Investment Securities

3 Months Ended

Aug. 31, 2022


NOTE 3—INVESTMENT SECURITIES

Our investment securities portfolio consists of debt securities classified as trading and equity securities with readily determinable fair values. We therefore record changes in the fair value of our debt and equity securities in earnings and report these unrealized changes together with realized gains and losses from the sale of securities as a component of non-interest income in our consolidated statements of operations.

Debt Securities

The following table presents the composition of our investment debt securities portfolio and the fair value as of August 31, 2022 and May 31, 2022.

Table 3.1: Investments in Debt Securities, at Fair Value


(Dollars in thousands)	August 31, 2022		May 31, 2022
Debt securities, at fair value:

Commercial paper	$	3,000	$	9,985

Corporate debt securities	478,966		487,172

Commercial agency mortgage-backed securities (“MBS”)(1)	7,572		7,815


U.S. state and municipality debt securities	29,696		27,778
Foreign government debt securities	959		967
Other asset-backed securities(2)	41,779		32,429
Total debt securities trading, at fair value	$	561,972	$	566,146

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(1)Consists of securities backed by the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”).

(2)Consists primarily of securities backed by auto lease loans, equipment-backed loans, auto loans and credit card loans.

We recognized net unrealized losses on our debt securities of $5 million and $3 million for the three months ended August 31, 2022 and 2021, respectively.

We did not sell any debt securities during the three months ended August 31, 2022; therefore, no realized gains or losses were recorded during this period for sale of securities. We sold $2 million of debt securities at fair value during the three months ended August 31, 2021 and recorded realized gains related to the sale of these securities of less than $1 million during three months ended August 31, 2021.

Equity Securities

The following table presents the composition of our equity security holdings and the fair value as of August 31, 2022 and May 31, 2022.

Table 3.2: Investments in Equity Securities, at Fair Value


(Dollars in thousands)	August 31, 2022		May 31, 2022
Equity securities, at fair value:
Farmer Mac—Series C non-cumulative preferred stock	$	28,000	$	25,520
Farmer Mac—Class A common stock	8,359		8,238
Total equity securities, at fair value	$	36,359	$	33,758

We recognized net unrealized gains on our equity securities of $3 million and $1 million for the three months ended August 31, 2022 and 2021, respectively.