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Accounting Policies
 9 Months Ended
Sep. 30, 2016
Accounting Policies [Abstract]  
Accounting Policies Disclosure
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The interim unaudited consolidated financial statements of the Federal Agricultural Mortgage Corporation ("Farmer Mac") and subsidiaries have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). These interim unaudited consolidated financial statements reflect all normal and recurring adjustments that are, in the opinion of management, necessary to present a fair statement of the financial position and the results of operations and cash flows of Farmer Mac and subsidiaries for the interim periods presented. Certain information and footnote disclosures normally included in the annual consolidated financial statements have been omitted as permitted by SEC rules and regulations. The December 31, 2015 consolidated balance sheet presented in this report has been derived from Farmer Mac's audited 2015 consolidated financial statements. Management believes that the disclosures are adequate to present fairly the consolidated financial statements as of the dates and for the periods presented. These interim unaudited consolidated financial statements should be read in conjunction with the 2015 consolidated financial statements of Farmer Mac and subsidiaries included in Farmer Mac's Annual Report on Form 10-K for the year ended December 31, 2015 filed with the SEC on March 10, 2016. That Form 10-K describes Farmer Mac's significant accounting policies, which include its policies on Principles of Consolidation; Cash and Cash Equivalents and Statements of Cash Flows; Transfers of Financial Assets and Liabilities; Investment Securities, Farmer Mac Guaranteed Securities, and USDA Securities; Loans; Securitization of Loans; Real Estate Owned; Financial Derivatives; Notes Payable; Allowance for Loan Losses and Reserve for Losses; Earnings Per Common Share; Income Taxes; Stock-Based Compensation; Comprehensive Income; Long-Term Standby Purchase Commitments; Fair Value Measurement; and Consolidation of Variable Interest Entities ("VIEs"). Results for interim periods are not necessarily indicative of those that may be expected for the fiscal year. Presented below are Farmer Mac's significant accounting policies that contain updated information for the three and nine months ended September 30, 2016.

Principles of Consolidation

The consolidated financial statements include the accounts of Farmer Mac and its three subsidiaries: (1) Farmer Mac Mortgage Securities Corporation ("FMMSC"), whose principal activities are to facilitate the purchase and issuance of Farmer Mac Guaranteed Securities; (2) Farmer Mac II LLC, whose principal activity is the operation of substantially all of the business related to the USDA Guarantees line of business – primarily the acquisition of USDA Securities; and (3) Contour Valuation Services, LLC (which began doing business as AgVisory during first quarter 2016), whose principal activity is to appraise agricultural real estate.  The consolidated financial statements also include the accounts of VIEs in which Farmer Mac determined itself to be the primary beneficiary.  

The following tables present, by line of business, details about the consolidation of VIEs:

Table 1.1
 
Consolidation of Variable Interest Entities
 
As of September 30, 2016
 
Farm & Ranch
 
USDA Guarantees
 
Rural Utilities
 
Institutional Credit
 
Corporate
 
Total
 
(in thousands)
On-Balance Sheet:
 
 
 
 
 
 
 
 
 
 
 
Consolidated VIEs:
 
 
 
 
 
 
 
 
 
 
 
Loans held for investment in consolidated trusts, at amortized cost
$
1,039,770

 
$
—

 
$
—

 
$
—

 
$
—

 
$
1,039,770

Debt securities of consolidated trusts held by third parties (1)
1,044,559

 
—

 
—

 
—

 
—

 
1,044,559

   Unconsolidated VIEs:
 
 
 
 
 
 
 
 
 
 
 
   Farmer Mac Guaranteed Securities:
 
 
 
 
 
 
 
 
 
 
 
      Carrying value (2)
—

 
32,824

 
—

 
30,666

 
—

 
63,490

      Maximum exposure to loss (3)
—

 
32,364

 
—

 
30,000

 
—

 
62,364

   Investment securities:
 
 
 
 
 
 
 
 
 
 
 
        Carrying value (4)
—

 
—

 
—

 
—

 
758,066

 
758,066

        Maximum exposure to loss (3) (4)
—

 
—

 
—

 
—

 
756,693

 
756,693

Off-Balance Sheet:
 
 
 
 
 
 
 
 
 
 
 
 Unconsolidated VIEs:
 
 
 
 
 
 
 
 
 
 
 
   Farmer Mac Guaranteed Securities:
 
 
 
 
 
 
 
 
 
 
 
      Maximum exposure to loss (3) (5)
441,417

 
61,054

 
—

 
970,000

 
—

 
1,472,471

(1) 
Includes borrower remittances of $4.8 million. The borrower remittances have not been passed through to third party investors as of September 30, 2016.
(2) 
Includes $0.5 million of unamortized premiums and discounts and fair value adjustments related to the USDA Guarantees line of business. Includes fair value adjustments related to the Institutional Credit line of business of $0.7 million.
(3) 
Farmer Mac uses unpaid principal balance and outstanding face amount of investment securities to represent maximum exposure to loss.
(4) 
Includes auction-rate certificates, asset-backed securities, and government-sponsored enterprise ("GSE")-guaranteed mortgage-backed securities.
(5) 
The amount under the Farm & Ranch line of business relates to unconsolidated trusts where Farmer Mac determined it was not the primary beneficiary due to shared power with an unrelated party.

 
Consolidation of Variable Interest Entities
 
As of December 31, 2015
 
Farm & Ranch
 
USDA Guarantees
 
Rural Utilities
 
Institutional Credit
 
Corporate
 
Total
 
(in thousands)
On-Balance Sheet:
 
 
 
 
 
 
 
 
 
 
 
Consolidated VIEs:
 
 
 
 
 
 
 
 
 
 
 
Loans held for investment in consolidated trusts, at amortized cost
$
708,111

 
$
—

 
$
—

 
$
—

 
$
—

 
$
708,111

Debt securities of consolidated trusts held by third parties (1)
713,536

 
—

 
—

 
—

 
—

 
713,536

   Unconsolidated VIEs:
 
 
 
 
 
 
 
 
 
 
 
   Farmer Mac Guaranteed Securities:
 
 
 
 
 
 
 
 
 
 
 
      Carrying value (2)
—

 
31,360

 
—

 
31,400

 
—

 
62,760

      Maximum exposure to loss (3)
—

 
31,553

 
—

 
30,000

 
—

 
61,553

   Investment securities:
 
 
 
 
 
 
 
 
 
 
 
        Carrying value (4)
—

 
—

 
—

 
—

 
917,292

 
917,292

        Maximum exposure to loss (3) (4)
—

 
—

 
—

 
—

 
918,121

 
918,121

Off-Balance Sheet:
 
 
 
 
 
 
 
 
 
 
 
 Unconsolidated VIEs:
 
 
 
 
 
 
 
 
 
 
 
   Farmer Mac Guaranteed Securities:
 
 
 
 
 
 
 
 
 
 
 
      Maximum exposure to loss (3) (5)
514,051

 
10,272

 
—

 
970,000

 
—

 
1,494,323

(1) 
Includes borrower remittances of $5.4 million, which have not been passed through to third party investors as of December 31, 2015.
(2) 
Includes $0.2 million of unamortized premiums and discounts and fair value adjustments related to the USDA Guarantees line of business. Includes fair value adjustments related to the Institutional Credit line of business of $1.4 million.
(3) 
Farmer Mac uses unpaid principal balance and the outstanding face amount of investment securities to represent maximum exposure to loss.
(4) 
Includes auction-rate certificates, asset-backed securities, and GSE-guaranteed mortgage-backed securities.
(5) 
The amount under the Farm & Ranch line of business relates to unconsolidated trusts where Farmer Mac determined it was not the primary beneficiary due to shared power with an unrelated party.
Statements of Cash Flows

The following table sets forth information regarding certain non-cash transactions for the nine months ended September 30, 2016 and 2015:

Table 1.2

 
For the Nine Months Ended
 
September 30, 2016
 
September 30, 2015
 
(in thousands)
Non-cash activity:
 
 
 
Loans acquired and securitized as Farmer Mac Guaranteed Securities
$
457,369

 
$
231,242

Consolidation of Farm & Ranch Guaranteed Securities from off-balance sheet to loans held for investment in consolidated trusts and to debt securities of consolidated trusts held by third parties
402,841

 
231,242

Purchases of securities - traded, not yet settled
25,000

 
15,000

Issuance costs on the retirement of Farmer Mac II LLC Preferred Stock
—

 
8,147

Unsettled common stock repurchases
—

 
796

Earnings Per Common Share

Basic earnings per common share ("EPS") is based on the weighted-average number of shares of common stock outstanding.  Diluted earnings per common share is based on the weighted-average number of shares of common stock outstanding adjusted to include all potentially dilutive common stock options, stock appreciation rights ("SARs"), and non-vested restricted stock awards.  The following schedule reconciles basic and diluted EPS for three and nine months ended September 30, 2016 and 2015:

Table 1.3

 
For the Three Months Ended
 
September 30, 2016
 
September 30, 2015
 
Net
Income
 
Weighted-Average Shares
 
$ per
Share
 
Net
Income
 
Weighted-Average Shares
 
$ per
Share
 
(in thousands, except per share amounts)
Basic EPS
 
 
 
 
 
 
 
 
 
 
 
Net income attributable to common stockholders
$
16,364

 
10,473

 
$
1.56

 
$
8,359

 
11,028

 
$
0.76

Effect of dilutive securities(1)
 
 
 
 
 
 
 

 
 

 
 
Stock options, SARs and restricted stock
—

 
176

 
(0.02
)
 
—

 
243

 
(0.02
)
Diluted EPS
$
16,364

 
10,649

 
$
1.54

 
$
8,359

 
11,271

 
$
0.74


(1) 
For the three months ended September 30, 2016 and 2015, stock options and SARs of 54,709 and 476,699, respectively, were outstanding but not included in the computation of diluted earnings per share of common stock because they were anti-dilutive. For the three months ended September 30, 2016 and 2015, contingent shares of non-vested restricted stock of 37,284 and 45,034, respectively, were outstanding but not included in the computation of diluted earnings per share of common stock because performance conditions had not yet been met.
 
For the Nine Months Ended
 
September 30, 2016
 
September 30, 2015
 
Net
Income
 
Weighted-Average Shares
 
$ per
Share
 
Net
Income
 
Weighted-Average Shares
 
$ per
Share
 
(in thousands, except per share amounts)
Basic EPS
 
 
 
 
 
 
 
 
 
 
 
Net income attributable to common stockholders
$
38,687

 
10,464

 
$
3.70

 
$
32,339

 
10,992

 
$
2.94

Effect of dilutive securities(1)
 
 
 
 
 
 
 
 
 
 
 
Stock options, SARs and restricted stock
—

 
291

 
(0.10
)
 
—

 
355

 
(0.09
)
Diluted EPS
$
38,687

 
10,755

 
$
3.60

 
$
32,339

 
11,347

 
$
2.85

(1) 
For the nine months ended September 30, 2016 and 2015, stock options and SARs of 115,875 and 302,598, respectively, were outstanding but not included in the computation of diluted earnings per share of common stock because they were anti-dilutive. For the nine months ended September 30, 2016 and 2015, contingent shares of non-vested restricted stock of 37,284 and 40,194, respectively, were outstanding but not included in the computation of diluted earnings per share of common stock because performance conditions had not yet been met.
Comprehensive Income

Comprehensive income represents all changes in stockholders' equity except those resulting from investments by or distributions to stockholders, and is comprised of net income and unrealized gains and losses on available-for-sale securities, certain held-to-maturity securities transferred from the available-for-sale classification, and cash flow hedges, net of related taxes.

The following table presents the changes in accumulated other comprehensive income ("AOCI"), net of tax, by component for the three and nine months ended September 30, 2016 and 2015:

Table 1.4

 
As of September 30, 2016
 
As of September 30, 2015
 
Available-for-Sale Securities
 
Held-to-Maturity Securities
 
Cash Flow Hedges
 
Total
 
Available-for-Sale Securities
 
Held-to-Maturity Securities
 
Cash Flow Hedges
 
Total
 
(in thousands)
For the Three Months Ended:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning Balance
$
19,704

 
$
(1,781
)
 
$
(5,539
)
 
$
12,384

 
$
20,498

 
$
1,622

 
$
613

 
$
22,733

Other comprehensive income/(loss) before reclassifications
2,746

 
—

 
527

 
3,273

 
(33,392
)
 
—

 
(2,347
)
 
(35,739
)
Amounts reclassified from AOCI
(2,388
)
 
(47
)
 
342

 
(2,093
)
 
(3,624
)
 
(1,454
)
 
270

 
(4,808
)
Net other comprehensive income/(loss)
358

 
(47
)
 
869

 
1,180

 
(37,016
)
 
(1,454
)
 
(2,077
)
 
(40,547
)
Ending Balance
$
20,062

 
$
(1,828
)
 
$
(4,670
)
 
$
13,564

 
$
(16,518
)
 
$
168

 
$
(1,464
)
 
$
(17,814
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Nine Months Ended
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning Balance
$
(10,035
)
 
$
(476
)
 
$
(508
)
 
$
(11,019
)
 
$
9,716

 
$
5,973

 
$
(156
)
 
$
15,533

Other comprehensive income/(loss) before reclassifications
37,446

 
—

 
(5,136
)
 
32,310

 
(15,985
)
 
—

 
(1,814
)
 
(17,799
)
Amounts reclassified from AOCI
(7,349
)
 
(1,352
)
 
974

 
(7,727
)
 
(10,249
)
 
(5,805
)
 
506

 
(15,548
)
Net other comprehensive income/(loss)
30,097

 
(1,352
)
 
(4,162
)
 
24,583

 
(26,234
)
 
(5,805
)
 
(1,308
)
 
(33,347
)
Ending Balance
$
20,062

 
$
(1,828
)
 
$
(4,670
)
 
$
13,564

 
$
(16,518
)
 
$
168

 
$
(1,464
)
 
$
(17,814
)


The following table presents other comprehensive income activity, the impact on net income of amounts reclassified from each component of AOCI, and the related tax impact for the three and nine months ended September 30, 2016 and 2015:

Table 1.5

 
For the Three Months Ended
 
September 30, 2016
 
September 30, 2015
 
Before Tax
 
Provision (Benefit)
 
After Tax
 
Before Tax
 
Provision (Benefit)
 
After Tax
 
(in thousands)
Other comprehensive income/(loss):
 
 
 
 
 
 
 
 
 
 
 
Available-for-sale-securities:
 
 
 
 
 
 
 
 
 
 
 
Unrealized holding gains/(losses) on available-for-sale-securities
$
4,225

 
$
1,479

 
$
2,746

 
$
(51,373
)
 
$
(17,981
)
 
$
(33,392
)
Less reclassification adjustments included in:
 
 
 
 
 
 
 
 
 
 
 
(Losses)/gains on financial derivatives and hedging activities(1)
(3,652
)
 
(1,278
)
 
(2,374
)
 
(5,038
)
 
(1,763
)
 
(3,275
)
Gains/(losses) on sale of available-for-sale investment securities(2)
—

 
—

 
—

 
(4
)
 
(2
)
 
(2
)
Other income(3)
(21
)
 
(7
)
 
(14
)
 
(534
)
 
(187
)
 
(347
)
Total
$
552

 
$
194

 
$
358

 
$
(56,949
)
 
$
(19,933
)
 
$
(37,016
)
Held-to-maturity securities:
 
 
 
 
 
 
 
 
 
 
 
Less reclassification adjustments included in:
 
 
 
 
 
 
 
 
 
 
 
Net interest income(4)
$
(73
)
 
$
(26
)
 
$
(47
)
 
$
(2,236
)
 
$
(782
)
 
$
(1,454
)
Total
$
(73
)
 
$
(26
)
 
$
(47
)
 
$
(2,236
)
 
$
(782
)
 
$
(1,454
)
Cash flow hedges
 
 
 
 
 
 
 
 
 
 
 
Unrealized gains/(losses) on cash flow hedges
$
810

 
$
283

 
$
527

 
$
(3,611
)
 
$
(1,264
)
 
$
(2,347
)
Less reclassification adjustments included in:
 
 
 
 
 
 
 
 
 
 
 
Net interest income(5)
526

 
184

 
342

 
416

 
146

 
270

Total
$
1,336

 
$
467

 
$
869

 
$
(3,195
)
 
$
(1,118
)
 
$
(2,077
)
Other comprehensive income/(loss)
$
1,815

 
$
635

 
$
1,180

 
$
(62,380
)
 
$
(21,833
)
 
$
(40,547
)
(1) 
Relates to the amortization of unrealized gains on hedged items prior to the application of fair value hedge accounting.
(2) 
Represents unrealized gains and losses on sales of available-for-sale investment securities.
(3) 
Represents amortization of deferred gains related to certain available-for-sale USDA Securities and Farmer Mac Guaranteed USDA Securities.
(4) 
Relates to the amortization of unrealized gains or losses prior to the reclassification of these securities from available-for-sale to held-to-maturity. The amortization of unrealized gains or losses reported in AOCI for held-to-maturity securities will be offset by the amortization of the premium or discount created from the transfer into held-to-maturity securities, which occurred at fair value. These unrealized gains or losses will be recorded over the remaining life of the security with no impact on future net income.
(5) 
Relates to the recognition of unrealized gains and losses on cash flow hedges recorded in AOCI.

 
For the Nine Months Ended
 
September 30, 2016
 
September 30, 2015
 
Before Tax
 
Provision (Benefit)
 
After Tax
 
Before Tax
 
Provision (Benefit)
 
After Tax
 
(in thousands)
Other comprehensive income:
 
 
 
 
 
 
 
 
 
 
 
Available-for-sale-securities:
 
 
 
 
 
 
 
 
 
 
 
Unrealized holding gains on available-for-sale-securities
$
57,610

 
$
20,164

 
$
37,446

 
$
(24,594
)
 
$
(8,609
)
 
$
(15,985
)
Less reclassification adjustments included in:
 
 
 
 
 
 
 
 
 
 
 
(Losses)/gains on financial derivatives and hedging activities(1)
(11,591
)
 
(4,056
)
 
(7,535
)
 
(14,852
)
 
(5,198
)
 
(9,654
)
Gains/(losses) on sale of available-for-sale investment securities(2)
9

 
3

 
6

 
(10
)
 
(5
)
 
(5
)
Other income(3)
277

 
97

 
180

 
(907
)
 
(317
)
 
(590
)
Total
$
46,305

 
$
16,208

 
$
30,097

 
$
(40,363
)
 
$
(14,129
)
 
$
(26,234
)
Held-to-maturity securities:
 
 
 
 
 
 
 
 
 
 
 
Net interest income(4)
$
(2,081
)
 
$
(729
)
 
$
(1,352
)
 
$
(8,930
)
 
$
(3,125
)
 
$
(5,805
)
Total
$
(2,081
)
 
$
(729
)
 
$
(1,352
)
 
$
(8,930
)
 
$
(3,125
)
 
$
(5,805
)
Cash flow hedges
 
 
 
 
 
 
 
 
 
 
 
Unrealized (losses)/gains on cash flow hedges
$
(7,901
)
 
$
(2,765
)
 
$
(5,136
)
 
$
(2,791
)
 
$
(977
)
 
$
(1,814
)
Less reclassification adjustments included in:
 
 
 
 
 
 
 
 
 
 
 
Net interest income(5)
1,498

 
524

 
974

 
779

 
273

 
506

Total
$
(6,403
)
 
$
(2,241
)
 
$
(4,162
)
 
$
(2,012
)
 
$
(704
)
 
$
(1,308
)
Other comprehensive income
$
37,821

 
$
13,238

 
$
24,583

 
$
(51,305
)
 
$
(17,958
)
 
$
(33,347
)
(1) 
Relates to the amortization of unrealized gains on hedged items prior to the application of fair value hedge accounting.
(2) 
Represents unrealized gains and losses on sales of available-for-sale investment securities.
(3) 
Represents amortization of deferred gains related to certain available-for-sale USDA Securities and Farmer Mac Guaranteed USDA Securities.
(4) 
Relates to the amortization of unrealized gains or losses prior to the reclassification of these securities from available-for-sale to held-to-maturity. The amortization of unrealized gains or losses reported in AOCI for held-to-maturity securities will be offset by the amortization of the premium or discount created from the transfer into held-to-maturity securities, which occurred at fair value. These unrealized gains or losses will be recorded over the remaining life of the security with no impact on future net income.
(5) 
Relates to the recognition of unrealized gains and losses on cash flow hedges recorded in AOCI.
New Accounting Standards

In January 2016, the FASB issued Accounting Standards Update ("ASU") 2016-01, "Recognition and Measurement of Financial Assets and Financial Liabilities," which amends the guidance in GAAP on the classification and measurement of financial instruments. The ASU significantly revises an entity's accounting related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. The ASU also amends certain disclosure requirements associated with the fair value of financial instruments. The new standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2017. Farmer Mac does not expect that adoption of the new guidance will have a material effect on Farmer Mac’s financial position, results of operations, or cash flows.

In February 2016, the FASB issued ASU 2016-02, "Leases," which provides new guidance intended to improve financial reporting about leasing transactions. The ASU will require organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The ASU also will require disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. The new standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. Farmer Mac does not expect that adoption of the new guidance will have a material effect on Farmer Mac’s financial position, results of operations, or cash flows.

In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting,” which provides new guidance intended to simplify several aspects of accounting for employee share-based payment transactions including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The new standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2016. Farmer Mac does not expect that adoption of the new guidance will have a material effect on Farmer Mac’s financial position, results of operations, or cash flows.

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments—Credit Losses," which will require entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.  Entities will be required to use forward-looking information to form their credit loss estimates.  The ASU will also require enhanced disclosures to help users of financial statements better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an entity’s portfolio.  The new standard is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2019.   Early application will be permitted for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.  Farmer Mac is currently evaluating the impact of adopting the new guidance on its consolidated financial statements. 

In August 2016, the FASB issued ASU 2016-15, "Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force)," which amends the existing guidance to add or clarify current guidance in GAAP on the classification of certain cash receipts and payments in the statement of cash flows to reduce diversity in practice in how certain transactions are classified. The new standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2017. Farmer Mac does not expect that adoption of the new guidance will have a material effect on Farmer Mac's statement of cash flows.
Reclassifications

Certain reclassifications of prior period information were made to conform to the current period presentation.