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Business Segment Reporting
 3 Months Ended
Mar. 31, 2015
Segment Reporting [Abstract]  
Business Segment Reporting Disclosure
BUSINESS SEGMENT REPORTING

Farmer Mac's operations consist of four reportable operating segments – Farm & Ranch, USDA Guarantees, Rural Utilities, and Institutional Credit. The Institutional Credit segment comprises Farmer Mac's guarantees of AgVantage securities related to general obligations of lenders that are secured by pools of eligible loans.

Farmer Mac uses these four segments to manage business risk, and each segment is based on distinct products and distinct business activities.  In addition to these four operating segments, a corporate segment is presented.  That segment represents activity in Farmer Mac's investment portfolio and other corporate activities.  The segment financial results include directly attributable revenues and expenses.  Corporate charges for administrative expenses that are not directly attributable to an operating segment are allocated based on headcount.

Farmer Mac uses core earnings to measure corporate economic performance and develop financial plans because, in management's view, core earnings is a useful alternative measure in understanding Farmer Mac's economic performance, transaction economics, and business trends.  Core earnings principally differs from net income attributable to common stockholders by excluding the effects of fair value fluctuations, which are not expected to have a cumulative net impact on financial condition or results of operations reported in accordance with generally accepted accounting principles ("GAAP") if the related financial instruments are held to maturity, as is generally expected. Core earnings also differs from net income attributable to common stockholders by excluding specified infrequent or unusual transactions that Farmer Mac believes are not indicative of future operating results and that may not reflect the trends and economic financial performance of Farmer Mac's core business. This non-GAAP financial measure may not be comparable to similarly labeled non-GAAP financial measures disclosed by other companies. Farmer Mac's disclosure of this non-GAAP measure is intended to be supplemental in nature and is not meant to be considered in isolation from, as a substitute for, or as more important than, the related financial information prepared in accordance with GAAP.

The financial information presented below reflects the accounts of Farmer Mac and its subsidiaries on a consolidated basis.  Accordingly, the core earnings for Farmer Mac's reportable operating segments will differ from the stand-alone financial statements of Farmer Mac's subsidiaries.  These differences will be due to various factors, including the reversal of unrealized gains and losses related to fair value changes of trading assets and financial derivatives, as well as the allocation of certain expenses such as dividends and interest expense related to the issuance of capital and the incurrence of indebtedness managed at the corporate level.  The allocation of general and administrative expenses that are not directly attributable to an operating segment may also result in differences.  The assets of Farmer Mac's subsidiary Farmer Mac II LLC will only be available to creditors of Farmer Mac after all obligations owed to creditors of and equity holders in Farmer Mac II LLC have been satisfied.  As of March 31, 2015, Farmer Mac II LLC held assets with a fair value of $1.9 billion, had debt outstanding of $735.0 million, and had $1.0 billion of common stock outstanding held by Farmer Mac.

The following tables present core earnings for Farmer Mac's reportable operating segments and a reconciliation to consolidated net income for the years ended March 31, 2015 and 2014:

Table 9.1


Core Earnings by Business Segment
For the Three Months Ended March 31, 2015
 
Farm & Ranch
 
USDA Guarantees
 
Rural 
Utilities
 
Institutional Credit
 
Corporate
 
Reconciling
Adjustments
 
Consolidated Net Income
 
(in thousands)
Interest income(1)
$
21,968

 
$
14,348

 
$
6,585

 
$
19,299

 
$
2,865

 
$
(1,114
)
 
$
63,951

Interest income related to consolidated trusts owned by third parties reclassified to guarantee fee income
(635
)
 
—

 
—

 
—

 
—

 
635

 
—

Interest expense(2)
(11,219
)
 
(10,123
)
 
(3,781
)
 
(8,874
)
 
(1,176
)
 
2,011

 
(33,162
)
Net effective spread
10,114

 
4,225

 
2,804

 
10,425

 
1,689

 
1,532

 
30,789

Guarantee and commitment fees
3,633

 
(6
)
 
—

 
385

 
—

 
(635
)
 
3,377

Other income/(expense)(3)
87

 
59

 
—

 
—

 
(552
)
 
(2,496
)
 
(2,902
)
Non-interest income/(loss)
3,720

 
53

 
—

 
385

 
(552
)
 
(3,131
)
 
475

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Provision for loan losses
(76
)
 
—

 
—

 
—

 
—

 
—

 
(76
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Release of reserve for losses
772

 
—

 
—

 
—

 
—

 
—

 
772

Other non-interest expense
(4,326
)
 
(385
)
 
(866
)
 
(535
)
 
(3,003
)
 
—

 
(9,115
)
Non-interest expense(4)
(3,554
)
 
(385
)
 
(866
)
 
(535
)
 
(3,003
)
 
—

 
(8,343
)
Core earnings before income taxes
10,204

 
3,893

 
1,938

 
10,275

 
(1,866
)
 
(1,599
)
(5) 
22,845

Income tax (expense)/benefit
(3,571
)
 
(1,363
)
 
(678
)
 
(3,596
)
 
2,516

 
2,461

 
(4,231
)
Core earnings before preferred stock dividends and attribution of income to non-controlling interest
6,633

 
2,530

 
1,260

 
6,679

 
650

 
862

(5) 
18,614

Preferred stock dividends
—

 
—

 
—

 
—

 
(3,295
)
 
—

 
(3,295
)
Non-controlling interest
—

 
—

 
—

 
—

 
(5,354
)
 
—

 
(5,354
)
Loss on retirement of preferred stock
—

 
—

 
—

 
—

 
—

 
(8,147
)
 
(8,147
)
Segment core earnings/(losses)
$
6,633

 
$
2,530

 
$
1,260

 
$
6,679

 
$
(7,999
)
 
$
(7,285
)
(5) 
$
1,818

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets at carrying value
$
2,637,743

 
$
1,876,337

 
$
970,020

 
$
5,594,736

 
$
3,770,849

 
$
—

 
$
14,849,685

Total on- and off-balance sheet program assets at principal balance
5,347,248

 
1,814,918

 
968,117

 
6,529,934

 


 
—

 
14,660,217

(1) 
Includes reconciling adjustments for the amortization of premiums and discounts on assets consolidated at fair value to reflect core earnings amounts and interest income related to securities purchased under agreements to resell.
(2) 
Based on effective funding cost determined for each operating segment, including expenses related to interest rate swaps not designated as hedges, which are included in "Losses on financial derivatives and hedging activities" on the consolidated financial statements. Includes reconciling adjustments for interest expense related to securities sold, not yet purchased.
(3) 
Includes interest income and interest expense related to securities purchased under agreements to resell and securities sold, not yet purchased, respectively; reconciling adjustments for the reclassification of expenses related to interest rate swaps not designated as hedges and fair value adjustments on financial derivatives and trading assets; and a reconciling adjustment related to the recognition of deferred gains over the estimated lives of certain Farmer Mac Guaranteed Securities and USDA Securities.
(4) 
Includes directly attributable costs and an allocation of indirectly attributable costs based on headcount.
(5) 
Net adjustments to reconcile core earnings before income taxes; core earnings before preferred stock dividends and attribution of income to non-controlling interest - preferred stock dividends; and segment core earnings to corresponding income measures: income before income taxes, net income, and net income attributable to common stockholders, respectively.
Core Earnings by Business Segment
For the Three Months Ended March 31, 2014
 
Farm & Ranch
 
USDA Guarantees
 
Rural 
Utilities
 
Institutional Credit
 
Corporate
 
Reconciling
Adjustments
 
Consolidated Net Income
 
(in thousands)
Interest income(1)
$
18,339

 
$
12,959

 
$
7,744

 
$
20,380

 
$
5,235

 
$
(12,205
)
 
$
52,452

Interest income related to consolidated trusts owned by third parties reclassified to guarantee fee income
(531
)
 
—

 
—

 
—

 
—

 
531

 
—

Interest expense(2)
(10,694
)
 
(9,175
)
 
(5,754
)
 
(10,974
)
 
(1,093
)
 
2,964

 
(34,726
)
Net effective spread
7,114

 
3,784

 
1,990

 
9,406

 
4,142

 
(8,710
)
 
17,726

Guarantee and commitment fees
3,909

 
26

 
—

 
380

 
—

 
(531
)
 
3,784

Other income/(expense)(3)
130

 
28

 
—

 
—

 
(571
)
 
(6,406
)
 
(6,819
)
Non-interest income/(loss)
4,039

 
54

 
—

 
380

 
(571
)
 
(6,937
)
 
(3,035
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Provision for loan losses
(573
)
 
—

 
—

 
—

 
—

 
—

 
(573
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Provision for losses
(101
)
 
—

 
—

 
—

 
—

 
—

 
(101
)
Other non-interest expense
(3,552
)
 
(731
)
 
(777
)
 
(445
)
 
(2,341
)
 
—

 
(7,846
)
Non-interest expense(4)
(3,653
)
 
(731
)
 
(777
)
 
(445
)
 
(2,341
)
 
—

 
(7,947
)
Core earnings before income taxes
6,927

 
3,107

 
1,213

 
9,341

 
1,230

 
(15,647
)
(5) 
6,171

Income tax (expense)/benefit
(2,424
)
 
(1,087
)
 
(425
)
 
(3,269
)
 
2,871

 
5,475

 
1,141

Core earnings before preferred stock dividends and attribution of income to non-controlling interest
4,503

 
2,020

 
788

 
6,072

 
4,101

 
(10,172
)
(5) 
7,312

Preferred stock dividends
—

 
—

 
—

 
—

 
(952
)
 
—

 
(952
)
Non-controlling interest
—

 
—

 
—

 
—

 
(5,547
)
 
—

 
(5,547
)
Segment core earnings/(losses)
$
4,503

 
$
2,020

 
$
788

 
$
6,072

 
$
(2,398
)
 
$
(10,172
)
(5) 
$
813

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets at carrying value
$
2,272,643

 
$
1,691,056

 
$
1,030,422

 
$
5,157,887

 
$
3,402,345

 
$
—

 
$
13,554,353

Total on- and off-balance sheet program assets at principal balance
5,293,975

 
1,686,696

 
1,027,246

 
6,100,286

 
 
 
—

 
14,108,203

(1) 
Includes reconciling adjustments for the amortization of premiums and discounts on assets consolidated at fair value to reflect core earnings amounts.
(2) 
Based on effective funding cost determined for each operating segment, including expenses related to interest rate swaps not designated as hedges, which are included in "Losses on financial derivatives and hedging activities" on the consolidated financial statements.
(3) 
Includes reconciling adjustments for the reclassification of expenses related to interest rate swaps not designated as hedges and fair value adjustments on financial derivatives and trading assets. Also includes a reconciling adjustment related to the recognition of deferred gains over the estimated lives of certain Farmer Mac Guaranteed Securities and USDA Securities.
(4) 
Includes directly attributable costs and an allocation of indirectly attributable costs based on headcount.
(5) 
Net adjustments to reconcile core earnings before income taxes; core earnings before preferred stock dividends and attribution of income to non-controlling interest - preferred stock dividends; and segment core earnings to corresponding income measures: income before income taxes, net income, and net income attributable to common stockholders, respectively.