs as of the
dates indicated:

<TABLE>
<CAPTION>
                                               Outstanding Balances
                                                as of December 31,
                                      ---------------------------------------
                                                2003                2002
                                      -------------------  ------------------
                                                  (in thousands)
<S>                                      <C>                 <C>
Post-1996 Act:
  Loans and Guaranteed Securities         $ 2,696,530         $ 2,168,994
  LTSPCs                                    2,348,702           2,681,240
Pre-1996 Act                                   24,734              31,960
                                      -------------------  ------------------
  Total Farmer Mac I program              $ 5,069,966         $ 4,882,194
                                      -------------------  ------------------
</TABLE>

      Funding of Guarantee and Purchase Commitment Obligations


     The  principal   sources  of  funding  for  the  payment  of  Farmer  Mac's
obligations  under its guarantees and LTSPCs are the fees for its guarantees and
commitments,  net interest income and the proceeds of debt issuance.  Farmer Mac
satisfies  its  guarantee  and purchase  commitment  obligations  by  purchasing
defaulted  loans  out of LTSPCs  and from the  related  trusts  for  Farmer  Mac
Guaranteed  Securities.  Farmer Mac typically recovers a significant  portion of
the value of defaulted loans purchased  either through borrower  payments,  loan
payoffs,  payments by third parties or  foreclosure  and sale.  Ultimate  losses
arising  from Farmer  Mac's  guarantees  and  commitments  are  reflected in the
Corporation's  charge-offs against its allowance for losses and gains and losses
on the sale of real estate owned. During 2003, Farmer Mac's net charge-offs were
$5.2 million,  compared to $4.1 million in net charge-offs during 2002. Gains on
the sale of real estate owned were $0.2 million and $0.1 million for each of the
years ended December 31, 2003 and 2002,  respectively.  The Act requires  Farmer
Mac to set aside, as an allowance for losses in a reserve account,  a portion of
the  guarantee  fees it  receives  from its  guarantee  activities.  Among other
things,  that  reserve  account must be  exhausted  before  Farmer Mac may issue
obligations to the Secretary of the Treasury against the $1.5 billion Farmer Mac
is  statutorily  authorized  to borrow  from the  Secretary  of the  Treasury to
fulfill its guarantee  obligations.  That borrowing authority is not intended to
be a routine funding source and has never been used.

     Although  total  outstanding  guarantees  exceed  the  amount  held  as  an
allowance for losses and the amount it may borrow from the U.S. Treasury, Farmer
Mac does not expect  its  obligations  under the  guarantees  to exceed  amounts
available to satisfy those obligations.  For information regarding the allowance
for losses, see "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Risk Management--Credit Risk - Loans," Note 2(j) and Note
8 to the consolidated  financial  statements.  For a more detailed discussion of
Farmer Mac's borrowing authority from the Treasury,  see "Farmer Mac's Authority
to Borrow from the U.S. Treasury."

      Portfolio Diversification

     It is Farmer  Mac's  policy to  diversify  its  portfolio of loans held and
loans   underlying   Farmer  Mac   Guaranteed   Securities   and  LTSPCs,   both
geographically and by commodity. Farmer Mac directs its marketing efforts toward
agricultural  lenders  throughout the nation to achieve commodity and geographic
diversification  in its exposure to credit risk.  Farmer Mac measures its credit
exposure in particular geographic regions and commodities as a percentage of the
total principal amount of all loans outstanding, adjusted for the credit quality
of the loans in that  particular  geographic  region or commodity group based on
the   loan-to-value,   debt  service  coverage,   equity-to-asset   and  working
capital-to-current asset ratios of the loans.

     Farmer Mac is not  obligated to buy every loan  submitted to it by eligible
sellers  that  meets  its  underwriting  and  appraisal  standards.  Farmer  Mac
considers other factors such as its overall portfolio diversification, commodity
and farming  forecasts and risk  management  objectives  in deciding  whether to
accept  the loans  into the  Farmer Mac I  program.  For  example,  if  industry
forecasts  indicate possible weakness in a geographic area or commodity,  Farmer
Mac may decide not to purchase or commit to purchase an affected loan as part of
managing its overall  portfolio  exposure to areas of possible  heightened  risk
exposure.  Because Farmer Mac  effectively  assumes the credit risk on all loans
under  an  LTSPC,   Farmer  Mac's   commodity  and  geographic   diversification
disclosures  reflect  all  loans  under  LTSPCs  and any  loans  that  have been
purchased out of LTSPC pools. For information  regarding the  diversification of
Farmer Mac's existing  portfolio,  see "Management's  Discussion and Analysis of
Financial  Condition and Results of Operations--Risk  Management--Credit  Risk -
Loans" and Note 8 to the consolidated financial statements.

Farmer Mac II

      General

     The Farmer Mac II program was  initiated  in 1992 and is  authorized  under
sections  8.0(3) and  8.0(9)(B)  of Farmer  Mac's  statutory  charter (12 U.S.C.
ss.ss. 2279aa(3) and 2279aa(9)(B)), which provide that:

     o    USDA-guaranteed portions are statutorily included in the definition of
          loans eligible for Farmer Mac's secondary market programs;
     o    USDA-guaranteed portions are exempted from the underwriting, appraisal
          and repayment  standards that all other loans must meet to be eligible
          for Farmer Mac programs, and are exempted from any diversification and
          internal  credit  enhancement  that may be  required of pools of other
          loans eligible for Farmer Mac programs; and
     o    Farmer  Mac is  authorized  to pool and issue  Farmer  Mac  Guaranteed
          Securities backed by USDA-guaranteed portions.

      United States Department of Agriculture Guaranteed Loan Programs

     The USDA,  acting through its various agencies,  currently  administers the
federal rural credit programs first  developed in the mid-1930s.  The USDA makes
direct   loans  and   guarantees   portions  of  loans  made  and   serviced  by
USDA-qualified  lenders for various purposes.  The USDA's guarantee is supported
by the full  faith and  credit of the United  States.  USDA-guaranteed  portions
represent up to 95 percent of the principal amount of guaranteed loans.

     Through its Farmer Mac II program,  Farmer Mac is one of several  competing
purchasers of  USDA-guaranteed  portions of farm ownership loans, farm operating
loans,  business and industry loans and other loans that are fully guaranteed as
to principal and interest by the USDA (collectively, the "guaranteed loans").


      USDA Guarantees. Each USDA guarantee is a full faith and credit obligation
of the United States and becomes enforceable if a lender fails to repurchase the
USDA-guaranteed portion from its owner within 30 days after written demand from
the owner when:

     o    the borrower under the guaranteed  loan is in default not less than 60
          days  in  the  payment  of  any  principal  or  interest  due  on  the
          USDA-guaranteed portion; or
     o    the lender has  failed to remit to the owner the  payment  made by the
          borrower on the  USDA-guaranteed  portion or any related  loan subsidy
          within 30 days after the lender's receipt of the payment.

     If the lender does not repurchase the  USDA-guaranteed  portion as provided
above,  the USDA is  required to purchase  the unpaid  principal  balance of the
USDA-guaranteed  portion  together  with accrued  interest  (including  any loan
subsidy) to the date of purchase,  less the servicing fee,  within 30 days after
written  demand upon the USDA by the owner.  While the USDA  guarantee  will not
cover the note interest to the owner on USDA-guaranteed  portions accruing after
90 days from the date of the original  demand  letter of the owner to the lender
requesting  repurchase,  Farmer Mac has established procedures to require prompt
tendering of USDA-guaranteed portions.

     If, in the opinion of the lender (with the  concurrence  of the USDA) or in
the opinion of the USDA, repurchase of the USDA-guaranteed  portion is necessary
to service  the  related  guaranteed  loan  adequately,  the owner will sell the
USDA-guaranteed  portion to the lender or USDA for an amount equal to the unpaid
principal  balance and accrued  interest  (including  any loan  subsidy) on such
USDA-guaranteed  portion less the lender's  servicing fee.  Federal  regulations
prohibit the lender from  repurchasing  USDA-guaranteed  portions for  arbitrage
purposes.

     Lenders.  Any lender authorized by the USDA to obtain a USDA guarantee on a
loan may sell loans to Farmer Mac  through  the  Farmer  Mac II  program.  As of
December 31, 2003,  there were 150 active  lenders in the Farmer Mac II program,
consisting  mostly of  community  and  regional  banks,  an increase of 7 active
lenders from December 31, 2002.

     Loan  Servicing.  The  lender  on  each  guaranteed  loan  is  required  by
regulation to retain the unguaranteed portion of the guaranteed loan, to service
the entire underlying  guaranteed loan,  including the USDA-guaranteed  portion,
and to remain  mortgagee  and/or  secured party of record.  The  USDA-guaranteed
portion and the unguaranteed portion of the underlying guaranteed loan are to be
secured  by the same  security  with equal lien  priority.  The  USDA-guaranteed
portion cannot be paid later than or in any way be  subordinated  to the related
unguaranteed portion.

     Farmer Mac II Guaranteed Securities

     Farmer Mac  guarantees  the timely  payment of  principal  and  interest on
Farmer Mac II Guaranteed Securities backed by USDA-guaranteed  portions.  Farmer
Mac does not guarantee the repayment of the USDA-guaranteed  portions,  only the
Farmer Mac II Guaranteed Securities that are backed by USDA-guaranteed portions.
In  addition  to  purchasing  USDA-guaranteed  portions  for  retention  in  its
portfolio,  Farmer Mac offers Farmer Mac II Guaranteed  Securities to lenders in
swap transactions or to other investors for cash.

     Farmer Mac II Transactions


     During the years ended December 31, 2003 and 2002, Farmer Mac issued $271.2
million and $173.0 million of Farmer Mac II Guaranteed Securities, respectively.
As of December 31, 2003, $729.5 million Farmer Mac II Guaranteed Securities were
outstanding.  See Note 5 and Note 12 to the consolidated  financial  statements.
The following table presents Farmer Mac II Guaranteed Securities issued for each
of the years indicated:

 <TABLE>
<CAPTION>
                                         For the Year Ended December 31,
                                  ----------------------------------------------
                                       2003           2002            2001
                                  --------------- -------------- ---------------
                                                 (in thousands)

<S>                                 <C>            <C>             <C>
Purchased and retained              $ 270,727      $ 173,011       $ 186,679
Swaps (issued to third parties)           502              -          11,492
                                  --------------- -------------- ---------------
   Total                            $ 271,229      $ 173,011       $ 198,171
                                  --------------- -------------- ---------------
</TABLE>

     The  following  table  presents  the  outstanding  balance of Farmer Mac II
Guaranteed Securities as of the dates indicated:

<TABLE>
<CAPTION>
                                    Outstanding Balance of
                              Farmer Mac II Guaranteed Securites
                                     as of December 31,
                           -----------------------------------------
                                  2003                   2002
                           ------------------    -------------------
                                       (in thousands)
<S>                           <C>                    <C>
   On-balance sheet            $ 678,229              $ 578,681
   Off-balance sheet              51,241                 67,109
                           ------------------    -------------------
   Total                       $ 729,470              $ 645,790
                           ------------------    -------------------
</TABLE>

To date, Farmer Mac has experienced no credit losses on any of its Farmer Mac II
transactions.  As of December 31, 2003 and 2002, Farmer Mac had outstanding $1.2
million of  principal  and  interest  advances,  respectively,  on Farmer Mac II
Guaranteed Securities.


Financing

     Debt Issuance

     Section  8.6(e)  of  Farmer  Mac's   statutory   charter  (12  U.S.C.   ss.
2279aa-6(e))  authorizes  Farmer  Mac to  issue  debt  obligations  to  purchase
eligible  mortgage  loans and Farmer Mac  Guaranteed  Securities and to maintain
reasonable amounts for business operations, including adequate liquidity. Farmer
Mac  funds  its  program  purchases   primarily  by  issuing  debt  obligations,
consisting of discount notes and medium-term notes of various maturities, in the
public capital  markets.  Farmer Mac also issues  discount notes and medium-term
notes to  obtain  monies  to  finance  its  investments,  transaction  costs and
guarantee and LTSPC payments.

     The  Corporation's  discount notes and medium-term notes are obligations of
Farmer Mac only,  are not rated by a nationally  recognized  statistical  rating
organization and the interest and principal thereon are not guaranteed by and do
not constitute  debts or obligations  of the Farm Credit  Administration  or the
United States or any agency or  instrumentality  of the United States other than
Farmer Mac.  Farmer Mac is an institution of the Farm Credit System,  but is not
liable for any debt or  obligation of any other  institution  of the Farm Credit
System.  Likewise,  neither  the Farm  Credit  System  nor any other  individual
institution  of the Farm Credit  System is liable for any debt or  obligation of
Farmer Mac. Income to the purchaser of a Farmer Mac discount note or medium-term
note is not exempt under federal law from federal, state or local taxation.

     Farmer Mac's board of directors has  authorized  the issuance of up to $5.0
billion outstanding of discount notes and medium-term notes, subject to periodic
review  of the  adequacy  of that  level  relative  to  Farmer  Mac's  borrowing
requirements.  Farmer Mac invests in loans, Farmer Mac Guaranteed Securities and
non-program  investment  assets in accordance  with policies  established by its
board of directors. The current policies authorize non-program investments in:

     o    U.S. Treasury obligations;
     o    agency and instrumentality obligations;
     o    repurchase agreements;
     o    commercial paper;
     o    guaranteed investment contracts;
     o    certificates of deposit;
     o    federal funds and bankers acceptances;
     o    securities and debt obligations of corporate and municipal issuers;
     o    asset-backed securities;
     o    corporate money market funds; and
     o    preferred stock of government-sponsored enterprises.

For  more   information   about  Farmer  Mac's   outstanding   investments   and
indebtedness, see Note 4 and Note 7 to the consolidated financial statements.

     Equity Issuance

     The Act  authorizes  Farmer Mac to issue voting  common  stock,  non-voting
common  stock and  non-voting  preferred  stock.  Only  banks,  other  financial
entities,  insurance  companies  and  institutions  of the  Farm  Credit  System
eligible  to  participate  in one or more of the  Farmer Mac  programs  may hold
voting  common  stock.  No holder of Class A voting common stock may directly or
indirectly  be a  beneficial  owner of more than 33 percent  of the  outstanding
shares  of Class A voting  common  stock.  There are no  ownership  restrictions
applicable to Class C non-voting common stock or preferred stock.

     The Class C  non-voting  common  stock and the  preferred  stock are freely
transferable.  Upon  liquidation,  dissolution  or winding up of the business of
Farmer Mac, after payment and provision for payment of  outstanding  debt of the
Corporation,  the holders of preferred stock would be paid in full at par value,
plus all  accrued  dividends,  before  the  holders  of shares  of common  stock
received  any  payment.  To date,  Farmer Mac has not paid any  dividends on its
common  stock,  nor does it  expect  to pay such  dividends  in the  foreseeable
future.  Farmer Mac's ability to declare and pay common stock dividends could be
restricted  if  it  were  to  fail  to  comply  with  its   regulatory   capital
requirements.   See  Note  9  to  the  consolidated   financial  statements  and
"Business--Government     Regulation    of    Farmer    Mac--Regulation--Capital
Standards--Enforcement levels."

     As of December 31, 2003,  1,030,780 shares of Class A common stock, 500,301
shares of Class B common stock,  10,522,513  shares of Class C non-voting common
stock and 700,000 shares of 6.40 percent non-voting  Cumulative Preferred Stock,
Series A were outstanding.  Farmer Mac may obtain additional capital from future
issuances of voting and non-voting common stock and non-voting  preferred stock.
Farmer Mac has no present  intention  to issue any  additional  shares of common
stock, except pursuant to programs in which employees,  members of management or
the board of directors may be granted or may purchase Class C non-voting  common
stock, or exercise  options to purchase Class C non-voting  common stock granted
as part of their compensation arrangements.


     The  Cumulative  Preferred  Stock,  Series  A has a  redemption  price  and
liquidation  preference of $50.00 per share,  plus accrued and unpaid dividends.
The preferred  stock does not have a maturity date.  Beginning on June 30, 2012,
Farmer Mac has the option to redeem the preferred stock at any time, in whole or
in part, at the  redemption  price of $50.00 per share,  plus accrued and unpaid
dividends  through and including the  redemption  date. The costs of issuing the
preferred  stock were charged to  additional  paid-in  capital.  Farmer Mac pays
cumulative  dividends on the preferred stock  quarterly in arrears,  when and if
declared by the board of  directors.  Farmer Mac's  ability to declare and pay a
dividend  could be  restricted  if it failed to comply with  regulatory  capital
requirements.  The  following  table  presents  the  dividends  declared  on the
preferred stock during and subsequent to 2003:

<TABLE>
<CAPTION>
         Date                 Per                For                     For
       Dividend              Share             Period                   Period                   Date
       Declared             Amount            Beginning                 Ending                   Paid
------------------------  ------------  ----------------------  -----------------------  ----------------------

<S>                       <C>            <C>                    <C>                       <C>
February 6, 2003           $ 0.80         January 1, 2003         March 31, 2003           March 31, 2003
June 5, 2003                 0.80         April 1, 2003           June 30, 2003            June 30, 2003
August 7, 2003               0.80         July 1, 2003            September 30, 2003       September 30, 2003
December 4, 2003             0.80         October 1, 2003         December 31, 2003        December 31, 2003
February 5, 2004             0.80         January 1, 2004         March 31, 2004                     *

*  The dividend declared on February 5, 2004 is scheduled to be paid on March 31, 2004.
</TABLE>


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

     Farmer Mac may, in extreme  circumstances,  issue  obligations  to the U.S.
Treasury in a cumulative amount not to exceed $1.5 billion. The proceeds of such
obligations  may be used  solely for the  purpose  of  fulfilling  Farmer  Mac's
guarantee commitments under the Farmer Mac I and Farmer Mac II programs. The Act
provides  that the U.S.  Treasury is required to purchase  such  obligations  of
Farmer Mac if Farmer Mac certifies that:

     o    a portion of the  guarantee  fees  assessed by Farmer Mac has been set
          aside  as a  reserve  against  losses  arising  out  of  Farmer  Mac's
          guarantee  activities in an amount determined by Farmer Mac's board of
          directors to be necessary and such reserve has been exhausted; and
     o    the proceeds of such  obligations  are needed to fulfill  Farmer Mac's
          guarantee obligations.

Such obligations would bear interest at a rate determined by the U.S.  Treasury,
taking into consideration the average rate on outstanding marketable obligations
of the United States as of the last day of the last calendar month ending before
the date of the  purchase  of the  obligations  from  Farmer  Mac,  and would be
required  to be  repurchased  from the U.S.  Treasury  by  Farmer  Mac  within a
"reasonable time."

     The United States government does not guarantee  payments due on Farmer Mac
Guaranteed Securities, funds invested in the equity or debt securities of Farmer
Mac, any dividend payments on shares of Farmer Mac stock or the profitability of
Farmer Mac.


                       GOVERNMENT REGULATION OF FARMER MAC

General

     Public  offerings of Farmer Mac  Guaranteed  Securities  must be registered
with the SEC under the federal  securities laws.  Farmer Mac also is required to
file reports with the SEC pursuant to the SEC's periodic reporting requirements.

Regulation

     Office of Secondary Market Oversight

     As an institution  of the Farm Credit System,  Farmer Mac is subject to the
regulatory  authority of FCA. FCA, acting through its Office of Secondary Market
Oversight,  has general  regulatory and  enforcement  authority over Farmer Mac,
including  the  authority to  promulgate  rules and  regulations  governing  the
activities of Farmer Mac and to apply its general  enforcement  powers to Farmer
Mac  and  its  activities.  The  Director  of the  Office  of  Secondary  Market
Oversight,  who is selected by and reports to the FCA board,  is responsible for
the examination of Farmer Mac and the general  supervision of the safe and sound
performance  by Farmer Mac of the powers and duties vested in it by the Act. The
Act requires an annual  examination of the financial  transactions of Farmer Mac
and  authorizes  FCA to  assess  Farmer  Mac  for  the  cost  of its  regulatory
activities,  including  the cost of any  examination.  Farmer Mac is required to
file quarterly reports of condition with FCA.

     Department of the Treasury

     In  connection  with the passage of the 1996 Act, the Chairmen of the House
and Senate  Agriculture  Committees  requested FCA, in a cooperative effort with
the  Department  of the  Treasury,  to "monitor  and review the  operations  and
financial  condition  of Farmer Mac and to report in writing to the  appropriate
subcommittees of the House Agriculture  Committee,  the House Financial Services
Committee  and the Senate  Agriculture,  Nutrition  and  Forestry  Committee  at
six-month   intervals  during  the  capital  deferral  period  and  beyond,   if
necessary."  Although the "capital  deferral  period" expired on January 1, 1999
and the  risk-based  capital rule went into effect on May 23,  2002,  it appears
that the FCA reports are ongoing.

     Comptroller General/General Accounting Office


     The Act permits the Comptroller  General of the United States,  head of the
General  Accounting Office (GAO), to perform reviews of the actuarial  soundness
and  reasonableness of the guarantee fees established by Farmer Mac. A review of
Farmer  Mac was  performed  by GAO at the  request of the  Senate  Committee  on
Committee  on  Agriculture,  Nutrition,  and Forestry  and GAO's  findings  were
published in a report  dated  October 16, 2003 (the  "Report").  The Report made
recommendations  to  Farmer  Mac for  enhancement  of its  risk  management  and
corporate governance practices, many of which were already being implemented, or
have since been  implemented,  by Farmer Mac as part of its commitment to ensure
that best  practices are being applied in its risk  management  operations.  The
Report, No. GAO-04-116, may be obtained directly from GAO.


     Capital Standards

     General.  The Act, as amended by the 1996 Act,  establishes  three  capital
standards for Farmer Mac:

     o    Minimum  capital - Farmer Mac's minimum  capital level is an amount of
          core  capital  equal  to the  sum of  2.75  percent  of  Farmer  Mac's
          aggregate  on-balance  sheet  assets,  as  calculated  for  regulatory
          purposes,  plus  0.75  percent  of  the  aggregate  off-balance  sheet
          obligations of Farmer Mac, specifically including:
          o    the unpaid principal balance of outstanding Farmer Mac Guaranteed
               Securities;
          o    instruments   issued  or   guaranteed  by  Farmer  Mac  that  are
               substantially  equivalent  to Farmer Mac  Guaranteed  Securities,
               including LTSPCs; and
          o    other off-balance sheet obligations of Farmer Mac.

     o    Critical capital - Farmer Mac's critical capital level is an amount of
          core  capital  equal  to 50  percent  of  the  total  minimum  capital
          requirement at that time.
     o    Risk-based  capital - The Act  directs FCA to  establish a  risk-based
          capital  stress  test for  Farmer  Mac,  using  specified  stress-test
          parameters.  While  the Act does not  specify  the  required  level of
          risk-based  capital,  that level is permitted to exceed the  statutory
          minimum capital requirement  applicable to Farmer Mac, if so indicated
          by the risk-based capital stress test.

Farmer  Mac is  required  to  comply  with the  higher  of the  minimum  capital
requirement or the risk-based capital requirement.

     FCA issued its final risk-based  capital regulation for Farmer Mac on April
12,  2001  and the  Corporation  was  required  to meet the  risk-based  capital
standards  beginning  on May  23,  2002.  The  risk-based  capital  stress  test
promulgated  by FCA is intended to determine  the amount of  regulatory  capital
(core capital plus  allowance for losses) that Farmer Mac would need to maintain
positive capital during a ten-year period in which:

     o    annual  losses  occur at a rate of default  and  severity  "reasonably
          related" to the rates of the highest sequential two-years in a limited
          U.S. geographic area; and
     o    there is an  initial  interest  rate  shock at the lesser of 600 basis
          points or 50 percent of the ten-year U.S.  Treasury rate, and interest
          rates remain at such level for the remainder of the period.

The  risk-based  capital  stress test then adds an  additional 30 percent to the
resulting capital requirement for management and operational risk.


     As of  December  31,  2003,  Farmer  Mac's  minimum  and  critical  capital
requirements were $142.0 million and $71.0 million, respectively, and its actual
core capital level was $215.5  million,  $73.5 million above the minimum capital
requirement and $144.5 million above the critical capital requirement.  Based on
the risk-based capital stress test, Farmer Mac's risk-based capital  requirement
as of December 31, 2003 was $38.8 million and Farmer Mac's regulatory capital of
$237.6  million  exceeded  that  amount by  approximately  $198.8  million.  See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations--Liquidity  and  Capital   Resources--Capital   Requirements"  for  a
presentation of Farmer Mac's current regulatory capital position.


     Enforcement  levels.  The Act directs FCA to classify Farmer Mac within one
of four enforcement  levels for purposes of determining  compliance with capital
standards.  At December  31,  2003,  Farmer Mac was  classified  as within level
I--the highest compliance level.


     Failure to comply with the  applicable  required  capital  level in the Act
would  result  in Farmer  Mac being  classified  as within  level II (below  the
applicable risk-based capital level, but above the minimum capital level), level
III (below the minimum, but above the critical capital level) or level IV (below
the critical  capital  level).  In the event that Farmer Mac were  classified as
within  level II,  III or IV, the Act  requires  the  Director  of the Office of
Secondary  Market Oversight to take a number of mandatory  supervisory  measures
and provides the Director with discretionary  authority to take various optional
supervisory  measures  depending on the level in which Farmer Mac is classified.
The mandatory measures applicable to level II include:

     o    requiring  Farmer Mac to submit and comply with a capital  restoration
          plan;
     o    prohibiting  the payment of dividends if such payment  would result in
          Farmer Mac being reclassified as within level III or IV, and requiring
          the  pre-approval  of any dividend  payment even if such payment would
          not result in reclassification as within level IV; and
     o    reclassifying  Farmer Mac as within  level III if it does not submit a
          capital  restoration  plan that is  approved by the  Director,  or the
          Director determines that Farmer Mac has failed to make, in good faith,
          reasonable efforts to comply with such a plan and fulfill the schedule
          for the plan approved by the Director.

The mandatory measures applicable to level III include:

     o    requiring Farmer Mac to submit (and comply with) a capital restoration
          plan;
     o    prohibiting  the payment of dividends if such payment  would result in
          Farmer Mac being  reclassified  as within level IV and  requiring  the
          pre-approval  of any dividend  payment even if such payment  would not
          result in reclassification as within level IV; and
     o    reclassifying Farmer Mac as within a lower level if it does not submit
          a capital  restoration  plan that is approved  by the  Director or the
          Director determines that Farmer Mac has failed to make, in good faith,
          reasonable efforts to comply with such a plan and fulfill the schedule
          for the plan approved by the Director.

     If Farmer Mac were classified as within level III, then, in addition to the
foregoing  mandatory  supervisory  measures,  the  Director  of  the  Office  of
Secondary  Market  Oversight  could  take  any  of the  following  discretionary
supervisory measures:

     o    imposing  limits on any increase in, or ordering the reduction of, any
          obligations of Farmer Mac, including off-balance sheet obligations;
     o    limiting or  prohibiting  asset growth or requiring  the  reduction of
          assets;
     o    requiring the  acquisition  of new capital in an amount  sufficient to
          provide for reclassification as within a higher level;
     o    terminating,   reducing  or   modifying   any  activity  the  Director
          determines creates excessive risk to Farmer Mac; or
     o    appointing a conservator or a receiver for Farmer Mac.

The  Act  does  not  specify  any  supervisory  measures,  either  mandatory  or
discretionary,  to be  taken  by the  Director  in the  event  Farmer  Mac  were
classified as within level IV.

     The  Director  of  the  Office  of  Secondary   Market  Oversight  has  the
discretionary  authority to  reclassify  Farmer Mac to a level that is one level
below its then  current  level  (for  example,  from level I to level II) if the
Director  determines  that Farmer Mac is engaging in any action not  approved by
the Director  that could  result in a rapid  depletion of core capital or if the
value of property subject to mortgages backing Farmer Mac Guaranteed  Securities
has decreased significantly.

Item 2.     Properties


     Farmer Mac currently occupies its principal  offices,  which are located at
1133 Twenty-First  Street,  N.W., Suite 600,  Washington,  D.C. 20036, under the
terms of a lease that  expires on  November  30,  2011 and covers  approximately
13,500  square feet of office  space.  Farmer  Mac's  offices are  suitable  and
adequate for its needs.


Item 3. Legal Proceedings

     Farmer Mac is not a party to any material pending legal proceedings.

Item 4. Submission of Matters to a Vote of Security Holders

     Not applicable.


<PAGE>


                                     PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

      Farmer Mac has three classes of common stock outstanding. Ownership of
Class A voting common stock is restricted to banks, insurance companies and
other financial institutions or similar entities that are not institutions of
the Farm Credit System. Ownership of Class B voting common stock is restricted
to institutions of the Farm Credit System. There are no ownership restrictions
on the Class C non-voting common stock. Under the terms of the original public
offering of the Class A and Class B voting common stock, the Corporation
reserved the right to redeem at book value any shares of either class held by an
ineligible holder.

      The Class A and Class C common stocks trade on the New York Stock Exchange
under the symbols AGMA and AGM, respectively. The Class B voting common stock,
which has a limited market and trades infrequently, is not listed or quoted on
any exchange or other medium, and Farmer Mac is unaware of any publicly
available quotations or prices for that class.

      The information below represents the high and low closing sale prices for
the Class A and Class C common stocks for the periods indicated as reported by
the New York Stock Exchange.

<TABLE>
<CAPTION>
                                                               Sales Price
                                            ---------------------------------------------------
                                                  Class A Stock             Class C Stock
                                            ------------------------- -------------------------
                                                High          Low         High          Low
                                            ------------ ------------ ------------ ------------
                                                          (dollars per share)
<S>                                          <C>          <C>          <C>          <C>
2004
   First quarter (through March 1, 2004)      $ 22.85      $ 20.30      $ 31.19      $ 26.01

2003
   Fourth quarter                               22.90        20.01        32.00        26.68
   Third quarter                                22.00        16.75        30.49        23.11
   Second quarter                               17.92        16.70        25.14        21.86
   First quarter                                22.65        15.50        34.50        20.25

2002
   Fourth quarter                               26.00        19.90        33.37        25.06
   Third quarter                                24.30        20.30        30.47        20.80
   Second quarter                               35.00        22.00        47.20        25.60
   First quarter                                34.55        28.60        47.80        38.95
</TABLE>


     As of March 1, 2004,  it was  estimated  that  there were 1,406  registered
owners of the Class A voting common stock, 103 registered  owners of the Class B
voting common stock and 1,345 registered owners of the Class C non-voting common
stock.

     Although the dividend  rights of all three  classes of its common stock are
the same,  to date,  Farmer Mac has not paid any  dividends on its common stock,
nor does it expect to pay  dividends  in the  foreseeable  future.  Farmer Mac's
ability to declare and pay  dividends  could be restricted if it were to fail to
comply with regulatory capital requirements.


     Information  about  securities  authorized  for issuance under Farmer Mac's
equity  compensation plans appears under "Equity  Compensation  Plans" in Farmer
Mac's Proxy  Statement to be filed on or about April 19,  2004.  That portion of
the Proxy Statement is incorporated by reference into this report.

<PAGE>



Item 6. Selected Financial Data

<TABLE>
<CAPTION>
                                                                       As of December 31,
                                              -----------------------------------------------------------------------
Summary of Financial Condition:                   2003            2002           2001          2000         1999
                                              --------------  --------------  ------------ ------------- ------------
                                                                   (dollars in thousands)
<S>                                            <C>             <C>           <C>           <C>          <C>
   Cash and cash equivalents                    $ 623,674       $ 723,800      $437,831      $537,871     $336,282
   Investment securities                        1,064,782         830,409     1,007,954       836,757      847,220
   Farmer Mac Guaranteed Securities             1,508,134       1,608,507     1,690,376     1,679,993    1,306,223
   Loans, net                                     983,624         963,461       198,003        30,279       38,509
   Total assets                                 4,299,650       4,222,915     3,415,856     3,160,899    2,590,410

   Notes payable
    Due within one year                         2,799,384       2,895,746     2,233,267     2,141,548    1,722,061
    Due after one year                          1,136,110         985,318       968,463       827,635      750,337

   Total liabilities                            4,086,396       4,039,344     3,281,419     3,028,238    2,503,267
   Stockholders' equity                           213,254         183,571       134,437       132,661       87,143

Selected Financial Ratios:
   Return on average assets                         0.59%           0.56%         0.50%         0.36%        0.31%
   Return on average common equity                 15.32%          15.00%        12.19%         9.50%        8.24%
   Average equity to assets                         4.66%           4.16%         4.06%         3.82%        3.71%

                                                                For the Year Ended December 31,
                                              -----------------------------------------------------------------------
Summary of Operations:                            2003            2002           2001          2000         1999
                                              --------------  --------------  ------------ ------------- ------------
                                                       (dollars in thousands, except per share amounts)
   Net interest income after provision
    for loan losses                              $ 30,728        $ 37,759      $ 28,666      $ 17,398     $ 14,838
   Guarantee and commitment fees                   20,685          19,277        15,807        11,677        7,396
   Gains/(Losses) on financial derivatives
    and trading assets                              2,357          (8,433)       (3,053)            -            -
   Gains on the repurchase of debt                      -           1,368             -             -            -
   Gains on the sale of real estate owned             178              24            61             -            -
   Miscellaneous                                      812           1,332           560           399          220
                                              --------------  --------------  ------------ ------------- ------------
    Total revenues                                 54,760          51,327        42,041        29,474       22,454
   Total operating expenses                        15,182          18,767        16,616        13,288       11,863
                                              --------------  --------------  ------------ ------------- ------------
    Income before income taxes and
    cumulative effect of change in
    accounting principles                          39,578          32,560        25,425        16,186       10,591
   Income tax expense                              12,308           9,809         8,419         5,749        3,670
   Cumulative effect of change in
    accounting principles, net of taxes                 -               -          (726)            -            -
                                              --------------  --------------  ------------ ------------- ------------
    Net income                                     27,270          22,751        16,280        10,437        6,921
      Preferred stock dividends                    (2,240)         (1,456)            -             -            -
                                              --------------  --------------  ------------ ------------- ------------
    Net income available to common
      stockholders                               $ 25,030        $ 21,295      $ 16,280      $ 10,437      $ 6,921
                                              --------------  --------------  ------------ ------------- ------------

Earnings Per Share:

   Basic earnings per share                        $ 2.13          $ 1.83        $ 1.44        $ 0.94       $ 0.64
   Diluted earnings per share                      $ 2.08          $ 1.77        $ 1.38        $ 0.92       $ 0.62

Earnings per share before cumulative
effect of change in accounting principles
   Basic earnings per share                        $ 2.13          $ 1.83        $ 1.50        $ 0.94       $ 0.64
   Diluted earnings per share                      $ 2.08          $ 1.77        $ 1.45        $ 0.92       $ 0.62
</TABLE>

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

     Financial  information  as of and for each of the years ended  December 31,
2003,  2002 and 2001 is  consolidated  to include the accounts of Farmer Mac and
its wholly-owned  subsidiary,  Farmer Mac Mortgage Securities  Corporation.  The
following  discussion  should be read  together  with Farmer Mac's  consolidated
financial statements and is not necessarily indicative of future results.

Forward-Looking Statements

     Certain statements made in this Form 10-K are "forward-looking  statements"
within  the  meaning of the  Private  Securities  Litigation  Reform Act of 1995
pertaining  to  management's  current  expectations  as to Farmer  Mac's  future
financial results, business prospects and business developments. Forward-looking
statements  include,  without  limitation,   any  statement  that  may  predict,
forecast,  indicate or imply future results,  performance or  achievements,  and
typically are accompanied by, and identified with, such terms as  "anticipates,"
"believes,"  "expects,"  "intends," "should" and similar phrases.  The following
management's  discussion  and  analysis  includes   forward-looking   statements
addressing Farmer Mac's:

     o    prospects for earnings;
     o    growth in loan purchase, guarantee, securitization and LTSPC volume;
     o    trends in net interest income;
     o    trends in provisions for losses;
     o    changes in capital position; and
     o    other business and financial matters.

Management's expectations for Farmer Mac's future necessarily involve a number
of assumptions and estimates and the evaluation of risks and uncertainties.
Various factors could cause Farmer Mac's actual results or events to differ
materially from the expectations as expressed or implied by the forward-looking
statements, including uncertainties regarding:

     o    the rate and  direction of  development  of the  secondary  market for
          agricultural mortgage loans;
     o    the possible  establishment  of  additional  statutory  or  regulatory
          restrictions or constraints on Farmer Mac that could hamper its growth
          or diminish its profitability;
     o    legislative or regulatory  developments or  interpretations  of Farmer
          Mac's statutory  charter that could adversely affect Farmer Mac or the
          ability  or  motivation  of  certain  lenders  to  participate  in its
          programs or the terms of any such participation,  or increase the cost
          of regulation and related corporate activities;
     o    possible  reaction  in  the  financial  markets  to  events  involving
          government-sponsored enterprises other than Farmer Mac;
     o    Farmer Mac's access to the debt markets at favorable rates and terms;
     o    the  possible  effect of the  risk-based  capital  requirement,  which
          could,  under  certain  circumstances,  be in excess of the  statutory
          minimum capital requirement;
     o    the rate of growth in agricultural mortgage indebtedness;
     o    lender  interest  in Farmer  Mac  credit  products  and the Farmer Mac
          secondary market;
     o    borrower    preferences   for   fixed-rate    agricultural    mortgage
          indebtedness;
     o    competitive  pressures in the purchase of agricultural  mortgage loans
          and the sale of agricultural mortgage-backed and debt securities;
     o    substantial  changes in  interest  rates,  agricultural  land  values,
          commodity prices, export demand for U.S. agricultural products and the
          general economy;
     o    protracted  adverse  weather,  market  or other  conditions  affecting
          particular  geographic  regions or particular  commodities  related to
          agricultural mortgage loans backing Farmer Mac I Guaranteed Securities
          or under LTSPCs;
     o    the willingness of investors to invest in agricultural mortgage-backed
          securities; or
     o    the effects on the  agricultural  economy or the value of agricultural
          real estate of any changes in federal assistance for agriculture.

The  foregoing  factors are not  exhaustive.  Other  sections of this report may
include additional factors that could adversely impact Farmer Mac's business and
its financial  performance.  Furthermore,  new risk factors  emerge from time to
time and it is not possible for management to predict all such risk factors, nor
assess the  effects of such  factors on Farmer  Mac's  business or the extent to
which any factor, or combination of factors,  may cause actual results to differ
materially  from the  expectations  expressed or implied by the  forward-looking
statements.  In light of  these  potential  risks  and  uncertainties,  no undue
reliance should be placed on any  forward-looking  statements  expressed in this
report. Furthermore, Farmer Mac undertakes no obligation to release publicly the
results  of  revisions  to any  forward-looking  statements  that may be made to
reflect any future events or circumstances,  except as otherwise mandated by the
Securities and Exchange Commission.

Critical Accounting Policy and Estimates

     The preparation of the consolidated financial statements in conformity with
accounting  principals  generally accepted in the United States requires the use
of  estimates  and  assumptions   that  affect  the  amounts   reported  in  the
consolidated  financial  statements and related notes for the periods presented.
Actual results could differ from those estimates. The critical accounting policy
that is both important to the portrayal of Farmer Mac's financial  condition and
results  of  operations  and  requires  complex,  subjective  judgments  is  the
accounting  policy for the  allowance  for losses.  Farmer Mac's  allowance  for
losses is presented in four components on its  consolidated  balance sheet:

     o    an "Allowance for loan losses" on loans held for investment;
     o    a valuation  allowance on real estate owned,  which is included in the
          balance sheet under "Real estate owned, net of valuation allowance";
     o    an allowance for losses on loans underlying post-1996 Act Farmer Mac I
          Guaranteed  Securities  and  LTSPCs  entered  into or  modified  after
          January 1, 2003,  which is included in the balance  sheet as a portion
          of the amount reported as "Guarantee and commitment obligation"; and
     o    an allowance for losses on loans underlying post-1996 Act Farmer Mac I
          Guaranteed  Securities  and  LTSPCs  entered  into prior to January 1,
          2003,  which is  included  in the balance  sheet  under  "Reserve  for
          losses."

     The provision for losses is presented in two components on the consolidated
statement of operations:

     o    a "Provision for loan losses," which represents losses on Farmer Mac's
          loans held for investment; and
     o    a "Provision for losses," which represents  losses on loans underlying
          post-1996 Act Farmer Mac I Guaranteed  Securities  and LTSPCs and real
          estate owned.


     The purpose of the allowance for losses is to provide for estimated  losses
that are  probable to have  occurred as of the  balance  sheet date,  and not to
predict or  account  for  future  potential  losses.  The  determination  of the
allowance for losses requires management to make significant  estimates based on
information  available as of the balance  sheet date,  including the amounts and
timing of losses and current market and economic conditions. These estimates are
subject to change in future reporting periods if such conditions and information
change. For example, a continued decline in the national or agricultural economy
could result in an increase in delinquencies or foreclosures,  which may require
additional allowances for losses in future periods.


      Farmer Mac maintains an allowance for losses to cover estimated probable
losses on loans held for investment, real estate owned and loans underlying
post-1996 Act Farmer Mac I Guaranteed Securities and LTSPCs. Farmer Mac
estimates probable losses using a systematic process that begins with
management's evaluation of the results of its proprietary loan pool simulation
and guarantee fee model (the "Model"). The Model draws upon historical
information from a data set of agricultural mortgage loans recorded over a
longer period of time than Farmer Mac's own experience to date, screened to
include only those loans with credit characteristics similar to those on which
Farmer Mac has assumed credit risk. The results generated by the Model are
modified by the application of management's judgment as required to take key
factors into account, including:

     o    economic conditions;
     o    geographic and agricultural  commodity  concentrations in Farmer Mac's
          portfolio;
     o    the credit profile of Farmer Mac's portfolio;
     o    delinquency trends of Farmer Mac's portfolio;
     o    Farmer  Mac's  experience  in the  management  and sale of real estate
          owned; and
     o    historical   charge-off  and  recovery   activities  of  Farmer  Mac's
          portfolio.

     The allowance for losses is increased through periodic  provisions for loan
losses that are charged  against net interest  income and  provisions for losses
charged to operating  expense and reduced by charge-offs for actual losses,  net
of  recoveries.  Charge-offs  represent  losses  on  the  outstanding  principal
balance, any interest payments previously accrued or advanced and expected costs
of liquidation.  The establishment of and periodic  adjustments to the valuation
allowance for real estate owned are charged  against  income as a portion of the
provision for losses charged to operating expense.  Gains and losses on the sale
of real estate owned are recorded in income based on the difference  between the
recorded investment at the time of sale and liquidation proceeds.

     No  allowance  for losses has been made for loans  underlying  Farmer Mac I
Guaranteed  Securities  issued prior to the 1996 Act or Farmer Mac II Guaranteed
Securities.  Farmer Mac I Guaranteed Securities issued prior to the 1996 Act are
supported by unguaranteed first loss subordinated interests,  which are expected
to exceed the estimated credit losses on those loans.  USDA-guaranteed  portions
collateralizing  Farmer Mac II Guaranteed  Securities are obligations  backed by
the full  faith  and  credit  of the  United  States.  To date,  Farmer  Mac has
experienced  no credit  losses  on any  pre-1996  Act  Farmer  Mac I  Guaranteed
Securities or on any Farmer Mac II Guaranteed  Securities and does not expect to
incur any such losses in the future.

     Further  information  regarding  the  allowance  for losses is  included in
"--Risk Management--Credit Risk - Loans."

Results of Operations


     Overview.  Net income  available  to common  stockholders  for 2003 rose to
$25.0 million or $2.08 per diluted  common  share,  compared to $21.3 million or
$1.77 per diluted  common  share in 2002 and $16.3  million or $1.38 per diluted
common share in 2001.

      Farmer Mac's growth continued in 2003, with outstanding guarantee and
LTSPC volume as of December 31, 2003 that was $271.5 million higher than at
December 31, 2002. During 2003, Farmer Mac:

     o    added $763.3 million of Farmer Mac I eligible loans under LTSPCs;
     o    purchased  $192.6  million of newly  originated  Farmer Mac I eligible
          loans; and
     o    purchased $271.2 million of Farmer Mac II USDA-guaranteed  portions of
          loans.

     As of December 31, 2003, the percentage of Farmer Mac I loans  purchased or
placed  under  Farmer Mac I Guaranteed  Securities  or LTSPCs  after  changes to
Farmer  Mac's  statutory  charter in 1996 that were 90 days or more past due, in
foreclosure, restructured after delinquency, in bankruptcy or classified as real
estate owned, decreased to 1.39 percent,  compared to 1.56 percent at the end of
2002.

     As Farmer  Mac's  portfolio of loans held and loans  underlying  LTSPCs and
post-1996 Act Farmer Mac I Guaranteed Securities has had certain cohort years of
loan  originations  enter,  and now start  exiting,  their peak  default  years,
segments of the portfolio are beginning to exhibit  characteristics  of a mature
portfolio,  which includes loans cycling through  foreclosure and into the asset
category real estate owned,  which  completes the involuntary  loan  liquidation
process.  As of December 31, 2003,  Farmer Mac had $15.5  million of real estate
owned, net of valuation  allowance,  compared to $5.0 million as of December 31,
2002 and $2.5 million as of December 31, 2001.  During the  foreclosure  process
Farmer Mac devises a liquidation  strategy,  based upon economics and local law,
that  results in either an immediate  sale of the property or retention  pending
later  sale.  The  increase  in real  estate  owned is the result of  historical
delinquencies  in Farmer  Mac's  portfolio.  With the recent  downward  trend in
delinquencies, management expects real estate owned to trend downward as well in
future years.  Farmer Mac's  portfolio  also has developed a core of loans that,
though the borrowers on those loans have filed for  bankruptcy  protection,  are
current  under  the  original  terms  of  the  loans  or  as  modified  under  a
court-approved bankruptcy plan.

     Non-performing  assets are loans 90 days or more past due, in  foreclosure,
restructured  after  delinquency,  in bankruptcy,  or real estate owned.  90-day
delinquencies  are loans 90 days or more past due, in foreclosure,  restructured
after  delinquency,  or in bankruptcy,  excluding loans  performing under either
their original loan terms or a  court-approved  bankruptcy  plan. The difference
between  the  non-performing  asset and  90-day  delinquencies  measures  is the
exclusion of real estate owned and loans  performing in  bankruptcy  from 90-day
delinquencies.

<TABLE>
<CAPTION>

                                                 As of December 31,
                                             ---------------------------
                                                  2003          2002
                                             -------------  ------------
                                                   (in thousands)
<C>                                            <C>          <C>
90-day delinquencies (including loans in        $30,056      $ 58,214
     foreclosure and loans restructured
     after delinquency)
Loans performing in bankruptcy                   24,192        11,471
Real estate owned                                15,716         5,623
                                             -------------  ------------
     Non-performing assets                      $69,964      $ 75,308
                                             -------------  ------------
</TABLE>

     The table below presents  non-performing assets and 90-day delinquency data
as of the dates indicated:

<TABLE>
<CAPTION>
                        Outstanding
                       Post-1996 Act                                           Less:
                           Loans,               Non-                           REO and
                       Guarantees and        Performing                      Performing          90-day
                           LTSPCs              Assets        Percentage     Bankruptcies     Delinquencies      Percentage
                     ------------------  ----------------- -------------- ---------------- ----------------- ----------------
                                                            (dollars in thousands)
<S>                  <C>                   <C>               <C>            <C>              <C>                <C>
December 31, 2003     $ 5,020,032           $ 69,964          1.39%          $ 39,908         $ 30,056           0.60%
September 30, 2003      4,871,756             84,583          1.74%            37,442           47,141           0.98%
June 30, 2003           4,875,059             80,169          1.64%            28,883           51,286           1.06%
March 31, 2003          4,820,887             94,822          1.97%            18,662           76,160           1.58%
December 31, 2002       4,821,634             75,308          1.56%            17,094           58,214           1.21%
September 30, 2002      4,506,330             91,286          2.03%            11,460           79,826           1.77%
June 30, 2002           4,489,735             65,196          1.45%            14,931           50,265           1.12%
March 31, 2002          3,754,171             87,097          2.32%             7,903           79,194           2.11%
December 31, 2001       3,428,176             58,279          1.70%             3,743           54,536           1.59%
September 30, 2001      3,318,796             71,686          2.16%             5,183           66,503           2.00%
June 30, 2001           3,089,460             53,139          1.72%             4,274           48,865           1.58%
March 31, 2001          2,562,374             67,134          2.62%             2,154           64,980           2.54%
</TABLE>

     Farmer Mac  experienced  $5.2  million in net losses  charged  against  the
allowance for losses in 2003,  compared with $4.1 million in net losses for 2002
and $2.2  million  in 2001.  Through  direct  charges  to  earnings,  Farmer Mac
provided for $7.3 million in total losses during 2003,  compared to $8.2 million
during 2002 and $6.8 million in 2001.  Farmer Mac recorded  gains on the sale of
real estate owned of $0.2 million,  $0.1 million and $0.1 million in 2003,  2002
and 2001,  respectively.  Farmer Mac's total allowance for losses as of December
31, 2003 was $22.1  million,  compared to $20.0  million as of December 31, 2002
and $15.9  million as of  December  31,  2001.  For  further  discussion  of the
increase in the  allowance  for losses and  provision  for  losses,  see "--Risk
Management--Credit Risk - Loans."


     As of December 31, 2003, a significant portion of Farmer Mac's portfolio of
post-1996  Act  Farmer  Mac I loans and loans  underlying  LTSPCs and Farmer Mac
Guaranteed Securities were in their peak default years. Accordingly, during 2004
the dollar  level of 90-day  delinquencies  could  increase  slightly and higher
charge-offs  could follow,  notwithstanding  positive trends in the agricultural
economy.


      Outlook for 2004.  USDA is currently forecasting:
      ----------------

     o    2004 net cash farm income to be $55.9 billion, $7.1 billion lower than
          2003, but only slightly below the 1994-2003 average of $57.0 billion;
     o    Total  direct  government  payments  to be $10.3  billion  in 2004,  a
          decrease  from the 2003 estimate of $17.4  billion.  Market prices for
          crops affect direct government payment rates for government  programs,
          and USDA  anticipates  program crop prices to be higher in 2004,  with
          prices for some crops at levels not seen in years;
     o    Demand for crop exports to be high,  due to tight global  supplies and
          the decline in the value of the  dollar,  which  lowers the  effective
          price of U.S. commodities;
     o    The value of U.S.  farm real estate to increase 3.5 percent in 2004 to
          $1.13 trillion,  up from the 2003 forecast of $1.09 trillion.  USDA is
          anticipating  improvement  in the general  economy to support  further
          growth in  farmland  values,  though at a rate  slower than the annual
          average gain since 1999, which exceeded 4 percent; and
     o    The value of farm real  estate debt to increase by 4.7 percent in 2004
          to $116.5 billion, up from $111.3 billion in 2003.


     The USDA forecast  components  referenced above relate to U.S.  agriculture
generally,  but should be favorable  for Farmer Mac's  business  plans,  as they
indicate strong borrower cash flows, greater global demand for U.S. commodities,
and  generally  increased  value of U.S.  farm  real  estate.  The last  item in
particular  increases  the  mortgageable  farm real estate base,  the ability of
borrowers  to repay  real  estate  debt and Farmer  Mac's  ability to recover in
foreclosures.

     As  management  evaluates  Farmer  Mac's  business  prospects  for 2004 and
beyond,  certain  factors and  conditions  remain  that are likely to  constrain
Farmer Mac's progress.  As a matter of historical practice,  and particularly in
the  current  low  interest  rate  and  steep  yield  curve  environment,   many
institutions  still prefer to retain  agricultural  mortgage  loans in portfolio
rather than sell them into the secondary market,  notwithstanding  the corporate
finance and capital planning  benefits they might realize through  participation
in Farmer Mac's programs,  such as greater liquidity,  greater lending capacity,
increased  return on equity and  decreased  capital  requirements.  Some lending
institutions  subsidize  their  agricultural  mortgage  loan rates out of higher
rates on  non-mortgage  loans,  or by  low-return  use of equity,  both of which
generate uneconomic  competition with Farmer Mac's programs.  The rate of growth
of Farmer Mac's business with many traditional portfolio lenders has been slowed
by reduced growth rates in the agricultural  mortgage  market.  (See "--Business
Volume" for a description of factors  affecting growth rates in the agricultural
mortgage  market.) With  particular  regard to Farm Credit System  institutions,
some business  prospects have been constrained by increased  insurance  premiums
assessed on loans held by those  institutions,  including loans under LTSPCs, by
the Farm Credit System  Insurance  Corporation  ("FCSIC"),  an independent  U.S.
Government  controlled  corporation managed by a three-member board of directors
composed  of the members of the Farm  Credit  Administration  (FCA) Board with a
different member serving as chairman. In addition,  FCSIC has recently indicated
to those  institutions  that  they  should be  cautious  about the risk of doing
business  with  government-sponsored  enterprises,   including  Farmer  Mac,  as
counterparties.   Moreover,   FCSIC  has  raised   objections   to  Farm  Credit
institutions'  use of Farmer Mac swaps,  which generate  Farmer Mac I Guaranteed
Securities that are not subject to the previously mentioned insurance premiums.

     Notwithstanding  slower  growth in 2003 than in 2002,  Farmer Mac  launched
marketing  initiatives  in the  fourth  quarter  of  2003  that  are  generating
promising business  opportunities for 2004 and beyond. New and expanded business
relationships  (including a strategic  alliance with a related party Farm Credit
System institution that will serve community banks), product enhancements,  such
as new open prepayment loan structures,  and new loan securitization structures,
are all underway.  While the  continued  growth in Farmer Mac's  guarantees  and
LTSPCs  evidences  significant  progress in developing the secondary  market for
agricultural  mortgages,   Farmer  Mac  continues  to  face  the  challenges  of
establishing a new market where none  previously  existed.  Acceptance of Farmer
Mac's  programs  among lenders is based upon the  competitive  rates,  terms and
products  offered,  and the advantages Farmer Mac believes its programs provide.
As of December  31,  2003,  Farmer  Mac's  outstanding  program  volume was $5.8
billion,  which  represented  13 percent  of  management's  estimate  of a $44.5
billion  market of  eligible  agricultural  mortgage  loans.  For  Farmer Mac to
succeed in realizing its business  development and profitability  goals over the
longer  term,  the use of Farmer Mac's  programs  and  products by  agricultural
mortgage  lenders,  whether  traditional  or  non-traditional,  must continue to
expand.  Farmer Mac believes that  prospects for larger  portfolio  transactions
similar  to those that have  accounted  for a  significant  portion of growth in
prior years continue to exist,  but no assurance can be given at this time as to
the certainty or timing of such transactions.


     During 2003 and continuing in 2004, Farmer Mac began several initiatives to
validate  and enhance its risk  management  practices,  internal  controls,  and
accounting and financial reporting.  These initiatives are the result of ongoing
corporate  diligence  and a number of regulatory  considerations,  including the
Sarbanes-Oxley  Act of  2002  and  FCA  requirements,  as  well  as the  general
regulatory environment for government-sponsored enterprises.


     A detailed  presentation  of Farmer Mac's  financial  results for the years
ended December 31, 2003, 2002 and 2001 follows.


     Net Interest Income.  Net interest income was $37.3 million for 2003, $39.1
million for 2002 and $29.3 million for 2001. The net interest yield,  which does
not  include  guarantee  fees for  loans  purchased  prior to April 1, 2001 (the
effective  date  of  Statement  of  Financial   Accounting  Standards  No.  140,
Accounting for Transfers and Servicing of Financial  Assets and  Extinguishments
of Liabilities  ("SFAS  140")),  was 93 basis points for the year ended December
31, 2003,  compared to 104 basis points for the year ended December 31, 2002 and
91 basis points for the year ended December 31, 2001. The effect of the adoption
of SFAS 140 was a  reclassification  of  approximately  $4.4  million  (11 basis
points) of guarantee fee income as interest  income for the year ended  December
31, 2003,  compared to $2.7 million (7 basis points) for the year ended December
31, 2002 and $0.4  million  (one basis  point) for the year ended  December  31,
2001.

     During third quarter 2003, the Chief Accountant at the U.S.  Securities and
Exchange Commission  provided  additional guidance to all registrants  regarding
the  classification  on the statement of operations of realized gains and losses
resulting  from  financial  derivatives  that are not in fair value or cash flow
hedge relationships. All registrants were requested to comply with this guidance
in  future  filings  and to  reclassify  this  activity  for all  prior  periods
presented.  As a result of the application of this additional guidance,  the net
interest income and expense  realized on financial  derivatives  that are not in
fair  value or cash flow hedge  relationships  have been  reclassified  from net
interest  income  into gains and losses on  financial  derivatives  and  trading
assets.  For the years ended December 31, 2003 and 2002,  this  reclassification
resulted  in a  decrease  of the net  interest  yield of one  basis  point and a
decrease of 11 basis points, respectively.

     The net interest  yields for the years ended  December  31, 2003,  2002 and
2001 included the benefits of yield  maintenance  payments  received of 12 basis
points,  8 basis  points and 3 basis  points,  respectively.  Yield  maintenance
payments  represent the present value of expected future interest income streams
and  accelerate  the  recognition  of interest  income  from the related  loans.
Because the timing and size of these  payments vary greatly,  variations  should
not be  considered  indicative  of positive or negative  trends to gauge  future
financial  results.  For the years ended  December 31, 2003,  2002 and 2001, the
after-tax  effects of yield  maintenance  payments  on net  income  and  diluted
earnings per share were $3.0 million or $0.25 per diluted share, $2.1 million or
$0.17  per  diluted  share  and  $0.7  million  or  $0.06  per  diluted   share,
respectively.

     The $1.8 million  decrease in net interest income from 2002 to 2003 was due
principally  to  lower  average  spreads  on  cash  and  cash   equivalents  and
investments.


     The following table provides information regarding  interest-earning assets
and funding for the years ended December 31, 2003, 2002 and 2001. The balance of
non-accruing  loans is included in the average balance of interest earning loans
presented, though no related income is included in the income figures presented.
Therefore, as the balance of non-accruing loans increases or decreases,  the net
interest yield will increase or decrease,  accordingly.  Net interest income and
the yield will also  fluctuate due to the  uncertainty of the timing and size of
yield maintenance payments.

<TABLE>
<CAPTION>
                                          2003                               2002                                   2001
                          ----------------------------------   ----------------------------------  --------------------------------
                             Average     Income/    Average      Average     Income/     Average     Average     Income/   Average
                             Balance     Expense     Rate        Balance     Expense      Rate       Balance     Expense     Rate
                          ------------- ---------- ---------   ----------- ----------- ----------  ------------ ---------- --------
                                                                     (dollars in thousands)
<S>                     <C>            <C>          <C>         <C>         <C>         <C>        <C>           <C>         <C>
Interest-earning assets:
  Cash and cash
   equivalents             $ 677,075    $ 8,171      1.21%       $ 564,614   $ 10,237    1.81%        $ 522,227   $21,464     4.11%
  Investments                932,738     27,115      2.91%         902,740     32,392    3.59%          922,856    45,070     4.88%
  Loans and Farmer Mac
   Guaranteed Securities   2,415,466    126,273      5.24%       2,291,887    129,241    5.64%        1,778,601   115,879     6.52%
                          ------------- ---------- ---------   ----------- ---------- ----------   ------------ ----------- -------
   Total interest-earning
    assets               $ 4,025,279    161,559      4.02%     $ 3,759,241    171,870    4.57%      $ 3,223,684   182,413     5.66%
                          -------------                        -------------                        -------------

Funding:
  Notes payable due
    within one year      $ 2,702,188     60,756      2.26%     $ 2,533,762     67,896    2.68%      $ 2,175,087    94,274     4.33%
  Notes payable due
    after one year         1,200,219     63,551      5.29%       1,102,485     64,875    5.88%          926,878    58,873     6.35%
                          ------------- ---------- ---------   ------------  ---------- ----------  ------------ ----------- ------
   Total interest-bearing
    liabilities            3,902,407    124,307      3.19%       3,636,247    132,771    3.65%        3,101,965   153,147     4.94%
  Net non-interest-bearing
   funding                   122,872          -      0.00%         122,994          -    0.00%          121,719         -     0.00%
                         ------------- ---------- ---------   ------------- ---------- ----------  ------------ ----------- -------
   Total funding         $ 4,025,279    124,307      3.10%     $ 3,759,241    132,771    3.53%      $ 3,223,684   153,147     4.94%
                         ------------- ---------- ---------   ------------- ---------- ----------  ------------ ----------- -------
Net interest income/
  yield                                $ 37,252      0.93%                   $ 39,099    1.04%                   $29,266     0.91%
                                      ----------- ----------                ---------- -----------              ------------ ------
</TABLE>

     For 2003,  the  decreases in all of the rates  presented  above tracked the
general  decline in interest rates relative to the prior year. The average rates
for cash and cash  equivalents  and  discount  notes  reflect  that  decline  in
short-term  interest rates during 2003,  while the average rates for investments
and loans and Farmer Mac Guaranteed  Securities  reflect the decline in interest
rates for investments of similar term to the rate reset or maturity date.

     The  following  table sets forth  information  regarding the changes in the
components of Farmer Mac's net interest  income for the periods  indicated.  For
each  category,  information is provided on changes  attributable  to changes in
volume (change in volume  multiplied by old rate) and changes in rate (change in
rate  multiplied  by old  volume).  Combined  rate/volume  variances,  the third
element of the  calculation,  are allocated  based on their  relative  size. The
decreases due to rate reflect the  short-term or  adjustable-rate  nature of the
assets or liabilities and the general decreases in market rates described above.

<TABLE>
<CAPTION>
                                                        2003 vs. 2002                        2002 vs. 2001
                                            ------------------------------------- ------------------------------------
                                                 Increase (Decrease) Due to           Increase (Decrease) Due to
                                            ------------------------------------- ------------------------------------
                                               Rate        Volume       Total        Rate       Volume       Total
                                            ------------ ----------- ------------ ------------ ----------  -----------
                                                                        (in thousands)
<S>                                         <C>            <C>       <C>         <C>          <C>        <C>
Income from interest-earning assets:
   Cash and cash equivalents                 $ (2,572)      $ 506     $ (2,066)   $ (13,134)   $ 1,907    $ (11,227)
   Investments                                 (6,323)      1,046       (5,277)     (11,716)      (962)     (12,678)
   Loans and Farmer Mac Guaranteed Securities  (9,719)      6,751       (2,968)     (11,659)    25,021       13,362
                                            ------------ ----------- ------------ ------------ ----------  -----------
    Total                                     (18,614)      8,303      (10,311)     (36,509)    25,966      (10,543)

Expense from interest-bearing liabilities     (17,593)      9,129       (8,464)     (50,247)    29,871      (20,376)
                                            ------------ ----------- ------------ ------------ ----------  -----------
Change in net interest income                $ (1,021)     $ (826)    $ (1,847)     $13,738   $ (3,905)     $ 9,833
                                            ------------ ----------- ------------ ------------ ----------  -----------
</TABLE>


     Guarantee and Commitment Fees.  Guarantee and commitment fee income,  which
compensate  Farmer Mac for assuming the credit risk on loans  underlying  Farmer
Mac Guaranteed  Securities and LTSPCs,  was $20.7 million for 2003,  compared to
$19.3 million for 2002 and $15.8 million for 2001. The increase in guarantee and
commitment fee income reflects an increase in the average balance of outstanding
guarantees  and  LTSPCs.  For 2003,  the  effect of SFAS 140  reclassified  $4.4
million  of  guarantee  fee  income  as  interest  income,  although  management
considers that amount to have been earned in consideration for the assumption of
credit risk.  That  portion of the  difference  or "spread"  between the cost of
Farmer Mac's debt funding for loans and the yield on post-1996  Act Farmer Mac I
Guaranteed Securities held on its books compensates for credit and interest rate
risk.  If a post-1996  Act Farmer Mac I  Guaranteed  Security is sold to a third
party,  Farmer Mac  continues  to receive the  guarantee  fee  component of that
spread,  which  continues to compensate  Farmer Mac for its assumption of credit
risk.  The portion of the spread that  compensates  for interest rate risk would
not  typically  continue  to be  received  by Farmer  Mac,  except to the extent
attributable to any retained interest-only strip, if the asset were sold.

     Gains and Losses on Financial Derivatives and Trading Assets.  Statement of
Financial  Accounting  Standards No. 133, Accounting for Derivative  Instruments
and Hedging  Activities  ("SFAS 133")  requires the change in the fair values of
financial  derivatives  to be reflected in a company's net income or accumulated
other comprehensive income. SFAS 133 became effective as of January 1, 2001. The
cumulative effect of the change in accounting  principles recognized during 2001
was a  charge  of $0.7  million,  net of  taxes.  The net  effect  of  financial
derivatives  that do not qualify for hedge accounting under SFAS 133 and trading
assets recorded in Farmer Mac's consolidated  statements of operations was a net
gain of $2.4  million  for 2003,  a net loss of $8.4  million for 2002 and a net
loss of $3.1 million for 2001. On a net after-tax basis, those gains and losses,
combined with the cumulative  effect of the change in accounting  principles and
benefits  received from the  elimination of the  amortization of certain premium
payments that resulted from SFAS 133,  increased net income  available to common
stockholders by $2.0 million for 2003 and reduced net income available to common
stockholders by $1.6 million for 2002.

     Gains on the Sale of Real Estate Owned.  Farmer Mac has reclassified  items
on its  consolidated  statements of operations to present more clearly the costs
related to carrying its real estate owned and the gains or losses  incurred upon
it's the ultimate disposition of real estate owned. Previously, gains and losses
on the sale of real estate owned were  reflected as adjustments to the allowance
for  losses  as  either a  charge-off  or  recovery.  Those  amounts  have  been
reclassified and are reported  separately as gains or losses on the sale of real
estate  owned.  Prior period  amounts have been  reclassified  to conform to the
current period classification.  Gains on the sale of real estate owned were $0.2
million,  $0.1  million and $0.1  million  for each of the years ended  December
2003, 2002 and 2001, respectively.

     Miscellaneous  Income.  Miscellaneous  income  was $0.8  million  for 2003,
compared to $1.3 million for 2002 and $0.6  million for 2001.  Both the decrease
in  miscellaneous  income from 2002 to 2003 and the  increase  from 2001 to 2002
were  primarily a result of the receipt of the high level of late fee income and
processing fees on Farmer Mac II refinance transactions received during 2002.

     Expenses.  During 2003 and into 2004, Farmer Mac began several  initiatives
to validate and enhance its risk management  practices,  internal controls,  and
accounting and financial reporting.  These initiatives are the result of ongoing
corporate  diligence  and  a  number  of  regulatory  considerations,  including
compliance with the Sarbanes-Oxley Act of 2002 and FCA requirements,  as well as
the general regulatory  environment for  government-sponsored  enterprises.  The
general  increases in both  compensation  and employee  benefits and general and
administrative   expenses   from  2001  to  2003  reflect  the  costs  of  those
initiatives.  Compensation and employee benefits were $6.1 million, $5.1 million
and  $5.6  million  for  2003,   2002  and  2001,   respectively.   General  and
administrative  expenses  were $6.0  million,  $5.5 million and $4.1 million for
2003,   2002  and  2001,   respectively.   For  2002,   increased   general  and
administrative  expenses  reflected  higher legal and consulting fees associated
with external events and publicity;  these expenses dissipated somewhat in 2003.
During 2003, the reduction in legal and consulting  fees was more than offset by
higher costs of regulatory  compliance and the costs of servicing  loans nearing
or in  foreclosure or bankruptcy.  Prospectively,  the loan servicing  costs are
expected  to  fluctuate  with the level of these  categories  of  non-performing
assets, while the regulatory costs are expected to be ongoing.

     Regulatory fees were $2.0 million,  $1.2 million and $0.7 million for 2003,
2002 and 2001,  respectively.  FCA has  advised  Farmer  Mac that its  estimated
assessment for 2004 is $1.7 million. The regulatory assessments from the FCA for
each of the examination  periods  corresponding  approximately  with each of the
years ended  December  31, 2003,  2002 and 2001  include  both their  originally
estimated assessments and revisions to those estimates that reflect actual costs
incurred.  These  revisions  have resulted in both  additional  assessments  and
refunds in the past.

     Real estate  owned  operating  expenses  were $0.7  million  and  operating
revenues were $0.4 million for 2003. Net real estate owned  operating costs were
$0.3  million for 2003.  These net costs  increased  from prior  years'  nominal
amounts as the number of properties owned increased.

     Farmer  Mac's  provision  for  losses  on  loans  underlying  Farmer  Mac I
Guaranteed  Securities  and  LTSPCs,  which  is  classified  as a  component  of
operating  expenses,  was $0.8 million for 2003,  $6.9 million for 2002 and $6.2
million in 2001. Farmer Mac also provides for losses on the loans on its balance
sheet through  provisions  that are charged  against net interest  income on the
statement of  operations  and  presented  as a reduction  to the  reported  loan
balances on Farmer Mac's  balance  sheet.  The total amount  provided for Farmer
Mac's  allowance  for losses  for 2003,  2002 and 2001 were $7.3  million,  $8.2
million and $6.8 million,  respectively.  The amount  provided for the allowance
for losses in 2003 decreased $0.9 million from the amount  provided in 2002 as a
result of lower estimated  probable losses during 2003. As of December 31, 2003,
Farmer Mac's allowance for losses for loans  underlying  Farmer Mac I Guaranteed
Securities  and  LTSPCs  was $15.9  million,  compared  to $16.8  million  as of
December 31, 2002. For further  discussion  and  presentation  regarding  Farmer
Mac's  provisions for losses and  allowances  for losses in the  aggregate,  see
"--Risk Management--Credit Risk - Loans"

     Income Tax  Expense.  Income tax  expense  totaled  $12.3  million in 2003,
compared  to $9.8  million  in 2002  and $8.4  million  in  2001.  Farmer  Mac's
effective tax rates for 2003 and 2002 were  approximately  31.1 percent and 30.1
percent,   respectively,   reflecting  the  effects  of  certain  tax-advantaged
investments, compared to 33.1 percent for 2001. Farmer Mac expects its effective
tax rate in 2004 to approximate 30 percent.  For more  information  about income
taxes, see Note 10 to the consolidated financial statements.

     Gains and Losses on the Repurchase of Debt. During 2003, Farmer Mac did not
repurchase any of its outstanding  debt. During 2002, Farmer Mac recognized $1.4
million of net gains on the  repurchase  of $103.7  million  of its  outstanding
debt. All of the repurchases  were from  outstanding  Farmer Mac debt that had a
maturity  date of October 14, 2011 and an interest  rate of 5.4  percent.  Those
debt securities  were replaced with new fixed-rate  funding to the same maturity
dates  at  more  attractive   interest  rates,   which  preserves  Farmer  Mac's
asset-liability match and reduced future interest expense.


     Non-GAAP Performance Measures.  Farmer Mac reports its financial results in
accordance with GAAP. In addition to GAAP measures,  Farmer Mac presents certain
non-GAAP  performance  measures.  Farmer  Mac uses  these  non-GAAP  performance
measures to develop  financial plans, to gauge corporate  performance and to set
incentive  compensation.  As described below,  because the Financial  Accounting
Standards  Board ("FASB") has adopted a mixed  attribute  accounting  model that
does not reflect the economics for transactions  involving Farmer Mac's callable
swaps,  in  management's  view the  non-GAAP  measures  provide a more  accurate
representation of Farmer Mac's economic  performance,  transaction economics and
business trends.  Investors and the investment analyst community have previously
relied upon  similar  measures to evaluate  performance  and issue  projections.
These non-GAAP  disclosures  are not intended to replace GAAP  information  but,
rather, to supplement it.


     One such non-GAAP  measure is core earnings,  which Farmer Mac developed to
present net income less the after-tax effects of SFAS 133 and less the after-tax
net gains and losses on the  repurchase of debt that,  prior to January 1, 2003,
were reported as extraordinary items. Core earnings for the years ended December
31, 2003,  2002 and 2001 were $23.0  million,  $22.9 million and $17.1  million,
respectively.  The  reconciliation  of  GAAP  net  income  available  to  common
stockholders to core earnings is presented in the following table:

<TABLE>
<CAPTION>

                       Reconciliation of GAAP Net Income Available
                         to Common Stockholders to Core Earnings
---------------------------------------------------------------------------------------------

                                                            Year Ended
                                        -----------------------------------------------------
                                          December 31,      December 31,       December 31,
                                             2003              2002               2001
                                        ---------------- ------------------ -----------------
                                                          (in thousands)

<S>                                        <C>               <C>             <C>
GAAP net income available
    to common stockholders                 $ 25,030           $ 21,295        $ 16,280

Less the effects of SFAS 133:
    Unrealized gains/(losses)
      on financial derivatives and
      trading assets, net of tax              1,720             (2,834)           (469)
    Benefit from non-amortization
      of premium payments
      on financial derivatives,
      net of tax                                317                382             404
    Cumulative effect of the adoption
      of SFAS 133                                 -                  -            (726)

Less gains on the repurchase of
    debt previously reported as
    extraordinary items                           -                889               -

                                        ---------------- ------------------ -----------------
Core earnings                              $ 22,993           $ 22,858        $ 17,071
                                        ---------------- ------------------ -----------------
</TABLE>

     Effects of SFAS 133 on Accounting for Callable Interest Rate Swaps.  Farmer
Mac enters into financial  derivative  transactions to protect against risk from
the effects of market price or interest  rate  movements on the value of assets,
future cash flows and debt issuance,  not for trading or  speculative  purposes.
Farmer  Mac  enters   into   interest   rate  swap   contracts   to  adjust  the
characteristics  of its short-term  debt to match more closely the cash flow and
duration  characteristics of its longer-term mortgage and other assets, and also
to adjust the  characteristics  of its long-term  debt to match more closely the
cash  flow  and  duration  characteristics  of its  short-term  assets,  thereby
reducing  interest  rate  risk and also to  derive an  overall  lower  effective
fixed-rate  cost of borrowing than would otherwise be available to Farmer Mac in
the  conventional  debt  market.  Specifically,   interest  rate  swaps  convert
economically  the  variable  cash flows  related to the  forecasted  issuance of
short-term debt to effectively  fixed-rate  medium-term and long-term notes that
match the anticipated  duration,  repricing and interest rate characteristics of
the corresponding  assets. Since this strategy provides Farmer Mac with the same
cash flows as those that are  inherent  in the  issuance of  medium-term  notes,
Farmer  Mac uses  either  the bond  market or the swap  market  based upon their
relative pricing efficiencies.

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

     The callable interest rate swaps are recorded at fair value on Farmer Mac's
balance  sheet  with  the  related  changes  in  fair  value  recognized  in the
consolidated  statement of  operations.  Although  Farmer Mac believes that this
strategy  achieves  its economic and risk  management  objectives,  the FASB has
adopted a mixed  attribute  accounting  model for  callable  swaps that does not
reflect the  economics of the  transactions.  Pursuant to that model,  while the
issuance of a callable  medium-term  note is recorded at  historical  cost,  the
economic  equivalent  (the  issuance  of short  term-debt  with  the  forecasted
rollover of that debt and the simultaneous  issuance of a callable interest rate
swap) is recorded  differently  (the  discount  notes are recorded at historical
cost and the interest rate swap is recorded at fair value).  Despite the closely
matched economics and optionality of the assets and the associated interest rate
swap and  funding  combination,  the  callable  swaps do not  qualify  for hedge
accounting  under SFAS 133 because the test for hedge  effectiveness  under SFAS
133 is based on the linkage  between the forecasted  short-term  funding and the
callable  interest rate swap and ignores the prepayable  characteristics  of the
associated assets being funded.

      Business Volume. Loans are brought into the Farmer Mac I and Farmer Mac II
programs as follows:

     o    Farmer Mac purchases  eligible loans and guarantees timely payments of
          principal and interest of securities  backed by those loans as part of
          the Farmer Mac I program.  Farmer Mac may retain  some or all of those
          securities  in its  portfolio or sell them to third parties in capital
          markets transactions.
     o    Farmer Mac purchases  USDA-guaranteed portions of loans and guarantees
          timely  payments of  principal  and interest of  securities  backed by
          those guaranteed portions as part of the Farmer Mac II program. Farmer
          Mac may retain some or all of those  securities  in its  portfolio  or
          sell them to third parties in capital markets transactions.
     o    Farmer Mac also enters into LTSPCs for  eligible  loans.  Farmer Mac's
          commitments through LTSPCs include either newly originated or seasoned
          eligible loans, and are part of the Farmer Mac I program.
     o    Farmer Mac exchanges  Farmer Mac  Guaranteed  Securities  for eligible
          loans or  USDA-guaranteed  portions of loans  ("swaps").  Farmer Mac's
          swaps of Farmer Mac Guaranteed Securities for USDA-guaranteed portions
          of loans are part of the Farmer Mac II program;  Farmer Mac's swaps of
          Farmer Mac Guaranteed Securities for any other eligible loans are part
          of the Farmer Mac I program.

     During  2003,  the volume of loans  purchased  or placed  under  Farmer Mac
Guaranteed  Securities  and LTSPCs  totaled $1.2  billion,  a decrease from 2002
volume of $2.1 billion.  That decrease was largely  attributable to the purchase
of a $489.5  million  loan  portfolio  in second  quarter 2002 and a decrease in
LTSPC  volume of $392.1  million in 2003,  partially  offset by an  increase  in
Farmer  Mac II  volume  of $98.2  million  in 2003.  See  "Business--Farmer  Mac
Programs--Farmer  Mac I--Off-Balance  Sheet Guarantees and Commitments" and Note
12 to the  consolidated  financial  statements for a description of LTSPCs.  The
following table sets forth  information  regarding the volume of loans purchased
or placed  under  Farmer Mac  Guaranteed  Securities  or LTSPCs for the  periods
indicated:

<TABLE>
<CAPTION>

           Farmer Mac Loan Purchases, Guarantees and LTSPCs
----------------------------------------------------------------------------------
                                           For the Year Ended December 31,
                                    ----------------------------------------------
                                          2003           2002            2001
                                    --------------- --------------  --------------
                                                    (in thousands)
<S>                                  <C>            <C>             <C>
Farmer Mac I:
   Loans and Guaranteed Securities      $ 192,577      $ 747,881       $ 272,127
   LTSPCs                                 763,342      1,155,479       1,032,967
Farmer Mac II                             271,229        173,011         198,171
                                    --------------- --------------  --------------
   Total                              $ 1,227,148    $ 2,076,371     $ 1,503,265
                                    --------------- --------------  --------------
</TABLE>

     The purchase  price of newly  originated  and seasoned  eligible  loans and
portfolios  purchased  through the cash window,  none of which are delinquent at
the time of purchase,  is the fair value based on current market  interest rates
and Farmer Mac's target net yield, which includes an amount to compensate Farmer
Mac for credit  risk that is  similar  to the  guarantee  or  commitment  fee it
receives for accepting credit risk on loans underlying  post-1996 Act Farmer Mac
I Guaranteed  Securities and LTSPCs. The purchase price for loans purchased from
all related  parties is determined in the same manner as for loans acquired from
any other third party. See Note 3 to the consolidated financial statements for a
description of related party transactions.

     As part of fulfilling its guarantee obligations for Farmer Mac I Guaranteed
Securities and commitments to purchase eligible loans underlying LTSPCs,  Farmer
Mac purchases  defaulted  loans, all of which are at least 90 days delinquent at
the time of purchase,  out of those securities and pools. The purchase price for
defaulted  loans  purchased  out of Farmer Mac I  Guaranteed  Securities  is the
current  outstanding  principal  balance  of the loan plus  accrued  and  unpaid
interest. The purchase price for defaulted loans purchased under an LTSPC is the
current  outstanding  principal  balance of the loan,  with  accrued  and unpaid
interest on the  defaulted  loans  payable  out of any future  loan  payments or
liquidation proceeds as received.  The purchase price of a defaulted loan is not
an  indicator  of the  expected  loss on that loan;  many other  factors  affect
expected  loss,  if any, on loans so purchased.  See "--Risk  Management--Credit
Risk - Loans."

     The following table presents Farmer Mac's purchases of newly originated and
current seasoned loans and purchases of defaulted loans underlying  Farmer Mac I
Guaranteed Securities and LTSPCs.

<TABLE>
<CAPTION>
                                                      For the Year Ended
                                                         December 31,
                                                ------------------------------
                                                    2003            2002
                                                --------------  --------------
                                                        (in thousands)
<S>                                              <C>             <C>
Farmer Mac I newly originated
    and current seasoned loan purchases           $ 192,577       $ 747,881

Defaulted loans purchased underlying
    off-balance sheet Farmer Mac I
    Guaranteed Securities                            16,276          17,386
Defaulted loans purchased
    underlying LTSPCs                                 4,266           3,386
Defaulted loans underlying
    on-balance sheet Farmer Mac I
    Guaranteed Securities transferred
    to loans                                         35,100          25,675
</TABLE>

     The decrease in newly  originated  and current  seasoned loan purchases was
attributable  to a decrease in program  volume that resulted  primarily from the
purchase of a $489.5 million loan portfolio in second quarter 2002, that was not
replicated  in  2003.  The  purchases  of  defaulted  loans  from  Farmer  Mac I
Guaranteed  Securities  and LTSPCs are pursuant to Farmer Mac's  obligations  as
guarantor and under its contractual commitments,  respectively.  With respect to
the transfer of loans from on-balance  sheet Farmer Mac I Guaranteed  Securities
to loans, when particular criteria are met, such as the default of the borrower,
Farmer Mac becomes  entitled to purchase the defaulted loans  underlying  Farmer
Mac I  Guaranteed  Securities  (commonly  referred  to  as  "removal-of-account"
provisions).  Farmer  Mac  records  these  loans in the  consolidated  financial
statements  during the period in which Farmer Mac becomes entitled to repurchase
the loans and therefore regains effective control over the transferred loans.

     The  weighted-average  age of the Farmer Mac I newly originated and current
seasoned  loans  purchased  during  2003 and  2002 was less  than one year and 3
years, respectively.  Of the combined total of Farmer Mac I newly originated and
seasoned  loans that were  purchased  (excluding  purchases of defaulted  loans)
during 2003 and 2002,  74 percent and 76 percent,  respectively,  had  principal
amortization  periods  longer  than the  maturity  date,  resulting  in  balloon
payments at maturity, with a weighted-average remaining term to maturity of 15.2
years and 11.1 years, respectively. The weighted-average age of delinquent loans
purchased out of securitized pools and LTSPCs during 2003 and 2002 was 4.7 years
and 4.3 years, respectively.

     The outstanding principal balance of loans held and loans underlying LTSPCs
and on- and off-balance  sheet Farmer Mac Guaranteed  Securities  increased five
percent to $5.8 billion as of December 31, 2003 from $5.5 billion as of December
31, 2002. The following table sets forth information regarding those outstanding
balances as of the dates indicated:

<TABLE>
<CAPTION>

         Outstanding Balance of Farmer Mac Loans and Loans Underlying
              Farmer Mac Guaranteed Securities and LTSPCs
-------------------------------------------------------------------------------------------

                                                          As of December 31,
                                         --------------------------------------------------
                                              2003              2002             2001
                                         ---------------   ---------------  ---------------
                                                            (in thousands)
<S>                                       <C>               <C>              <C>
Farmer Mac I:
     Post-1996 Act:
        Loans and Guaranteed Securities    $2,696,530        $2,168,994       $1,658,716
        LTSPCs                              2,348,702         2,681,240        1,884,260
     Pre-1996 Act                              24,734            31,960           48,979
Farmer Mac II                                 729,470           645,790          595,156
                                         ---------------   ---------------  ---------------
Total                                      $5,799,436        $5,527,984       $4,187,111
                                         ---------------   ---------------  ---------------
</TABLE>

     The  following  table sets  forth  information  regarding  the Farmer Mac I
Guaranteed Securities issued during the periods indicated:

<TABLE>
<CAPTION>

                    Farmer Mac I Guaranteed Securities Issuances
--------------------------------------------------------------------------------------------------------
                                                                 For the Year Ended December 31,
                                                          ----------------------------------------------
                                                               2003            2002            2001
                                                          --------------- --------------  --------------
                                                                          (in thousands)

<S>                                                         <C>             <C>            <C>
Retained                                                           $ -            $ -        $ 33,932
Sold                                                            78,254         47,682          77,422
Swap transactions                                              722,315              -           5,574
                                                          --------------- --------------  --------------
   Total Farmer Mac Guaranteed Securities Issuances          $ 800,569       $ 47,682       $ 116,928
                                                          --------------- --------------  --------------

</TABLE>

     Based  on  market  conditions,  Farmer  Mac  either  retains  the  loans it
purchases or  securitizes  them and issues  Farmer Mac I  Guaranteed  Securities
backed by those loans.  During 2003 and 2002,  Farmer Mac  securitized  and sold
$78.3 million and $47.7 million,  respectively ($75.9 million and $47.7 million,
respectively,  of such  securities  were sold to a related  party,  Zions  First
National Bank) of the loans purchased,  and issued $722.3 million in the form of
a swap transaction with a related party participant, Farm Credit West, ACA. This
transaction  resulted from the  participant's  exercise of a conversion  feature
incorporated  in all  existing  LTSPCs.  Farmer  Mac's  decision  to retain  the
remainder of the loans it purchased  was based on favorable  underlying  funding
costs that  resulted in  attractive  net  interest  income over the lives of the
loans and Farmer Mac Guaranteed Securities it holds.

     LTSPCs typically involve seasoned loans,  while cash purchase  transactions
usually  represent  acquisitions of newly originated  loans. The decreased LTSPC
activity  in 2003 was a  result  of  reduced  growth  rates in the  agricultural
mortgage  market,  which  have  tended to be a  function  of the  interest  rate
environment and other factors  described two paragraphs  below.  With particular
regard to Farm Credit System  institutions,  some business  prospects  have been
constrained  by increased  FCSIC  insurance  premiums  assessed on loans held by
those  institutions,  including  loans  under  LTSPCs.  In  addition,  FCSIC has
recently  indicated to those institutions that they should be cautious about the
risk of doing business with government-sponsored  enterprises,  including Farmer
Mac, as  counterparties.  Moreover,  FCSIC has raised  objections to Farm Credit
institutions'  use of Farmer Mac swaps,  which generate  Farmer Mac I Guaranteed
Securities that are not subject to the previously mentioned insurance premiums.

     Notwithstanding  this,  management  expects  that LTSPCs  will  continue to
constitute a  significant  portion of new Farmer Mac I program  activity  during
2004.


     Indicators of future loan purchase and  guarantee  volume  through the cash
window  (but  not  future  LTSPC,  swap or  portfolio  purchase  volume)  in the
immediately  succeeding  reporting  period  include  outstanding  commitments to
purchase  loans  (other  than  under  LTSPCs)  and the  total  balance  of loans
submitted  for  approval  or  approved  but not  yet  purchased.  Many  purchase
commitments entered into by Farmer Mac are mandatory delivery commitments.  If a
seller  obtains  a  mandatory  commitment  and is unable  to  deliver  the loans
required,  Farmer Mac  requires  the  seller to pay a fee to  modify,  extend or
cancel the  commitment.  As of December 31,  2003,  outstanding  commitments  to
purchase Farmer Mac I and Farmer Mac II loans totaled $11.2 million, compared to
$26.2  million  as of  December  31,  2002.  Of the  total  Farmer  Mac I and II
commitments  outstanding  as of December  31, 2003 and 2002,  $11.2  million and
$21.7 million,  respectively,  were mandatory  commitments.  Loans submitted for
approval or approved but not yet committed to purchase  totaled $26.6 million as
of December 31, 2003, compared to $53.4 million as of December 31, 2002. Not all
of such loans are purchased,  as some are denied for credit reasons or withdrawn
by the seller.


     New  business  volume was down  during 2003  compared  to 2002.  Farmer Mac
believes this trend is traceable to:

     o    general  conditions  in the  agricultural  mortgage  market  affecting
          agricultural mortgage lenders,  including payments received by farmers
          under the 2002 Farm Bill and lower  short-term  interest  rates,  that
          have resulted in reduced  borrower  inclination  to finance their real
          estate assets, particularly at long-term fixed rates;
     o    diminished  expansion in the capital intensive livestock and permanent
          crop sectors that have, in the past, been  significant  sources of new
          business for Farmer Mac;
     o    adverse   publicity  about  and  increased   regulatory   pressure  on
          government-sponsored enterprises, including Farmer Mac; and
     o    increased FCSIC insurance premiums on loans held by Farm Credit System
          institutions and FCSIC' indications  regarding  counterparty risk, as
          discussed above.

Nonetheless,  lender interest in Farmer Mac produced a consistent  stream of new
volume  in the  form  of  Farmer  Mac I and II  individual  loan  purchases  and
additions to existing LTSPC  arrangements  during 2003. In the fourth quarter of
2003, Farmer Mac launched  marketing  initiatives that are generating  promising
business   opportunities  for  2004  and  beyond.   New  and  expanded  business
relationships  (including a strategic  alliance with a related party Farm Credit
System institution that will serve community banks), product enhancements,  such
as new open prepayment loan structures,  and new loan securitization structures,
are all  underway.  Farmer Mac  believes  that  prospects  for larger  portfolio
transactions  similar to those that have accounted for a significant  portion of
growth in prior years  continue to exist,  but no assurance can be given at this
time as to the certainty or timing of such transactions.

     As of December 31, 2003, there were 142 approved loan sellers in the Farmer
Mac I program ranging from single-office to multi-branch institutions,  spanning
community banks,  Farm Credit System  associations,  mortgage  companies,  large
multi-state Farm Credit System banks,  commercial banks and insurance companies,
of which 81 were active  participants  in the program.  As of December 31, 2002,
there were 219  approved  sellers in the Farmer Mac I program,  of which 79 were
active participants in the program. In addition to participating directly in the
Farmer Mac I program,  some of the approved loan sellers enable other lenders to
participate  indirectly  in the Farmer Mac I program by  managing  correspondent
networks of lenders from which they purchase  loans to sell to Farmer Mac. As of
December 31, 2003,  more than 75 lenders were  participating  in those networks,
bringing  the total  Farmer  Mac I program  participants  to more than 200 as of
December 31, 2003.

     To be  considered  for  approval  as a Farmer  Mac I  seller,  a  financial
institution must meet criteria established by Farmer Mac, including:

     o    owning a  requisite  amount  of  Farmer  Mac Class A or Class B voting
          common stock according to a schedule  prescribed for the size and type
          of institution;
     o    having  the  ability  and  experience  to make or  purchase  and  sell
          agricultural mortgage loans of the type that will qualify for purchase
          by Farmer Mac and service such mortgage  loans in accordance  with the
          Farmer  Mac  requirements  either  through  its own  staff or  through
          contractors and originators;
     o    maintaining a minimum adjusted net worth of $1.0 million;
     o    maintaining  a  fidelity  bond  and  errors  and  omissions  insurance
          coverage (or acceptable substitute insurance coverage) in a prescribed
          amount according to the size of the institution; and
     o    entering into a Seller/Servicer  agreement to comply with the terms of
          the Farmer Mac Seller/Servicer  Guide,  including  representations and
          warranties regarding the eligibility of the loans and accuracy of loan
          data provided to Farmer Mac.

     Any lender  authorized by the USDA to obtain a USDA guarantee on a loan may
be a seller in the Farmer Mac II program.  As of December 31,  2003,  there were
150 active sellers in the Farmer Mac II program,  compared to 143 as of December
31, 2002.  Sellers in the Farmer Mac II program  consist mostly of community and
regional banks.

     Thus, in the aggregate,  more than 300 lenders were actively  participating
either  directly or  indirectly in one or both of the Farmer Mac I or Farmer Mac
II programs during 2003.

     Related Party Transactions. In 2002 and 2003, Farmer Mac conducted business
with entities  that are related  parties as a result of a member of Farmer Mac's
board of directors  being  affiliated  with the entity in some  capacity.  These
transactions  were conducted in the ordinary course of business,  with terms and
conditions  comparable  to those  available to any other third  party.  For more
information  about related party  transactions,  see Note 3 to the  consolidated
financial statements.


Balance Sheet Review


     Assets. As of December 31, 2003, total assets were $4.3 billion compared to
$4.2 billion as of December 31, 2002.  On-balance  sheet program  assets (Farmer
Mac Guaranteed  Securities and loans),  decreased $77.5 million during 2003 to a
total of $2.5 billion, while non-program assets increased $134.2 million to $1.7
billion as of December 31,  2003.  The  following  table  presents  Farmer Mac's
on-balance sheet program assets based on their repricing frequency.

<TABLE>
<CAPTION>
        Outstanding Balance of Loans Held and Loans Underlying
          On-Balance Sheet Farmer Mac Guaranteed Securities
-----------------------------------------------------------------------
                                           As of December 31,
                                   ------------------------------------
                                         2003               2002
                                   -----------------   ----------------
                                             (in thousands)

<S>                                  <C>                <C>
Fixed rate (10-yr. wtd. avg. term)      $ 860,874        $ 1,003,434
5-to-10 year ARMs and resets            1,045,217            981,548
1-Month-to-3-Year ARMs                    542,024            494,713
                                   -----------------   ----------------
    Total held in portfolio           $ 2,448,115        $ 2,479,695
                                   -----------------   ----------------
</TABLE>

     Liabilities. Total liabilities increased to $4.1 billion as of December 31,
2003 from $4.0 billion as of December 31, 2002. The increase in liabilities  was
primarily due to growth in notes payable,  which  corresponded to the growth and
funding of on-balance sheet program assets.  For more  information  about Farmer
Mac's funding and interest rate risk practices and how financial derivatives are
used, see "--Risk  Management--Interest  Rate Risk." For more information  about
Farmer Mac's reserve for losses, see "--Risk Management--Credit Risk - Loans."

     Capital.  As of December  31, 2003,  stockholders'  equity  totaled  $213.3
million,  compared to $183.6  million as of December 31, 2002.  The increase was
primarily due to net income  available to common  stockholders  of $25.0 million
earned  during  2003.  That  increase  was  partially  offset by a $1.9  million
decrease in accumulated other comprehensive  income/(loss)  resulting from a net
increase  of  $17.2  million  in the  market  values  of  financial  derivatives
classified as cash flow hedges and a decrease of $19.1 million in net unrealized
gains on investment  securities and Farmer Mac Guaranteed  Securities classified
as available for sale. Accumulated other comprehensive income is not a component
of Farmer Mac's core capital or regulatory capital.

     Return on average common equity was 15.3 percent for 2003, compared to 15.0
percent for 2002. The effects of SFAS 133 and Statement of Financial  Accounting
Standards  No.  115,  Accounting  for  Certain  Investments  in Debt and  Equity
Securities,  increased  the average  return on common  equity by 1.1 percent for
2003 and reduced the average return on common equity by 3.9 percent for 2002.

     As of December 31, 2003,  Farmer Mac's core capital totaled $215.5 million,
compared to $184.0  million as of December  31,  2002.  As of December 31, 2003,
Farmer Mac's core capital exceeded its statutory minimum capital  requirement of
$142.0  million  by $73.5  million.  FCA  issued  its final  risk-based  capital
regulation for Farmer Mac on April 12, 2001 and the  Corporation was required to
meet the risk-based capital standards  beginning on May 23, 2002. As of December
31, 2003 the  risk-based  capital  stress test  generated a  regulatory  capital
requirement of $38.8 million.  Farmer Mac's regulatory capital of $237.6 million
exceeded  that  amount by  approximately  $198.8  million.  The  Corporation  is
required  to  hold  capital  at the  higher  of the  statutory  minimum  capital
requirement or the amount  required by the  risk-based  capital stress test. For
further   information,   see   "--Liquidity   and   Capital   Resources--Capital
Requirements."

     Off-Balance Sheet Farmer Mac Guaranteed  Securities and LTSPCs.  Farmer Mac
offers  approved   agricultural  and  rural  residential  mortgage  lenders  two
alternatives to increase their liquidity or lending capacity while retaining the
cash flow benefits of their loans: (1) Farmer Mac Guaranteed  Securities,  which
are  available  through  either  the  Farmer  Mac I program or the Farmer Mac II
program,  and (2)  LTSPCs,  which are  available  only  through the Farmer Mac I
program. Both of these alternatives result in off-balance sheet transactions for
Farmer Mac.

     To be eligible for the Farmer Mac I program,  a loan must meet Farmer Mac's
credit underwriting,  appraisal and documentation standards. Accordingly, Farmer
Mac  believes  the credit risk it assumes for Farmer Mac  Guaranteed  Securities
backed by loans that are eligible for the Farmer Mac I program and for LTSPCs is
the same and considers the effects of all on- and off-balance  sheet  activities
on its overall portfolio  diversification and credit risk. See Note 12 to Farmer
Mac's  consolidated  financial  statements for more detail on the  Corporation's
off-balance sheet program activities.

     As  of  December  31,  2003,  outstanding   off-balance  sheet  Farmer  Mac
Guaranteed Securities and LTSPCs totaled $3.4 billion,  compared to $3.0 billion
as of December 31, 2002. The following table presents the balance of outstanding
LTSPCs and off-balance sheet Farmer Mac Guaranteed Securities as of December 31,
2003 and 2002:

<TABLE>
<CAPTION>
                   Outstanding Balance of LTSPCs and
           Off-Balance Sheet Farmer Mac Guaranteed Securities
----------------------------------------------------------------------------------
                                                        As of December 31,
                                                ----------------------------------
                                                      2003              2002
                                                -----------------  ---------------
                                                          (in thousands)
<S>                                                <C>              <C>
Farmer Mac I:
   Post-1996 Act obligations:
    Farmer Mac I Guaranteed Securities               $ 952,134        $ 299,940
    LTSPCs                                           2,348,702        2,681,240
                                                -----------------  ---------------
     Total Post-1996 Act obligations                 3,300,836        2,981,180
   Pre-1996 Act Farmer Mac I
    Guaranteed Securities                                    -                -
                                                -----------------  ---------------
     Total Farmer Mac I                              3,300,836        2,981,180
Farmer Mac II Guaranteed Securities                     51,241           67,109
                                                -----------------  ---------------
     Total Farmer Mac I and II                     $ 3,352,077      $ 3,048,289
                                                -----------------  ---------------
</TABLE>

     For  more  information   about  off-balance  sheet  Farmer  Mac  Guaranteed
Securities,  see  "--Risk  Management--Credit  Risk - Loans"  and Note 12 to the
consolidated financial statements.

Risk Management

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

     Yield maintenance  provisions and other prepayment  penalties  contained in
many  agricultural  mortgage  loans  reduce,  but do not  eliminate,  this risk,
particularly in the case of a defaulted loan where yield  maintenance may not be
collected. Those provisions require borrowers to make an additional payment when
they prepay their loans, so that,  when  reinvested with the prepaid  principal,
yield maintenance payments generate substantially the same cash flows that would
have  been  generated  had the  loan  not  prepaid.  This  provision  creates  a
disincentive to prepayment and compensates the Corporation for its interest rate
risks to a large degree.  As of December 31, 2003, 58 percent of the outstanding
balance of all loans held and loans  underlying  on-balance  sheet  Farmer Mac I
Guaranteed  Securities  (including  92 percent of all loans with fixed  interest
rates)  were  covered  by yield  maintenance  provisions  and  other  prepayment
penalties.  As of December 31, 2003, 51 percent of the total outstanding balance
of retained Farmer Mac I loans and Guaranteed  Securities had yield  maintenance
provisions and 7 percent had other forms of prepayment protection. Of the Farmer
Mac I new and current loans purchased in 2003, 12 percent had yield  maintenance
or another form of prepayment protection (including 35 percent of all loans with
fixed interest rates).  None of the  USDA-guaranteed  portions underlying Farmer
Mac II Guaranteed Securities had yield maintenance provisions.

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

     The goal of interest  rate risk  management  at Farmer Mac is to create and
maintain a portfolio that generates  stable  earnings and value across a variety
of interest  rate  environments.  Farmer  Mac's  primary  strategy  for managing
interest rate risk is to fund asset purchases with liabilities that have similar
durations  so that they will  perform  similarly as interest  rates  change.  To
achieve  this match,  Farmer Mac issues  discount  notes and both  callable  and
non-callable  medium-term  notes  across a spectrum  of  maturities.  Farmer Mac
issues callable debt to offset the prepayment risk associated with some mortgage
assets.  By  using a blend of  liabilities  that  includes  callable  debt,  the
interest rate  sensitivities  of the liabilities tend to increase or decrease as
interest  rates  change in a manner  similar  to changes  in the  interest  rate
sensitivities of the assets. Farmer Mac also uses financial derivatives to alter
the  duration of its assets and  liabilities  to better  match their  durations,
thereby reducing overall interest rate sensitivity.

     Farmer Mac's $623.7 million of cash and cash equivalents as of December 31,
2003 matures within three months and is match-funded  with discount notes having
similar maturities.  Investment  securities of $1.065 billion as of December 31,
2003 consist of $710.0 million (67 percent) of floating rate securities that all
have rates that adjust within one year. See Note 4 to the consolidated financial
statements for more  information on investment  securities.  These floating rate
investments  are funded using (i) a series of discount  note  issuances in which
each   successive   discount  note  is  issued  and  matures  on  or  about  the
corresponding repricing date of the related investment; (ii) floating-rate notes
having  similar  rate  reset  provisions  as the  related  investment;  or  iii)
fixed-rate  notes swapped to floating rates having  similar reset  provisions as
the related investment.

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

     o    sells Farmer Mac Guaranteed Securities backed by the loans; or
     o    issues  debt to retain the loans in its  portfolio  (although  issuing
          debt to fund  the  loans  as  investments  does  not  fully  eliminate
          interest rate risk due to the possible timing  differences in the cash
          flows of the assets and related liabilities, as discussed above).

Farmer Mac manages the interest rate risk related to such loans, and any related
Farmer Mac Guaranteed  Securities or debt  issuance,  through the use of forward
sale   contracts   on  the  debt  and   mortgage-backed   securities   of  other
government-sponsored  enterprises and futures contracts  involving U.S. Treasury
securities.  Farmer Mac uses  forward  sale  contracts  on  government-sponsored
enterprise  securities  to reduce its interest  rate exposure to changes in both
Treasury  rates and  spreads  on Farmer  Mac debt and  Farmer  Mac I  Guaranteed
Securities.

     Since interest rate  sensitivity may change with the passage of time and as
interest rates change,  Farmer Mac assesses this exposure on a regular basis and
rebalances its portfolio of assets and liabilities as necessary through:

     o    the purchase of mortgage assets in the ordinary course of business;
     o    the refunding of existing liabilities; or
     o    the use of derivatives to alter the characteristics of existing assets
          or liabilities.

     The most  strenuous  measure of the long-term  interest rate risk of Farmer
Mac's current portfolio is the sensitivity of its Market Value of Equity ("MVE")
to yield curve shocks. MVE represents the present value of all future cash flows
from on- and off-balance  sheet assets,  liabilities and financial  derivatives,
discounted  at  current  interest  rates and  spreads.  The  following  schedule
summarizes the results of Farmer Mac's MVE  sensitivity  analysis as of December
31, 2003 and December 31, 2002 to an immediate and instantaneous  parallel shift
in the yield curve.

<TABLE>
<CAPTION>

                      Percentage Change in MVE from Base Case
                      ---------------------------------------
     Interest Rate      December 31,    December 31,
       Scenario            2003             2002
    ---------------   ---------------------------------------

<S>   <C>                <C>               <C>
       + 300 bp           -0.4%             15.6%
       + 200 bp            0.2%             11.0%
       + 100 bp            0.4%              5.9%
       - 100 bp            0.0%             -7.1%
       - 200 bp            N/A*              N/A*
       - 300 bp            N/A*              N/A*

*    As of December 31, 2003 and 2002,  a -200 bp parallel  shift
     of the U. S. Treasury yield curve produced negative interest
     rates for maturities of 2 years and shorter.
</TABLE>

     Farmer Mac's long-term interest rate sensitivity decreased during 2003, and
remained  relatively  stable and at relatively  low levels  despite the volatile
interest rate environment  during the year. Farmer Mac's effective  duration gap
was minus 0.1 months as of December 31, 2003, compared to minus 3.6 months as of
December 31, 2002.  As interest  rates  declined  during  2003,  prepayments  of
mortgages  without  prepayment  penalties  increased,   thereby  shortening  the
duration  of  the   Corporation's   assets  relative  to  the  duration  of  its
liabilities.  Throughout  the year,  Farmer Mac  shortened  the  duration of its
liabilities through various rebalancing strategies.  As a result, Farmer Mac was
able to improve its overall  risk  profile  even as interest  rates  declined to
historic lows.

     As of December  31,  2003,  a uniform or  "parallel"  increase of 100 basis
points would have increased NII by 5.6 percent, while a parallel decrease of 100
basis points would have  decreased NII by 9.4 percent.  Farmer Mac also measures
the sensitivity of both MVE and NII to a variety of  non-parallel  interest rate
shocks,  including  flattening  and  steepening  yield  curve  scenarios.  As of
December 31, 2003,  both MVE and NII showed similar  sensitivity to non-parallel
shocks as to the parallel shocks. The sensitivity of Farmer Mac's MVE and NII to
both  parallel and  non-parallel  interest  rate shocks,  and its duration  gap,
indicate the  effectiveness  of Farmer  Mac's  approach to managing its interest
rate risk exposures.

     The economic  effects of financial  derivatives,  including  interest  rate
swaps,  are  included in the MVE,  NII and  duration  gap  analyses.  Farmer Mac
generally  enters into various  interest rate swaps to reduce interest rate risk
as follows:

     o    "floating-to-fixed  interest  rate swaps" in which it pays fixed rates
          of  interest  to,  and  receives  floating  rates  of  interest  from,
          counterparties;  these swaps adjust the  characteristics of short-term
          debt to match more closely the cash flow and duration  characteristics
          of  longer-term  reset and  fixed-rate  mortgages and other assets and
          provide  an  overall  lower  effective  cost of  borrowing  than would
          otherwise be available in the conventional debt market;
     o    "fixed-to-floating  interest  rate swaps" in which it  receives  fixed
          rates of  interest  from,  and pays  floating  rates of  interest  to,
          counterparties;  these  transactions  adjust  the  characteristics  of
          long-term  debt to  match  more  closely  the cash  flow and  duration
          characteristics of short-term assets; and
     o    "basis swaps" in which it pays variable rates of interest based on one
          index to, and  receives  variable  rates of interest  based on another
          index from, counterparties; these swaps alter interest rate indices of
          liabilities to match those of assets, and vice versa.

As of December 31, 2003, Farmer Mac had $1.3 billion combined notional amount of
interest rate swaps,  of which $674.4  million were  floating-to-fixed  interest
rate swaps, $25.0 million were floating-to-floating  interest rate swaps, $321.9
million were basis swaps and $245.0 million were fixed-to-floating interest rate
swaps, with terms ranging from one to fifteen years.

     Farmer Mac uses financial  derivatives as an end-user for hedging purposes,
not for trading or speculative  purposes.  When financial  derivatives  meet the
specific  hedge  criteria  under SFAS 133, they are accounted for as either fair
value  hedges or cash flow  hedges.  Financial  derivatives  that do not satisfy
those hedge  criteria  are not  accounted  for as hedges and changes in the fair
value of those financial derivatives are reported as a gain or loss on financial
derivatives and trading assets in the consolidated statement of operations.  All
of Farmer Mac's financial derivatives  transactions are conducted under standard
collateralized  agreements that limit Farmer Mac's potential  credit exposure to
any counterparty.  As of December 31, 2003,  Farmer Mac had no  uncollateralized
net exposure to any counterparty.

     Credit Risk - Loans.  Farmer Mac's  primary  exposure to credit risk is the
risk of loss resulting from the inability of borrowers to repay their  mortgages
in conjunction with a deficiency in the value of the collateral  relative to the
amount  outstanding on the mortgage and the cost of  liquidation.  Farmer Mac is
exposed  to credit  risk on:

     o    loans it holds;
     o    loans underlying Farmer Mac Guaranteed Securities; and
     o    loans underlying LTSPCs.

Loans held or loans underlying Farmer Mac Guaranteed Securities or LTSPCs can be
divided into four groups:

     o    loans held for investment;
     o    loans underlying pre-1996 Act Farmer Mac I Guaranteed Securities;
     o    loans underlying  post-1996 Act Farmer Mac I Guaranteed  Securities or
          LTSPCs; and
     o    USDA-guaranteed   portions   underlying   Farmer  Mac  II   Guaranteed
          Securities.


     For loans underlying pre-1996 Act Farmer Mac I Guaranteed  Securities,  ten
percent  first-loss  subordinated  interests  mitigate  Farmer Mac's credit risk
exposure.  Before  Farmer Mac incurs a credit loss,  full recourse must first be
taken  against  the   subordinated   interest.   The  1996  Act  eliminated  the
subordinated interest requirement. As a result, Farmer Mac generally assumes 100
percent of the credit  risk on loans held for  investment  and loans  underlying
post-1996 Act Farmer Mac I Guaranteed Securities and LTSPCs. Farmer Mac's credit
exposure on USDA-guaranteed  portions is covered by the full faith and credit of
the United States.  Farmer Mac believes it has little or no credit risk exposure
to loans underlying  pre-1996 Act Farmer Mac I Guaranteed  Securities because of
the subordinated interests,  or to USDA-guaranteed  portions because of the USDA
guarantee.  The outstanding  principal  balance of loans held, real estate owned
and loans  underlying  Farmer Mac  Guaranteed  Securities  (including  AgVantage
bonds) or LTSPCs is summarized in the table below.

<TABLE>
<CAPTION>

                                         As of December 31,
                               ------------------------------------
                                     2003                 2002
                               -------------------  ---------------
                                         (in thousands)
<S>                             <C>                 <C>
Farmer Mac I:
   Post-1996 Act                 $ 5,045,232         $ 4,850,234
   Pre-1996 Act                       24,734              31,960
Farmer Mac II:
   USDA-guaranteed portions          729,470             645,790
                               ----------------   -----------------
                                 $ 5,799,436         $ 5,527,984
                               ----------------   -----------------
</TABLE>

     For  several  years,  Farmer  Mac  has  conducted  guarantee  fee  adequacy
analyses,  using stress-test models developed internally and with the assistance
of outside  experts.  These  analyses  have taken into  account  the diverse and
dissimilar  characteristics of the various asset categories for which Farmer Mac
manages its risk exposures,  and have evolved as the mix and character of assets
under management has shifted with growth in the business and the addition of new
asset  categories.  Based on current  information,  Farmer Mac believes that its
guarantee fee is adequate compensation for the credit risk that it assumes.

     Farmer  Mac  has  established  underwriting,  appraisal  and  documentation
standards  for  agricultural  mortgage  loans to mitigate  the risk of loss from
borrower   defaults  and  to  provide   guidance   concerning  the   management,
administration  and conduct of underwriting and appraisals to all  participating
sellers and potential sellers in its programs. These standards were developed on
the basis of industry norms for agricultural  mortgage loans and are designed to
assess  the  creditworthiness  of the  borrower,  as  well as the  value  of the
collateral   securing   the  loan.   Farmer   Mac   requires   sellers  to  make
representations  and warranties  regarding the  conformity of eligible  mortgage
loans to these  standards,  the accuracy of loan data provided to Farmer Mac and
other requirements  related to the loans.  Sellers are responsible to Farmer Mac
for breaches of those  representations  and  warranties  that result in economic
losses  to the  Corporation.  Pursuant  to  contracts  with  Farmer  Mac  and in
consideration for underwriting and servicing fees, Farmer  Mac-approved  central
servicers  underwrite  mortgage  loans for Farmer Mac in  accordance  with those
standards and other  requirements,  and service  those loans in accordance  with
Farmer Mac  requirements.  Central  servicers are  responsible to Farmer Mac for
serious  errors in the  underwriting  and  servicing  of those  mortgage  loans.
Detailed information regarding Farmer Mac's underwriting and appraisal standards
and seller  eligibility  requirements  are  presented in  "Business--Farmer  Mac
Programs--Farmer    Mac   I--Underwriting    and   Appraisal    Standards"   and
"Business--Farmer Mac Programs--Farmer Mac I--Sellers."

     Farmer Mac  maintains an allowance for losses to cover  estimated  probable
losses on loans held for  investment,  real  estate  owned and loans  underlying
post-1996 Act Farmer Mac I Guaranteed  Securities and LTSPCs in accordance  with
Statement of Financial  Accounting Standard No. 5, Accounting for Contingencies,
("SFAS 5") and Statement of Financial Accounting Standard No. 114, Accounting by
Creditors for Impairment of a Loan ("SFAS 114"), as amended. The methodology for
determining  the allowance for losses is the same for loans held for  investment
and loans underlying post-1996 Act Farmer Mac I Guaranteed Securities and LTSPCs
because Farmer Mac believes the ultimate credit risk is substantially  the same,
i.e.,  the  underlying  agricultural  mortgage  loans  all meet the same  credit
underwriting  and  appraisal  standards.  For accepting the credit risk on loans
underlying post-1996 Act Farmer Mac I Guaranteed  Securities and LTSPCs,  Farmer
Mac receives guarantee fees and commitment fees,  respectively.  For loans held,
Farmer Mac receives interest income that includes a component that correlates to
its guarantee fee, which Farmer Mac views as compensation  for accepting  credit
risk.

     No  allowance  for losses has been made for loans  underlying  Farmer Mac I
Guaranteed  Securities  issued prior to the 1996 Act or Farmer Mac II Guaranteed
Securities.  Farmer Mac I Guaranteed Securities issued prior to the 1996 Act are
supported by unguaranteed first-loss subordinated interests,  which are expected
to exceed the estimated credit losses on those loans.  USDA-guaranteed  portions
collateralizing  Farmer Mac II Guaranteed  Securities are obligations  backed by
the full  faith  and  credit  of the  United  States.  To date,  Farmer  Mac has
experienced  no credit  losses  on any  pre-1996  Act  Farmer  Mac I  Guaranteed
Securities or on any Farmer Mac II Guaranteed  Securities and does not expect to
incur any such losses in the future.

     Farmer Mac's  allowance  for losses is presented in four  components on its
consolidated balance sheet:

     o    an "Allowance for loan losses" on loans held for investment;
     o    a valuation  allowance on real estate owned,  which is included in the
          balance sheet under "Real estate owned, net of valuation allowance";
     o    an allowance for losses on loans underlying post-1996 Act Farmer Mac I
          Guaranteed  Securities  and  LTSPCs  entered  into or  modified  after
          January 1, 2003,  which is included in the balance  sheet as a portion
          of the amount reported as "Guarantee and commitment obligation"; and
     o    an allowance for losses on loans underlying post-1996 Act Farmer Mac I
          Guaranteed  Securities  and  LTSPCs  entered  into prior to January 1,
          2003,  which is  included  in the balance  sheet  under  "Reserve  for
          losses."

     The provision for losses is presented in two components on the consolidated
statement of operations:

     o    a "Provision for loan losses," which represents losses on Farmer Mac's
          loans held for investment; and
     o    a "Provision for losses," which represents  losses on loans underlying
          post-1996 Act Farmer Mac I Guaranteed  Securities  and LTSPCs and real
          estate owned.

     Farmer Mac estimates probable losses using a systematic process that begins
with  management's  evaluation  of the  results  of its  proprietary  loan  pool
simulation  and  guarantee  fee  model  (the  "Model").  The  Model  draws  upon
historical  information from a data set of agricultural  mortgage loans recorded
over a longer period of time than Farmer Mac's own experience to date,  screened
to include  only those  loans with  credit  characteristics  similar to those on
which Farmer Mac has assumed credit risk. The results generated by the Model are
modified by the  application of management's  judgment,  as required to take key
factors into account, including:

     o    economic conditions;
     o    geographic and agricultural  commodity  concentrations in Farmer Mac's
          portfolio;
     o    the credit profile of Farmer Mac's portfolio;
     o    delinquency trends of Farmer Mac's portfolio;
     o    Farmer  Mac's  experience  in the  management  and sale of real estate
          owned; and
     o    historical   charge-off  and  recovery   activities  of  Farmer  Mac's
          portfolio.

     Management  believes that its use of this  methodology  produces a reliable
estimate of total probable  losses,  as of the balance sheet date, for all loans
included in Farmer Mac's portfolio,  including loans held, real estate owned and
loans  underlying  post-1996 Act Farmer Mac I Guaranteed  Securities and LTSPCs.
Farmer Mac's  methodology  for determining its allowance for losses will migrate
over time away from the Model,  to become based on Farmer  Mac's own  historical
portfolio loss experience.  Until that time, Farmer Mac will continue to use the
results from the Model,  augmented by the application of management's  judgment,
to determine its allowance for losses.

     In  addition,   Farmer  Mac   specifically   analyzes   its   portfolio  of
non-performing  assets  (loans  90  days  or  more  past  due,  in  foreclosure,
restructured,  in  bankruptcy,  including  loans  performing  under either their
original loan terms or a court-approved  bankruptcy plan, and real estate owned)
on a loan-by-loan  basis.  This analysis  measures  impairment based on the fair
value of the  underlying  collateral  for each  individual  loan relative to the
total amount due, including principal,  interest and advances under SFAS 114. In
the event that the updated  appraisal  or  management's  estimate of  discounted
collateral  value does not support the total amount due, Farmer Mac specifically
determines  an allowance  for the loan for the  difference  between the recorded
investment and its fair value, less estimated costs to liquidate the collateral.

     For this analysis and the  allocation  of specific  reserves as of December
31, 2003, Farmer Mac expanded the population of loans  specifically  reviewed to
include:

     o    non-performing assets (loans 90 days or more past due, in foreclosure,
          restructured,  in bankruptcy - including loans performing under either
          their original loan terms or a  court-approved  bankruptcy  plan - and
          real estate owned);
     o    loans for which  Farmer  Mac had  adjusted  the  timing of  borrowers'
          payment  schedules  within the past three years,  but still expects to
          collect all amounts due and has not made economic concessions; and
     o    additional  performing  loans that have  previously been delinquent or
          are secured by real estate that produces  commodities  currently under
          stress.

     Management  believes that the general  allowance,  which is the  difference
between the total allowance for losses (generated  through use of the Model) and
the specific allowances,  adequately covers any losses inherent in the portfolio
of performing loans under SFAS 5.

     Farmer  Mac  believes  that the  methodology  described  above  produces  a
reliable  estimate  of the  total  probable  losses  inherent  in  Farmer  Mac's
portfolio. The Model:

     o    uses  historical   agricultural   real  estate  loan  origination  and
          servicing  data that reflect  varied  economic  conditions  and stress
          levels in the agricultural sector;
     o    contains  features that allow variations for changes in loan portfolio
          characteristics  to make the data set more  representative  of  Farmer
          Mac's portfolio and credit underwriting standards; and
     o    considers  the effects of the ageing of the loan  portfolio  along the
          expected loss curves  associated  with individual  origination  years,
          including  the segments  that are entering into or coming out of their
          peak default years.

     Farmer Mac  analyzes  various  iterations  of the Model data and  considers
various  configurations of loan types,  terms,  economic conditions and borrower
eligibility  criteria to generate a distribution of loss exposures over time for
all loans in the  portfolio,  all to evaluate its overall  allowance for losses,
and back tests the results to validate  the Model.  Such tests use prior  period
data  to  project  losses  expected  in  a  current  period  and  compare  those
projections to actual losses incurred during the current period.

     The allowance for losses is increased through periodic  provisions for loan
losses that are charged  against net interest  income and  provisions for losses
charged to operating  expense and reduced by charge-offs for actual losses,  net
of  recoveries  that are  recognized if  liquidation  proceeds  exceed  previous
estimates.  Charge-offs  represent losses on the outstanding  principal balance,
any interest  payments  previously  accrued or advanced  and  expected  costs of
liquidation.  The  establishment  of and periodic  adjustments  to the valuation
allowance for real estate owned are charged  against  income as a portion of the
provision for losses charged to operating expense.  Gains and losses on the sale
of real estate owned are recorded in income based on the difference  between the
recorded investment at the time of sale and liquidation proceeds.

The following  table  summarizes  the changes in the  components of Farmer Mac's
allowance for losses for each year in the  three-year  period ended December 31,
2003:

<TABLE>
<CAPTION>
                                    -------------------------------------------------------------------------
                                                                                 Contingent
                                      Allowance         REO                      Obligation        Total
                                      for Loan       Valuation      Reserve     for Probable     Allowance
                                       Losses        Allowance     for Losses      Losses        for Losses
                                    -------------- -------------- ------------- --------------  -------------
                                                                 (in thousands)

<S>                                    <C>             <C>         <C>             <C>           <C>
Balances as of January 1, 2001            $ 420            $ -      $ 10,903            $ -       $ 11,323
                                    -------------- -------------- ------------- --------------  -------------
     Provision for losses                   600              -         6,186              -          6,786
     Net allocation of
       allowance                             (5)             -             5              -              -
     Net recoveries/(charge-offs)           337              -        (2,562)             -         (2,225)
                                    -------------- -------------- ------------- --------------  -------------
Balances as of December 31, 2001        $ 1,352            $ -      $ 14,532            $ -       $ 15,884
                                    -------------- -------------- ------------- --------------  -------------
     Provision for losses                 1,340              -         6,907              -          8,247
     Net allocation of
       allowance                          3,221          1,308        (4,529)             -              -
     Net charge-offs                     (3,251)          (716)         (153)             -         (4,120)
                                    -------------- -------------- ------------- --------------  -------------
Balances as of December 31, 2002        $ 2,662          $ 592      $ 16,757            $ -       $ 20,011
                                    -------------- -------------- ------------- --------------  -------------
     Provision for losses                 6,524          1,230        (3,145)         2,676          7,285
     Net charge-offs                     (3,219)        (1,584)         (440)             -         (5,243)
                                    -------------- -------------- ------------- --------------  -------------
Balances as of December 31, 2003        $ 5,967          $ 238      $ 13,172        $ 2,676       $ 22,053
                                    -------------- -------------- ------------- --------------  -------------
</TABLE>

     During third quarter 2003,  Farm Credit West,  ACA, a related party program
participant,  exercised  the  conversion  feature  incorporated  in all existing
LTSPCs and Farmer Mac converted that  participant's  $722.3 million LTSPC into a
Farmer Mac I Guaranteed  Security in a swap transaction.  In accordance with FIN
45,  Farmer Mac  recorded  the fair value of its  obligation  to stand  ready to
perform  under the new Farmer Mac  Guaranteed  Security.  The fair value of this
obligation  includes  Farmer Mac's  estimate of the losses that are  anticipated
over the life of each contractual obligation.  The change in accounting for this
obligation,  from a probable loss model to a fair value model, has resulted in a
reduction in the reserve for losses of approximately $4.9 million.  Since Farmer
Mac believes that these losses remain  probable,  they have been included in the
determination  of the fair value of the  contractual  obligation  and  therefore
there was no reduction in the total allowance for losses.

     When certain criteria are met, such as the default of the borrower,  Farmer
Mac may, in its sole  discretion,  repurchase  the  defaulted  loans  underlying
Farmer Mac Guaranteed  Securities and is obligated to purchase those  underlying
an  LTSPC.  These  acquisitions  are  recorded  in  the  consolidated  financial
statements  at their  fair  value.  Fair value is  determined  by  appraisal  or
management's  estimate of discounted collateral value. In September 2002, Farmer
Mac adopted EITF issue 02-9,  Accounting for Changes That Result in a Transferor
Regaining Control of Financial Assets Sold ("the consensus" or "EITF 02-9"). The
consensus  requires  that  Farmer Mac record,  at  acquisition,  the  difference
between each loan's  acquisition cost and its fair value, if any, as a charge to
the reserve for losses.  Prior to the  adoption of the  consensus,  any specific
allowance that had been  established for the off-balance  sheet obligation would
have been  transferred  from the  reserve for losses to the  allowance  for loan
losses  (referred to as "net  allocation of the  allowance" in the table above).
Upon  the  receipt  of  each  loan's  updated   appraisal  or  determination  of
management's estimate of discounted collateral value, the difference between the
acquisition  cost of the loan and its fair  value,  if any,  was  recorded  as a
charge to the allowance for loan losses.

     Farmer Mac's total provision for losses was $7.3 million for 2003, compared
to $8.2 million for 2002.  During  2003,  Farmer Mac charged off $5.2 million in
losses  against the allowance for losses and recovered  $0.2 million on the sale
of real estate owned. During 2002, Farmer Mac charged off $4.1 million in losses
against the allowance for losses and recovered  $0.1 million on the sale of real
estate owned.  The net  charge-offs  for 2003  included $0.1 million  related to
previously  accrued or  advanced  interest  on loans or Farmer Mac I  Guaranteed
Securities, compared to $1.3 million for 2002.

     As of December 31, 2003,  Farmer Mac's  allowance for losses  totaled $22.1
million,  or 44 basis points of the outstanding  principal balance of loans held
and loans  underlying  post-1996  Act Farmer  Mac I  Guaranteed  Securities  and
LTSPCs, compared to $20.0 million (42 basis points) as of December 31, 2002. The
year-to-year  increase in this ratio is a result of the  provisions for probable
losses during 2003 outpacing charge-offs and the growth of the portfolio.

     As of December 31, 2003,  Farmer Mac's 90-day  delinquencies  totaled $30.1
million and represented 0.60 percent of the principal  balance of all loans held
and loans  underlying  post-1996  Act Farmer  Mac I  Guaranteed  Securities  and
LTSPCs,  compared to $58.2 million (1.21 percent) as of December 31, 2002.  From
quarter  to  quarter,  Farmer Mac  anticipates  the  90-day  delinquencies  will
fluctuate,  both in dollars and as a percentage  of the  outstanding  portfolio,
with  higher  levels  likely at the end of the first and third  quarters of each
year  corresponding  to the  semi-annual  (January  1st and  July  1st)  payment
characteristics  of most Farmer Mac I loans. As of December 31, 2003, loans held
and loans underlying post-1996 Act Farmer Mac I Guaranteed Securities and LTSPCs
that  were  90 days  or  more  past  due,  in  foreclosure,  restructured  after
delinquency,  in  bankruptcy  (including  loans  performing  under  either their
original loan terms or a  court-approved  bankruptcy plan) and real estate owned
("post-1996 Act  non-performing  assets")  totaled $70.0 million and represented
1.39  percent of the  principal  balance of all loans held and loans  underlying
post-1996 Act Farmer Mac I Guaranteed  Securities and LTSPCs,  compared to $75.3
million  (1.56  percent)  as  of  December  31,  2002.   Loans  that  have  been
restructured  after  delinquency were  insignificant and are included within the
reported 90-day delinquency and non-performing asset disclosures.

     The following table presents historical  information regarding Farmer Mac's
non-performing assets and 90-day delinquencies:

<TABLE>
<CAPTION>
                        Outstanding
                       Post-1996 Act                                           Less:
                           Loans,               Non-                           REO and
                       Guarantees and        Performing                      Performing          90-day
                           LTSPCs              Assets        Percentage     Bankruptcies     Delinquencies      Percentage
                     ------------------  ----------------- -------------- ---------------- ----------------- ----------------
                                                             (dollars in thousands)

<S>                    <C>                  <C>              <C>            <C>              <C>                 <C>
December 31, 2003       $ 5,020,032          $ 69,964         1.39%          $ 39,908         $ 30,056            0.60%
September 30, 2003        4,871,756            84,583         1.74%            37,442           47,141            0.98%
June 30, 2003             4,875,059            80,169         1.64%            28,883           51,286            1.06%
March 31, 2003            4,820,887            94,822         1.97%            18,662           76,160            1.58%
December 31, 2002         4,821,634            75,308         1.56%            17,094           58,214            1.21%
September 30, 2002        4,506,330            91,286         2.03%            11,460           79,826            1.77%
June 30, 2002             4,489,735            65,196         1.45%            14,931           50,265            1.12%
March 31, 2002            3,754,171            87,097         2.32%             7,903           79,194            2.11%
December 31, 2001         3,428,176            58,279         1.70%             3,743           54,536            1.59%
September 30, 2001        3,318,796            71,686         2.16%             5,183           66,503            2.00%
June 30, 2001             3,089,460            53,139         1.72%             4,274           48,865            1.58%
March 31, 2001            2,562,374            67,134         2.62%             2,154           64,980            2.54%
</TABLE>

     The dollar level of 90-day delinquencies and period-over-period charge-offs
correlates to the proportion of Farmer Mac's portfolio of loans,  guarantees and
commitments  entering their peak  delinquency  and default years  (approximately
years  three  through  five  after  origination).   As  of  December  31,  2003,
approximately  $1.7 billion (34 percent) of Farmer Mac's  outstanding loans held
and loans underlying post-1996 Act Farmer Mac I Guaranteed Securities and LTSPCs
were in their peak  delinquency  and default years  compared to $1.8 billion (38
percent) of such loans as of December  31, 2002.  The Model takes the  portfolio
age distribution and maturation into  consideration.  Accordingly,  those trends
did not cause management to alter the Model's  projection for the provisions for
losses.

     As of December 31, 2003, Farmer Mac analyzed the following three categories
of assets for impairment, based on the fair value of the underlying collateral:

     o    $70.0 million of non-performing assets;
     o    $37.4 million of loans for which Farmer Mac has adjusted the timing of
          borrowers'  payment  schedules  within the past three years, but still
          expects  to  collect  all  amounts  due  and  has  not  made  economic
          concessions; and
     o    $65.3 million of performing loans that have previously been delinquent
          or are  secured by real  estate that  produces  commodities  currently
          under stress.

Those  individual  assessments  covered  a total of  $172.7  million  of  assets
measured  for  impairment  against  updated  appraised  values,   other  updated
collateral  valuations or  discounted  values.  Of the $172.7  million of assets
analyzed, $154.5 million were adequately  collateralized.  For the $18.2 million
that  were  not  adequately  collateralized,  individual  collateral  shortfalls
totaled $3.8 million.  Accordingly,  Farmer Mac allocated specific allowances of
$3.8 million to those under-collateralized assets as of December 31, 2003. As of
December  31,   2003,   after  the   allocation   of  specific   allowances   to
under-collateralized  loans,  Farmer Mac had additional  non-specific or general
allowances of $18.3  million,  bringing the total  allowance for losses to $22.1
million.  The  following  table  summarizes  Farmer  Mac's  assets  specifically
reviewed for impairment and its specific allowance for losses:

<TABLE>
<CAPTION>

                   Farmer Mac I Post-1996 Act Assets Specifically Reviewed
                       for Impairment and the Allowance for Losses
---------------------------------------------------------------------------------------------------------------

                                           As of December 31, 2003               As of December 31, 2002
                                      -----------------------------------  ------------------------------------
                                                                 (in thousands)
                                            Assets           Specific            Assets            Specific
                                         Specifically        Allowance        Specifically        Allowance
                                           Reviewed         for Losses          Reviewed          for Losses
                                      -------------------  --------------  -------------------- ---------------
<S>                                       <C>               <C>                  <C>              <C>
Loans in foreclosure                        $ 11,016           $ 119              $ 16,856           $ 519
Loans in bankruptcy *                         38,047           2,769                35,229             687
Loans 90 days or more past due                 5,185             100                17,600             238
Other loans specifically reviewed            102,736             536                     -               -
Real estate owned                             15,716             238                 5,623             592
                                      -------------------  --------------  -------------------- ---------------
   Total                                   $ 172,700         $ 3,762              $ 75,308         $ 2,036
                                      -------------------  --------------  -------------------- ---------------

                                                             Allowance                             Allowance
                                                             for Losses                            for Losses
                                                           --------------                       ---------------
Specific allowance for losses                                $ 3,762                               $ 2,036
General allowance for losses                                  18,291                                17,975
                                                           --------------                       ---------------

   Total allowance for losses                               $ 22,053                              $ 20,011
                                                           --------------                       ---------------

*    Includes loans that are  performing  under either their original loan terms
     or a court-approved bankruptcy plan.

</TABLE>

Based on Farmer Mac's loan-by-loan analyses, loan collection experience and
continuing provisions for the allowance for losses, Farmer Mac believes that
ongoing losses will be covered adequately by the allowance for losses.

     Original  loan-to-value ratios are one of many factors Farmer Mac considers
in evaluating  loss  severity.  Other factors  include,  but are not limited to,
other underwriting  standards,  commodity and agricultural  economic  forecasts.
Loans in the  Farmer  Mac I program  are all first  mortgage  agricultural  real
estate  loans.  Accordingly,  Farmer Mac's  exposure on a loan is limited to the
difference between the total of the accrued interest, advances and the principal
balance of a loan and the value of the property.  Measurement  of that excess or
shortfall  is the best  predictor  and  determinant  of loss  compared  to other
measures that evaluate the efficiency of a particular farm operator.

     Loan-to-value  ratios  depend upon the market value of a property  with due
regard  for  its  income-producing   potential.  As  required  by  Farmer  Mac's
collateral  valuation  standards,  an appraisal of agricultural real estate must
include analysis of the income producing  capability of the property and address
the income estimate in the market analysis. Debt service ratios depend upon farm
operator  efficiency  and  leverage,  which can vary widely  within a geographic
region, commodity type, or an operator's business and farming skills.

     As of December 31, 2003, the weighted-average  original loan-to-value ratio
for  all  post-1996  Act  loans  and  loans  underlying  Farmer  Mac  Guaranteed
Securities  and  LTSPCs  was  49  percent,  and  the  weighted-average  original
loan-to-value ratio for all post-1996 Act non-performing assets was 56 percent.

     The following table summarizes the post-1996 Act  non-performing  assets by
original  loan-to-value ratio (calculated by dividing the loan principal balance
at the time of guarantee,  purchase or commitment by the appraised  value at the
date of loan origination or, when available, updated appraised value at the time
of guarantee, purchase or commitment):

<TABLE>
<CAPTION>

    Distribution of Post-1996 Act Non-performing
Assets by Original LTV Ratio as of December 31, 2003
-----------------------------------------------------
              (dollars in thousands)
                         Post-1996 Act
                         Non-performing
   Original LTV Ratio        Assets       Percentage
  --------------------  ---------------- ------------
<S>                      <C>               <C>
   0.00% to 40.00%         $ 7,207           10%
  40.01% to 50.00%          10,237           14%
  50.01% to 60.00%          28,183           40%
  60.01% to 70.00%          23,111           33%
  70.01% to 80.00%           1,050            2%
  80.01% +                     176            1%
                        --------------   -----------
                Total      $ 69,964         100%
                        --------------   -----------
</TABLE>

<PAGE>


     The following table presents  outstanding  loans held and loans  underlying
post-1996  Act Farmer Mac I  Guaranteed  Securities  and LTSPCs,  post-1996  Act
non-performing assets and specific allowances for losses as of December 31, 2003
by year of origination, geographic region and commodity.

<TABLE>
<CAPTION>
                Farmer Mac I Post-1996 Act Non-performing Assets and Specific Allowance for Losses
-------------------------------------------------------------------------------------------------------------------
                              Distribution of
                                Outstanding         Outstanding      Post-1996 Act
                                   Loans,             Loans,             Non-             Non-          Specific
                               Guarantees and     Guarantees and      performing       performing       Allowance
                                   LTSPCs             LTSPCs          Assets (1)       Asset Rate      for Losses
                            ------------------- ------------------ ---------------- ---------------- --------------
                                                       (dollars in thousands)
<S>                              <C>              <C>                 <C>                <C>          <C>
By year of origination:
  Before 1994                      13%               $ 653,746          $ 2,328            0.36%           $ -
  1994                              3%                 156,635              863            0.55%             -
  1995                              3%                 154,805            4,912            3.17%           677
  1996                              7%                 342,153            9,819            2.87%           395
  1997                              8%                 403,455           13,667            3.39%           360
  1998                             13%                 644,931           14,363            2.23%           541
  1999                             13%                 673,406            9,928            1.47%           221
  2000                              8%                 394,661            7,756            1.97%           908
  2001                             12%                 581,473            5,791            1.00%           660
  2002                             12%                 627,122              537            0.09%             -
  2003                              8%                 387,645                -            0.00%             -
                            ------------------- ------------------ ---------------- ---------------- --------------
Total                             100%             $ 5,020,032         $ 69,964            1.39%       $ 3,762
                            ------------------- ------------------ ---------------- ---------------- --------------

By geographic region (2):
  Northwest                        21%             $ 1,066,399         $ 40,841            3.83%       $ 1,065
  Southwest                        46%               2,307,812           18,321            0.79%           475
  Mid-North                        14%                 677,755            3,561            0.53%           107
  Mid-South                         5%                 257,664            5,396            2.09%         1,972
  Northeast                         8%                 397,231            1,282            0.32%            48
  Southeast                         6%                 313,171              563            0.18%            95
                            ------------------- ------------------ ---------------- ---------------- --------------
Total                             100%             $ 5,020,032         $ 69,964            1.39%       $ 3,762
                            ------------------- ------------------ ---------------- ---------------- --------------
By commodity:
  Crops                            44%             $ 2,228,506         $ 26,388            1.18%         $ 688
  Permanent plantings              27%               1,355,070           27,243            2.01%         1,619
  Livestock                        21%               1,025,245           13,810            1.35%         1,312
  Part-time farm                    7%                 374,057            2,523            0.67%           143
  Other                             1%                  37,154                -            0.00%             -
                            ------------------- ------------------ ---------------- ---------------- --------------
Total                             100%             $ 5,020,032         $ 69,964            1.39%       $ 3,762
                            ------------------- ------------------ ---------------- ---------------- --------------

<FN>
(1)  Includes loans 90 days or more past due, in foreclosure, restructured after
     delinquency,  in bankruptcy  (including loans performing under either their
     original loan terms or a court-approved  bankruptcy  plan), and real estate
     owned.
(2)  Geographic  regions -  Northwest  (AK,  ID, MT,  ND,  NE, OR, SD, WA,  WY);
     Southwest (AZ, CA, CO, HI, NM, NV, UT);  Mid-North (IA, IL, IN, MI, MN, MO,
     WI); Mid-South (KS, OK, TX); Northeast (CT, DE, KY, MA, MD, ME, NC, NH, NJ,
     NY, OH, PA, RI, TN, VA, VT, WV);  and  Southeast  (AL,  AR, FL, GA, LA, MS,
     SC).
</FN>
</TABLE>

<PAGE>


     The  following  table  presents  Farmer Mac's  cumulative  charge-offs  and
current  specific  allowances  relative to the  cumulative  original  purchased,
guaranteed  or LTSPC  principal  balances  for all  loans  purchased  and  loans
underlying  post-1996 Act Farmer Mac I Guaranteed  Securities  and LTSPCs.  This
information  is  presented  by  year  of  origination,   geographic  region  and
commodity.  The purpose of this information is to present information  regarding
losses  and  collateral   deficiencies   relative  to  original  guarantees  and
commitments.

<TABLE>
<CAPTION>

             Farmer Mac I Post-1996 Act Credit Losses and Specific Allowance for Losses
                 Relative to all Cumulative Original Loans, Guarantees and LTSPCs
-------------------------------------------------------------------------------------------------------------------
                                              Cumulative                                              Combined
                             Cumulative     Original Loans,                        Current          Credit Loss
                                 Net          Guarantees           Loss            Specific         and Specific
                            Credit Losses     and LTSPCs           Rate           Allowances       Allowance Rate
                           ---------------- ---------------- ----------------- -----------------  -----------------
                                                           (dollars in thousands)
<S>                          <C>               <C>                 <C>             <C>                  <C>
By year of origination:
  Before 1994                      $ -          $ 1,963,835         0.00%               $ -              0.00%
  1994                               -              357,510         0.00%                 -              0.00%
  1995                             488              320,056         0.15%               677              0.36%
  1996                           2,168              620,108         0.35%               395              0.41%
  1997                           3,263              710,891         0.46%               360              0.51%
  1998                           2,573            1,055,110         0.24%               541              0.30%
  1999                           1,414            1,050,984         0.13%               221              0.16%
  2000                           1,489              641,391         0.23%               908              0.37%
  2001                              10              862,811         0.00%               660              0.08%
  2002                               -              862,936         0.00%                 -              0.00%
  2003                               -              479,049         0.00%                 -              0.00%
                           ----------------    ---------------- ----------------- -----------------  ---------------
Total                         $ 11,405          $ 8,924,681         0.13%           $ 3,762              0.17%
                           ----------------    ----------------                   -----------------
By geographic region (1):
  Northwest                    $ 5,919          $ 1,983,957         0.30%           $ 1,065              0.35%
  Southwest                      5,381            3,886,015         0.14%               475              0.15%
  Mid-North                          -            1,127,594         0.00%               107              0.01%
  Mid-South                          5              417,517         0.00%             1,972              0.47%
  Northeast                          -              753,769         0.00%                48              0.01%
  Southeast                        100              755,829         0.01%                95              0.03%
                           ----------------    ---------------- ----------------- -----------------  ---------------
Total                         $ 11,405          $ 8,924,681         0.13%           $ 3,762              0.17%
                           ----------------    ----------------                   -----------------
By commodity:
  Crops                        $ 1,552          $ 3,912,921         0.04%             $ 688              0.06%
  Permanent plantings            8,020            2,300,118         0.35%             1,619              0.42%
  Livestock                      1,458            1,962,189         0.07%             1,312              0.14%
  Part-time farm                   375              653,879         0.06%               143              0.08%
  Other                              -               95,574         0.00%                 -              0.00%
                           ----------------    --------------- ----------------- -----------------  ----------------
Total                         $ 11,405          $ 8,924,681         0.13%           $ 3,762              0.17%
                           ----------------    ----------------                  -----------------
<FN>
(1)  Geographic  regions -  Northwest  (AK,  ID, MT,  ND,  NE, OR, SD, WA,  WY);
     Southwest (AZ, CA, CO, HI, NM, NV, UT);  Mid-North (IA, IL, IN, MI, MN, MO,
     WI); Mid-South (KS, OK, TX); Northeast (CT, DE, KY, MA, MD, ME, NC, NH, NJ,
     NY, OH, PA, RI, TN, VA, VT, WV);  and  Southeast  (AL,  AR, FL, GA, LA, MS,
     SC).
</FN>
</TABLE>

     An analysis  of Farmer  Mac's  historical  losses and  identified  specific
collateral  deficiencies  within the portfolio (by  origination  year) indicates
that  Farmer Mac has  experienced  peak loss  years as loans  have aged  between
approximately their third and fifth years subsequent to origination,  regardless
of the year the loans were added to Farmer Mac's portfolio.  As a consequence of
the combination of principal  amortization  and collateral  value  appreciation,
there  are few  loans  in the  portfolio  originated  prior to 1996  with  known
collateral deficiencies.  While Farmer Mac expects that there will be loans that
have aged  past  their  fifth  year that will  become  delinquent  and  possibly
default, Farmer Mac does not anticipate significant losses on such loans.

     Analysis of portfolio performance by commodity  distribution indicates that
losses and  collateral  deficiencies  have been and are  expected to remain less
prevalent in the loans secured by real estate producing agricultural commodities
that receive significant government support (such as cotton, soybeans, wheat and
corn)  and more  prevalent  in those  that do not  receive  such  support.  This
analysis is consistent with corresponding  commodity  analysis,  which indicates
that Farmer Mac has experienced  higher loss and collateral  deficiency rates in
its loans classified as permanent  plantings.  The loans classified as permanent
plantings do not receive  significant  government support and are therefore more
susceptible to adverse  commodity-specific  economic trends. Further, as adverse
economic conditions persist for a particular commodity that requires a long-term
improvement on the land, such as permanent plantings, the prospective sale value
of  the  land  is  likely  to  decrease   and  the  related   loans  may  become
under-collateralized.  Farmer  Mac  anticipates  that  one  or  more  particular
commodity  groups will be under  economic  pressure at any one time and actively
manages its portfolio to mitigate  concentration  risks while preserving  Farmer
Mac's ability to meet the financing needs of all commodity groups.

     Analysis of portfolio  performance  by  geographic  distribution  indicates
that, while commodities are the primary  determinant of exposure to loss, within
most commodity groups certain  geographic areas allow greater economies of scale
or proximity to markets than others and, consequently, result in more successful
farms within the  commodity  group.  Likewise,  certain  geographic  areas offer
better  growing  conditions  than  others  and,  consequently,  result  in  more
versatile and more  successful  farms within a given  commodity  group - and the
ability to switch crops among commodity groups.

     Farmer Mac's  methodologies  for pricing its guarantee and commitment fees,
managing credit risks and providing adequate  allowances for losses consider all
of the foregoing factors and information.

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

     o    issuers of AgVantage bonds and other investments held by Farmer Mac;
     o    sellers and servicers; and
     o    interest rate contract counterparties.


AgVantage bonds are general obligations of the AgVantage Issuers and are secured
by collateral  in an amount  ranging from 120 percent to 150 percent of the bond
amount.  In addition to requiring  collateral,  Farmer Mac mitigates credit risk
related to AgVantage bonds by evaluating and monitoring the financial  condition
of the issuers of the AgVantage bonds. Outstanding AgVantage bonds totaled $25.2
million as of December 31, 2003, and $28.6 million as of December 31, 2002.

     Farmer Mac  manages  institutional  credit  risk  related  to  sellers  and
servicers by requiring  those  institutions  to meet Farmer Mac's  standards for
creditworthiness.   Farmer  Mac  monitors  the  financial   condition  of  those
institutions  by evaluating  financial  statements and bank credit rating agency
reports and confirms that they maintain  adequate  fidelity bonds and errors and
omissions  insurance.  For more information on Farmer Mac's approval of sellers,
see  "Business--Farmer Mac Programs--Farmer Mac I--Sellers." Credit risk related
to interest  rate  contracts is discussed in "--Risk  Management--Interest  Rate
Risk" and Note 6 to the consolidated financial statements.

     Credit  Risk -  Other  Investments.  The  credit  risk  inherent  in  other
investments  held by  Farmer  Mac is  mitigated  by  Farmer  Mac's  policies  of
investing in highly-rated  instruments and  establishing  concentration  limits,
which reduce exposure to any one  counterparty.  Farmer Mac's policies limit the
Corporation's total credit exposure,  including uncollateralized credit exposure
resulting from financial derivatives,  to a single entity by limiting the dollar
amount of investments  with each individual  entity to the greater of 25 percent
of Farmer Mac's regulatory core capital or $25 million. That limitation excludes
exposure to agencies of the U.S.  government,  government-sponsored  enterprises
and money market funds.  Farmer Mac policy also requires each individual  entity
to be  rated in one of the  three  highest  rating  categories  of at least  one
nationally recognized statistical rating organization for investments with terms
greater  than 270  days  and in one of the two  highest  rating  categories  for
investments with terms of 270 days or less.

     As of December 31, 2003,  Farmer Mac had  investments in commercial  paper,
corporate  debt  securities,   asset-backed  securities,  municipal  bonds,  and
preferred stock issued by forty-five  entities  totaling $887.4 million.  Farmer
Mac's  investments  in eighteen of these  entities  each  exceeded 10 percent of
Farmer  Mac's  core  capital  (the  cumulative  balance of  investments  in such
entities totaled $439.6 million),  and investments in two of these entities each
exceeded 15 percent of core  capital.  In  addition,  as of December  31,  2002,
Farmer Mac held  $282.3  million of  securities  issued by  government-sponsored
enterprises or agencies of the U.S. government and $516.7 million in three money
market investment accounts. The maximum amount held in any one money market fund
investment fund at any time during 2003 was approximately  $480.1 million. As of
December  31,  2003,  53  percent  of  the   investment   portfolio,   excluding
government-sponsored enterprise and agency investments,  consisted of short-term
highly liquid investments.


Liquidity and Capital Resources

     Farmer Mac has  sufficient  liquidity and capital  resources to support its
operations  for the next twelve  months and has a  contingency  funding  plan to
handle unanticipated disruptions in its access to the capital markets.

     Debt Issuance.  Section 8.6(e) of Farmer Mac's statutory charter (12 U.S.C.
ss.  2279aa-6(e))  authorizes  Farmer Mac to issue debt  obligations to purchase
eligible  mortgage  loans and Farmer Mac  Guaranteed  Securities and to maintain
reasonable amounts for business operations, including adequate liquidity. Farmer
Mac funds its program purchases primarily by issuing debt obligations of various
maturities in the public capital markets.  Farmer Mac's debt obligations consist
of discount notes and  medium-term  notes issued to obtain funds  principally to
cover the costs of purchasing and holding loans and securities (including Farmer
Mac  Guaranteed   Securities).   Farmer  Mac  also  issues  discount  notes  and
medium-term  notes to  obtain  funds  for  investments,  transaction  costs  and
guarantee payments.  The Corporation's  discount notes and medium-term notes are
obligations  of Farmer  Mac only,  are not rated by any  rating  agency  and the
interest and principal thereon are not guaranteed by and do not constitute debts
or  obligations  of the Farm Credit  Administration  or the United States or any
agency or instrumentality of the United States other than Farmer Mac. Farmer Mac
is an institution  of the Farm Credit System,  but is not liable for any debt or
obligation of any other institution of the Farm Credit System. Likewise, neither
the Farm Credit System nor any other  individual  institution of the Farm Credit
System is liable  for any debt or  obligation  of Farmer  Mac.  Income on Farmer
Mac's discount notes and  medium-term  notes has no exemption  under federal law
from federal, state or local taxation.

     Farmer Mac's board of directors has  authorized  the issuance of up to $5.0
billion of  discount  notes and  medium-term  notes (of which $3.9  billion  was
outstanding as of December 31, 2003), subject to periodic review of the adequacy
of that  level  relative  to Farmer  Mac's  borrowing  requirements.  Farmer Mac
invests  the  proceeds  of  such  issuances  in  loans,  Farmer  Mac  Guaranteed
Securities  and  non-program  investment  assets in accordance  with  guidelines
established by its board of directors.

     Liquidity.  The  funding  and  liquidity  needs of  Farmer  Mac's  business
programs  are  driven by the  purchase  and  retention  of loans and  Farmer Mac
Guaranteed  Securities,  the  maturities  of  Farmer  Mac's  discount  notes and
medium-term notes and payment of principal and interest on Farmer Mac Guaranteed
Securities. Farmer Mac's primary sources of funds to meet these needs are:


     o    principal and interest  payments and ongoing  guarantee and commitment
          fees received on loans, Farmer Mac Guaranteed Securities and LTSPCs;
     o    principal and interest payments  received from investment  securities;
          and
     o    the issuance of new discount notes and medium-term notes.

     Farmer Mac  projects  its  expected  cash flows from loans and  securities,
other earnings and the sale of assets and matches those with its  obligations to
retire  debt and pay  other  liabilities  as they come due.  Farmer  Mac  issues
discount  notes  and  medium-term  notes to meet the needs  associated  with its
business operaions,  including liquidity,  and also to increase its presence in
the capital markets in order to enhance the liquidity and pricing  efficiency of
its discount notes and  medium-term  notes and Farmer Mac Guaranteed  Securities
transactions  and so improve the mortgage rates  available to farmers,  ranchers
and rural homeowners.


     Though Farmer Mac's mortgage  purchases do not currently  necessitate daily
debt issuance,  the Corporation  continued its strategy of using its non-program
investment  portfolio  (referred  to as Farmer  Mac's  liquidity  portfolio)  to
facilitate  increasing its ongoing  presence in the capital markets during 2003.
To meet investor  demand for daily presence in the capital  markets,  Farmer Mac
issues  discount  notes  in  maturities  principally  ranging  from  one  day to
approximately  90 days and invests  the  proceeds  not needed for program  asset
purchases in highly-rated  securities.  Investments are predominantly short-term
money market  securities  with  maturities  closely matched to the discount note
maturities and  floating-rate  securities with reset terms of less than one year
and closely matched to the maturity of the discount  notes.  The positive spread
earned from these investments enhances the net interest income Farmer Mac earns,
thereby improving the net yields at which Farmer Mac can purchase mortgages from
lenders who may pass that  benefit to  farmers,  ranchers  and rural  homeowners
through the Farmer Mac programs.  Subject to dollar amount, issuer concentration
and  credit  quality  limitations,  the  Corporation's  board of  directors  has
authorized non-program investments in:

     o    U.S. Treasury obligations;
     o    agency and instrumentality obligations;
     o    repurchase agreements;
     o    commercial paper;
     o    guaranteed investment contracts;
     o    certificates of deposit;
     o    federal funds and bankers acceptances;
     o    securities and debt obligations of corporate and municipal issuers;
     o    asset-backed securities;
     o    corporate money market funds; and
     o    preferred stock of government-sponsored enterprises.

As of  December  31,  2003,  Farmer Mac was in  compliance  with the  investment
authorizations set forth in its investment guidelines.


     The following  table presents  Farmer Mac's five largest  investments as of
December 31, 2003:

<TABLE>
<CAPTION>
                                                                      Security
                                                                       Credit          Recorded       Percent of
          Investment                          Issuer                   Rating         Investment     Core Capital
-------------------------------   -----------------------------   ---------------  ---------------  --------------
                                               (dollars in thousands)
<S>                                                                                   <C>                <C>
Merrill Lynch Premier              Merrill Lynch & Co., Inc.           N/A *          $ 255,554          118.5%
     Institutional Fund
Federated Prime Value              Federated Group Inc.                N/A *            160,740           74.6%
     Obligations Fund
Dreyfus Cash Management            Dreyfus Corp.                       N/A *            100,379           46.6%
     and Institutional Shares
Preferred Stock                    CoBank, ACB                      not rated **         88,500           41.1%

Preferred Stock                    AgFirst Farm Credit Bank         not rated **         88,035           40.8%

<FN>
*    These money  market  funds are not rated,  but invest in  short-term,  high
     quality money market  securities and conform to Rule 2a-7 of the Investment
     Company Act of 1940.
**   CoBank,  ACB and  AgFirst  Farm Credit  Bank are  institutions  of the Farm
     Credit System, a government-sponsored enterprise.
</FN>
</TABLE>

     As a result  of  Farmer  Mac's  regular  issuance  of  discount  notes  and
medium-term notes and its status as a federally chartered instrumentality of the
United  States,  Farmer  Mac has been  able to access  the  capital  markets  at
favorable rates. Farmer Mac has also used floating-to-fixed interest rate swaps,
combined with discount note issuances,  as a source of fixed-rate funding. While
the swap market may provide  favorable  fixed rates,  swap  transactions  expose
Farmer Mac to the risk of future  widening of its own  issuance  spreads  versus
corresponding  LIBOR rates. If the spreads on the Farmer Mac discount notes were
to  increase  relative to LIBOR,  Farmer Mac would be exposed to a  commensurate
reduction   on  its  net  interest   yield  on  the   notional   amount  of  its
floating-to-fixed  interest  rate  swaps and  other  LIBOR-based  floating  rate
assets.  Farmer Mac  compensates for this risk by pricing the required net yield
on program  asset  purchases to reflect the cost of  medium-term  notes  without
regard to the savings that may be achievable in the interest rate swap market.

     Farmer Mac  maintains a  liquidity  investment  portfolio  of cash and cash
equivalents  (including  commercial  paper and  other  short-term  money  market
instruments)  and  investment  securities  consisting  mostly of  floating  rate
securities  that reprice within one year,  which can be drawn upon for liquidity
needs.  As of December 31,  2003,  Farmer  Mac's cash and cash  equivalents  and
investment securities totaled $623.7 million and $1,064.8 million, respectively,
a combined 39.3 percent of total assets and 42.9 percent of total notes payable.
In addition, as of December 31, 2003, Farmer Mac held a $678.2 million portfolio
of Farmer Mac II Guaranteed  Securities backed by USDA Guaranteed  Portions that
carry the full faith and credit of the U.S. Government. As of December 31, 2003,
the  aggregate  of the Farmer Mac II  Guaranteed  Securities  and the  liquidity
investment  portfolio  represented 55.1 percent of total assets and 60.1 percent
of total notes payable.  During 2003, exclusive of daily overnight discount note
issuances the proceeds of which were invested  overnight,  the average  discount
note issuance term and re-funding frequency was approximately 65.8 days.

     The  principal  sources of funding for Farmer Mac's  obligations  under its
guarantees and LTSPCs are:

     o    the ongoing fees received on its guarantees and commitments:
     o    net interest income received on loans and Guaranteed Securities; and
     o    the proceeds of debt issuance.

Farmer Mac  satisfies  its  guarantee  and purchase  commitment  obligations  by
purchasing  defaulted loans out of LTSPCs and from the related trusts for Farmer
Mac Guaranteed  Securities.  Farmer Mac typically recovers a significant portion
of the value of defaulted loans purchased either through borrower payments, loan
payoffs,  payments  by third  parties  or  foreclosure  and sale.  Farmer  Mac's
liquidity  position and ready access to the debt markets also provide additional
flexibility to meet liquidity needs that result from the  uncertainty  regarding
the timing and amount of required  purchases of loans  underlying  either Farmer
Mac Guaranteed Securities or LTSPCs, should significantly more loans be required
to be purchased than in prior periods.

     Capital  Requirements.  The Act,  as amended  by the 1996 Act,  establishes
three capital standards for Farmer  Mac--minimum,  critical and risk-based.  The
minimum  capital  requirement  is expressed as a percentage of on-balance  sheet
assets and off-balance sheet obligations,  with the critical capital requirement
equal to one-half of the minimum  capital  amount.  Higher  minimum and critical
capital  requirements  were phased in over a transition  period,  which ended on
January 1, 1999,  when the highest level of minimum  capital became  applicable.
The Act does not specify the required  level of risk-based  capital.  It directs
FCA to  establish a  risk-based  capital  test for Farmer Mac,  using  specified
stress-test   parameters.   For  a  discussion   of  risk-based   capital,   see
"Business--Government     Regulation    of    Farmer    Mac--Regulation--Capital
Standards--General."

     Certain  enforcement  powers are given to FCA  depending  upon Farmer Mac's
compliance with the capital standards. See  "Business--Government  Regulation of
Farmer  Mac--Regulation--Capital  Standards--Enforcement levels." As of December
31, 2003 and 2002,  Farmer Mac was  classified  as within "level I" (the highest
compliance  level).  The following table sets forth Farmer Mac's minimum capital
requirement  as of  December  31,  2003 and 2002  based on the  fully  phased-in
requirements.

<TABLE>
<CAPTION>

                                                           December 31, 2003                       December 31, 2002
                                            -----------------------------------------  ----------------------------------------
                                                                          Capital                                   Capital
                                                Amount       Ratio        Required        Amount         Ratio      Required
                                            ------------- ------------ -------------  ---------------  ----------- ------------
                                                                         (dollars in thousands)
<S>                                          <C>             <C>        <C>           <C>               <C>       <C>
On-balance sheet assets as defined for
   determining statutory minimum capital      $4,231,931      2.75%      $116,378      $4,126,719        2.75%     $113,485
Outstanding balance of Farmer Mac
   Guaranteed Securities held by others
   and LTSPCs                                  3,352,078      0.75%        25,141       3,048,289        0.75%       22,862
Derivative and hedging obligations                67,670      0.75%           508          93,997        0.75%          705
                                                                      -------------                              ------------

Minimum capital level                                                     142,026                                   137,052
Actual core capital                                                       215,550                                   183,978
                                                                      -------------                              ------------
Capital surplus                                                          $ 73,524                                   $46,926
                                                                      -------------                              ------------
</TABLE>

     Based on the statutory minimum capital  requirements,  Farmer Mac's current
capital surplus of $73.5 million would support  additional  guarantee  growth in
amounts  ranging from $2.7 billion of on-balance  sheet  guarantees to more than
$9.8 billion of  off-balance  sheet  guarantees  and  commitments.  Furthermore,
Farmer Mac could sell $1.7 billion of on-balance sheet non-program  assets (cash
and cash  equivalents and investment  securities) and $2.5 billion of on-balance
sheet  program  assets  in  order  to  support  further  increases  of  on-  and
off-balance sheet program guarantees and commitments.  Any of these transactions
would be evaluated for compliance with risk-based  capital  requirements  and to
optimize Farmer Mac's return on equity and capital flexibility.

     Accordingly,  in the  opinion  of  management,  Farmer  Mac has  sufficient
capital and liquidity for the next twelve months.

     Contractual  Obligations,  Contingent  Liabilities  and  Off-Balance  Sheet
Arrangements. The following table presents the amount and timing of Farmer Mac's
known  fixed and  determinable  contractual  obligations  by payment  date as of
December 31, 2003. The payment amounts represent those amounts contractually due
to the  recipient  and do not include any  unamortized  premiums or discounts or
other similar carrying value adjustments.

<TABLE>
<CAPTION>
                                  One Year          One to          Three to      Over Five
                                  or Less         Three Years      Five Years       Years           Total
                               ---------------  ----------------  -------------  ------------   ---------------
                                                                 (in thousands)
<S>                             <C>                  <C>            <C>           <C>            <C>
Discount notes*                  $2,648,760               $ -            $ -           $ -        $2,648,760
Medium-term notes*                  381,375           510,969        307,798       367,239         1,567,381
Operating lease obligations**           545             1,131          1,187         1,897             4,760
Purchase obligations***                 479                13                                            492
<FN>
*    Future  events,   including  additional  issuance  of  discount  notes  and
     medium-term  notes and  refinancing  of those  notes,  could  cause  actual
     payments to differ  significantly from these amounts.  For more information
     regarding  discount  notes  and  medium-term  notes,  see  Note  7  to  the
     consolidated financial statements.

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

***  Includes  minimum amounts due under  non-cancelable  agreements to purchase
     goods or services that are  enforceable and legally binding and specify all
     significant terms. These agreements include agreements for the provision of
     internal  audit  services,  consulting  services,   information  technology
     support,  equipment  maintenance,   and  financial  analysis  software  and
     services.  The amounts  actually paid under these agreements will likely be
     higher due to the variable  components  of some of these  agreements  under
     which the ultimate  obligation  owed is  determined  by reference to actual
     usage or hours  worked.  The  table  does not  include  amounts  due  under
     agreements  that are cancelable  without  penalty or further  payment as of
     December 31, 2003 and  therefore do not represent  enforceable  and legally
     binding obligations.  The table also does not include amounts due under the
     terms of employment agreements with members of senior management.
</FN>
</TABLE>

See the  tables  below  in this  section  for  information  about  Farmer  Mac's
commitments  to purchase  loans and Farmer Mac's  contingent  obligations  under
outstanding Farmer Mac I Guaranteed Securities and LTSPCs.


     Farmer Mac enters into financial derivative contracts under which it either
receives cash from counterparties, or is required to pay cash to them, depending
on  changes  in  interest  rates.  Financial  derivatives  are  carried  on  the
consolidated balance sheet at fair value,  representing the net present value of
expected  future cash payments or receipts based on market  interest rates as of
the balance sheet date. The fair values of the contracts  change daily as market
interest rates change.  Because the financial derivative liabilities recorded on
the  consolidated  balance  sheet as of December 31, 2003 do not  represent  the
amounts that may  ultimately be paid under the financial  derivative  contracts,
those  liabilities  are not  included  in the table of  contractual  obligations
presented above. Further information regarding financial derivatives is included
in Note 2(h) and Note 6 to the consolidated financial statements.

     In  conducting  its  loan  purchase  activities,  Farmer  Mac  enters  into
mandatory and optional delivery commitments to purchase  agricultural  mortgages
and  corresponding   optional  commitments  to  deliver  Farmer  Mac  Guaranteed
Securities.  In  conducting  its  LTSPC  activities,   Farmer  Mac  enters  into
arrangements whereby it commits to buy agricultural mortgages at an undetermined
future date. The following table presents these significant commitments.

<TABLE>
<CAPTION>

                                      As of               As of
                                   December 31,        December 31,
                                      2003                2002
                                ----------------    ---------------
                                           (in thousands)
<S>                             <C>                  <C>
Mandatory commitments to
    purchase loans and
    USDA-guaranteed portions      $ 11,226             $ 21,700
Optional commitments to
    purchase loans                       -                4,478
Optional commitments to
     deliver Farmer Mac
     Guaranteed Securities               -                4,478
LTSPCs                           2,348,702            2,681,240
</TABLE>

Further information regarding commitments to purchase and sell loans is included
in Note 12 to the consolidated financial statements.

     Farmer  Mac  also may have  liabilities  that  arise  from its  Farmer  Mac
Guaranteed  Securities.  Farmer Mac  Guaranteed  Securities  are issued  through
trusts and, when sold to third-party investors, accordingly, are not included in
the consolidated balance sheets. In performing its obligations related to LTSPCs
and Farmer Mac Guaranteed Securities, Farmer Mac would have the right to enforce
the  underlying  agricultural  mortgage  loans,  and in the event of the default
under the terms of those loans, would have access to the underlying collateral.

     The  following  table  presents  the  balance  of  outstanding  LTSPCs  and
off-balance  sheet Farmer Mac Guaranteed  Securities as of December 31, 2003 and
2002:

<TABLE>
<CAPTION>

           Outstanding Balance of LTSPCs and
           Off-Balance Sheet Farmer Mac Guaranteed Securities
--------------------------------------------------------------------------------------
                                                            As of December 31,
                                                    ----------------------------------
                                                          2003              2002
                                                    -----------------  ---------------
                                                              (in thousands)
<S>                                                    <C>             <C>
Farmer Mac I Post-1996 Act obligations:
    Farmer Mac I Guaranteed Securities                   $ 952,134        $ 299,940
    LTSPCs                                               2,348,702        2,681,240
                                                    -----------------  ---------------
     Total Farmer Mac I Post-1996 Act obligations        3,300,836        2,981,180
Farmer Mac II Guaranteed Securities                         51,241           67,109
                                                    -----------------  ---------------
     Total Farmer Mac I and II                         $ 3,352,077      $ 3,048,289
                                                    -----------------  ---------------
</TABLE>

     See  Note  2(c),  Note  2(e)  and  Note  5 to  the  consolidated  financial
statements for more  information  on Farmer Mac  Guaranteed  Securities and Note
2(o) and Note 12 to the consolidated  financial  statements for more information
on LTSPCs.

Other Matters

     New Accounting  Standards.  For all LTSPCs or guarantees issued or modified
on or after  January  1,  2003,  Farmer  Mac  recognizes,  at  inception  of the
guarantee or  commitment,  an asset that is equal to the fair value for the fees
that  will be  received  over the life of each  guarantee  or  commitment  and a
liability for the fair value of its  obligation to stand ready to perform.  Both
the asset and liability were  subsequently  measured and recorded at fair value.
In  December  of 2003,  the SEC  provided  additional  guidance on the "day two"
accounting for these  financial  instruments.  In accordance with this guidance,
Farmer Mac has adopted the  amortized  cost model for day two  accounting.  This
guidance will be applied  prospectively for guarantees and commitments  recorded
at December 31, 2003 and all guarantees and commitments issued or modified on or
after January 1, 2004.

     In December 2003, the American  Institute of Certified  Public  Accountants
issued  Statement  of  Position  03-3,  Accounting  for  Certain  Loans  or Debt
Securities Acquired in a Transfer ("SOP 03-3"). SOP 03-3,  addresses  accounting
for  differences  between  contractual  cash flows and cash flows expected to be
collected  from an investor's  initial  investment  in loans or debt  securities
acquired in a transfer if those differences are attributable,  at least in part,
to credit quality.  Specifically, SOP 03-3 limits the yield that may be accreted
and prohibits the  "carry-over" of a valuation  allowance for all impaired loans
that are within the scope of SOP 03-3.  SOP 03-3 is effective for loans acquired
in fiscal years beginning after December 15, 2004.

     On January 1, 2003,  Farmer Mac adopted  Statement of Financial  Accounting
Standards No. 145,  Rescission of FASB Statements No. 4, 44 and 64, Amendment of
FASB  Statement No. 13 and Technical  Corrections  ("SFAS 145"),  which requires
gains and losses from the  extinguishment or repurchase of debt to be classified
as extraordinary items only if they meet the criteria for such classification in
Accounting Principles Board Opinion No. 30, Reporting the Results of Operations,
Reporting the Effects of Disposal of a Segment of a Business and  Extraordinary,
Unusual and Infrequently  Occurring Events and Transactions ("APB 30"). Prior to
the  adoption  of this  standard,  gains and losses from the  extinguishment  or
repurchase  of debt  were  classified  as  extraordinary  items.  This  standard
effectively  eliminated  the  classification  of most  debt  extinguishments  or
repurchases as  extraordinary  items, as reflected in Farmer Mac's  consolidated
financial   statements.   All  prior  period   repurchases  of  debt  have  been
reclassified to conform to the new classification.


Item 7A. Quantitative and Qualitative Disclosures About Market Risk

     Farmer Mac is exposed to market risk from changes in interest rates. Farmer
Mac manages this market risk by entering  into various  financial  transactions,
including  financial  derivatives,  and by monitoring its exposure to changes in
interest rates. See "Management's Discussion and Analysis of Financial Condition
and  Results  of  Operations--Risk  Management--Interest  Rate  Risk"  for  more
information  about Farmer Mac's exposure to interest rate risk and strategies to
manage such risk. For information  regarding  Farmer Mac's use of and accounting
policies for financial derivatives, see Note 2(h) and Note 6 to the consolidated
financial statements.


<PAGE>


Item 8. Financial Statements
REPORTS OF INDEPENDENT AUDITORS

To the Board of Directors and Stockholders of
Federal Agricultural Mortgage Corporation:

We have  audited the  accompanying  consolidated  balance  sheets of the Federal
Agricultural  Mortgage  Corporation and subsidiary ("Farmer Mac") as of December
31,  2003 and 2002,  and the  related  consolidated  statements  of  operations,
changes in stockholders'  equity, and cash flows for the years then ended. These
financial  statements are the  responsibility  of Farmer Mac's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.  The consolidated  financial  statements for the year ended December
31, 2001, before the  reclassifications  discussed in Note 2 to the consolidated
financial statements, were audited by other auditors who have ceased operations.
Those auditors expressed an unqualified  opinion,  dated January 23, 2002, which
included an explanatory paragraph regarding Farmer Mac's change in its method of
accounting  for  financial  derivatives  on January  1, 2001 on those  financial
statements.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  such 2003 and 2002 consolidated  financial  statements  present
fairly,  in all  material  respects,  the  financial  position  of  the  Federal
Agricultural  Mortgage Corporation and subsidiary at December 31, 2003 and 2002,
and the  results  of their  operations  and their  cash flows for the years then
ended in conformity with accounting  principles generally accepted in the United
States of America.

As  discussed  above,  the  consolidated  financial  statements  of the  Federal
Agricultural Mortgage Corporation and subsidiary for the year ended December 31,
2001, were audited by other auditors who have ceased operations. As described in
Note 2 to the consolidated  financial statements,  certain  reclassifications of
the 2001 consolidated  financial  statements were made to conform to the current
period presentation. We audited the reclassifications described in Note 2 to the
consolidated  financial  statements that were made to conform the 2001 financial
statements to the current period presentation. Our audit procedures with respect
to the 2001  reclassifications  described in Note 2 included  (1) comparing  the
amounts  shown as the  provision for loan losses and the provision for losses in
Farmer Mac's  consolidated  statement of operations  to Farmer Mac's  underlying
accounting analysis obtained from management, (2) on a test basis, comparing the
amounts  comprising  the  provision for loan losses and the provision for losses
obtained from  management  to  supporting  documentation,  and  (3) testing  the
mathematical   accuracy  of  the  underlying  analyses.  In  our  opinion,  such
reclassifications  are appropriate and have been properly applied.  However,  we
were not engaged to audit, review, or apply any procedures to the 2001 financial
statements of Farmer Mac other than with respect to such  reclassifications and,
accordingly,  we do not express an opinion or any form of  assurance on the 2001
financial statements taken as a whole.


DELOITTE & TOUCHE LLP


McLean, Virginia
March 15, 2004

<PAGE>



The report of Arthur  Andersen  LLP below is a copy of their  previously  issued
report  contained in Farmer Mac's Annual  Report on Form 10-K for the year ended
December  31,  2001.  Arthur  Andersen  LLP has  ceased  operations  and has not
reissued its report in connection with this Form 10-K.

                                         * * * * *

The Board of Directors and Stockholders of
Federal Agricultural Mortgage Corporation:

We have  audited the  accompanying  consolidated  balance  sheets of the Federal
Agricultural Mortgage Corporation ("Farmer Mac") and subsidiaries as of December
31,  2001 and 2000,  and the  related  consolidated  statements  of  operations,
changes in stockholders'  equity,  and cash flows for each of the three years in
the  period  ended  December  31,  2001.  These  financial  statements  are  the
responsibility of Farmer Mac's management.  Our  responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable  assurance about whether the financial  statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting  the amounts and  disclosures in the financial  statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by  management,  as well as  evaluating  the  overall  financial  statement
presentation.  We believe  that our audits  provide a  reasonable  basis for our
opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of Farmer Mac and subsidiaries as
of December  31, 2001 and 2000,  and the results of their  operations  and their
cash flows for each of the three years in the period ended December 31, 2001, in
conformity with accounting principles generally accepted in the United States.

As  discussed  in Note 2 to the  consolidated  financial  statements,  effective
January 1, 2001,  Farmer Mac  changed  its method of  accounting  for  financial
derivatives.

Arthur Andersen LLP



Vienna, VA
January 23, 2002






<PAGE>


                  FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                                            December 31,
                                                                ------------------------------------
                                                                      2003               2002
                                                                -----------------  -----------------
                                                                           (in thousands)
<S>                                                               <C>                <C>
Assets:
   Cash and cash equivalents                                         $ 623,674          $ 723,800
   Investment securities                                             1,064,782            830,409
   Farmer Mac Guaranteed Securities                                  1,508,134          1,608,507

   Loans held for sale                                                  46,662             37,015
   Loans held for investment                                           942,929            929,108
    Allowance for loan losses                                           (5,967)            (2,662)
                                                                -----------------  -----------------
     Loans, net                                                        983,624            963,461
  Real estate owned, net of valuation allowance                         15,478              5,031
     of $0.2 million and $0.6 million
   Financial derivatives                                                   961                317
   Interest receivable                                                  58,423             65,276
   Guarantee and commitment fees receivable                             16,885              5,938
   Deferred tax asset, net                                              10,891              9,666
   Prepaid expenses and other assets                                    16,798             10,510
                                                                -----------------  -----------------
     Total Assets                                                  $ 4,299,650        $ 4,222,915
                                                                -----------------  -----------------

Liabilities and Stockholders' Equity:
Liabilities:
   Notes payable:
    Due within one year                                            $ 2,799,384        $ 2,895,746
    Due after one year                                               1,136,110            985,318
                                                                -----------------  -----------------
     Total notes payable                                             3,935,494          3,881,064

   Financial derivatives                                                67,670             94,314
   Accrued interest payable                                             26,342             29,756
   Guarantee and commitment obligation                                  14,144                  -
   Accounts payable and accrued expenses                                29,574             17,453
   Reserve for losses                                                   13,172             16,757
                                                                -----------------  -----------------
     Total Liabilities                                               4,086,396          4,039,344
                                                                -----------------  -----------------

Commitments and Contingencies (Note 12)

Stockholders' Equity:
   Preferred stock:
    Series A, stated at redemption/liquidation value,
     $50 per share, 700,000 shares authorized, issued
     and outstanding                                                    35,000             35,000
   Common stock:
    Class A Voting, $1 par value, no maximum authorization,
     1,030,780 shares issued and outstanding                             1,031              1,031
    Class B Voting, $1 par value, no maximum authorization,
     500,301 shares issued and outstanding                                 500                500
    Class C Non-Voting, $1 par value, no maximum authorization,
     10,522,513 and 10,106,903 shares issued and outstanding
     as of December 31, 2003 and 2002, respectively                     10,523             10,107
   Additional paid-in capital                                           88,652             82,527
   Accumulated other comprehensive income/(loss)                        (2,295)              (407)
   Retained earnings                                                    79,843             54,813
                                                                -----------------  -----------------
     Total Stockholders' Equity                                        213,254            183,571
                                                                -----------------  -----------------
   Total Liabilities and Stockholders' Equity                      $ 4,299,650        $ 4,222,915
                                                                -----------------  -----------------


                   See accompanying notes to consolidated financial statements.
</TABLE>

                  FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                        For Year Ended December 31,
                                                              ------------------------------------------------
                                                                   2003             2002            2001
                                                              ---------------  ---------------  --------------
                                                                    (in thousands, except per share amounts)
<S>                                                              <C>              <C>             <C>
Interest income:
   Investments and cash equivalents                               $ 35,287         $ 42,629        $ 66,534
   Farmer Mac Guaranteed Securities                                 73,692           89,736         110,169
   Loans                                                            52,580           39,505           5,710
                                                              ---------------  ---------------  --------------
    Total interest income                                          161,559          171,870         182,413
Interest expense                                                   124,307          132,771         153,147
                                                              ---------------  ---------------  --------------
Net interest income                                                 37,252           39,099          29,266
   Provision for loan losses                                        (6,524)          (1,340)           (600)
                                                              ---------------  ---------------  --------------
Net interest income after provision for loan losses                 30,728           37,759          28,666
Guarantee and commitment fees                                       20,685           19,277          15,807
Gains/(Losses) on financial derivatives and trading assets           2,357           (8,433)         (3,053)
Gains on the repurchase of debt                                          -            1,368               -
Gains on the sale of real estate owned                                 178               24              61
Miscellaneous income                                                   812            1,332             560
                                                              ---------------  ---------------  --------------
    Total revenues                                                  54,760           51,327          42,041
                                                              ---------------  ---------------  --------------
Expenses:
   Compensation and employee benefits                                6,121            5,142           5,601
   General and administrative                                        6,031            5,521           4,093
   Regulatory fees                                                   2,005            1,172             735
   REO operating costs, net                                            264               25               1
   Provision for losses                                                761            6,907           6,186
                                                              ---------------  ---------------  --------------
    Total operating expenses                                        15,182           18,767          16,616
                                                              ---------------  ---------------  --------------
Income before income taxes                                          39,578           32,560          25,425
Income tax expense                                                  12,308            9,809           8,419
                                                              ------------------------------------------------
Net income before cumulative effect
   of change in accounting principles                               27,270           22,751          17,006
Cumulative effect of change
   in accounting principles, net of taxes                                -                -            (726)
                                                              ---------------  ---------------  --------------
Net income                                                          27,270           22,751          16,280
Preferred stock dividends                                           (2,240)          (1,456)              -
                                                              ---------------  ---------------  --------------
Net income available to common stockholders                       $ 25,030         $ 21,295        $ 16,280
                                                              ---------------  ---------------  --------------
Earnings per common share:
    Basic earnings per common share                                 $ 2.13           $ 1.83          $ 1.44
    Diluted earnings per common share                               $ 2.08           $ 1.77          $ 1.38
Earnings per common share before cumulative
   effect of change in accounting principles
    Basic earnings per common share                                 $ 2.13           $ 1.83          $ 1.50
    Diluted earnings per common share                               $ 2.08           $ 1.77          $ 1.45

                     See accompanying notes to consolidated financial statements.
</TABLE>

<PAGE>


                  FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARY
                 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                     (in thousands)

<TABLE>
<CAPTION>
                                     Common           Preferred                  Accumulated
                                     Stock              Stock       Additional      Other
                              ------------------ ------------------  Paid-in    Comprehensive    Retained
                               Shares   Amount     Shares  Amount     Capital    Income/(Loss)   Earnings    Total
                              -------- --------- -------- --------- ----------   -------------- ---------- ----------
<S>                          <C>      <C>            <C>     <C>   <C>             <C>         <C>        <C>
Balance, January 1, 2001      11,152   $11,152        -       $ -   $ 72,773        $ 31,498    $17,238    $132,661
                              -------- --------- -------- --------- ----------   -------------- ---------- ----------

  Net income                                                                                     16,280      16,280
  Change in unrealized gain/loss
    on securities available-for-sale,
    net of taxes of $4.2 million                                                      (7,601)                (7,601)
  Cumulative effect of change in
    accounting principles,
    net of taxes of $4.8 million                                                      (8,632)                (8,632)
  Change in unrealized gain/loss
    on financial derivatives,
    net of taxes of $3.7 million                                                      (6,870)                (6,870)
                                                                                                           ----------
  Total comprehensive loss                                                                                   (6,823)
  Issuance of class C
   common stock                   412       412                         8,187                                 8,599
                              -------- --------- -------- --------- ----------   -------------- --------   ----------
Balance, December 31, 2001     11,564   $11,564        -       $ -   $ 80,960        $ 8,395    $33,518    $134,437
                              -------- --------- -------- --------- ----------   -------------- --------   ----------

  Net Income                                                                                     22,751      22,751
  Change in unrealized gain/loss
    on securities available-for-sale,
    net of taxes of $20.7 million                                                     38,423                 38,423
  Change in unrealized gain/loss
    on financial derivatives,
    net of taxes of $25.4 million                                                    (47,225)               (47,225)
                                                                                                          ----------
 Total comprehensive income                                                                                  13,949
  Issuance of class C
   common stock                    74        74                         1,900                                 1,974
  Issuance of preferred stock                        700    35,000       (333)                               34,667
  Preferred stock dividends                                                                      (1,456)     (1,456)
                              -------- --------- -------- --------- ----------   -------------- --------  ----------
Balance, December 31, 2002     11,638   $11,638      700   $35,000   $ 82,527         $ (407)   $54,813    $183,571
                              -------- --------- -------- --------- ----------   -------------- --------  ----------

  Net Income                                                                                     27,270      27,270
  Change in unrealized gain/loss
    on securities available-for-sale,
    net of taxes of $10.3 million                                                    (19,063)               (19,063)
  Change in unrealized gain/loss
    on financial derivatives,
    net of taxes of $9.2 million                                                      17,175                 17,175
                                                                                                          ----------
  Total comprehensive income                                                                                 25,382
  Issuance of class C
   common stock                   416       416                         6,125                                 6,541
  Preferred stock dividends                                                                      (2,240)     (2,240)
                              -------- --------- -------- --------- ----------   -------------- --------   ----------
Balance, December 31, 2003     12,054   $12,054      700   $35,000   $ 88,652       $ (2,295)   $79,843    $213,254
                              -------- --------- -------- --------- ----------   -------------- --------   ----------

                         See accompanying notes to consolidated financial statements.
</TABLE>

<PAGE>


                  FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                                     For Year Ended December 31,
                                                                        ------------------------------------------------------
                                                                              2003              2002               2001
                                                                        -----------------  ----------------  -----------------
                                                                                            (in thousands)
<S>                                                                      <C>               <C>               <C>
Cash flows from operating activities:
   Net income                                                                $ 27,270          $ 22,751           $ 16,280
   Adjustments to reconcile net income to net cash provided by
    operating activities:
    Net amortization of investment premiums and discounts                        (834)              743             (7,885)
    Amortization of debt premiums, discounts and issuance costs                34,844            46,859             89,131
    Proceeds from repayment of trading investment securities                    7,184            34,029             21,717
    Net change in fair value of trading securities and derivatives             (2,479)            4,359               (202)
    Amortization of settled financial derivatives contracts                     1,596             1,111                461
    Gain on the repurchase of debt                                                  -               889                  -
    Total provision for losses                                                  7,285             8,247              6,786
    Deferred income tax benefit                                                  (221)           (2,959)            (2,250)
    Decrease/(increase) in interest receivable                                  6,853            (9,023)              (572)
    (Increase)/decrease in guarantee and
     commitment fees receivable                                               (10,947)               66               (510)
    (Increase)/decrease in other assets                                       (21,965)           (6,089)               494
    (Decrease)/increase in accrued interest payable                            (3,414)            3,398              5,506
    Increase in other liabilities                                              23,436             6,756              3,762
                                                                        -----------------  ----------------  -----------------
     Net cash provided by operating activities                                 68,608           111,137            132,718
                                                                        -----------------  ----------------  -----------------
Cash flows from investing activities:
   Purchases of available-for-sale investment securities                     (959,081)         (179,146)          (592,747)
   Purchases of Farmer Mac II Guaranteed Securities and
     AgVantage bonds                                                         (299,079)         (200,583)          (273,061)
   Purchases of loans                                                        (248,219)         (794,328)          (278,989)
   Proceeds from repayment of investment securities                           719,262           331,880            412,310
   Proceeds from repayment Farmer Mac Guaranteed Securities                   363,718           242,748            268,351
   Proceeds from repayment of loans                                           151,824            67,168              2,021
   Proceeds from sale of loans and
    Farmer Mac Guaranteed Securities                                           78,254            47,682             82,995
   Purchases of office equipment                                                 (126)             (161)               (71)
                                                                        -----------------  ----------------  -----------------
    Net cash used in investing activities                                    (193,447)         (484,740)          (379,191)
                                                                        -----------------  ----------------  -----------------

Cash flows from financing activities:
   Proceeds from issuance of discount notes                                73,025,686        58,967,290        105,736,192
   Proceeds from issuance of medium-term notes                                354,027           303,017            295,186
   Payments to redeem discount notes                                      (73,235,160)      (58,433,613)      (105,641,354)
   Payments to redeem medium-term notes                                      (122,140)         (207,254)          (246,960)
   Settlement of financial derivatives                                         (2,001)           (5,053)            (5,230)
   Net proceeds from preferred stock issuance                                       -            34,667                  -
   Proceeds from common stock issuance                                          6,541             1,974              8,599
   Preferred stock dividends                                                   (2,240)           (1,456)                 -
                                                                        -----------------  ----------------  -----------------
    Net cash provided by financing activities                                  24,713           659,572            146,433
                                                                        -----------------  ----------------  -----------------
   Net (decrease)/increase  in cash and cash equivalents                     (100,126)          285,969           (100,040)

   Cash and cash equivalents at beginning of period                           723,800           437,831            537,871
                                                                        -----------------  ----------------  -----------------
   Cash and cash equivalents at end of period                               $ 623,674         $ 723,800          $ 437,831
                                                                        -----------------  ----------------  -----------------

                                  See accompanying notes to consolidated financial statements.

</TABLE>

<PAGE>


            FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 2003, 2002 and 2001


1. ORGANIZATION

The   Federal   Agricultural   Mortgage   Corporation   ("Farmer   Mac"  or  the
"Corporation") was chartered by the U.S. Congress in the Agricultural Credit Act
of 1987 (12 U.S.C.  ss.ss. 2279aa et seq.), which amended the Farm Credit Act of
1971 (collectively,  as amended,  the "Act").  Farmer Mac is a stockholder-owned
instrumentality  of the United  States that was created to establish a secondary
market for  agricultural  real estate and rural  housing  mortgage  loans and to
increase  the  availability  of  long-term  credit at stable  interest  rates to
American farmers, ranchers and rural homeowners. The Farmer Mac secondary market
for agricultural mortgage loans accomplishes that mission by providing liquidity
and lending capacity to agricultural mortgage lenders by:

     o    purchasing  newly originated and  pre-existing  ("seasoned")  eligible
          mortgage  loans  directly  from lenders  through its "cash window" and
          seasoned  eligible mortgage loans from lenders and other third parties
          in negotiated transactions;
     o    exchanging  newly  issued  agricultural   mortgage-backed   securities
          guaranteed  by Farmer Mac ("Farmer  Mac  Guaranteed  Securities")  for
          newly originated and seasoned  eligible mortgage loans that back those
          securities in "swap" transactions;
     o    issuing  long-term standby purchase  commitments  ("LTSPCs") for newly
          originated and seasoned eligible mortgage loans; and
     o    purchasing and guaranteeing  mortgage-backed bonds secured by eligible
          mortgage loans, which are referred to as AgVantage bonds.

Farmer Mac conducts  these  activities  through two  programs--Farmer  Mac I and
Farmer Mac II. Under the Farmer Mac I program, Farmer Mac

     o    purchases eligible mortgage loans;
     o    securitizes  eligible  mortgage  loans  purchased and  guarantees  the
          timely   payment  of  principal  and  interest  on  the   agricultural
          mortgage-backed securities backed by such loans; and
     o    commits to purchase  eligible  mortgage  loans  under  LTSPCs for such
          loans.

To be  eligible  for the  Farmer Mac I program,  loans  must meet  Farmer  Mac's
underwriting,  appraisal and  documentation  standards.  Under the Farmer Mac II
program, Farmer Mac purchases the guaranteed portions of loans guaranteed by the
United  States  Department  of  Agriculture  (the  "USDA-guaranteed   portions")
pursuant to the  Consolidated  Farm and Rural  Development Act (7 U.S.C.  ss.ss.
1921 et seq.) and guarantees securities backed by those USDA-guaranteed portions
purchased by Farmer Mac.

As of December  31,  2003,  outstanding  loans held by Farmer Mac and loans that
either back Farmer Mac  Guaranteed  Securities or are subject to LTSPCs  totaled
$5.8  billion.  Farmer Mac may retain  Farmer Mac  Guaranteed  Securities in its
portfolio or sell them to third parties.

Farmer Mac's two principal sources of revenue are:

     o    fees received in connection  with  outstanding  Farmer Mac  Guaranteed
          Securities and LTSPCs; and
     o    net interest  income earned on its portfolio of Farmer Mac  Guaranteed
          Securities, loans and investment securities.

Farmer Mac funds its program  purchases by issuing debt  obligations  of various
maturities.  As of December 31, 2003, Farmer Mac had outstanding $2.6 billion of
discount notes and $1.3 billion of medium-term  notes.  During 2003,  Farmer Mac
continued  its strategy of issuing debt  obligations  and investing a portion of
the proceeds in non-program  investments to increase its presence in the capital
markets and thereby  improve the mortgage  rates  offered by lenders to farmers,
ranchers and rural homeowners.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The  accounting  and  reporting  policies of Farmer Mac conform with  accounting
principles  generally  accepted  in the  United  States of  America  ("generally
accepted  accounting  principles").  The preparation of  consolidated  financial
statements in conformity with generally accepted accounting  principles requires
management to make certain  estimates and  assumptions  that affect the reported
amounts of assets and  liabilities  and  disclosures  of  contingent  assets and
liabilities  (including,  but not limited  to, the  allowance  for loan  losses,
reserve for losses,  valuation  allowance for real estate owned and valuation of
Farmer Mac Guaranteed  Securities) as of the date of the consolidated  financial
statements and the reported  amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.  The following are the
significant  accounting  policies  that  Farmer  Mac  follows in  preparing  and
presenting its consolidated financial statements:

(a)   Principles of Consolidation

The consolidated financial statements include the accounts of Farmer Mac and its
wholly-owned  subsidiary,  Farmer Mac Securities  Corporation,  whose  principal
activities  are to facilitate the purchase and issuance of Farmer Mac Guaranteed
Securities and to act as a registrant under  registration  statements filed with
the  Securities  and  Exchange   Commission.   All  intercompany   balances  and
transactions have been eliminated in consolidation.

(b)   Cash and Cash Equivalents

Farmer  Mac  considers  highly  liquid  investment   securities  with  remaining
maturities  of  three  months  or  less  at the  time  of  purchase  to be  cash
equivalents. Changes in the balance of cash and cash equivalents are reported in
the  consolidated  statements  of cash  flows.  The  following  table sets forth
information regarding certain cash and non-cash transactions for the years ended
December 31, 2003, 2002 and 2001.

<TABLE>
<CAPTION>
                                                                2003          2002          2001
                                                            ------------ ------------- -------------
                                                                         (in thousands)
<S>                                                         <C>           <C>           <C>
Cash paid during the year for:
     Interest                                                $ 60,745      $ 63,750      $ 75,821
     Income taxes                                              11,000        12,600         8,200
Non-cash activity:
     Real estate owned acquired through foreclosure            19,868         7,632         2,457
     Loans securitized as Farmer Mac
        Guaranteed Securities                                  78,254        47,682        77,422
     Loans under LTSPCs converted to Farmer Mac
        Guaranteed Securities                                 722,315             -             -
     Loans acquired from on-balance sheet Farmer Mac
        Guaranteed Securities                                  35,100        25,675           526
</TABLE>

(c)   Investments and Farmer Mac Guaranteed Securities

Farmer Mac  classifies  investments  and Farmer Mac Guaranteed  Securities  that
Farmer  Mac has  the  positive  intent  and  ability  to  hold  to  maturity  as
held-to-maturity.  Such securities are carried at cost, adjusted for unamortized
premiums and unearned  discounts.  Securities for which Farmer Mac does not have
the positive intent to hold to maturity are classified as available-for-sale and
are  carried  at  estimated   fair  value.   Unrealized   gains  and  losses  on
available-for-sale  securities are reported as accumulated  other  comprehensive
income/(loss)  in  stockholders'   equity.   Securities  classified  as  trading
securities are reported at their fair value,  with  unrealized  gains and losses
included in  earnings.  Gains and losses on the sale of  available-for-sale  and
trading securities are determined using the specific identification cost method.

Farmer Mac determines the fair value of Farmer Mac Guaranteed  Securities  based
on the present value of the associated expected future cash flows. In estimating
the present value of the expected  future cash flows,  management is required to
make estimates and assumptions. The key estimates and assumptions include future
discount rates and collateral  repayment  rates.  Premiums,  discounts and other
deferred  costs are amortized to interest  income over the estimated life of the
security using the effective interest method. Interest income on investments and
Farmer Mac  Guaranteed  Securities  is recorded on an accrual  basis  unless the
collection of interest is considered doubtful.

Farmer Mac receives  yield  maintenance  payments  when  certain  loans or loans
underlying  Farmer Mac Guaranteed  Securities  prepay.  These payments  mitigate
Farmer Mac's exposure to  reinvestment  risk and are calculated  such that, when
reinvested with the prepaid  principal,  they should generate  substantially the
same cash flows that would have been generated had the loans not prepaid.  Yield
maintenance  payments  are  recognized  as interest  income in the  consolidated
statements of operations upon receipt.

(d)   Loans


Loans for which Farmer Mac has the  positive  intent and ability to hold for the
foreseeable  future are  classified as held for investment and reported at their
unpaid principal balance net of unamortized purchase discounts or premiums.  The
net  unamortized  purchase  premiums as of December 31, 2003 and 2002 were $13.3
million and $16.7 million,  respectively.  Loans that Farmer Mac does not intend
to hold for the foreseeable  future are classified as held for sale and reported
at the lower of cost or market using the aggregate method.


(e)   Securitization of Loans

Asset securitization involves the transfer of financial assets to another entity
in exchange  for cash and/or  beneficial  interests  in the assets  transferred.
Farmer Mac transfers  agricultural  mortgage  loans into trusts that are used as
vehicles  for the  securitization  of the  transferred  loans.  The trusts issue
Farmer Mac Guaranteed  Securities that are beneficial interests in the assets of
the trusts, to either Farmer Mac or third party investors. In most cases, Farmer
Mac retains all of the securities  issued by the trusts.  From time to time, the
securities issued by the trusts are sold to third party investors.

Farmer Mac  guarantees  the timely  payment of  principal  and  interest  on the
securities issued by the trusts and receives  guarantee fees as compensation for
its guarantee. Farmer Mac recognizes guarantee fees on an accrual basis over the
terms of the Farmer Mac Guaranteed Securities,  which coincide with the terms of
the underlying  loans. As such, no guarantee fees are unearned at the end of any
reporting  period. If Farmer Mac purchases a delinquent loan underlying a Farmer
Mac  Guaranteed  Security,  Farmer Mac stops accruing the guarantee fee upon the
loan purchase.

Prior to April 1, 2001,  Farmer Mac  accounted  for the  transfer  of loans into
trusts in accordance with Statement of Financial  Accounting  Standards No. 125,
Accounting for Transfers and Servicing of Financial  Assets and  Extinguishments
of  Liabilities,   ("SFAS  125").  Under  that  standard,  each  trust  met  the
requirements of a "qualifying  special purpose  entity."  Therefore,  the trusts
were not consolidated into Farmer Mac's consolidated  financial statements.  The
Farmer Mac Guaranteed Securities  securitized prior to April 1, 2001 that Farmer
Mac  retained,  have  been  recorded  in  Farmer  Mac's  consolidated  financial
statements as Farmer Mac Guaranteed  Securities and are classified and accounted
for in  accordance  with  Statement of Financial  Accounting  Standards No. 115,
Accounting for Certain Investments in Debt and Equity Securities, see Note 2(c).

Statement of Financial  Accounting  Standards No. 140,  Accounting for Transfers
and Servicing of Financial  Assets and  Extinguishments  of  Liabilities  ("SFAS
140"),  which became effective for transfers of financial assets after March 31,
2001,  expanded the requirements for "qualifying special purposes entities." The
trust vehicles used in loan securitization transactions after March 31, 2001, in
which Farmer Mac retains all the Farmer Mac Guaranteed  Securities issued by the
trust, do not meet the "qualifying special purpose entity"  requirements of SFAS
140.  Accordingly,  Farmer Mac accounts for the Farmer Mac Guaranteed Securities
it retains in these transactions as loans in its consolidated balance sheets and
the guarantee fees earned on those assets are recorded as interest income in the
consolidated statements of operations.

Transfers  of  agricultural  mortgage  loans  into  trusts in which  Farmer  Mac
surrenders  control over the financial  assets and receives  compensation  other
than  beneficial  interests in the underlying  loans are recorded as sales under
both  SFAS  125 and  SFAS  140.  The  carrying  amount  of the  assets  that are
transferred in these  transactions is allocated  between the assets sold and the
interests  retained,  if any,  based on the relative  fair values of each at the
date of the  transfer.  A gain or loss is included in income for the  difference
between  the  allocated  carrying  amount  of the  asset  sold  and the net cash
proceeds received.  In 2003, 2002 and 2001, Farmer Mac did not realize any gains
or losses upon the sale of loans  accounted  for as sales under SFAS 125 or SFAS
140.

When  particular  criteria are met, such as the default of the borrower,  Farmer
Mac has the option to  repurchase  the  defaulted  loans  underlying  Farmer Mac
Guaranteed   Securities   (these   options   are   commonly   referred   to   as
"removal-of-account"   provisions).  Farmer  Mac  records  these  loans  in  the
consolidated  financial statements during the period in which Farmer Mac has the
option to repurchase the loans and therefore  regains effective control over the
transferred loans.

(f)   Non-Performing Loans

Non-performing  loans are loans for which it is probable that Farmer Mac will be
unable to collect all amounts due according to the contractual terms of the loan
agreement and include all loans 90 days or more past due. When a loan becomes 90
days past due,  interest due on the loan is not  recognized  as interest  income
until the payment is received from the borrower.  Interest previously accrued on
such loans or  interest  advanced  to  security  holders is charged  against the
allowance for losses when deemed uncollectible.

(g)   Real Estate Owned

Real estate owned consists of real estate  acquired  through  foreclosure and is
recorded at fair value less estimated  selling costs at acquisition.  Fair value
is  determined  by  appraisal  or other  appropriate  valuation  method.  Losses
estimated  at the time of  acquisition  are  charged to the  allowance  for loan
losses. Subsequent to the acquisition,  management continues to perform periodic
valuations and establishes a valuation allowance for real estate owned through a
charge to income in the provision for losses if the carrying value of a property
exceeds its estimated fair value less estimated selling costs.

Farmer Mac contracts with third parties to operate or preserve real estate owned
and   offered  for  sale  when   appropriate   to   maintain   property   value.
Non-recoverable  costs  are  expensed  as  incurred  and  those  related  to the
production  of saleable  goods or crops are  capitalized  to the extent they are
realizable.  As revenues from the sale of goods or crops are received,  they are
applied  first  to any  capitalized  costs  and any  remaining  revenues  offset
non-recoverable expenses incurred.

(h)   Financial Derivatives

Farmer Mac enters into financial derivative transactions  principally to protect
against risk from the effects of market price or interest rate  movements on the
value of certain assets and future cash flows or debt issuance,  not for trading
or  speculative  purposes.  Farmer Mac enters into interest rate swap  contracts
principally to adjust the  characteristics  of its short-term debt to match more
closely the cash flow and duration  characteristics of its longer-term  mortgage
and other assets,  and also to adjust the  characteristics of its long-term debt
to  match  more  closely  the  cash  flow and  duration  characteristics  of its
short-term assets,  thereby reducing interest rate risk. These transactions also
may provide an overall lower effective cost of borrowing than would otherwise be
available in the conventional debt market.


Farmer Mac  recognizes  contracts and  commitments  as financial  derivatives in
accordance with the Financial  Accounting  Standards Board ("FASB") Statement of
Financial  Accounting  Standards No. 133, Accounting for Derivative  Instruments
and Hedging Activities, as amended ("SFAS 133").

Effective  January  1, 2001,  Farmer Mac  adopted  SFAS 133,  which  establishes
accounting and reporting standards for financial  derivatives  including certain
financial  derivatives  embedded in other contracts and for hedging  activities.
The adoption of SFAS 133 resulted in a $0.7 million charge, net of tax, reported
as a cumulative  effect of a change in accounting  principles (net of taxes) and
an $8.6 million  decrease,  net of tax, in stockholders'  equity in Farmer Mac's
consolidated  financial  statements  as of and for the year ended  December  31,
2001.

All financial  derivatives  are recorded on the balance sheet at fair value as a
freestanding asset or liability.  Financial derivatives in hedging relationships
that  mitigate  exposure  to changes in the fair value of assets are  considered
fair value hedges.  Financial derivatives in hedging relationships that mitigate
the  exposure  to the  variability  in  expected  future  cash  flows  or  other
forecasted  transactions are considered cash flow hedges.  Financial derivatives
that do not satisfy the hedging  criteria of SFAS 133 are not  accounted  for as
hedges  and  changes  in the fair  values  of those  financial  derivatives  are
reported as gains or losses on financial  derivatives  and trading assets in the
consolidated statements of operations.

Fair value hedges are accounted for by recording the fair value of the financial
derivative  and the change in fair value of the asset  attributable  to the risk
being hedged on the consolidated balance sheets with the net difference reported
as  ineffectiveness  in the  consolidated  statements of operations as a gain or
loss on financial derivatives. The adjustment to the hedged asset is included in
the reported  amount of the hedged item.  Cash  payments or receipts and related
amounts  accrued  during the reporting  period on financial  derivatives in fair
value hedging relationships are recorded as an adjustment to the interest income
on  the  hedged  asset.  If a  financial  derivative  in a  fair  value  hedging
relationship  is  no  longer  effective,   is  de-designated  from  its  hedging
relationship,  or is  terminated,  Farmer  Mac  discontinues  fair  value  hedge
accounting for the financial  derivative and the hedged item.  Accordingly,  the
hedged item is no longer adjusted for changes in its fair value  attributable to
the risk being hedged. The accumulated  adjustment of the carrying amount of the
hedged asset is recognized in earnings as an adjustment to interest  income over
the  expected  remaining  life of the asset using the  effective  interest  rate
method.

Cash flow hedges are  accounted for by recording the fair value of the financial
derivative as either a  freestanding  asset or a  freestanding  liability on the
consolidated  balance sheets,  with the effective  portion of the change in fair
value of the financial  derivative  recorded in accumulated other  comprehensive
income/(loss) within stockholders'  equity, net of tax. Amounts are reclassified
from accumulated other comprehensive income/(loss) to interest income or expense
in the consolidated statements of operations in the period the hedged forecasted
transaction  affects  earnings.  Any  ineffective  portion of the change in fair
value of the  financial  derivative  is reported as a gain or loss on  financial
derivatives and trading assets in the consolidated statements of operations.  If
it becomes  probable that a hedged  forecasted  transaction  will not occur, any
amounts  included  in  accumulated  other  comprehensive  income  related to the
specific  hedging   relationship  are   reclassified   from  accumulated   other
comprehensive  income/(loss)  to the  consolidated  statements of operations and
reported as gains or losses on financial derivatives and trading assets.

Gains and losses on financial  derivatives  not considered  highly  effective in
hedging  the change in fair value or expected  cash flows of the related  hedged
item are  recognized  in the  consolidated  statement of operations as a gain or
loss on financial  derivatives and trading assets,  as these  derivatives do not
qualify for hedge accounting  under SFAS 133. If a financial  derivative has not
been or will not continue to be highly effective as a hedge, hedge accounting is
discontinued prospectively and the financial derivative continues to be recorded
at fair value with changes in fair value reported as a gain or loss on financial
derivatives and trading assets in the consolidated statement of operations.

(i)   Notes Payable

Notes payable are  classified as due within one year or due after one year based
on their contractual maturities.  Debt issuance costs are deferred and amortized
to  interest  income or expense  using the  effective  interest  method over the
estimated life of the related debt.

(j)   Allowance for Losses

Farmer Mac maintains an allowance and contingent  obligation for probable losses
("allowance  for losses") to cover  estimated  probable losses on loans held for
investment,  real estate owned and loans  underlying  post-1996 Act Farmer Mac I
Guaranteed  Securities  and LTSPCs in  accordance  with  Statement  of Financial
Accounting  Standard  No.  5,  Accounting  for  Contingencies  ("SFAS  5"),  and
Statement of Financial  Accounting Standard No. 114, Accounting by Creditors for
Impairment of a Loan ("SFAS 114"),  as amended.  The methodology for determining
the  allowance  for losses is the same for loans held for  investment  and loans
underlying  post-1996 Act Farmer Mac I Guaranteed  Securities and LTSPCs because
Farmer Mac believes the ultimate credit risk is  substantially  the same,  i.e.,
the underlying agricultural mortgage loans all meet the same credit underwriting
and appraisal standards.

The  allowance  for losses is increased  through  periodic  provisions  for loan
losses that are charged  against net interest  income and  provisions for losses
that are charged to operating  expense and is reduced by charge-offs  for actual
losses,  net of  recoveries.  Charge-offs  represent  losses on the  outstanding
principal  balance,  any interest  payments  previously  accrued or advanced and
expected costs of liquidation.

Farmer Mac estimates probable losses using a systematic process that begins with
management's  evaluation of the results of its proprietary  loan pool simulation
and  guarantee  fee  model  (the  "Model").  The  Model  draws  upon  historical
information  from a data set of  agricultural  mortgage  loans  recorded  over a
longer  period of time than Farmer  Mac's own  experience  to date,  screened to
include only those loans with credit  characteristics  similar to those on which
Farmer Mac has  assumed  credit  risk.  The results  generated  by the Model are
modified by the  application of management's  judgment,  as required to take key
factors into account, including:

     o    economic conditions;
     o    geographic and agricultural  commodity  concentrations in Farmer Mac's
          portfolio;
     o    the credit profile of Farmer Mac's portfolio;
     o    delinquency trends of Farmer Mac's portfolio;
     o    Farmer  Mac's  experience  in the  management  and sale of real estate
          owned; and
     o    historical   charge-off  and  recovery   activities  of  Farmer  Mac's
          portfolio.

Management  believes  that  its  use of this  methodology  produces  a  reliable
estimate of total probable  losses,  as of the balance sheet date, for all loans
included in Farmer Mac's portfolio,  including loans held, real estate owned and
loans underlying post-1996 Act Farmer Mac I Guaranteed Securities and LTSPCs.

In addition,  Farmer Mac  specifically  analyzes certain assets in its portfolio
for impairment. This analysis measures impairment based on the fair value of the
underlying collateral for each individual loan relative to the total amount due,
including principal, interest and advances under SFAS 114. In the event that the
updated appraisal or management's  estimate of discounted  collateral value does
not  support  the total  amount  due,  Farmer  Mac  specifically  determines  an
allowance for the loan for the  difference  between the recorded  investment and
its fair value, less estimated costs to liquidate the collateral.

For this  analysis and the  allocation  of specific  reserves as of December 31,
2003,  Farmer Mac  expanded the  population  of loans  specifically  reviewed to
include:

     o    non-performing assets (loans 90 days or more past due, in foreclosure,
          restructured,  in bankruptcy - including loans performing under either
          their original loan terms or a  court-approved  bankruptcy  plan - and
          real estate owned);
     o    loans for which  Farmer  Mac had  adjusted  the  timing of  borrowers'
          payment  schedules  within the past three years,  but still expects to
          collect all amounts due and has not made economic concessions; and
     o    additional  performing  loans that have  previously been delinquent or
          are secured by real estate that produces  commodities  currently under
          stress.

Prior to December 31, 2003, the review consisted only of non-performing  assets.
Management believes that the general allowance,  which is the difference between
the total  allowance  for losses  (generated  through  use of the Model) and the
specific  allowances,  adequately covers any losses inherent in the portfolio of
performing loans under SFAS 5.

Farmer Mac believes that the  methodology  described  above  produces a reliable
estimate of the total probable  losses inherent in Farmer Mac's  portfolio.  The
Model:

     o    uses  historical   agricultural   real  estate  loan  origination  and
          servicing  data that reflect  varied  economic  conditions  and stress
          levels in the agricultural sector;
     o    contains  features that allow variations for changes in loan portfolio
          characteristics  to make the data set more  representative  of  Farmer
          Mac's portfolio and credit underwriting standards; and
     o    considers  the effects of the ageing of the loan  portfolio  along the
          expected loss curves  associated  with individual  origination  years,
          including  the segments  that are entering into or coming out of their
          peak default years.

When certain  criteria are met, such as the default of the borrower,  Farmer Mac
may, in its sole discretion,  repurchase the defaulted loans  underlying  Farmer
Mac  Guaranteed  Securities  and is obligated to purchase  those  underlying  an
LTSPC. These acquisitions are recorded in the consolidated  financial statements
at their fair value.  Fair value is  determined  by  appraisal  or  management's
estimate of discounted collateral value.

No  allowance  for  losses  has been  made for  loans  underlying  Farmer  Mac I
Guaranteed  Securities  issued prior to the 1996 Act or Farmer Mac II Guaranteed
Securities.  Farmer Mac I Guaranteed Securities issued prior to the 1996 Act are
supported by unguaranteed first loss subordinated interests,  which are expected
to exceed the estimated credit losses on those loans.  USDA-guaranteed  portions
collateralizing  Farmer Mac II Guaranteed  Securities are obligations  backed by
the full  faith  and  credit  of the  United  States.  To date,  Farmer  Mac has
experienced  no credit  losses  on any  pre-1996  Act  Farmer  Mac I  Guaranteed
Securities or on any Farmer Mac II Guaranteed  Securities and does not expect to
incur any such losses in the future.

(k)   Earnings Per Common Share


Basic  earnings  per common  share are based on the  weighted-average  number of
common  shares  outstanding.   Diluted  earnings  per  share  is  based  on  the
weighted-average  number of common  shares  outstanding  adjusted to include all
potentially  dilutive common stock options.  The following  schedule  reconciles
basic and diluted earnings per common share ("EPS") for the years ended December
31, 2003, 2002 and 2001.

<TABLE>
<CAPTION>
                                                2003                            2002                             2001
                                 --------------------------------  ------------------------------- -------------------------------
                                              Dilutive                        Dilutive                        Dilutive
                                   Basic       stock     Diluted     Basic     stock     Diluted     Basic     stock     Diluted
                                    EPS       options      EPS        EPS     options      EPS        EPS     options      EPS
                                 ---------- ----------- ---------  --------- ---------- ---------- --------- ---------- ----------
                                                              (in thousands, except per share amounts)
<S>                            <C>             <C>     <C>         <C>           <C>     <C>       <C>           <C>    <C>
Net income available to         $ 25,030               $ 25,030    $ 21,295              $ 21,295  $ 16,280             $ 16,280
   common stockholders
Weighted-average                  11,742       307       12,049      11,613      437       12,050    11,329      440      11,769
   shares
Earnings per
   common share                   $ 2.13                 $ 2.08      $ 1.83                $ 1.77    $ 1.44               $ 1.38

Effects of:
   Cumulative effect of
    change in accounting
    principles                       -                     -           -                     -      $ (0.06)             $ (0.07)
</TABLE>

(l)   Income Taxes

Deferred federal income tax assets and liabilities are established for temporary
differences between financial and taxable income and are measured using the
current enacted statutory tax rate. Income tax expense is equal to the income
taxes payable in the current year plus the net change in the deferred tax asset
or liability balance.

(m)   Stock-Based Compensation


Farmer Mac accounts for its stock-based  employee  compensation plans, which are
described  more fully in Note 9, using the intrinsic  value method of accounting
for employee stock options  pursuant to Accounting  Principles Board Opinion No.
25,   Accounting   for  Stock   Issued  to   Employees,   and  has  adopted  the
disclosure-only  provisions of Statement of Financial  Accounting  Standards No.
123,   Accounting  for  Stock-Based   Compensation  ("SFAS  123"),  as  amended.
Accordingly,  no compensation  expense was recognized in 2003, 2002 and 2001 for
employee stock option plans. Had Farmer Mac elected to use the fair value method
of  accounting  for  employee  stock  options,  net income  available  to common
stockholders  and earnings per share for the years ended December 31, 2003, 2002
and 2001  would  have been  reduced to the pro forma  amounts  indicated  in the
following table:

<TABLE>
<CAPTION>

                                           For the Years Ended December 31,
                                       ----------------------------------------
                                          2003          2002          2001
                                       ------------ ------------- -------------
                                       (in thousands, except per share amounts)
<S>                                     <C>           <C>           <C>
Net income available to common
  stockholders, as reported              $ 25,030      $ 21,295      $ 16,280
Add back:  Restricted stock
  compensation expense included in
  reported net income, net of taxes           304           617           577
Deduct:  Total stock-based employee
  compensation expense determined
  under fair value-based method
  for all awards, net of tax               (2,833)       (2,990)       (2,662)
                                       ------------ ------------- -------------
Pro forma net income available to
  common stockholders                    $ 22,501      $ 18,922      $ 14,195
                                       ------------ ------------- -------------

Earnings per share:
  Basic - as reported                      $ 2.13        $ 1.83        $ 1.44
  Basic - pro forma                          1.92        $ 1.63        $ 1.25

  Diluted - as reported                    $ 2.08        $ 1.77        $ 1.38
  Diluted - pro forma                        1.87        $ 1.57        $ 1.21
</TABLE>

The  underlying  assumptions to these fair value  calculations  are presented in
Note 9.

(n) Comprehensive Income/(Loss)

Comprehensive  income/(loss)  represents  all  changes in  stockholders'  equity
except those resulting from investments by or distributions to stockholders, and
is comprised of net income  available to common  stockholders,  unrealized gains
and losses on securities  available-for-sale  and the  effective  portion of the
unrealized  gains  and  losses  on  financial  derivatives  in cash  flow  hedge
relationships,   net  of   reclassification   adjustments   and  related  taxes.
Comprehensive  income is reported in the  consolidated  statements of changes in
stockholders'  equity.  The following  table presents  Farmer Mac's  accumulated
other comprehensive income/(loss) as of December 31, 2003, 2002 and 2001.

<TABLE>
<CAPTION>
                                                                         As of December 31,
                                                                  2003         2002          2001
                                                             ------------- ------------ -------------
                                                                          (in thousands)
<S>                                                            <C>          <C>           <C>
Net unrealized gains on securities
  available-for-sale, net of taxes                              $ 43,258     $ 62,321      $ 23,898
Net unrealized losses on financial derivatives in
  cash flow hedge relationships, net of taxes                    (45,553)     (62,728)      (15,503)
                                                             ------------- ------------ -------------
Accumulated other comprehensive income/(loss), net of tax       $ (2,295)      $ (407)      $ 8,395
                                                             ------------- ------------ -------------
</TABLE>

(o) Long-Term Standby Purchase Commitments ("LTSPCs")

Farmer Mac accounts for its LTSPCs in accordance  with the consensus  reached in
EITF 85-20, Recognition of Fees for Guaranteeing a Loan. As is specified in this
consensus,  Farmer Mac  recognizes  LTSPC  commitment  fees over the life of the
underlying  loans. As such, no guarantee fees or commitment fees are unearned at
the end of any  reporting  period.  If Farmer Mac  purchases  a  defaulted  loan
underlying an LTSPC,  Farmer Mac stops accruing the commitment fee upon the loan
purchase.  If the loan becomes current and is repurchased  from Farmer Mac under
the terms of an LTSPC,  Farmer Mac resumes  accrual of the  commitment  fee. See
Note 2(j) for Farmer Mac's policy for estimating probable losses for LTSPCs.

(p)   New Accounting Standards

On January 1, 2003, Farmer Mac adopted the liability  recognition  provisions of
the Financial  Accounting  Standards Board  Interpretation  No. 45,  Guarantor's
Accounting  and  Disclosure  Requirements  for  Guarantees,  Including  Indirect
Guarantees of  Indebtedness  of Others ("FIN 45") which  requires  Farmer Mac to
recognize,  at the  inception of a guarantee,  a liability for the fair value of
its  obligation  to stand  ready to  perform  under the terms of each  guarantee
agreement  and an asset that is equal to the fair value of the fees that will be
received over the life of each guarantee.  Subsequently,  both the asset and the
liability  are measured  and recorded at their fair value.  In December of 2003,
the SEC  provided  additional  guidance  on the "day two"  accounting  for these
financial instruments.  In accordance with this guidance, Farmer Mac has adopted
the amortized cost model for day two  accounting.  This guidance will be applied
prospectively  for guarantees and commitments  recorded at December 31, 2003 and
all guarantees and commitments issued or modified on or after January 1, 2004.

In December 2003, the American  Institute of Certified Public Accountants issued
Statement of Position  03-3,  Accounting  for Certain  Loans or Debt  Securities
Acquired  in  a  Transfer  ("SOP  03-3").  SOP  03-3  addresses  accounting  for
differences  between  contractual  cash  flows  and cash  flows  expected  to be
collected  from an investor's  initial  investment  in loans or debt  securities
acquired in a transfer if those differences are attributable,  at least in part,
to credit quality.  Specifically, SOP 03-3 limits the yield that may be accreted
and prohibits the  "carry-over" of a valuation  allowance for all impaired loans
that are within the scope of SOP 03-3.  SOP 03-3 is effective for loans acquired
in fiscal years beginning after December 15, 2004.


On  January 1,  2003,  Farmer Mac  adopted  Statement  of  Financial  Accounting
Standards No. 145,  Rescission of FASB Statements No. 4, 44 and 64, Amendment of
FASB  Statement No. 13 and Technical  Corrections  ("SFAS 145"),  which requires
gains and losses from the  extinguishment or repurchase of debt to be classified
as extraordinary items only if they meet the criteria for such classification in
Accounting Principles Board Opinion No. 30, Reporting the Results of Operations,
Reporting the Effects of Disposal of a Segment of a Business and  Extraordinary,
Unusual and Infrequently  Occurring Events and Transactions ("APB 30"). Prior to
the  adoption  of this  standard,  gains and losses from the  extinguishment  or
repurchase  of debt  were  classified  as  extraordinary  items.  This  standard
effectively  eliminated  the  classification  of most  debt  extinguishments  or
repurchases as  extraordinary  items, as reflected in Farmer Mac's  consolidated
financial   statements.   All  prior  period   repurchases  of  debt  have  been
reclassified to conform to the new classification.


(q)   Reclassifications

Certain  reclassifications of prior year information were made to conform to the
2003 presentation.


Farmer Mac has reclassified  items on its consolidated  statements of operations
to present more clearly the costs  related to carrying its real estate owned and
the gains or losses incurred upon the ultimate disposition of real estate owned.
Previously,  gains and losses on the sale of real estate owned were reflected as
adjustments  to the  allowance  for losses as either a  charge-off  or recovery.
Those  amounts have been  reclassified  and are reported  separately as gains or
losses on the sale of real estate owned.  Gains on the sale of real estate owned
were $0.2  million,  $0.1  million and $0.1  million for each of the years ended
December 2003, 2002 and 2001, respectively.

During third  quarter 2003,  the Chief  Accountant  at the U.S.  Securities  and
Exchange Commission  provided  additional guidance to all registrants  regarding
the  classification  on the statement of operations of realized gains and losses
resulting  from  financial  derivatives  that are not in fair value or cash flow
hedge relationships. All registrants were requested to comply with this guidance
in  future  filings  and to  reclassify  this  activity  for all  prior  periods
presented.  As a result of the application of this additional guidance,  the net
interest income and expense  realized on financial  derivatives  that are not in
fair  value or cash flow hedge  relationships  have been  reclassified  from net
interest  income  into gains and losses on  financial  derivatives  and  trading
assets.   For  the  years  ended  December  31,  2003,   2002  and  2001,   this
reclassification  resulted in increases of net  interest  income and  offsetting
decreases in gains and losses on  financial  derivatives  and trading  assets of
$0.2 million, $4.1 million and $2.3 million, respectively.

Farmer Mac  reclassified  its  presentation  of the allowance for losses and the
provisions  for losses as of and for the year ended December 31, 2001 to conform
to  the  current  year   presentation.   The  following  table   summarizes  the
reclassifications  on the 2001 consolidated  financial  statements to conform to
the current presentation.

<TABLE>
<CAPTION>
                                                  2001          Reclass-          2003
                                              Presentation     ifications     Presentation
                                             ---------------   -----------   ---------------
                                                             (in thousands)
<S>                                             <C>            <C>              <C>
Balance sheet reclassifications:
    Allowance for loan losses                         $ -       $ 1,352           $ 1,352
    Reserve for losses                             15,884        (1,352)           14,532
                                             ---------------   -----------   ---------------
       Total                                     $ 15,884           $ -          $ 15,884
                                             ---------------   -----------   ---------------

Statement of operations reclassifications:
    Provision for loan losses                         $ -         $ 600             $ 600
    (Gain)/loss on sale of real estate owned            -           (61)              (61)
    Provision for losses                            6,725          (539)            6,186
                                             ---------------   -----------   ---------------
       Total                                      $ 6,725           $ -           $ 6,725
                                             ---------------   -----------   ---------------
</TABLE>

3. RELATED PARTY TRANSACTIONS


As provided by Farmer Mac's statutory charter,  only banks,  insurance companies
and other financial institutions or similar entities may hold Farmer Mac's Class
A voting common stock and only  institutions  of the Farm Credit System may hold
Farmer Mac's Class B voting common stock.  Farmer Mac's  statutory  charter also
provides that Class A stockholders  elect five members of Farmer Mac's 15-member
board of directors and that Class B stockholders elect five members of the board
of directors. Additionally, in order to participate in the Farmer Mac I program,
a financial  institution  must own a  requisite  amount of Farmer Mac Class A or
Class B voting common  stock,  based on the size and type of  institution.  As a
result of these requirements,  Farmer Mac conducts business with related parties
in the normal course of Farmer Mac's  business.  Farmer Mac  considers  that all
such  transactions  were "arm's  length" and has  neither  made to nor  received
concessions  from these  institutions  that were outside the range of those made
and received in other, similar transactions with non-related parties.


During 2003, Farmer Mac purchased newly originated and current seasoned eligible
loans from 81 entities, placed loans under LTSPCs with 11 entities and conducted
Farmer Mac II  transactions  with 150 entities  operating  throughout the United
States.  During 2003,  the top ten  institutions  generated  80.8 percent of the
total Farmer Mac I cash window loan volume.  During 2002,  Farmer Mac  purchased
newly  originated and current seasoned  eligible loans from 79 entities,  placed
loans under LTSPCs with 16 entities  and  conducted  Farmer Mac II  transactions
with 143 entities operating  throughout the United States.  During 2002, the top
10  institutions  generated  90.0  percent of the total Farmer Mac I cash window
loan volume.

For all of the  transactions  discussed  below,  Farmer Mac has a related  party
relationship  with each entity  resulting from a member of Farmer Mac's board of
directors being affiliated with the entity in some capacity.  These transactions
were  conducted in the ordinary  course of business,  with terms and  conditions
comparable to those availible to any other third party.

The following is a summary of the related party activity for the year ended
  December 31, 2003:

     o    The following  transactions occurred between Zions First National Bank
          or its affiliates  ("Zions"),  which is Farmer Mac's largest holder of
          Class A voting  common  stock and a major holder of Class C non-voting
          common stock, and Farmer Mac during 2003:

          o    Farmer Mac  purchased  148 loans  having an  aggregate  principal
               amount of approximately $74.5 million from Zions under the Farmer
               Mac I program,  representing  approximately  38.7 percent of that
               program's volume for the year;
          o    Farmer  Mac  purchased  six  USDA-guaranteed  portions  having an
               aggregate  principal  amount of  approximately  $1.7 million from
               Zions under the Farmer Mac II program, representing approximately
               0.6 percent of that program's volume for the year;
          o    Farmer  Mac  sold  approximately  $75.8  million  of  Farmer  Mac
               Guaranteed Securities to Zions at no gain or loss;
          o    Farmer Mac and Zions entered into interest rate swap transactions
               having an aggregate  notional  principal  amount of approximately
               $28.6  million  (the  aggregate  outstanding  notional  principal
               amount all interest rate swap transactions between Farmer Mac and
               Zions was $307.6 million as of December 31, 2003);
          o    Farmer Mac received  approximately $1.4 million in guarantee fees
               on Farmer Mac Guaranteed  Securities  whose underlying loans were
               swapped or sold to Farmer Mac by Zions;
          o    Farmer Mac paid Zions  approximately  $48,000 in underwriting and
               loan  file  review  fees;
          o    Zions received  approximately  $1.3 million in servicing fees for
               acting as a central servicer in the Farmer Mac I program;
          o    Zions received approximately $225,500 in fees for acting as agent
               with  respect  to  approximately  $154.7  million  of Farmer  Mac
               medium-term notes; and
          o    Zions received approximately $18,400 in commissions for acting as
               dealer with respect to approximately  $189.0 million par value of
               Farmer Mac discount notes;

     o    The following  transactions  occurred between AgFirst Farm Credit Bank
          ("AgFirst"),  which is a major holder of Class B voting  common stock,
          and Farmer Mac during 2003:

          o    Farmer Mac  purchased  four loans having an  aggregate  principal
               amount of  approximately  $0.9  million  from  AgFirst  under the
               Farmer Mac I program,  representing  approximately 0.5 percent of
               that program's volume for the year;
          o    Farmer Mac  extended  LTSPCs on 1,016 loans  having an  aggregate
               principal balance of approximately $172.5 million to AgFirst (the
               aggregate  outstanding principal balance of the 3,843 total loans
               underlying  LTSPCs with AgFirst was $545.9 million as of December
               31, 2003);
          o    For the year ended  December  31,  2003,  Farmer  Mac  guaranteed
               approximately $393.0 million of Farmer Mac Guaranteed  Securities
               backed  by  rural   housing  loans  under  which  Farmer  Mac  is
               second-loss  guarantor for the last 10 percent of the securities;
               the total guaranteed  amount  outstanding as of December 31, 2003
               was $741.5 million;
          o    Farmer Mac received  approximately $0.4 million in guarantee fees
               and approximately $2.1 million in commitment fees attributable to
               transactions with AgFirst;
          o    AgFirst  received  approximately  $107,000 in servicing  fees for
               acting as a central servicer in the Farmer Mac I program;
          o    As of December 31,  2003,  Farmer Mac owned  approximately  $88.0
               million of fixed rate  preferred  stock issued by AgFirst,  which
               Farmer Mac  purchased  on the open market prior to 2003.

     o    During  2003,  Farmer  Mac  extended  LTSPCs  on 287  loans  having an
          aggregate  principal  balance of approximately  $174.3 million to Farm
          Credit West,  ACA or its affiliates  ("FCW"),  and Farmer Mac received
          commitment fees of  approximately  $1.9 million.  During third quarter
          2003,  FCW  exercised  the  conversion  feature  incorporated  in  all
          existing  LTSPCs,  and Farmer Mac  converted  $722.3  million of FCW's
          LTSPCs into a Farmer Mac I Guaranteed  Security in a swap transaction.
          Farmer Mac received  guarantee fees of  approximately  $1.7 million on
          FCW's Farmer Mac I Guaranteed Security during 2003. As of December 31,
          2003,  the aggregate  outstanding  principal  balance of the 157 loans
          underlying  LTSPCs  with FCW was  $106.2  million,  and the  aggregate
          outstanding  balance of the 885 loans  underlying  FCW's  Farmer Mac I
          Guaranteed Security was $680.2 million.

     o    During  2003,  Farmer  Mac  extended  LTSPCs  on 295  loans  having an
          aggregate  principal  balance of  approximately  $47.4 million to Farm
          Credit Bank of Texas (the aggregate  outstanding  principal balance of
          the 275 loans underlying  LTSPCs with AgStar Financial  Services,  ACA
          was $40.8  million as of December 31,  2003),  and Farmer Mac received
          commitment fees of approximately $89,000.

     o    During 2003, Farmer Mac purchased 37  USDA-guaranteed  portions having
          an aggregate  principal amount of approximately $8.7 million from Bath
          State Bank under the Farmer Mac II  program,  and Farmer Mac  received
          approximately  $45,000 in guarantee  fees on Farmer Mac II  Guaranteed
          Securities  whose  underlying  USDA-guaranteed  portions  were sold to
          Farmer Mac by Bath State Bank.

     o    During  2003,  Farmer Mac  extended  LTSPCs on 2,347  loans  having an
          aggregate principal balance of approximately  $194.2 million to AgStar
          Financial Services,  ACA (the aggregate  outstanding principal balance
          of the 3,570 loans underlying  LTSPCs with AgStar Financial  Services,
          ACA was  $265.6  million  as of  December  31,  2003),  and Farmer Mac
          received commitment fees of approximately $0.9 million.


The  following  is a summary of the related  party  activity  for the year ended
December 31, 2002:

     o    The  following  transactions  occurred  between  Zions and  Farmer Mac
          during 2002:

          o    Farmer Mac  purchased  183 loans  having an  aggregate  principal
               amount of approximately $77.2 million from Zions under the Farmer
               Mac I program,  representing  approximately  4.1  percent of that
               program's volume for the year;
          o    Farmer  Mac  purchased  16  USDA-guaranteed  portions  having  an
               aggregate  principal  amount of  approximately  $3.6 million from
               Zions under the Farmer Mac II program, representing approximately
               2.1 percent of that program's volume for the year;
          o    Farmer  Mac  sold  approximately  $47.7  million  of  Farmer  Mac
               Guaranteed Securities to Zions at no gain or loss;
          o    Farmer Mac and Zions entered into interest rate swap transactions
               having an aggregate  notional  principal  amount of approximately
               $41.6  million  (the  aggregate  outstanding  notional  principal
               amount all interest rate swap transactions between Farmer Mac and
               Zions was $326.8 million as of December 31, 2002);
          o    Farmer Mac received  approximately $1.0 million in guarantee fees
               on Farmer Mac Guaranteed  Securities  whose underlying loans were
               swapped or sold to Farmer Mac by Zions;
          o    Farmer Mac paid Zions  approximately  $51,000 in underwriting and
               loan file review fees;
          o    Zions received  approximately  $1.2 million in servicing fees for
               acting as a central servicer in the Farmer Mac I program;
          o    Zions received  approximately $43,000 in fees for acting as agent
               with  respect  to  approximately  $28.3  million  of  Farmer  Mac
               medium-term notes; and
          o    Zions received approximately $89,000 in commissions for acting as
               dealer with respect to approximately  $738.7 million par value of
               Farmer Mac discount notes.

     o    The following  transactions  occurred  between  AgFirst and Farmer Mac
          during 2002:

          o    Farmer Mac  extended  LTSPCs on 1,810 loans  having an  aggregate
               principal balance of approximately $314.1 million to AgFirst (the
               aggregate  outstanding principal balance of the 2,840 total loans
               underlying  LTSPCs with AgFirst was $431.3 million as of December
               31, 2002);
          o    Farmer Mac guaranteed  approximately $161.0 million of Farmer Mac
               Guaranteed  Securities  backed by rural housing loans under which
               Farmer Mac is  second-loss  guarantor  for the last 10 percent of
               the securities;
          o    Farmer Mac received  approximately $0.2 million in guarantee fees
               and approximately $1.3 million in commitment fees attributable to
               transactions with AgFirst; and
          o    AgFirst  received  approximately  $122,000 in servicing  fees for
               acting as a central servicer in the Farmer Mac I program.

     o    During  2002,  Farmer  Mac  extended  LTSPCs  on 389  loans  having an
          aggregate  principal  balance of  approximately  $388.6 million to FCW
          (the  aggregate   outstanding  principal  balance  of  the  777  loans
          underlying  LTSPCs  with FCW was  $712.4  million as of  December  31,
          2002), and Farmer Mac received  commitment fees of approximately  $2.8
          million.

     o    During 2002, Farmer Mac purchased 28  USDA-guaranteed  portions having
          an aggregate  principal amount of approximately $4.6 million from Bath
          State Bank under the Farmer Mac II  program,  and Farmer Mac  received
          approximately  $50,000 in guarantee  fees on Farmer Mac II  Guaranteed
          Securities  whose  underlying  USDA-guaranteed  portions  were sold to
          Farmer Mac by Bath State Bank.

     o    During  2002,  Farmer  Mac  extended  LTSPCs  on 56  loans  having  an
          aggregate  principal  balance of approximately  $4.5 million to AgStar
          Financial Services,  ACA (the aggregate  outstanding principal balance
          of the 1,540 loans underlying  LTSPCs with AgStar Financial  Services,
          ACA was  $103.3  million  as of  December  31,  2002),  and Farmer Mac
          received commitment fees of approximately $0.5 million.

     o    During 2002,  GreenPoint  Financial  Corp. or its affiliates  received
          approximately  $25,000  in  servicing  fees for  acting  as a  central
          servicer in the Farmer Mac I program.


As of December 31, 2003 and 2002,  Farmer Mac had net interest  payable to Zions
or its affiliates of approximately $6.2 million and $7.3 million,  respectively.
As of December 31, 2003 and 2002,  Farmer Mac had the following  commitment fees
receivable from related parties:

<TABLE>
<CAPTION>
                                           As of        As of
                                        December 31, December 31,
                                            2003        2002
                                        -----------  ----------
                                            (in thousands)
<S>                                       <C>         <C>
Farm Credit West, ACA or its affiliates    $ 321       $ 291
AgStar Financial Services, ACA               100          38
AgFirst Farm Credit Bank                     380         307
</TABLE>

4. INVESTMENT SECURITIES


Farmer Mac's investment portfolio is comprised of the following:

<TABLE>
<CAPTION>

                     December 31,    December 31,
                        2003            2002
                    -------------   ------------
                           (in thousands)
<S>                  <C>            <C>
Held-to-maturity       $ 10,604       $ 10,604
Available-for-sale    1,039,673        795,234
Trading                  14,505         24,571
                    -------------   ------------
                    $ 1,064,782      $ 830,409
                    -------------   ------------
</TABLE>

The amortized  cost and estimated  fair values of investments as of December 31,
2003 and 2002 were as follows.  Fair value was estimated  based on quoted market
prices.

<TABLE>
<CAPTION>
                                                  2003                                             2002
                              --------------------------------------------------- ---------------------------------------------
                               Amortized    Unrealized   Unrealized                Amortized  Unrealized Unrealized
                                  Cost         Gain         Loss      Fair Value     Cost        Gain       Loss     Fair Value
                              ------------ ------------ ------------ ------------ ----------- ---------- ----------- -----------
                                                                   (in thousands)
<S>                          <C>           <C>           <C>       <C>            <C>         <C>         <C>        <C>
Held-to-maturity:
   Cash investment in
    fixed rate guaranteed
    investment contract         $ 10,604       $ 342         $ -      $ 10,946     $ 10,604       $ 890         $ -    $ 11,494
                              ------------ ------------ ------------ ------------ ----------- ---------- ----------- -----------
    Total held-to-maturity      $ 10,604       $ 342         $ -      $ 10,946     $ 10,604       $ 890         $ -    $ 11,494
                              ------------ ------------ ------------ ------------ ----------- ---------- ----------- -----------

Available-for-sale:
   Floating rate
    asset-backed securities     $ 78,817       $ 682         $ -      $ 79,499     $ 12,543         $ -      $ (345)   $ 12,198
   Floating rate corporate
    debt securities              370,145         573        (100)      370,618      344,330           -      (1,464)    342,866
   Fixed rate corporate
    debt securities                    -           -           -             -       34,000         552           -      34,552
   Fixed rate preferred
    stock                        186,253      12,196           -       198,449      186,799      11,511           -     198,310
   Fixed rate
    commercial paper             120,452           -           -       120,452            -           -           -           -
   Floating rate
    municipal bonds                2,820           -           -         2,820            -           -           -           -
   Floating rate mortgage-
    backed securities            268,522         198        (885)      267,835      207,394           -         (86)    207,308
                              ------------ ------------ ------------ ------------ ----------- ---------- ----------- -----------
    Total available-for-sale  $1,027,009    $ 13,649      $ (985)   $1,039,673     $785,066    $ 12,063    $ (1,895)  $ 795,234
                              ------------ ------------ ------------ ------------ ----------- ---------- ----------- -----------

Trading:
   Adjustable rate mortgage-
    backed securities           $ 14,296       $ 209         $ -      $ 14,505     $ 23,944       $ 627         $ -    $ 24,571
                              ------------- ----------- ----------- ------------------------ ----------- ----------- -----------
    Total trading               $ 14,296       $ 209         $ -      $ 14,505     $ 23,944       $ 627         $ -    $ 24,571
                              ------------- ----------- ----------- ------------------------ ----------- ----------- -----------
</TABLE>

As of  December  31,  2003 no  unrealized  losses  were  incurred on trading and
held-to-maturity portfolios.  Unrealized losses on available-for-sale securities
were as follows as of December 31, 2003.

<TABLE>
<CAPTION>

                                   Available-for-Sale
                                      Securities
                              ---------------------------------
                               Fair Value      Unrealized Loss
                              -------------    ----------------
                                      (in thousands)
<S>                            <C>                <C>
Unrealized loss position
   for less than 12 months      $ 258,893          $ (961)
Unrealized loss position
   for more than 12 months         10,171             (24)
                              -------------     --------------
   Total                        $ 269,064          $ (985)
                              -------------     --------------
</TABLE>

The amortized cost, fair value and yield of investments by remaining contractual
maturity as of December 31, 2003 are set forth below. Asset- and mortgage-backed
securities  are included  based on their final  maturities,  although the actual
maturities may differ due to prepayments of the underlying  assets or mortgages.
As of December 31, 2003 Farmer Mac owned one  held-to-maturity  investment  that
matures after ten years with an amortized cost of $10.6 million, a fair value of
$10.9 million, and a yield of six percent.

<TABLE>
<CAPTION>
                                 Available-for-Sale                      Trading                             Total
                        ----------------------------------- -------------------------------- ---------------------------------
                          Amortized                         Amortized                           Amortized
                            Cost      Fair Value   Yield      Cost     Fair Value   Yield         Cost     Fair Value   Yield
                        ----------------------------------- -------------------------------- ---------------------------------
                                                                   (dollars in thousands)
<S>                    <C>         <C>           <C>          <C>      <C>         <C>       <C>         <C>           <C>
Due within one year      $ 218,891   $ 218,949    1.34%        $ -      $ -          -         $ 218,891   $ 218,949    1.34%
Due after one year
   through five years      281,701     282,130    1.39%          -        -          -           281,701     282,130    1.39%
Due after five years
   through ten years       187,371     199,569    8.07%          -        -          -           187,371     199,569    8.07%
Due after ten years        339,046     339,025    1.60%      14,296       14,505    4.38%        353,342     353,530    1.71%
                        --------------------------------- ------------- -------------------- ---------------------------------
   Total                $1,027,009  $1,039,673    2.67%    $ 14,296     $ 14,505    4.38%     $1,041,305  $1,054,178    2.69%
                        --------------------------------- ------------- -------------------- ---------------------------------
</TABLE>

5. FARMER MAC GUARANTEED SECURITIES

As of  December  31,  2003 and 2002,  Farmer  Mac  on-balance  sheet  Guaranteed
Securities included the following:

<TABLE>
<CAPTION>
                                           As of December 31,
               ----------------------------------------------------------------------------
                                2003                                  2002
               -----------------------------------  ---------------------------------------
                Held-to-  Available-for              Held-to-   Available-for
                Maturity      Sale        Total      Maturity      Sale           Total
               ---------- ------------- ----------  ---------- --------------- ------------
                                            (in thousands)
<S>           <C>          <C>        <C>           <C>          <C>          <C>
Farmer Mac I   $ 49,901     $779,560     $829,461    $ 60,519     $969,234     $1,029,753
Farmer Mac II   678,673          -        678,673     578,754         -          578,754
               ---------- ------------- ----------  ---------- --------------- ------------
   Total       $728,574     $779,560   $1,508,134    $639,273     $969,234      $1,608,507
               ---------- ------------- ----------  ---------- --------------- ------------
</TABLE>


The following table sets forth the amortized costs,  unrealized gains and losses
and estimated fair values of the Farmer Mac Guaranteed Securities as of December
31, 2003 and 2002.

<TABLE>
<CAPTION>
                                                 As of December 31,
                    ----------------------------------------------------------------------------
                               2003                                       2002
                    -----------------------------------   ---------------------------------------
                     Held-to-  Available-for               Held-to-   Available-for
                     Maturity      Sale        Total       Maturity      Sale          Total
                    ---------- ------------- ----------   ---------- -------------- ------------
                             (in thousands)
<S>                 <C>        <C>          <C>           <C>         <C>          <C>
Amortized cost       $728,574   $725,674     $1,454,248    $639,273    $883,120     $1,522,393
Unrealized gains       14,434     53,886         68,320      24,376      86,114        110,490
Unrealized losses         -          -             -           -           -              -
                    ---------- ------------- ----------   ---------- -------------- ------------
   Fair value        $743,008   $779,560     $1,522,568    $663,649    $969,234     $1,632,883
                    ---------- ------------- ----------   ---------- -------------- ------------
</TABLE>

Of the total Farmer Mac Guaranteed  Securities held by Farmer Mac as of December
31, 2003, $969.6 million are fixed-rate or reprice after one year.


The table below presents a sensitivity analysis for Farmer Mac's retained Farmer
Mac Guaranteed Securities as of December 31, 2003.

<TABLE>
<CAPTION>
                                            December 31, 2003
                                         -----------------------
                                         (dollars in thousands)

<S>                                           <C>
Fair value of beneficial interests retained
    in Farmer Mac Guaranteed Securities        $ 1,522,568

Weighted-average remaining life (in years)             4.7

Weighted-average prepayment speed (annual rate)        9.9%
    Effect on fair value of a 10% adverse change     $(811)
    Effect on fair value of a 20% adverse change   $(1,531)

Weighted-average discount rate                         4.6%
    Effect on fair value of a 10% adverse change  $(19,299)
    Effect on fair value of a 20% adverse change  $(38,445)
</TABLE>

These sensitivities are hypothetical.  As the figures indicate,  changes in fair
value  based on a 10  percent  variation  in  assumptions  generally  cannot  be
extrapolated because the relationship of the change in assumptions to the change
in fair value may not be linear.  Also,  in this table the effect of a variation
in a  particular  assumption  on the fair  value  of the  retained  interest  is
calculated without changing any other assumption. In fact, changes in one factor
may result in changes in another  (for  example,  increases  in market  interest
rates may result in lower  prepayments),  which might amplify or counteract  the
sensitivities.

Farmer Mac  securitizes  two types of assets:  agricultural  mortgage  loans and
USDA-guaranteed  portions. Farmer Mac manages the credit risk of its securitized
agricultural  mortgage loans, both on- and off-balance sheet,  together with its
on-balance sheet agricultural mortgage loans and the agricultural mortgage loans
underlying  its  off-balance  sheet  LTSPCs.  See  Note 8 for  more  information
regarding this credit risk. Due to the differing  interest rate and funding risk
characteristics  of on- and off-balance sheet asset classes,  Farmer Mac manages
its  on-balance   sheet   agricultural   mortgage  loans  held  and  securitized
differently from its off-balance sheet securitized  agricultural  mortgage loans
and off-balance sheet agricultural mortgage loans underlying LTSPCs.

Farmer Mac  separately  manages its  securitized  USDA-guaranteed  portions  and
manages  those  held on its  balance  sheet  differently  from  those  that  are
off-balance  sheet - also due to their differing  interest rate and funding risk
characteristics.

As part of  fulfilling  its  guarantee  obligations  for Farmer Mac I Guaranteed
Securities and commitments to purchase eligible loans underlying LTSPCs,  Farmer
Mac purchases  defaulted  loans, all of which are at least 90 days delinquent at
the time of  purchase,  out of those  securities  and  pools,  and  records  the
purchased loans as such on its balance sheet.

The  table  below   presents  the   outstanding   principal   balances,   90-day
delinquencies and net credit losses as of and for the periods indicated for each
managed asset class, both on- and off-balance sheet.

<TABLE>
<CAPTION>

                               Outstanding Principal         90-Day
                                      Amount            Delinquencies (1)         Net Credit Losses
                              -----------------------  ------------------   -------------------------------
                                          As of December 31,                For the Year Ended December 31,
                              ------------------------------------------    -------------------------------
                                 2003         2002        2003      2002         2003       2002       2001
                              -----------   ----------   -------- ---------    ---------- --------------------
                                                             (in thousands)
<S>                              <C>           <C>          <C>        <C>          <C>        <C>        <C>
On-balance sheet assets:
   Farmer Mac I:
    Loans                      $ 976,280    $ 949,378    $ 22,721   $ 54,679     $ 3,219    $ 3,728    $ 1,325
    Guaranteed Securities        777,134      946,014       5,368          -         440        368       (211)
   Farmer Mac II:
    Guaranteed Securities        678,229      578,681          -           -           -          -          -
                              -----------   ----------   --------   ---------    --------   --------   --------
  Total on-balance sheet     $ 2,431,643  $ 2,474,073    $ 28,089   $ 54,679     $ 3,659    $ 4,096    $ 1,114
                              -----------   ----------   --------   ---------    --------   --------   --------
Off-balance sheet assets:
   Farmer Mac I:
    LTSPCs                   $ 2,348,703  $ 2,681,240     $ 1,560    $ 3,535         $ -        $ -        $ -
    Guaranteed Securities        952,134      299,940         407          -           -          -      1,050
   Farmer Mac II:
    Guaranteed Securities         51,241       67,109          -           -           -          -          -
                              -----------   ----------   --------   ---------    --------   --------   --------
    Total off-balance sheet  $ 3,352,078  $ 3,048,289     $ 1,967    $ 3,535         $ -        $ -    $ 1,050
                              -----------   ----------   --------   ---------    --------   --------   --------
     Total                   $ 5,783,721  $ 5,522,362    $ 30,056   $ 58,214     $ 3,659    $ 4,096    $ 2,164
                              -----------   ----------   --------   ---------    --------   --------   --------
<FN>
(1)  Includes loans and loans  underlying  post-1996 Act Farmer Mac I Guaranteed
     Securities that are 90 days or more past due, in foreclosure,  restructured
     after  delinquency,  and in bankruptcy  excluding  loans  performing  under
     either  their  original  loan terms or a  court-approved  bankruptcy  plan.
     90-day deliquencies do not include deliquencies on Farmer Mac II Guaranteed
     Securities  because the portion of loans  underlying  these  securities are
     obligations backed by full faith credit of the United States.
</FN>
</TABLE>


6. FINANCIAL DERIVATIVES

Farmer  Mac  enters   into   interest   rate  swap   contracts   to  adjust  the
characteristics  of Farmer  Mac's debt to match more  closely  the cash flow and
duration  characteristics  of the Corporation's  assets and to derive an overall
lower  effective  fixed-rate cost of borrowing than would otherwise be available
to Farmer Mac in the  conventional  debt market.  Farmer Mac is also required to
recognize   certain   contracts  and   commitments  as   derivatives   when  the
characteristics  of those  contracts and  commitments  meet the  definition of a
derivative  as  promulgated  by SFAS  133.  Farmer  Mac  enters  into  financial
derivatives as an end-user, not for trading or speculative purposes. As with any
financial instrument, financial derivatives have inherent risks: market risk and
credit risk.

Market Risk:

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

Credit Risk:


Credit risk is the risk that a  counterparty  will fail to perform  according to
the terms of a financial  contract in which Farmer Mac has an  unrealized  gain.
Credit losses could occur in the event of  non-performance  by counterparties to
the  financial  derivative  contracts.  Farmer Mac mitigates  this  counterparty
credit risk by contracting only with  counterparties  that have investment grade
credit ratings (i.e., at least BBB),  establishing  and  maintaining  collateral
requirements  based upon credit  ratings and entering  into netting  agreements.
Netting  agreements  provide  for  the  calculation  of the  net  amount  of all
receivables and payables under all transactions covered by the netting agreement
between  Farmer Mac and a single  counterparty.  Farmer Mac's exposure to credit
risk related to its financial derivatives is represented by those counterparties
for which Farmer Mac has a net  receivable,  including the effect of any netting
arrangements.  As of December 31, 2003 and 2002,  Farmer Mac's credit  exposure,
excluding netting arrangements, was $1.0 million and $0.4 million, respectively;
however,  including  netting  arrangements,  Farmer Mac had no net  receivables.
Conversely,  financial derivatives in a net payable position required Farmer Mac
to pledge  securities  as collateral  of  approximately  $16.9 million and $37.0
million as of December 31, 2003 and December 31, 2002, respectively.


Interest Rate Risk:

Farmer Mac uses financial  derivatives to provide a cost- and  capital-efficient
way to manage its  interest  rate risk  exposure by modifying  the  repricing or
maturity characteristics of certain assets and liabilities and by locking in the
rates for certain  forecasted  issuances of liabilities.  The primary  financial
derivatives  Farmer  Mac uses  include  interest  rate  swaps and  forward  sale
contracts.  Farmer Mac uses  interest-rate  swaps to assume fixed rate  interest
payments  in  exchange  for  variable  rate  interest  payments  and vice versa.
Depending on the hedging  relationship,  the effects of these agreements are (a)
the  conversion  of  variable  rate   liabilities  to  longer-term   fixed  rate
liabilities,  (b) the conversion of long-term  fixed rate assets to shorter-term
variable rate assets,  or (c) the reduction of the variability of future changes
in interest rates on forecasted  issuances of  liabilities.  The net payments of
these  agreements  are charged to either  interest  expense or interest  income,
depending  on whether  the  agreement  is  designated  to hedge an  existing  or
forecasted liability or asset.

Fair Value Hedges:

Interest Rate Swaps: Farmer Mac uses interest rate swaps primarily to offset the
change in value of certain  fixed rate  investments  and  liabilities  caused by
movements in the benchmark  interest rate (LIBOR).  In calculating the effective
portion of the fair value hedges under SFAS 133, the change in fair value of the
financial  derivative is recognized  currently in earnings,  as is the change in
the  value  of  the  hedged  items   attributable  to  the  risk  being  hedged.
Accordingly, the net difference or hedge ineffectiveness,  if any, is recognized
currently  in the  consolidated  statement  of  operations  as a gain or loss on
financial  derivatives and trading assets. Fair value hedge  ineffectiveness for
each of the years ended December 31, 2003 and 2002 was not significant.

Forward Sale Agreements:  Loans held for sale expose Farmer Mac to interest rate
risk.  Farmer Mac manages  this risk for certain  loans held for sale by selling
forward government-sponsored enterprise debt and mortgage backed securities. The
changes in fair values of the hedged loans and the related financial derivatives
are recorded in the  consolidated  statements of operations as a gain or loss on
financial  derivatives and trading assets.  The net change in the fair values of
loans held for sale and the related financial  derivatives for each of the years
ended December 31, 2003 and 2002 was not significant.

The following  table  summarizes  information  related to Farmer Mac's financial
derivatives in fair value hedge relationships as of December 31, 2003:

<TABLE>
<CAPTION>


                                                                                                                         Weighted-
                                                                               Weighted-     Weighted-     Weighted-      Average
                                                           Fair Value           Average       Average       Average      Remaining
                                       Notional   ---------------------------     Pay         Receive       Forward         Life
                                        Amount        Asset      (Liability)      Rate          Rate         Price       (in Years)
                                      ----------- ------------- ------------- ------------  ------------  ------------  ------------
                                                                       (dollars in thousands)
<S>                                   <C>             <C>       <C>             <C>           <C>            <C>           <C>
Medium-term notes:
    Pay variable interest rate swaps   $ 145,000          -        (2,782)       1.93%         3.70%             -          4.82
Loans:
    Agency forwards                       26,332         76             -            -             -          1.07          0.04
                                      ----------- ------------- ------------- ------------  ------------
       Total fair value hedges         $ 171,332       $ 76      $ (2,782)       1.93%         3.70%
                                      ----------- ------------- ------------- ------------  ------------
</TABLE>

Cash Flow Hedges:

Interest  Rate  Swaps:
Farmer Mac uses  interest  rate swaps to hedge the  variability  of future  cash
flows  associated  with  existing   variable  rate  liabilities  and  forecasted
issuances  of  liabilities.  With  respect  to  the  variable  rate  liabilities
(discount  notes or  medium-term  notes) on its balance  sheet,  Farmer Mac uses
interest rate swaps to hedge the risk of changes in the benchmark  rate (LIBOR).
With  respect to the hedging of the  forecasted  issuance  of discount  notes or
medium-term  notes,  Farmer  Mac  utilizes  interest  rate  swaps  with a longer
maturity  than  the  underlying  liabilities.  The  use of  interest  rate  swap
contracts with longer maturities than the underlying  liabilities  allows Farmer
Mac to hedge both the risk of changes in the benchmark  rate (LIBOR) on existing
liabilities and the replacement of such  liabilities  upon maturity.  These cash
flow hedge  relationships  are treated as effective hedges as long as the future
issuances of  liabilities  remain  probable and the hedges  continue to meet the
requirements of SFAS 133. Farmer Mac expects to hedge the forecasted issuance of
liabilities  over a period  that ranges from a minimum of 1 year to a maximum of
15 years.

Farmer Mac measures the  ineffectiveness  of cash flow hedges in accordance with
SFAS  133  and  reports  this  amount,  if any,  as a gain or loss on  financial
derivatives and trading assets in the consolidated statement of operations.  The
ineffectiveness  for each of the years ended  December 31, 2003 and 2002 was not
significant.

Basis Swaps:
Farmer  Mac uses basis  swaps to create  comparable  asset-liability  positions.
Specifically,  Farmer Mac uses  basis  swaps to hedge  combined  asset-liability
positions  in which an asset and a  liability  with  variable  cash  flows  have
different interest rate bases. Basis swaps are used to convert the interest rate
index of the asset to the same  index as the  variable  rate  liability  or vice
versa. These swaps are treated as effective hedge  relationships if the index of
one leg of the swap is the same as the  index of the  identified  asset  and the
index of the other  leg of the swap is the same as the  index of the  identified
liability.  Farmer Mac measures  ineffectiveness  for basis swaps in  accordance
with SFAS 133 and reports this amount as a gain or loss on financial derivatives
and  trading  assets  in  the   consolidated   statement  of   operations.   The
ineffectiveness  for each of the years ended  December 31, 2003 and 2002 was not
significant.

A  significant  proportion  of Farmer Mac's  outstanding  basis swaps are with a
related  party.  See Note 3 for  additional  information  on these related party
transactions.

Forward Sale Agreements and Future Contracts:
Farmer Mac uses forward sale contracts involving government-sponsored enterprise
debt instruments and mortgage backed securities and futures contracts  involving
U.S. Treasury securities to reduce the variability of future changes in interest
rates  on   forecasted   issuances   of   liabilities.   Farmer   Mac   measures
ineffectiveness   in   accordance   with  the   provisions   of  SFAS  133.  The
ineffectiveness  for each of the years ended  December 31, 2003 and 2002 was not
significant.  The  effective  portion  of the  change  in fair  value  of  these
contracts is recorded in accumulated other comprehensive  income/(loss),  net of
tax. The amounts recorded in accumulated other comprehensive  income/(loss) will
be recognized in the statements of operations as the hedged  transactions affect
earnings.

The following table summarizes  information related to financial  derivatives in
cash flow hedging relationships, as of December 31, 2003:

<TABLE>
<CAPTION>



                                                                                                                         Weighted-
                                                                               Weighted-     Weighted-     Weighted-      Average
                                                           Fair Value           Average       Average       Average      Remaining
                                       Notional   ---------------------------     Pay         Receive       Forward         Life
                                        Amount        Asset      (Liability)      Rate          Rate         Price       (in Years)
                                      ----------- ------------- ------------- ------------  ------------  ------------  ------------
                                                                       (dollars in thousands)
<S>                                  <C>              <C>        <C>            <C>           <C>            <C>          <C>
Discount notes or medium-term notes:
    Pay fixed interest rate swaps     $ 636,213        $ 885      $(56,282)      5.81%         1.16%             -          7.74
    Agency forwards                      54,196            -          (417)          -             -          1.03          0.04
Loans or Farmer Mac Guaranteed
  Securities and discount notes:
    Basis swaps                         307,621            -        (5,879)      4.80%         1.46%             -         11.76
                                    --------------- ------------  ------------ ------------  ------------
       Total cash flow hedges         $ 998,030        $ 885      $(62,578)      5.48%         1.26%
                                    --------------- ------------  ------------ ------------  ------------
</TABLE>

As of December  31,  2003,  Farmer Mac had  approximately  $45.6  million of net
after-tax  unrealized  losses on cash flow hedges included in accumulated  other
comprehensive income/(loss). These amounts will be reclassified into earnings in
the same  period or  periods  during  which the hedged  forecasted  transactions
(either the payment of  interest  or issuance of discount  notes or  medium-term
notes) affect earnings or immediately when it becomes probable that the original
hedged forecasted transaction will not occur within two months of the originally
specified date.

During the next 12 months,  Farmer Mac expects to reclassify  approximately $8.1
million of the net after-tax  unrealized  losses  included in accumulated  other
comprehensive income/(loss) as of December 31, 2003.


Other Financial Derivatives:

Farmer  Mac  employs  certain  hedging  strategies  that do not meet  the  hedge
accounting criteria in SFAS 133. These financial derivatives are recorded on the
balance  sheet at fair  value as  freestanding  assets  or  liabilities  and the
related changes in fair value are recognized in the  consolidated  statements of
operations as gains or losses on financial derivatives and trading assets.

The  following  table  summarizes  information  related  to Farmer  Mac's  other
financial derivatives as of December 31, 2003:

<TABLE>
<CAPTION>
                                                                                                               Weighted-
                                                                                  Weighted-    Weighted-       Average
                                                                Fair Value         Average      Average       Remaining
                                             Notional   ------------------------     Pay        Receive          Life
                                              Amount     Asset      (Liability)     Rate         Rate        (in Years)
                                            ----------- ---------- ------------- ------------ -----------    ------------
                                                                     (dollars in thousands)

<S>                                        <C>           <C>      <C>              <C>          <C>           <C>
Pay fixed callable interest rate swaps      $ 138,177     $ -      $ (2,023)        6.16%        2.70%         8.76
Basis swaps                                    14,296       -          (260)        4.38%        1.43%         3.30
Other swaps                                    25,000       -           (27)        1.67%        1.04%         2.83
Purchased caps                                210,000       -             -             -            -         0.75
                                           ----------------------  ------------  ------------ -----------
   Total other financial derivatives        $ 387,473     $ -      $ (2,310)        5.38%        2.36%
                                           ----------------------  ------------  ------------ -----------
</TABLE>

For the years ended December 31, 2003 and 2002, Farmer Mac reported $2.4 million
of gains and $8.4 million of losses, respectively, on financial derivatives that
do not receive hedge accounting treatment and trading assets in the consolidated
statements of operations.


7. NOTES PAYABLE

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

The following table sets forth  information  related to Farmer Mac's  borrowings
for 2003 and 2002:

<TABLE>
<CAPTION>

                                         2003                                                2002
                 ------------------------------------------------------------------------------------------------------------
                                             Average                                              Average
                  Outstanding as of    Outstanding During    Maximum     Outstanding as of   Outstanding During    Maximum
                  December 31, 2003          the Year       Outstanding  December 31, 2002        the Year       Outstanding
                 -------------------- ---------------------  at Any     -------------------  -------------------   at Any
                    Amount     Rate       Amount    Rate    Month End      Amount    Rate       Amount    Rate    Month End
                 ----------- -------- ------------- ------ ------------ ------------ ------  ------------------- ------------
                                                           (dollars in thousands)
<S>              <C>           <C>     <C>         <C>     <C>          <C>         <C>      <C>         <C>    <C>
Due within one
  year:
  Discount notes  $2,645,624    1.04%   $2,702,188  1.21%   $2,781,377   $2,777,206  2.71%    $2,533,762  2.65%  $2,815,784
  Current portion
   of medium-
   term notes        153,760    4.57%                                       118,540  4.61%
                 ----------- ---------                                  ------------ ------
                  $2,799,384    1.23%                                    $2,895,746  2.79%
                                                                        ------------ ------
Due after one
  year:
  Medium-term
   notes due in:
   2005              302,903    4.87%
   2006              253,310    3.93%
   2007               59,303    3.93%
   2008              209,360    2.82%
   2009              134,914    6.56%
   Thereafter        176,320    6.51%
                 ------------ --------
                   1,136,110    4.69%
                 ------------ --------
   Total          $3,935,494    2.23%
                 ------------ --------
</TABLE>

Callable  medium-term notes give Farmer Mac the option to redeem the debt at par
value on a specified call date or at any time on or after a specified call date.
The following table summarizes the maturities,  amounts and costs for Farmer Mac
callable debt by call period as of December 31, 2003.

<TABLE>
<CAPTION>

                         Callable Debt as of
                          December 31, 2003
               -----------------------------------------
                  Maturity       Amount          Rate
               ------------ --------------  ------------
                       (dollars in thousands)
<S>            <C>            <C>               <C>
Callable in:
   2004         2005-2013      $ 167,748         2.68%
   2005           2008            15,000         3.63%
                            --------------  ------------
                               $ 182,748         2.76%
                            --------------  ------------
</TABLE>

The  following  schedule   summarizes  the  earliest  repricing  date  of  total
borrowings   outstanding  as  of  December  31,  2003,  including  callable  and
non-callable  medium-term  notes,  assuming  callable  notes are redeemed at the
initial call date.

<TABLE>
<CAPTION>

               Earliest Repricing Date of
                 Borrowings Outstanding
              -----------------------------
                                Weighted-
                                 Average
                  Amount           Rate
              ---------------   -----------
                 (dollars in thousands)

<C>           <C>                 <C>
2004           $ 2,967,133         3.58%
2005               262,986         5.38%
2006               166,878         4.75%
2007                59,303         5.36%
2008               184,360         2.68%
2009               134,914         5.56%
Thereafter         159,920         6.60%
            ---------------   -----------
     Total     $ 3,935,494         3.96%
            ---------------   -----------
</TABLE>

During  2003 and 2002,  Farmer Mac called  $83.7  million  and $49.3  million of
callable medium-term notes, respectively.


Authority to Borrow from the U.S. Treasury

Farmer  Mac's  statutory  charter  authorizes  Farmer Mac to borrow,  in extreme
circumstances,  up to $1.5  billion  from  the  Secretary  of the  Treasury,  if
necessary,  to fulfill its obligations under any guarantee.  The debt would bear
interest at a rate determined by the Secretary of the Treasury based on the then
current cost of funds to the United States.  The charter requires the debt to be
repaid  within a reasonable  time.  To date,  Farmer Mac has not  utilized  this
borrowing authority.

Gains and Losses on the Repurchase of Outstanding Debt


During 2002,  Farmer Mac recognized  $1.4 million of net gains on the repurchase
of $103.7 million of outstanding  Farmer Mac debt. All of the  repurchases  were
from  outstanding  Farmer Mac debt that had a maturity  date of October 14, 2011
and an interest rate of 5.4 percent.  Those debt  securities  were replaced with
new fixed-rate  funding to the same maturity dates at lower  effective  interest
rates.


8. ALLOWANCE FOR LOSSES AND CONCENTRATIONS OF CREDIT RISK

Allowance for Losses

Farmer  Mac  maintains  an  allowance  for  losses to cover  probable  estimated
principal  and interest  losses on all loans held  (allowance  for loan losses),
loans  underlying  post-1996 Act Farmer Mac I Guaranteed  Securities  and LTSPCs
(reserve for losses and a portion of the  guarantee  and  commitment  obligation
that represents Farmer Mac's contingent obligation for probable losses) and real
estate owned (real estate owned  valuation  allowance).  No allowance for losses
has been  provided  for Farmer Mac I Guaranteed  Securities  issued prior to the
1996 Act or for Farmer Mac II Securities.  See Note 2(e),  Note 2(j), Note 5 and
Note 12 for more information about Farmer Mac Guaranteed Securities.

The allowance for losses is increased  through  periodic  provisions  for losses
charged to  expense  and  reduced  by  charge-offs  for  actual  losses,  net of
recoveries.  Charge-offs  represent losses on the outstanding principal balance,
any interest  payments  previously  accrued or advanced  and  expected  costs of
liquidation.

The  following is a summary of the changes in the  allowance for losses for each
year in the three-year period ended December 31, 2003:

<TABLE>
<CAPTION>
                                     -------------------------------------------------------------------------
                                                                                  Contingent
                                       Allowance         REO                      Obligation        Total
                                        for Loan       Valuation      Reserve     for Probable     Allowance
                                         Losses        Allowance     for Losses      Losses        for Losses
                                     -------------- -------------- ------------- --------------  -------------
                                                                   (in thousands)
<S>                                    <C>             <C>         <C>             <C>           <C>
Balances as of January 1, 2001            $ 420            $ -      $ 10,903            $ -       $ 11,323
                                     -------------- -------------- ------------- --------------  -------------
     Provision for losses                   600              -         6,186              -          6,786
     Net allocation of
       allowance                             (5)             -             5              -              -
     Net recoveries/(charge-offs)           337              -        (2,562)             -         (2,225)
                                     -------------- -------------- ------------- --------------  -------------

Balances as of December 31, 2001        $ 1,352            $ -      $ 14,532            $ -       $ 15,884
                                     -------------- -------------- ------------- --------------  -------------
     Provision for losses                 1,340              -         6,907              -          8,247
     Net allocation of
       allowance                          3,221          1,308        (4,529)             -              -
     Net charge-offs                     (3,251)          (716)         (153)             -         (4,120)
                                     -------------- -------------- ------------- --------------  -------------

Balances as of December 31, 2002        $ 2,662          $ 592      $ 16,757            $ -       $ 20,011
                                     -------------- -------------- ------------- --------------  -------------
     Provision for losses                 6,524          1,230        (3,145)         2,676          7,285
     Net charge-offs                     (3,219)        (1,584)         (440)             -         (5,243)
                                     -------------- -------------- ------------- --------------  -------------

Balances as of December 31, 2003        $ 5,967          $ 238      $ 13,172        $ 2,676       $ 22,053
                                     -------------- -------------- ------------- --------------  -------------
</TABLE>

All loans that  Farmer Mac  purchases,  issues  guarantees  with  respect to, or
commits to purchase under an LTSPC in the Farmer Mac I program are  underwritten
for conformance to Farmer Mac's underwriting and appraisal  standards and Farmer
Mac believes the ultimate credit risk is  substantially  the same.  Accordingly,
management  establishes  general  allowances for loans held and loans underlying
LTSPCs and Farmer Mac Guaranteed Securities collectively.

The following  table presents  Farmer Mac's reserve for losses for all post-1996
Act  Farmer  Mac I  Guaranteed  Securities  and LTSPCs on a pro rata basis as of
December 31, 2003 and 2002.

<TABLE>
<CAPTION>

         Reserve for Losses on LTSPCs and Post-1996 Act
               Farmer Mac I Guaranteed Securities
-----------------------------------------------------------------------------------------
                                                          December 31,      December 31,
                                                             2003               2002
                                                       -----------------  ---------------
                                                                  (in thousands)
<S>                                                        <C>              <C>
On-balance sheet Farmer Mac I Guaranteed Securities          $ 2,861          $ 4,036
Off-balance sheet Farmer Mac I Guaranteed Securities           1,070            1,280
LTSPCs                                                         9,241           11,441
                                                       -----------------  ---------------
 Total reserve for losses                                   $ 13,172          $ 16,757
                                                       -----------------  ---------------
</TABLE>

When certain  criteria are met, such as the default of the borrower,  Farmer Mac
may, in its sole discretion,  repurchase the defaulted loans  underlying  Farmer
Mac  Guaranteed  Securities  and is obligated to purchase  those  underlying  an
LTSPC. These acquisitions are recorded in the consolidated  financial statements
at their fair value.  Fair value is determined by appraisal or other appropriate
valuation  method.  In  September  2002,  Farmer Mac  adopted  EITF 02-9,  which
requires  that Farmer Mac record at  acquisition  the  difference  between  each
loan's  acquisition  cost and its fair value, if any, as a charge to the reserve
for losses.  Prior to the adoption of EITF 02-9, any specific allowance that had
been established for the off-balance  sheet obligation would be transferred from
the reserve for losses to the  allowance  for loan losses  (referred  to as "net
allocation of the  allowance" in the summary of the changes in the allowance for
losses).  Upon the receipt of each loan's  updated  appraisal or  estimation  of
value,  the  difference  between the  acquisition  cost of the loan and its fair
value, if any, was recorded as a charge to the allowance for loan losses.

A portion of the  allowance  for losses is  specifically  allocated  to impaired
loans when the fair value of the collateral, less the estimated selling cost, is
less than the cost basis in the loan.  For this  analysis and the  allocation of
specific reserves as of December 31, 2003, Farmer Mac expanded the population of
loans specifically reviewed to include:

     o    non-performing assets;

     o    loans for which  Farmer  Mac had  adjusted  the  timing of  borrowers'
          payment  schedules  within the past three years,  but still expects to
          collect all amounts due and has not made economic concessions; and

     o    additional  performing  loans that have  previously been delinquent or
          are secured by real estate that produces  commodities  currently under
          stress.

Prior to December 31, 2003, the review consisted only of non-performing  assets.
The balance of impaired loans,  both on- and off-balance  sheet, and the related
allowance specifically allocated to those impaired loans as of December 31, 2003
and 2002 are summarized in the following table:

<TABLE>
<CAPTION>
                                                    December 31, 2003                      December 31, 2002
                                          --------------------------------------- ----------------------------------------
                                                          Specific       Net                    Specific         Net
                                             Balance      Allowance    Balance      Balance     Allowance      Balance
                                          ------------- ------------------------- ------------- ---------------------------
                                                                          (in thousands)
<S>                                        <C>           <C>         <C>           <C>          <C>            <C>
Assets specifically reviewed
 for impairment:
     Specific allowance for losses           $ 18,213     $ (3,762)    $ 14,451     $ 12,137     $ (2,036)      $ 10,101
     No specific allowance for losses         154,487            -      154,487       63,171            -         63,171
                                          ------------- ------------ ------------ ------------ ------------  -------------
          Total                             $ 172,700     $ (3,762)   $ 168,938     $ 75,308     $ (2,036)      $ 73,272
                                          ------------- ------------ ------------ ------------ ------------  -------------
</TABLE>

Farmer Mac recognized  interest  income of  approximately  $1.7 million and $0.6
million on impaired  loans  during the years ended  December  31, 2003 and 2002,
respectively.  During 2003 and 2002, Farmer Mac's average investment in impaired
loans and loans underlying on-balance sheet Farmer Mac Guaranteed Securities was
$68.5 million and $71.0 million, respectively.

In accordance  with the terms of all  applicable  trust  agreements,  Farmer Mac
acquires  all loans that  collateralize  Farmer Mac  Guarantee  Securities  that
become and remain 90 days or more past due on the next  subsequent  loan payment
date.  During 2003,  Farmer Mac purchased 81 defaulted  loans having a principal
balance of $55.6 million from pools underlying Farmer Mac Guaranteed  Securities
and LTSPCs.  During 2002, Farmer Mac made 79 such purchases for a total of $46.4
million.  The following table presents Farmer Mac's purchases of defaulted loans
underlying Farmer Mac I Guaranteed Securities and LTSPCs.

<TABLE>
<CAPTION>

                                               For the Year Ended
                                                  December 31,
                                          ------------------------------
                                               2003            2002
                                          --------------  --------------
                                                 (in thousands)
<S>                                        <C>             <C>
Defaulted loans purchased underlying
    off-balance sheet Farmer Mac I
    Guaranteed Securities                   $ 16,276        $ 17,386
Defaulted loans underlying
    on-balance sheet Farmer Mac I
    Guaranteed Securities transferred
    to loans                                  35,100          25,675
Defaulted loans purchased underlying
    LTSPCs                                     4,266           3,386
                                          --------------  --------------

Total                                       $ 55,642        $ 46,447
                                          --------------  --------------
</TABLE>


Concentrations of Credit Risk

The following table sets forth the geographic and commodity diversification,  as
well as the range of original loan-to-value ratios, for all loans held and loans
underlying  post-1996  Act Farmer Mac I Guaranteed  Securities  and LTSPCs as of
December 31, 2003 and 2002:

<TABLE>
<CAPTION>

                                      As of December 31,
                               ---------------------------------
                                    2003              2002
                               ---------------   ---------------
                                       (in thousands)
<S>                             <C>               <C>
By geographic region (1):
     Northwest                   $ 1,066,399       $ 1,167,331
     Southwest                     2,307,812         2,273,846
     Mid-North                       677,755           518,439
     Mid-South                       257,664           233,997
     Northeast                       397,231           298,340
     Southeast                       313,171           329,681
                               ---------------   ---------------
       Total                     $ 5,020,032       $ 4,821,634
                               ---------------   ---------------
By commodity:
     Crops                       $ 2,228,506       $ 2,085,963
     Livestock                     1,355,070           987,533
     Permanent plantings           1,025,245         1,341,165
     Part-time farms                 374,057           367,823
     Other                            37,154            39,150
                               ---------------   ---------------
       Total                     $ 5,020,032       $ 4,821,634
                               ---------------   ---------------
By original loan-to-value:
     0.00% to 40.00%             $ 1,300,869       $ 1,246,891
    40.01% to 50.00%               1,082,540         1,046,915
    50.01% to 60.00%               1,404,260         1,339,891
    60.01% to 70.00%               1,107,888         1,066,419
    70.01% to 80.00%                 109,848           106,493
    80.01% to 90.00%                  14,627            15,025
                               ---------------   ---------------
       Total                     $ 5,020,032       $ 4,821,634
                               ---------------   ---------------
<FN>
(1)  Geographic regions:  Mid-North (IA, IL, IN, MI, MN, MO, WI); Mid-South (KS,
     OK, TX); Northeast (CT, DE, KY, MA, MD, ME, NC, NH, NJ, NY, OH, PA, RI, TN,
     VA, VT, WV); Northwest (AK, ID, MT, ND, NE, OR, SD, WA, WY); Southeast (AL,
     AR, FL, GA, LA, MS, SC); Southwest (AZ, CA, CO, HI, NM, NV, UT).
</FN>
</TABLE>

The original  loan-to-value  ratio is calculated by dividing the loan  principal
balance at the time of guarantee,  purchase or commitment by the appraised value
at the date of loan origination or, when available,  updated  appraised value at
the time of guarantee, purchase or commitment.  Current loan-to-value ratios may
be higher or lower than the original loan-to-value ratios.

9. STOCKHOLDERS' EQUITY

Common Stock

Farmer Mac has three classes of common stock outstanding:

     o    Class  A  voting  common  stock,  which  may be held  only  by  banks,
          insurance  companies  and  other  financial  institutions  or  similar
          entities  that are not  institutions  of the Farm  Credit  System.  By
          statute,  no holder of Class A voting  common  stock may  directly  or
          indirectly  be a  beneficial  owner  of more  than 33  percent  of the
          outstanding shares of Class A voting common stock;
     o    Class B voting common stock, which may be held only by institutions of
          the Farm  Credit  System.  There are no  restrictions  on the  maximum
          holdings of Class B voting common stock; and
     o    Class C non-voting common stock, which has no ownership restrictions.

Dividends  have not been paid to any  common  stockholders  nor does  Farmer Mac
expect to pay  dividends in the  foreseeable  future.  Farmer  Mac's  ability to
declare  and pay a  dividend  could be  restricted  if it failed to comply  with
regulatory capital requirements.

Preferred Stock

The  Corporation  has  outstanding  700,000  shares of 6.40  percent  Cumulative
Preferred  Stock,  Series  A,  which  has a  redemption  price  and  liquidation
preference of $50.00 per share, plus accrued and unpaid dividends. The preferred
stock does not have a maturity date.  Beginning on June 30, 2012, Farmer Mac has
the option to redeem the  preferred  stock at any time,  in whole or in part, at
the  redemption  price of $50.00 per share,  plus  accrued and unpaid  dividends
through and including the redemption date. Farmer Mac pays cumulative  dividends
on the preferred stock  quarterly in arrears,  when and if declared by the board
of  directors.  Farmer  Mac's  ability  to declare  and pay a dividend  could be
restricted  if it failed to comply with  regulatory  capital  requirements.  The
costs of issuing the preferred stock were charged to additional paid-in capital.


Stock Option Plan

In 1996,  Farmer Mac adopted a stock option plan for officers to acquire  shares
of Class C non-voting  common stock.  Under the 1996 plan, stock options awarded
under the plan  vested  annually  in thirds,  with the last  installment  having
vested in June 1998. If not exercised,  any options  granted under the 1996 plan
will  expire 10 years  from the date of grant.  The  exercise  price of  options
granted under the 1996 plan,  which were issued in 1996,  is $2.63.  The maximum
number of options that could be issued  under the 1996 plan was 338,490,  all of
which were issued.

In 1997, Farmer Mac adopted a new stock option plan for directors,  officers and
other employees, the terms of which are generally the same as for the 1996 plan,
except that options  issued to directors  since June 1, 1998, if not  exercised,
will  expire  five  years  from  the  date of  grant.  Of the  3,750,000  shares
authorized to be issued under the 1997 plan,  2,265,751 have been issued, net of
cancellations.  Options  granted  under the 1997 plan during 2003 have  exercise
prices  ranging from $22.40 to $26.68 per share.  For all stock options  granted
under both of Farmer  Mac's plans,  the exercise  price was equal to the closing
price of the Class C common stock on or immediately preceding the grant date.


The following table summarizes stock option activity for 2003 and 2002:

<TABLE>
<CAPTION>

                                              2003                            2002
                                  ------------------------------  --------------------------
                                                   Weighted-                     Weighted-
                                                    Average                       Average
                                                    Exercise                      Exercise
                                     Shares          Price           Shares        Price
                                  -------------  ---------------  -------------  -----------
<S>                                <C>             <C>           <C>            <C>
Outstanding, beginning of year      1,637,111       $ 19.45       1,416,426      $ 17.61
Granted                               366,104         22.67         270,421        28.97
Exercised                            (422,236)         9.14         (39,736)       15.64
Canceled                               (4,999)        28.07         (10,000)       31.24
                                  -------------  ------------   -------------  -----------
Outstanding, end of year            1,575,980       $ 22.92       1,637,111      $ 19.45
                                  -------------  ------------   -------------  -----------
Options exercisable at year end     1,247,658                     1,368,884
                                  -------------                 -------------
</TABLE>


The  cancellations  of stock  options  during 2003 and 2002 were due to unvested
options  terminating in accordance  with the provisions of the applicable  stock
option plans upon directors' or employees'  departures from Farmer Mac. For 2003
and 2002 the additional paid in capital  received as a result of the exercise of
stock options was $3.4 million and $0.6 million,  respectively.  During 2003 and
2002 the  reduction  of  income  tax paid as a result of the  deduction  for the
exercise of stock options was $2.8 million and $0.3 million, respectively.


The following table summarizes  information  regarding options outstanding as of
December 31, 2003:

<TABLE>
<CAPTION>

                      Options Outstanding        Exercisable
                 ------------------------------ --------------
                                   Weighted-
                                    Average
                                   Remaining
     Exercise      Number of      Contractual     Number of
       Price         Shares          Life          Shares
   ------------- -------------- --------------- --------------

<S>  <C>           <C>            <C>             <C>
      $ 2.63          5,490        2.5 years         5,490
       11.83         57,312        3.5 years        57,312
       12.67          1,200        4.7 years         1,200
       15.13        295,775        6.4 years       295,775
       16.38         24,110        6.7 years        24,110
       18.13          3,000        6.8 years         3,000
       18.25          2,400        3.9 years         2,400
       19.38         16,063        5.7 years        16,063
       20.00         77,586        2.7 years        77,586
       21.19          3,000        6.9 years         3,000
       22.08        194,064        5.4 years       194,064
       22.38          2,000        7.0 years         2,000
       22.40        343,104        9.4 years       114,368
       22.94          1,500        5.6 years         1,500
       26.20          2,000        7.2 years         2,000
       26.25         13,000        8.7 years         8,667
       26.68         21,000        9.8 years         6,999
       26.92            500        7.3 years           500
       27.75          3,000        7.1 years         3,000
       29.10        242,257        8.4 years       161,505
       29.56          1,000        8.7 years           500
       31.02          4,627        7.5 years         4,627
       31.20          8,750        7.7 years         8,750
       31.24        250,042        7.4 years       250,042
       31.50          1,500        7.4 years         1,500
       34.90          1,000        7.7 years         1,000
       34.91            200        7.7 years           200
       45.06            500        8.3 years           500
                 --------------                 --------------
                  1,575,980                      1,247,658
                 --------------                 --------------
</TABLE>

The weighted-average  fair values of options granted in 2003, 2002 and 2001 were
$10.68, $13.50 and $11.61, respectively, which under the fair value-based method
of accounting for  stock-based  compensation  cost would have reduced net income
available to common stockholders by $2.5 million,  $2.4 million and $2.1 million
for 2003, 2002 and 2001, respectively.  The fair values were estimated using the
Black-Scholes option pricing model based on the following assumptions:

<TABLE>
<CAPTION>

                                   2003        2002          2001
                               -----------  ----------   -----------
<S>                             <C>         <C>           <C>
Risk-free interest rate             2.9%        5.2%          5.4%
Expected years until exercise    5 years     5 years       5 years
Expected stock volatility          47.8%       40.0%         47.1%
Dividend yield                      0.0%        0.0%          0.0%
</TABLE>

Restricted Stock


In addition to stock options, the Corporation,  by authorization of the board of
directors,  issued  restricted  stock to employees  during 2003,  2002 and 2001.
Restricted  stock  entitles  participants  to all the  rights of a  stockholder,
except  that  some of the  shares  awarded  are  subject  to  forfeiture  if the
participant is not employed by Farmer Mac at the end of the  restriction  period
and other shares are not subject to forfeiture but may not be disposed of by the
participant during the restriction  period. The vesting or restriction period is
usually one to two years.  The value of restricted stock granted to employees is
amortized over the vesting period.  During 2003,  2002 and 2001,  37,045 shares,
32,338 shares and 28,602 shares of restricted stock, respectively, were granted,
resulting in compensation expense of $0.8 million, $0.9 million and $0.9 million
being recognized during the respective years.

Statutory and Regulatory Capital Requirements

Farmer Mac is subject to three statutory and regulatory capital requirements:

     o    Minimum  capital - Farmer Mac's minimum  capital level is an amount of
          core capital (stockholders equity less accumulated other comprehensive
          income)  equal to the sum of 2.75  percent of Farmer  Mac's  aggregate
          on-balance sheet assets, as calculated for regulatory  purposes,  plus
          0.75 percent of the aggregate  off-balance sheet obligations of Farmer
          Mac, specifically including:
          o    the unpaid principal balance of outstanding Farmer Mac Guaranteed
               Securities;
          o    instruments   issued  or   guaranteed  by  Farmer  Mac  that  are
               substantially  equivalent  to Farmer Mac  Guaranteed  Securities,
               including LTSPCs; and
          o    other off-balance sheet obligations of Farmer Mac.
     o    Critical capital - Farmer Mac's critical capital level is an amount of
          core  capital  equal  to 50  percent  of  the  total  minimum  capital
          requirement at that time.
     o    Risk-based  capital - The Act  directs FCA to  establish a  risk-based
          capital  stress  test for  Farmer  Mac,  using  specified  stress-test
          parameters.  While  the Act does not  specify  the  required  level of
          risk-based  capital,  that level is permitted to exceed the  statutory
          minimum capital requirement  applicable to Farmer Mac, if so indicated
          by the risk-based capital stress test.

Farmer  Mac is  required  to  comply  with the  higher  of the  minimum  capital
requirement or the risk-based capital requirement.

As of December 31, 2003, Farmer Mac's minimum and critical capital  requirements
were $142.0 million and $71.0 million, respectively, and its actual core capital
level was $215.5 million,  $73.5 million above the minimum  capital  requirement
and  $144.5  million  above  the  critical  capital  requirement.  Based  on the
risk-based capital stress test, Farmer Mac's risk-based  capital  requirement as
of December 31, 2003 was $38.8 million and Farmer Mac's regulatory capital (core
capital plus  allowance  for losses) of $237.6  million  exceeded that amount by
approximately $198.8 million.


10. INCOME TAXES

The  components of the  provision  for federal  income taxes for the years ended
December 31, 2003, 2002 and 2001 were as follows:

<TABLE>
<CAPTION>
                     2003          2002           2001
                -------------  -------------  -------------
                             (in thousands)
<S>              <C>            <C>            <C>
Current           $ 12,529       $ 12,768       $ 10,669
Deferred              (221)        (2,959)        (2,250)
                -------------  -------------  -------------
                  $ 12,308        $ 9,809        $ 8,419
                -------------  -------------  -------------
</TABLE>

A  reconciliation  of tax at the  statutory  federal  tax rate to the income tax
provision for the years ended December 31, 2003, 2002 and 2001 is as follows:

<TABLE>
<CAPTION>

                                       2003        2002        2001
                                   ----------- ----------- ------------
                                         (dollars in thousands)
<S>                                <C>         <C>           <C>
Tax expense at statutory rate       $ 13,852    $ 11,396      $ 8,899
Effect of non-taxable
 dividend income                      (1,694)     (1,596)        (386)
Other                                    150           9          (94)
                                   ----------- ----------- ------------
Income tax expense                  $ 12,308     $ 9,809      $ 8,419
                                   ----------- ----------- ------------
Statutory tax rate                     35.0%       35.0%        35.0%
Effective tax rate                     31.1%       30.1%        33.1%
</TABLE>

The  components  of the deferred tax assets and  liabilities  as of December 31,
2003 and 2002 were as follows:

<TABLE>
<CAPTION>

                                                       2003        2002
                                                   ------------ -----------
                                                       (in thousands)
<S>                                                 <C>         <C>
Deferred tax assets:
 Allowance for losses                                $ 8,216     $ 7,004
 Unrealized loss on financial derivatives
   designated as cash flow hedges                     24,529      33,777
 Other                                                 1,439       2,442
                                                   ------------ -----------
   Total deferred tax assets                          34,184      43,223

Deferred tax liability:
Unrealized gain on available-for-sale securities      23,293      33,557
                                                   ------------ -----------
   Total deferred tax liability                       23,293      33,557
                                                   ------------ -----------
Net deferred tax aset                                $10,891     $ 9,666
                                                   ------------ -----------
</TABLE>

A valuation  allowance  is required to reduce the net  deferred  tax asset to an
amount that is more likely than not to be realized.  No valuation  allowance was
considered necessary as of December 31, 2003 and 2002.

11. EMPLOYEE BENEFITS


On December 28, 1989, Farmer Mac adopted a defined contribution  retirement plan
for all of its employees.  Through 2001,  Farmer Mac contributed 13.2 percent of
the lesser of an individual's gross salary or $170,000,  plus 5.7 percent of the
difference  between (1) the lesser of the gross  salary or $170,000  and (2) the
Social  Security   Taxable  Wage  Base.  The  Economic  Growth  and  Tax  Relief
Reconciliation  Act of 2001 increased the $170,000 limit to $200,000 in 2002, to
be adjusted  from time to time for  inflation.  Employees are fully vested after
having been employed for three years.  Expense for this plan for the years ended
December  31,  2003,  2002  and  2001  was  $464,000,   $384,000  and  $376,000,
respectively.


12. OFF-BALANCE SHEET GUARANTEES AND LTSPCs, COMMITMENTS AND CONTINGENCIES

Farmer Mac offers approved  agricultural and rural residential  mortgage lenders
two alternatives to increase their liquidity or lending capacity while retaining
the cash flow  benefits of their loans:  (1) Farmer Mac  Guaranteed  Securities,
which are available through either the Farmer Mac I program or the Farmer Mac II
program,  and (2)  LTSPCs,  which are  available  only  through the Farmer Mac I
program. Both of these alternatives result in off-balance sheet transactions for
Farmer Mac.

Off-Balance Sheet Farmer Mac Guaranteed Securities

Periodically Farmer Mac transfers  agricultural  mortgage loans into trusts that
are used as vehicles for the  securitization  of the transferred  assets and the
beneficial  interests in the loans are sold to third party investors.  The table
below summarizes certain cash flows received from and paid to these trusts.

<TABLE>
<CAPTION>

                                         Year Ended December 31,
                                     -----------------------------
                                       2003       2002      2001
                                     ---------  --------- ---------
                                          (in thousands)

<S>                                 <C>        <C>        <C>
Proceeds from new securitizations    $ 78,254   $ 47,682   $ 82,995
Guarantee fees received                 1,988        775        579
Purchase of assets from the trusts     16,276     17,386      6,005
Servicing advances                        503      1,235        819
Repayments of servicing advances          107      1,134         52
</TABLE>

Farmer Mac is liable  under its  guarantee  to ensure that the  securities  make
timely  payments to investors of principal and interest  based on the underlying
loans, regardless of whether the trust has actually received such scheduled loan
payments.  As  consideration  for Farmer Mac's  assumption of the credit risk on
these mortgage  pass-through  certificates,  Farmer Mac receives  guarantee fees
that are  recognized as earned on an accrual basis over the life of the loan and
based upon the outstanding balance of the Farmer Mac Guaranteed Security.


Farmer Mac is required to perform under its obligation when the underlying loans
for the  off-balance  sheet Farmer Mac  Guaranteed  Securities do not make their
scheduled installment payments. When a loan underlying a Farmer Mac I Guaranteed
Security  becomes  90 days  or more  past  due,  Farmer  Mac  may,  in its  sole
discretion,  repurchase  the loan from the trust and generally  does  repurchase
such loans, thereby reducing the principal balance of the outstanding Farmer Mac
I Guaranteed Security.

The  following  table  presents  the  maximum   principal  amount  of  potential
undiscounted  future  payments  that  Farmer Mac could be required to make under
off-balance  sheet Farmer Mac Guaranteed  Securities as of December 31, 2003 and
2002, not including offsets provided by any recourse provisions, recoveries from
third parties or collateral for the underlying loans.

<TABLE>
<CAPTION>

            Outstanding Balance of Off-Balance Sheet
                Farmer Mac Guaranteed Securities
----------------------------------------------------------------------------
                                             December 31,      December 31,
                                                2003              2002
                                          -----------------  ---------------
                                                   (in thousands)
<S>                                        <C>                <C>
Farmer Mac I Guaranteed Securities:
   Post-1996 Act                              $ 952,134        $ 299,940
   Pre-1996 Act                                       -                -
                                          -----------------  ---------------
     Total Farmer Mac I                         952,134          299,940
Farmer Mac II Guaranteed Securities              51,241           67,109
                                          -----------------  ---------------

     Total Farmer Mac I and II              $ 1,003,375        $ 367,049
                                          -----------------  ---------------
</TABLE>

If  Farmer  Mac  repurchases  a loan  that  is  collateral  for a  Farmer  Mac I
Guaranteed Security, Farmer Mac would have the right to enforce the terms of the
loan,  and in the  event of a  default,  would  have  access  to the  underlying
collateral.  Farmer Mac typically recovers a significant portion of the value of
defaulted  loans  purchased  either  through  borrower  payments,  loan payoffs,
payments by third parties or foreclosure and sale of the collateral.

Farmer Mac has  recourse  to the USDA for any  amounts  advanced  for the timely
payment of principal and interest on Farmer Mac II Guaranteed  Securities.  That
recourse is the USDA guarantee, a full faith and credit obligation of the United
States  that  becomes   enforceable   if  a  lender  fails  to  repurchase   the
USDA-guaranteed  portion from its owner within 30 days after written demand from
the owner when (a) the borrower under the guaranteed loan is in default not less
than  60  days  in  the  payment  of  any  principal  or  interest  due  on  the
USDA-guaranteed  portion, or (b) the lender has failed to remit to the owner the
payment made by the borrower on the USDA-guaranteed  portion or any related loan
subsidy within 30 days after the lender's receipt thereof.

As of December 31, 2003, the  weighted-average  remaining  maturity of all loans
underlying off-balance sheet Farmer Mac Guaranteed Securities was 16.4 years. As
of  December  31,  2003 and  2002,  the  portion  of the  allowance  for  losses
attributable  to  off-balance  sheet Farmer Mac  Guaranteed  Securities was $3.7
million and $1.3 million,  respectively. The increase is largely a result of the
contingent  obligation for probable  losses of $2.7 million,  a component of the
allowance for losses reported on the  consolidated  balance sheet as part of the
guarantee and commitment obligation,  which relates to an LTSPC converted into a
Farmer Mac Guaranteed  Security at the request of a program  participant  during
2003. The conversion resulted in a corresponding  decrease in the portion of the
allowance for losses  attributable  to LTSPCs.  For additional  detail on Farmer
Mac's  methodology for  determining the allowance for losses,  see Note 2(j) and
Note 8.


Long-Term Standby Purchase Commitments

An LTSPC is a commitment by Farmer Mac to purchase  eligible  loans,  either for
cash or in  exchange  for Farmer  Mac I  Guaranteed  Securities,  on one or more
undetermined  future dates.  As  consideration  for its assumption of the credit
risk on loans underlying an LTSPC,  Farmer Mac receives a commitment fee payable
monthly  in  arrears,  in an  amount  approximating  what  would  have  been the
guarantee  fee if the  transaction  were  structured  as a swap for  Farmer  Mac
Guaranteed Securities.

An LTSPC permits a seller to nominate  from its  portfolio a segregated  pool of
loans,  which are retained in the seller's portfolio and serviced by the seller.
Upon nomination, Farmer Mac reviews the loan pool to confirm that it conforms to
Farmer  Mac's  underwriting  standards.  Upon  Farmer  Mac's  acceptance  of the
eligible loans, the seller effectively  transfers the credit risk on those loans
to Farmer Mac,  thereby  reducing the  seller's  credit and  concentration  risk
exposures and,  consequently,  its regulatory capital  requirements and its loss
reserve requirements. Credit risk is transferred through Farmer Mac's commitment
to purchase the segregated loans from the  counterparty  based upon Farmer Mac's
original credit review and acceptance of the credit risk on the loans.

The specific events or  circumstances  that would require Farmer Mac to purchase
some or all of the segregated loans under its LTSPCs include: (1) the failure of
the borrower under any loan to make  installment  payments under that loan for a
period of at least four months;  or (2) the  determination  by the holder of the
LTSPC to sell or  exchange  some or all of the  loans  under the LTSPC to Farmer
Mac.

Farmer Mac generally purchases loans subject to an LTSPC:

     o    At  par  plus  accrued  interest,  if the  loans  become  four  months
          delinquent;
     o    At a  mark-to-market  price,  if the loans are not  delinquent and are
          standard  Farmer Mac cash window  loan  products;  or in exchange  for
          Farmer Mac I Guaranteed Securities.
     o    If  the  loans   are  not  four   months   delinquent,   either  at  a
          mark-to-market  negotiated  price for all (but not some)  loans in the
          pool,  based on the sale of Farmer Mac I Guaranteed  Securities in the
          capital  markets or the  funding  obtained  by Farmer Mac  through the
          issuance of matching debt in the capital  markets;  or in exchange for
          Farmer Mac I Guaranteed Securities.

As of December  31, 2003 and 2002,  the maximum  principal  amount of  potential
undiscounted  future  payments  that Farmer Mac could be requested to make under
LTSPCs,  not including offsets provided by any recourse  provisions,  recoveries
from third parties or collateral for the underlying  loans, was $2.3 billion and
$2.7 billion respectively.

In the event of loan  default,  Farmer Mac would  have the right to enforce  the
terms of the  loans  including  the  right  to  foreclose  upon  the  collateral
underlying  such loans.  Farmer Mac believes  that it will  generally  recover a
significant portion of the value of the defaulted loans purchased either through
borrower  payments,  loan payoffs,  payments by third parties or foreclosure and
sale of the collateral.


As of December 31, 2003, the  weighted-average  remaining  maturity of all loans
underlying LTSPCs was 14.5 years. The portion of the reserve for losses that was
attributable  to LTSPCs was $9.2  million and $11.4  million as of December  31,
2003 and 2002, respectively.  The decrease is largely a result of the contingent
obligation for probable  losses, a component of the allowance for losses of $2.7
million  created upon the  conversion  of an LTSPC into a Farmer Mac  Guaranteed
Security at the request of a program  participant  during 2003.  The  conversion
resulted in a corresponding  decrease in the portion of the allowance for losses
attributable to LTSPCs.  For additional  detail on Farmer Mac's  methodology for
determining the reserve for losses, see Note 2(j) and Note 8.


Commitments


Farmer Mac enters into mandatory and optional  delivery  commitments to purchase
loans. Most loan purchase  commitments  entered into by Farmer Mac are mandatory
commitments,  in  which  Farmer  Mac  charges  a fee to  extend  or  cancel  the
commitment.  All optional  loan  purchase  commitments  are sold  forward  under
optional  commitments to deliver Farmer Mac  Guaranteed  Securities  that may be
cancelled by Farmer Mac without penalty. As of December 31, 2003, commitments to
purchase  Farmer Mac I and II loans  totaled $11.2  million,  none of which were
optional  commitments.  Outstanding loan purchase commitments as of December 31,
2002, totaled $26.2 million, of which $4.5 million were optional commitments.

Farmer Mac is exposed to interest rate risk from the time it commits to purchase
a loan to the time it either: (a) sells Farmer Mac Guaranteed  Securities backed
by the loan or (b) issues debt to retain the loan in its  portfolio.  There were
no commitments to sell Farmer Mac Guaranteed  Securities as of December 31, 2003
and 2002.  Farmer Mac manages the  interest  rate risk  related to loans not yet
sold  or  funded  as a  retained  investment  through  the use of  forward  sale
contracts  involving  government  sponsored  enterprise debt and mortgage-backed
securities and futures contracts  involving U.S. Treasury  securities.  See Note
2(h) and Note 6 for information regarding financial derivatives.

Rental  expense  for  Farmer  Mac's  office  space for each of the  years  ended
December  31,  2003,  2002  and 2001 was $0.5  million,  $0.5  million  and $0.3
million,  respectively.  The future  minimum lease  payments  under Farmer Mac's
non-cancelable lease for its office space are as follows:

<TABLE>
<CAPTION>

   Future Minimum Lease Payments
-----------------------------------
            (in thousands)
<S>   <C>               <C>
       2004                $ 545
       2005                  558
       2006                  573
       2007                  586
       2008                  601
Thereafter                 1,897
                    ---------------
Total                    $ 4,760
                    ---------------
</TABLE>

13. FAIR VALUE DISCLOSURES

The following table sets forth the estimated fair values and the carrying values
for financial assets,  liabilities and guarantees and commitments as of December
31,  2003  and  2002.  Significant  estimates,  assumptions  and  present  value
calculations are used for the following  disclosure,  resulting in a high degree
of subjectivity in the indicated fair values. Accordingly,  these estimated fair
values are not  necessarily  indicative  of what Farmer Mac would  realize in an
actual sale or purchase.

<TABLE>
<CAPTION>

                                                          As of December 31,
                                       ----------------------------------------------------------
                                                   2003                           2002
                                       ---------------------------   ----------------------------
                                                         Carrying                      Carrying
                                         Fair Value       Amount       Fair Value       Amount
                                       --------------  -----------   --------------  ------------
                                                             (in thousands)
<S>                                      <C>            <C>            <C>            <C>
Financial assets:
    Cash and cash equivalents              $623,674       $623,674       $723,800      $ 723,800
    Investment securities                 1,065,124      1,064,782        831,299        830,409
    Farmer Mac Guaranteed Securities      1,522,568      1,508,134      1,632,883      1,608,507
    Loans                                 1,038,247        983,624      1,008,706        963,461
    Financial derivatives                       961            961            317            317

Financial liabilities:
    Notes payable:
     Due within one year                  2,801,616      2,799,384      2,863,224      2,895,746
     Due after one year                   1,213,623      1,136,110      1,168,760        985,318
     Financial derivatives                   67,670         67,670         94,314         94,314

Guarantee and commitment fees receivable:
    LTSPCs                                   26,547          4,136         27,102              -
    Off-balance sheet Farmer Mac
     Guaranteed Securities                    8,032          7,333          5,452              -
</TABLE>

Farmer Mac  estimates  the fair  value of its loans and  Farmer  Mac  Guaranteed
Securities by  discounting  the  projected  cash flows of these  instruments  at
projected  interest  rates.  Because the cash flows of these  instruments may be
interest  rate path  dependent,  these values and projected  discount  rates are
derived using a Monte Carlo  simulation  model.  Notes payable and interest rate
contracts are valued using a similar  methodology.  For  investment  securities,
futures  contracts and  commitments  to purchase and sell  government  sponsored
enterprise debt and mortgage-backed  securities, fair values are based on market
quotes. The carrying value of cash and cash equivalents approximates fair value.

14. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

<TABLE>
<CAPTION>

                                                  2003 Quarter Ended                               2002 Quarter Ended
                                   ------------------------------------------------ ------------------------------------------------
                                     Dec. 31     Sept. 30     June 30     Mar. 31     Dec. 31     Sept. 30     June 30     Mar. 31
                                   ----------- ------------ ----------- ----------- ----------- ------------ ----------- -----------
                                                          (dollars in thousands, except per share amounts)
<S>                                 <C>          <C>         <C>         <C>         <C>          <C>         <C>         <C>
Interest income                      $39,405      $39,320     $40,866     $41,968     $44,062      $46,185     $43,935     $37,688
Interest expense                      30,311       30,402      31,501      32,093      34,557       35,096      33,991      29,126
                                   ----------- ------------ ----------- ----------- ----------- ------------ ----------- -----------
   Net interest income                 9,094        8,918       9,365       9,875       9,505       11,089       9,944       8,562
    Provision for loan losses           (509)      (3,391)     (1,416)     (1,208)     (1,340)           -           -           -
                                   ----------- ------------ ----------- ----------- ----------- ------------ ----------- -----------
   Net interest income after
    provision for loan losses          8,585        5,527       7,949       8,667       8,165       11,089       9,944       8,562
Guarantee and commitment fees          5,424        5,056       5,111       5,094       5,114        4,874       4,723       4,567
Gains/(Losses) on derivatives         (1,297)      (3,348)      3,669       3,333      (3,679)      (2,563)     (1,324)       (868)
Gains/(Losses) on the
   repurchase of debt                      -            -           -           -      (2,021)           -         897       2,490
Gains/(Losses) on the sale
   of real estate owned                  201           79        (225)        123           -           85         (27)        (34)
Miscellaneous                             69          354         138         251         114          458         368         391
                                   ----------- ------------ ----------- ----------- ----------- ------------ ----------- -----------
Total revenues                        12,982        7,668      16,642      17,468       7,693       13,943      14,581      15,108
Total operating expenses               5,292        2,325       3,532       4,033       3,210        6,012       5,015       4,530
                                   ----------- ------------ ----------- ----------- ----------- ------------ ----------- -----------
Income before income taxes             7,690        5,343      13,110      13,435       4,483        7,931       9,566      10,578
Income tax expense                     2,234        1,438       4,184       4,452       1,146        2,341       2,944       3,376
                                   ----------- ------------ ----------- ----------- ----------- ------------ ----------- -----------
Net income                             5,456        3,905       8,926       8,983       3,337        5,590       6,622       7,202
                                   ----------- ------------ ----------- ----------- ----------- ------------ ----------- -----------
Preferred stock dividends               (560)        (560)       (560)       (560)       (560)        (560)       (336)          -
                                   ----------- ------------ ----------- ----------- ----------- ------------ ----------- -----------
Net income available to
   common stockholders               $ 4,896      $ 3,345     $ 8,366     $ 8,423     $ 2,777      $ 5,030     $ 6,286     $ 7,202
                                   ----------- ------------ ----------- ----------- ----------- ------------ ----------- -----------
Earnings per share:
    Basic net earnings                $ 0.42       $ 0.28      $ 0.72      $ 0.72      $ 0.24       $ 0.43      $ 0.54      $ 0.62
    Diluted net earnings              $ 0.40       $ 0.28      $ 0.70      $ 0.70      $ 0.23       $ 0.42      $ 0.52      $ 0.59
</TABLE>

Item 9. Changes  in   and  Disagreements  With  Accountants  on  Accounting  and
        Financial Disclosure

      Not Applicable

Item 9A. Controls and Procedures

     Farmer Mac maintains  disclosure controls and procedures designed to ensure
that information required to be disclosed in the Corporation's  periodic filings
under the Securities  Exchange Act of 1934 (the "Exchange Act"),  including this
report, is recorded, processed, summarized and reported on a timely basis. These
disclosure  controls and procedures include controls and procedures  designed to
ensure that  information  required to be  disclosed  under the  Exchange  Act is
accumulated and communicated to the  Corporation's  management on a timely basis
to allow decisions regarding required  disclosure.  Farmer Mac's Chief Executive
Officer and Chief  Financial  Officer have  evaluated the  effectiveness  of the
design and operation of the Corporation's disclosure controls and procedures (as
defined under Rules  13a-15(e) and 15d-15(e) of the Exchange Act) as of December
31, 2003. Based upon that evaluation,  Farmer Mac's Chief Executive  Officer and
Chief  Financial  Officer  have  concluded  that  the  Corporation's  disclosure
controls  and  procedures  are  adequate and  effective.  For the quarter  ended
December 31, 2003,  there were no  significant  changes in Farmer Mac's internal
controls,  or in other  factors that could  materially  affect  these  controls,
subsequent to the date of their  evaluation,  including any  corrective  actions
with regard to significant deficiencies or material weaknesses.


<PAGE>



                                    PART III

Item 10. Directors and Executive Officers of the Registrant

     Farmer Mac has adopted a code of business  conduct and ethics (the  "Code")
that applies to all  directors,  officers,  employees  and agents of Farmer Mac,
including Farmer Mac's principal executive officer, principal financial officer,
principal  accounting officer and other senior financial officers. A copy of the
Code is available  in the  "Investors--Corporate  Governance"  section of Farmer
Mac's Internet website  (www.farmermac.com).  Farmer Mac will post any amendment
to, or waiver from, a provision of the Code in that same section of its Internet
website.  A print  copy of the Code is  available  free of charge  upon  written
request to Farmer Mac's Corporate Secretary.

     Additional  information  required by this item is incorporated by reference
to the Corporation's Proxy Statement to be filed on or about April 19, 2004.

Item 11. Executive Compensation

     The  information  required by this item is incorporated by reference to the
Corporation's Proxy Statement to be filed on or about April 19, 2004.

Item 12. Security Ownership of Certain Beneficial Owners and Management

     The  information  required by this item is incorporated by reference to the
Corporation's Proxy Statement to be filed on or about April 19, 2004.

Item 13. Certain Relationships and Related Transactions

     The  information  required by this item is incorporated by reference to the
Corporation's Proxy Statement to be filed on or about April 19, 2004.

Item 14. Principal Accounting Fees and Services

     The  information  required by this item is incorporated by reference to the
Corporation's Proxy Statement to be filed on or about April 19, 2004.



<PAGE>

                                     PART IV

Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

     (a)    (1)   Financial Statements.

      Refer to Item 8 above.

            (2) Financial Statement Schedules.

     All schedules are omitted  since they are not  applicable,  not required or
the information required to be set forth therein is included in the consolidated
financial statements or in notes thereto.

            (3) Exhibits.

*  3.1    - Title VIII of the Farm Credit Act of 1971, as most recently  amended
            by the  Farm Credit System  Reform  Act of 1996, P.L.  104-105 (Form
            10-K filed March 29, 1996).

*  3.2    - Amended  and  restated By-Laws of the  Registrant  (Form  10-Q filed
            August 12, 1999).

*  4.1    - Specimen  Certificate  for  Farmer Mac  Class A  Voting Common Stock
            (Form 10-Q filed May 15, 2003).

*  4.2    - Specimen  Certificate  for  Farmer Mac  Class  B Voting Common Stock
            (Form 10-Q filed May 15, 2003).

*  4.3    -  Specimen Certificate for Farmer Mac Class C Non-Voting Common Stock
            (Form 10-Q filed May 15, 2003).

*  4.4    - Certificate of Designation  of Terms and  Conditions  of Farmer  Mac
            6.40% Cumulative Preferred Stock,  Series A (Form 10-Q filed May 15,
            2003).

+* 10.1   - Stock  Option Plan  (Previously  filed as Exhibit 19.1 to Form 10-Q
            filed August 14, 1992).

+* 10.1.1 - Amendment No. 1 to Stock Option  Plan (Previously filed  as Exhibit
            10.2 to Form 10-Q filed August 16, 1993).

+* 10.1.2 - 1996 Stock Option Plan (Form 10-Q filed August 14, 1996).

__________________
*     Incorporated by reference to the indicated prior filing.
**    Filed herewith.
+     Management contract or compensatory plan.
#     Portions of this exhibit have been omitted pursuant to a request for
      confidential treatment.

<PAGE>

+* 10.1.3 - Amended and Restated 1997 Incentive Plan (Form 10-Q filed  November
            14, 2003).

+* 10.2  -  Employment Agreement dated May 5, 1989 between Henry D. Edelman and
            the Registrant (Previously  filed as Exhibit 10.4 to Form 10-K filed
            February 14, 1990).

+* 10.2.1 - Amendment  No.  1 dated  as  of  January  10,  1991  to   Employment
            Contract between  Henry D. Edelman  and  the  Registrant (Previously
            filed as Exhibit 10.4 to Form 10-K filed April 1, 1991).

+* 10.2.2 - Amendment to  Employment Contract dated as  of June 1, 1993 between
            Henry D. Edelman  and  the Registrant (Previously  filed  as Exhibit
            10.5 to Form 10-Q filed November 15, 1993).

+* 10.2.3 - Amendment  No. 3 dated  as  of  June 1, 1994 to Employment  Contract
            between Henry  D.  Edelman and the Registrant  (Previously  filed as
            Exhibit 10.6 to Form 10-Q filed August 15, 1994).

+* 10.2.4 - Amendment No. 4 dated as of February 8, 1996 to  Employment Contract
            between   Henry  D. Edelman  and  the  Registrant (Form  10-K  filed
            March 29, 1996).

+* 10.2.5 - Amendment  No. 5 dated  as  of June 13, 1996 to Employment  Contract
            between Henry D. Edelman and the Registrant  (Form 10-Q filed August
            14, 1996).

+* 10.2.6 - Amendment No. 6 dated  as  of August 7, 1997 to Employment  Contract
            between  Henry  D. Edelman  and  the  Registrant  (Form  10-Q  filed
            November 14, 1997).

+* 10.2.7 - Amendment  No. 7 dated  as of  June 4, 1998 to  Employment  Contract
            between Henry D. Edelman and the  Registrant (Form 10-Q filed August
            14, 1998).

+* 10.2.8 - Amendment  No. 8 dated  as of  June 3, 1999 to Employment  Contract
            between Henry D. Edelman and the  Registrant (Form 10-Q filed August
            12, 1999).

+* 10.2.9 - Amendment No. 9 dated  as  of June 1, 2000 to  Employment  Contract
            between  Henry D. Edelman and the Registrant  Form 10-Q filed August
            14, 2000).

__________________
*     Incorporated by reference to the indicated prior filing.
**    Filed herewith.
+     Management contract or compensatory plan.
#     Portions of this exhibit have been omitted pursuant to a request for
      confidential treatment.
<PAGE>



+* 10.2.10 - Amendment No. 10 dated  as of June 7, 2001 to  Employment  Contract
             between Henry D. Edelman and the Registrant (Form 10-Q filed August
             14, 2001).

+* 10.2.11 - Amendment No. 11 dated as  of  June 6, 2002  to Employment Contract
             between Henry D. Edelman and the Registrant (Form 10-Q filed August
             14, 2002).

+* 10.2.12 - Amendment No. 12 dated  as of  June 5, 2003 to  Employment Contract
             between Henry D. Edelman and the Registrant (Form 10-Q filed August
             14, 2003).

+* 10.3    - Employment  Agreement dated May 11, 1989 between Nancy E. Corsiglia
             and the Registrant (Previously filed as  Exhibit  10.5 to Form 10-K
             filed February 14, 1990).

+* 10.3.1  - Amendment dated  December 14, 1989 to  Employment Agreement between
             Nancy E. Corsiglia and the Registrant (Previously  filed as Exhibit
             10.5 to Form 10-K filed February 14, 1990).

+* 10.3.2  - Amendment No. 2 dated   February 14, 1991  to Employment  Agreement
             between Nancy E. Corsiglia and the Registrant (Previously  filed as
             Exhibit 10.7 to Form 10-K filed April 1, 1991).

+* 10.3.3  - Amendment to Employment Contract dated as  of June 1, 1993 between
             Nancy E. Corsiglia and the Registrant (Previously  filed as Exhibit
             10.9 to Form 10-Q filed November 15, 1993).

+* 10.3.4  - Amendment No. 4 dated  June 1, 1993 to  Employment Contract between
             Nancy E. Corsiglia and the Registrant (Previously  filed as Exhibit
             10.10 to Form 10-K filed March 31, 1994).

+* 10.3.5  - Amendment No. 5 dated  as of  June 1, 1994  to Employment  Contract
             between Nancy E. Corsiglia and the Registrant (Previously  filed as
             Exhibit 10.12 to Form 10-Q filed August 15, 1994).

+* 10.3.6  - Amendment No. 6  dated  as  of June 1, 1995 to Employment  Contract
             between Nancy E.Corsiglia and the Registrant(Form 10-Q filed August
             14, 1995).

+* 10.3.7  - Amendment  No.  7 dated  as  of  February  8,  1996  to  Employment
             Contract between Nancy E. Corsiglia and the  Registrant  (Form 10-K
             filed March 29, 1996).

__________________
*     Incorporated by reference to the indicated prior filing.
**    Filed herewith.
+     Management contract or compensatory plan.
#     Portions of this exhibit have been omitted pursuant to a request for
      confidential treatment.

<PAGE>


+* 10.3.8 -  Amendment No. 8 dated  as of June 13, 1996  to Employment  Contract
             between  Nancy E. Corsiglia and  the  Registrant (Form  10-Q  filed
             August 14, 1996).

+* 10.3.9 -  Amendment  No. 9 dated as  of August 7, 1997 to Employment Contract
             between Nancy  E. Corsiglia  and the  Registrant (Form  10-Q  filed
             November 14, 1997).

+* 10.3.10 - Amendment  No. 10 dated  as  of June 4, 1998 to Employment Contract
             between  Nancy E. Corsiglia  and  the Registrant  (Form  10-Q filed
             August 14, 1998).

+* 10.3.11 - Amendment No. 11 dated  as  of  June 3, 1999 to Employment Contract
             between  Nancy E. Corsiglia  and  the  Registrant  (Form 10-Q filed
             August 12, 1999).

+* 10.3.12 - Amendment  No. 12 dated  as  of June 1, 2000 to Employment Contract
             between  Nancy E. Corsiglia  and  the  Registrant  (Form 10-Q filed
             August 14, 2000).

+* 10.3.13 - Amendment No. 13  dated  as  of June 7, 2001 to Employment Contract
             between  Nancy E. Corsiglia  and  the  Registrant  (Form 10-Q filed
             August 14, 2001).

+* 10.3.14 - Amendment  No. 14 dated  as  of June 6, 2002 to Employment Contract
             between  Nancy E. Corsiglia  and  the  Registrant  (Form 10-Q filed
             August 14, 2002).

+* 10.3.15 - Amendment  No. 15  dated  as of June 5, 2003 to Employment Contract
             between  Nancy E. Corsiglia  and  the  Registrant  (Form 10-Q filed
             August 14, 2003).

+* 10.4    - Employment  Contract  dated as  of September 1, 1997 between Tom D.
             Stenson and  the  Registrant  (Previously  filed as Exhibit 10.8 to
             Form 10-Q filed November 14, 1997).

+* 10.4.1  - Amendment No. 1  dated  as of  June 4, 1998 to Employment  Contract
             between  Tom D. Stenson  and  the  Registrant (Previously  filed as
             Exhibit 10.8.1 to Form 10-Q filed August 14, 1998).

+* 10.4.2  - Amendment No. 2 dated  as  of June 3, 1999 to  Employment  Contract
             between  Tom D. Stenson and the Registrant  (Form 10-Q filed August
             12, 1999).

__________________
*     Incorporated by reference to the indicated prior filing.
**    Filed herewith.
+     Management contract or compensatory plan.
#     Portions of this exhibit have been omitted pursuant to a request for
      confidential treatment.

<PAGE>


+* 10.4.3  - Amendment No. 3 dated  as  of June 1, 2000  to Employment  Contract
             between Tom D. Stenson  and the Registrant  (Form 10-Q filed August
             14, 2000).

+* 10.4.4  - Amendment  No. 4 dated  as of June 7, 2001 to  Employment  Contract
             between Tom D. Stenson and the  Registrant  (Form 10-Q filed August
             14, 2001).

+* 10.4.5 -  Amendment No. 5 dated  as of  June 6, 2002 to Employment  Contract
             between  Tom D. Stenson and the Registrant  (Form 10-Q filed August
             14, 2002).

+* 10.4.6 -  Amendment No. 6 dated  as of June 5, 2003 to  Employment  Contract
             between  Tom D. Stenson and the Registrant  (Form 10-Q filed August
             14, 2003).

+* 10.5   - Employment Contract dated February 1, 2000 between Jerome G. Oslick
            and the  Registrant (Previously  filed as Exhibit  10.6 to Form 10-Q
            filed May 11, 2000).

+* 10.5.1 - Amendment No. 1 dated  as  of June 1, 2000  to Employment  Contract
            between  Jerome G. Oslick  and the  Registrant (Previously  filed as
            Exhibit 10.6.1 to Form 10-Q filed August 14, 2000).

+* 10.5.2 - Amendment  No. 2 dated  as  of June 7, 2001 to  Employment  Contract
            between Jerome G.  Oslick and the  Registrant  (Previously  filed as
            Exhibit 10.6.2 to Form 10-Q filed August 14, 2001).

+* 10.5.3 - Amendment No. 3  dated  as  of June  6, 2002 to Employment  Contract
            between Jerome G. Oslick and the Registrant  (Form 10-Q filed August
            14, 2002).

+* 10.5.4 - Amendment  No. 4 dated  as  of June 5, 2003 to  Employment  Contract
            between Jerome G. Oslick and the Registrant  (Form 10-Q filed August
            14, 2003).

+* 10.6   - Employment  Contract dated June 5, 2003 between Timothy L. Buzby and
            the Registrant (Form 10-Q filed August 14, 2003).

*  10.7   - Farmer Mac I  Seller/Servicer  Agreement  dated as of August 7, 1996
            between  Zions First  National  Bank and the  Registrant  (Form 10-Q
            filed November 14, 2002).

__________________
*     Incorporated by reference to the indicated prior filing.
**    Filed herewith.
+     Management contract or compensatory plan.
#     Portions of this exhibit have been omitted pursuant to a request for
      confidential treatment.
<PAGE>


*  10.8    - Medium-Term Notes U.S. Selling Agency Agreement dated as of October
             1, 1998 between Zions First National Bank and the Registrant  (Form
             10-Q filed November 14, 2002).

*  10.9    - Discount  Note  Dealer  Agreement  dated as of  September  18, 1996
             between  Zions First  National  Bank and the Registrant  (Form 10-Q
             filed November 14, 2002).

*# 10.10   - ISDA Master  Agreement  and Credit  Support Annex dated as of June
             26, 1997 between Zions First National Bank and the Registrant (Form
             10-Q filed November 14, 2002).

*# 10.11   - Master Central  Servicing  Agreement dated as of December 17, 1996
             between  Zions First  National Bank and the  Registrant  (Form 10-Q
             filed November 14, 2002).

*# 10.11.1 - Amendment No. 1 dated  as  of  February 26, 1997  to Master Central
             Servicing  Agreement  dated as  of  December 17, 1996 between Zions
             First National Bank  and  the  Registrant (Form 10-Q filed November
             14, 2002).

*# 10.12   - Loan File Review and  Underwriting  Agreement dated as of December
             17, 1996 between Zions First National Bank and the Registrant (Form
             10-Q filed November 14, 2002).

*# 10.12.1 - Amendment No. 1 dated  as  of January 20, 2000 to  Loan File Review
             and  Underwriting  Agreement dated as  of December 17, 1996 between
             Zions First  National Bank  and  the  Registrant  (Form  10-Q filed
             November 14, 2002).

*# 10.13   - Long  Term  Standby  Commitment  to Purchase  dated as of August 1,
             1998 between AgFirst Farm Credit Bank and the Registrant (Form 10-Q
             filed November 14, 2002).

*# 10.13.1 - Amendment No. 1 dated  as of January 1, 2000 to  Long  Term Standby
             Commitment to Purchase dated as  of August 1, 1998 between  AgFirst
             Farm Credit  Bank and  the Registrant (Form 10-Q filed November 14,
             2002).

*  10.13.2 - Amendment  No. 2  dated   as  of  September 1, 2002  to  Long  Term
             Standby  Commitment  to  Purchase dated  as  of  August 1, 1998, as
             amended  by  Amendment  No. 1 dated as of January 1, 2000,  between
             AgFirst  Farm  Credit  Bank  and  the  Registrant  (Form 10-Q filed
             November 14, 2002).

__________________
*     Incorporated by reference to the indicated prior filing.
**    Filed herewith.
+     Management contract or compensatory plan.
#     Portions of this exhibit have been omitted pursuant to a request for
      confidential treatment.
<PAGE>


*   10.14 - Lease  Agreement,  dated June 28, 2001 between  EOP - Two Lafayette,
            L.L.C. and the Registrant (Previously filed as Exhibit 10.10 to Form
            10-K filed March 27, 2002).

+** 10.15 - Employment   Contract  dated   October 31, 2003  between  Michael P.
            Morris and the Registrant.

    21    - Farmer Mac Mortgage Securities Corporation, a Delaware corporation.

**  31.1 -  Certification   of   Chief  Executive   Officer  relating   to   the
            Registrant's  Annual Report on Form 10-K for the fiscal  year  ended
            December  31, 2003, pursuant to Rule 13a-14(a),  as adopted pursuant
            to Section 302 of the Sarbanes-Oxley Act of 2002.

**  31.2 -  Certification   of   Chief   Financial   Officer   relating  to  the
            Registrant's  Annual Report on Form 10-K for the  fiscal year  ended
            December  31, 2003, pursuant  to Rule 13a-14(a), as adopted pursuant
            to Section 302 of the Sarbanes-Oxley Act of 2002.

**  32   -  Certification of Chief Executive Officer and Chief Financial Officer
            relating to  the  Registrant's Annual Report  on  Form 10-K  for the
            fiscal year  ended December 31, 2003,  pursuant to 18 U.S.C.ss.1350,
            as  adopted  pursuant to  Section 906 of  the  Sarbanes-Oxley Act of
            2002.

     (b) Reports on Form 8-K.

     On October 16, 2003,  Farmer Mac furnished to the  Securities  and Exchange
Commission a Current Report on Form 8-K that attached a press release addressing
a report issued by the U.S. General Accounting Office on Farmer Mac.

     On October 23, 2003,  Farmer Mac furnished to the  Securities  and Exchange
Commission a Current Report on Form 8-K that attached a press release announcing
Farmer Mac's financial results for third quarter 2003.

     On November 14,  2003,  Farmer Mac filed with the  Securities  and Exchange
Commission a Current  Report on Form 8-K reporting that Farmer Mac had filed its
Quarterly  Report on Form 10-Q for the quarter ended September 30, 2003 and that
four of Farmer Mac's officers had each entered into a trading plan in compliance
with Securities and Exchange Commission Rule 10b5-1.

     On  December 5, 2003,  Farmer Mac filed with the  Securities  and  Exchange
Commission a Current  Report on Form 8-K  announcing  that, on December 4, 2003,
the Board of Directors  of Farmer Mac had  declared a quarterly  dividend on the
Corporation's 6.40% Cumulative Preferred Stock, Series A.

__________________
*     Incorporated by reference to the indicated prior filing.
**    Filed herewith.
+     Management contract or compensatory plan.
#     Portions of this exhibit have been omitted pursuant to a request for
      confidential treatment.
<PAGE>


                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

FEDERAL AGRICULTURAL MORTGAGE CORPORATION


     /s/ Henry D. Edelman                             March 12, 2004
-------------------------------------      -------------------------------------
By:   Henry D. Edelman                                      Date
      President and
      Chief Executive Officer

      Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

             Name                             Title                   Date

    /s/ Fred L. Dailey            Chairman of the Board and      March 12, 2004
--------------------------------  Director
  Fred L. Dailey

    /s/ Henry D. Edelman          President and Chief Executive  March 12, 2004
--------------------------------  Officer (Principal Executive
  Henry D. Edelman                Officer)


    /s/ Nancy E. Corsiglia        Vice President - Finance,      March 12, 2004
--------------------------------  Chief Financial Officer
  Nancy E. Corsiglia              and Treasurer
                                  (Principal Financial Officer)


    /s/ Timothy L. Buzby          Vice President - Controller    March 12, 2004
--------------------------------  (Principal Accounting Officer)
  Timothy L. Buzby





<PAGE>





                 Name                             Title               Date

    /s/ Julia Bartling                          Director         March 12, 2004
---------------------------------------
  Julia Bartling

    /s/ Dennis L. Brack                         Director         March 12, 2004
---------------------------------------
  Dennis L. Brack

    /s/ Ralph W. Cortese                        Director         March 12, 2004
---------------------------------------
  Ralph W. Cortese

    /s/ Grace T. Daniel                         Director         March 12, 2004
---------------------------------------
  Grace T. Daniel

    /s/ Paul A. DeBriyn                         Director         March 12, 2004
---------------------------------------
  Paul A. DeBriyn

    /s/ Kenneth E. Graff                        Director         March 12, 2004
---------------------------------------
  Kenneth E. Graff

    /s/ W. David Hemingway                      Director         March 12, 2004
---------------------------------------
  W. David Hemingway

    /s/ Mitchell A. Johnson                     Director         March 12, 2004
---------------------------------------
  Mitchell A. Johnson

    /s/ Lowell L. Junkins                     Vice Chairman      March 12, 2004
---------------------------------------       and Director
  Lowell L. Junkins

    /s/ Glen Klippenstein                       Director         March 12, 2004
---------------------------------------
  Glen Klippenstein

    /s/ Charles E. Kruse                        Director         March 12, 2004
---------------------------------------
  Charles E. Kruse

    /s/ John G. Nelson                          Director         March 12, 2004
---------------------------------------
  John G. Nelson

    /s/ Peter T. Paul                           Director         March 12, 2004
---------------------------------------
  Peter T. Paul

    /s/ John Dan Raines, Jr.                    Director         March 12, 2004
---------------------------------------
  John Dan Raines, Jr.










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