Investment Securities

9 Months Ended

Feb. 28, 2023


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 February 28, 2023 and May 31, 2022.

Table 3.1: Investments in Debt Securities, at Fair Value


(Dollars in thousands)	February 28, 2023		May 31, 2022
Debt securities, at fair value:

Commercial paper	$	—	$	9,985

Corporate debt securities	467,581		487,172

Commercial agency mortgage-backed securities (“MBS”)(1)	7,288		7,815


U.S. state and municipality debt securities	28,762		27,778
Foreign government debt securities	962		967
Other asset-backed securities(2)	44,531		32,429
Total debt securities trading, at fair value	$	549,124	$	566,146

____________________________

(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 gains on our debt securities of $2 million and net unrealized losses of $7 million for the three and nine months ended February 28, 2023, respectively. We recognized net unrealized losses on our debt securities of $9 million and $18 million for the three and nine months ended February 28, 2022, respectively.

We did not sell any debt securities during the three and nine months ended February 28, 2023; therefore, no realized gains or losses were recorded during each period for sale of securities. We sold $3 million of debt securities at fair value during the three months ended February 28, 2022 and realized gains on the sale of these securities of less than $1 million. We sold $5 million of debt securities at fair value during the nine months ended February 28, 2022 and realized gains on the sale of these securities of less than $1 million. Subsequent to the quarter ended February 28, 2023, we sold debt securities at fair value totaling $36 million and realized gains on the sale of these securities of $1 million.

Equity Securities

The following table presents the composition of our equity security holdings and the fair value as of February 28, 2023 and May 31, 2022.

Table 3.2: Investments in Equity Securities, at Fair Value


(Dollars in thousands)	February 28, 2023		May 31, 2022
Equity securities, at fair value:
Farmer Mac—Series C non-cumulative preferred stock	$	28,140	$	25,520
Farmer Mac—Class A common stock	9,862		8,238
Total equity securities, at fair value	$	38,002	$	33,758

We recognized net unrealized losses on our equity securities of $2 million and net unrealized gains of $4 million for the three and nine months ended February 28, 2023, respectively. We recognized net unrealized losses on our equity securities of $2 million and net unrealized gains of less than $1 million for the three and nine months ended February 28, 2022, respectively.