Financial Derivatives (Tables)

12 Months Ended

Dec. 31, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Derivative Instruments in Statement of Financial Position

The following tables summarize information related to Farmer Mac's financial derivatives on a gross basis without giving consideration to master netting arrangements as of December 31, 2019 and 2018:

Table 6.1


	As of December 31, 2019
			Fair Value					Weighted- Average Pay Rate	Weighted- Average Receive Rate	Weighted- Average Forward Price	Weighted- Average Remaining Term (in years)
	Notional Amount		Asset		(Liability)
	(dollars in thousands)
Fair value hedges:
Interest rate swaps:
Pay fixed non-callable	$	4,955,686	$	7,163	$	(3,281)	2.47%	1.93%		11.26
Receive fixed non-callable	1,413,200		76		(5,329)		1.88%	2.13%		1.25
Receive fixed callable	524,000		476		(772)		1.52%	1.91%		2.83
Cash flow hedges:
Interest rate swaps:
Pay fixed non-callable	428,000		1,882		(1,514)		2.36%	2.12%		5.43
No hedge designation:
Interest rate swaps:
Pay fixed non-callable	342,745		7		(14,046)		3.55%	2.00%		5.51
Receive fixed non-callable	3,124,148		49		(1,637)		1.88%	2.06%		1.66
Receive fixed callable	525,000		79		(80)		1.64%	1.68%		0.83
Basis swaps	2,670,000		787		(395)		1.86%	1.76%		0.90
Treasury futures	39,400				(51)				128.29
Credit valuation adjustment			—		63
Total financial derivatives	$	14,022,179	$	10,519	$	(27,042)
Collateral (held)/pledged			(2,685)		132,129
Net amount			$	7,834	$	105,087


	As of December 31, 2018
			Fair Value					Weighted- Average Pay Rate	Weighted- Average Receive Rate	Weighted- Average Forward Price	Weighted- Average Remaining Term (in years)
	Notional Amount		Asset		(Liability)
	(dollars in thousands)
Fair value hedges:
Interest rate swaps:
Pay fixed non-callable	$	3,097,084	$	3,004	$	(4,326)	2.42%	2.58%		9.75
Receive fixed non-callable	1,871,200		547		(4,484)		2.50%	1.84%		1.58
Receive fixed callable	160,000		338		(28)		2.35%	3.06%		2.91
Cash flow hedges:
Interest rate swaps:
Pay fixed non-callable	373,000		2,441		(99)		2.40%	2.83%		6.12
No hedge designation:
Interest rate swaps:
Pay fixed non-callable	316,664		796		(10,399)		3.69%	2.52%		6.25
Receive fixed non-callable	2,347,371		—		—		2.37%	2.10%		0.86
Basis swaps	1,770,026		421		(130)		2.45%	2.49%		1.27
Treasury futures	20,400		—		(188)				121.09
Credit valuation adjustment			(60)		21
Total financial derivatives	$	9,955,745	$	7,487	$	(19,633)
Collateral (held)/pledged			(1,778)		47,018
Net amount			$	5,709	$	27,385

Schedule of Net Income/(Expense) Recognized

The following table summarizes the net income/(expense) recognized in the consolidated statements of operations related to derivatives for the years ended December 31, 2019, 2018, and 2017:

Table 6.2


	For the Year Ended December 31, 2019
	Net Income/(Expense) Recognized in Consolidated Statement of Operations on Derivatives
	Net Interest Income										Non-Interest Income	Total
	Interest Income Farmer Mac Guaranteed Securities and USDA Securities		Interest Income Loans		Total Interest Expense		Gains/(losses) on financial derivatives
	(in thousands)
Total amounts presented in the consolidated statement of operations	$	333,896	$	229,675	$	(471,958)	$	5,282	$	96,895
Income/(expense) related to interest settlements on fair value hedging relationships:
Recognized on derivatives	(2,177)		(2,053)		(6,227)		—		(10,457)
Recognized on hedged items	118,609		26,352		(45,309)		—		99,652
Discount amortization recognized on hedged items	—		—		(631)		—		(631)
Income/(expense) related to interest settlements on fair value hedging relationships	$	116,432	$	24,299	$	(52,167)	$	—	$	88,564

(Losses)/gains on fair value hedging relationships:
Recognized on derivatives	$	(184,478)	$	(50,141)	$	18,401	$	—	$	(216,218)
Recognized on hedged items	181,144		43,194		(16,027)		—		208,311
(Losses)/gains on fair value hedging relationships	$	(3,334)	$	(6,947)	$	2,374	$	—	$	(7,907)

Expense related to interest settlements on cash flow hedging relationships:
Interest settlements reclassified from AOCI into net income on derivatives	$	—	$	—	$	1,166	$	—	$	1,166
Recognized on hedged items	—		—		(10,569)		—		(10,569)
Discount amortization recognized on hedged items	—		—		(4)		—		(4)
Expense recognized on cash flow hedges	$	—	$	—	$	(9,407)	$	—	$	(9,407)

Gains on financial derivatives not designated in hedging relationships:
Gains on interest rate swaps	$	—	$	—	$	—	$	10,321	$	10,321
Interest expense on interest rate swaps	—		—		—		(4,213)		(4,213)

Treasury futures	—		—		—		(826)		(826)
Gains on financial derivatives not designated in hedge relationships	$	—	$	—	$	—	$	5,282	$	5,282


	For the Year Ended December 31, 2018
	Net Income/(Expense) Recognized in Consolidated Statement of Operations on Derivatives
	Net Interest Income										Non-Interest Income	Total
	Interest Income Farmer Mac Guaranteed Securities and USDA Securities		Interest Income Loans		Total Interest Expense		(Losses)/gains on financial derivatives
	(in thousands)
Total amounts presented in the consolidated statement of operations:	$	290,953	$	198,152	$	(369,848)	$	(3,687)	$	115,570
Income/(expense) related to interest settlements on fair value hedging relationships:
Recognized on derivatives	1,861		(630)		(7,995)		—		(6,764)
Recognized on hedged items	65,238		6,284		(36,837)		—		34,685
Discount amortization recognized on hedged items	—		—		(668)		—		(668)
Income/(expense) related to interest settlements on fair value hedging relationships	$	67,099	$	5,654	$	(45,500)	$	—	$	27,253

Gains/(losses) on fair value hedging relationships:
Recognized on derivatives	$	(20,279)	$	5,031	$	835	$	—	$	(14,413)
Recognized on hedged items	21,460		(5,243)		3,137		—		19,354
Gains/(losses) on fair value hedging relationships	$	1,181	$	(212)	$	3,972	$	—	$	4,941

Expense related to interest settlements on cash flow hedging relationships:
Interest settlements reclassified from AOCI into net income on derivatives	$	—	$	—	$	316	$	—	$	316
Recognized on hedged items	—		—		(9,182)		—		(9,182)
Discount amortization recognized on hedged items	—		—		(6)		—		(6)
Expense recognized on cash flow hedges	$	—	$	—	$	(8,872)	$	—	$	(8,872)

Losses on financial derivatives not designated in hedge relationships:
Gains on interest rate swaps	$	—	$	—	$	—	$	7,206	$	7,206
Interest expense on interest rate swaps	—		—		—		(10,920)		(10,920)

Treasury futures	—		—		—		27		27
Losses on financial derivatives not designated in hedge relationships	$	—	$	—	$	—	$	(3,687)	$	(3,687)


	For the Year Ended December 31, 2017
	Net Income/(Expense) Recognized in Consolidated Statement of Operations on Derivatives
	Net Interest Income										Non-Interest Income	Total
	Interest Income Farmer Mac Guaranteed Securities and USDA Securities		Interest Income Loans		Total Interest Expense		Gains/(losses) on financial derivatives
	(in thousands)
Total amounts presented in the consolidated statement of operations	$	203,796	$	162,150	$	(242,885)	$	753	$	123,814
Income/(expense) related to interest settlements on fair value hedging relationships:
Recognized on derivatives	(10,346)		(1,141)		2,642		—		(8,845)
Recognized on hedged items	46,389		3,379		(14,283)		—		35,485
Discount amortization recognized on hedged items	—		—		(345)		—		(345)
Income/(expense) related to interest settlements on fair value hedging relationships	$	36,043	$	2,238	$	(11,986)	$	—	$	26,295

(Losses)/gains on fair value hedging relationships:
Recognized on derivatives	$	—	$	—	$	—	$	1,694	$	1,694
Recognized on hedged items	—		—		—		(2,413)		(2,413)
(Losses)/gains on fair value hedging relationships	$	—	$	—	$	—	$	(719)	$	(719)

Expense related to interest settlements on cash flow hedging relationships:
Interest settlements reclassified from AOCI into net income on derivatives	$	—	$	—	$	(1,974)	$	—	$	(1,974)
Recognized on hedged items	—		—		(4,133)		—		(4,133)
Discount amortization recognized on hedged items	—		—		(5)		—		(5)
Losses recognized in income for hedge ineffectiveness	—		—		—		(320)		(320)
Expense recognized on cash flow hedges	$	—	$	—	$	(6,112)	$	(320)	$	(6,432)

Gains on financial derivatives not designated in hedging relationships:
Gains on interest rate swaps	$	—	$	—	$	—	$	12,240	$	12,240
Interest expense on interest rate swaps	—		—		—		(10,200)		(10,200)
Agency forwards	—		—		—		(588)		(588)
Treasury futures	—		—		—		340		340
Gains on financial derivatives not designated in hedge relationships	$	—	$	—	$	—	$	1,792	$	1,792

(1)Included in the assessment of hedge effectiveness as of December 31, 2017, but excluded from the amounts in the table, were gains of $0.1 million for the year ended December 31, 2017, attributable to the fair value of the swaps at the inception of the hedging relationship. Accordingly, the amount recognized as hedge ineffectiveness for the year ended December 31, 2017 were gains of $0.6 million.

Schedule of Hedged Items in Fair Value Hedging Relationships

The following table shows the carrying amount and associated cumulative basis adjustment related to the application of hedge accounting that is included in the carrying amount of hedged assets and liabilities in fair value hedging relationships as of December 31, 2019 and 2018:

Table 6.3


	Hedged Items in Fair Value Relationship
	Carrying Amount of Hedged Assets/(Liabilities)						Cumulative Amount of Fair Value Hedging Adjustments included in the Carrying Amount of the Hedged Assets/(Liabilities)
	December 31, 2019		December 31, 2018		December 31, 2019		December 31, 2018
	(in thousands)
Farmer Mac Guaranteed Securities, Available-for-Sale, at fair value	$	4,092,611	$	2,882,919	$	180,215	$	(906)
Loans held for investment, at amortized cost	1,050,335		194,617		37,907		(5,287)

Notes Payable, due after one year⁽¹⁾	(2,761,052)		(2,021,356)		(7,433)		8,785

⁽¹⁾Carrying amount represents amortized cost.

Schedule of Credit Exposure to Interest Rate Swap Counterparties

The following table shows Farmer Mac's credit exposure to interest rate swap counterparties as of December 31, 2019 and 2018:

Table 6.4


	December 31, 2019
	Gross Amount Recognized⁽¹⁾		Counterparty Netting		Net Amount Presented in the Consolidated Balance Sheet
	(in thousands)
Assets:
Derivatives
Interest rate swap	$	56,139	$	53,771	$	2,368
Liabilities:
Derivatives
Interest rate swap	$	305,584	$	291,326	$	14,258

⁽¹⁾Gross amount excludes netting arrangements and any adjustment for nonperformance risk, but includes accrued interest.


	December 31, 2018
	Gross Amount Recognized⁽¹⁾		Counterparty Netting		Net Amount Presented in the Consolidated Balance Sheet
	(in thousands)
Assets:
Derivatives
Interest rate swaps	$	51,267	$	48,124	$	3,143
Liabilities:
Derivatives
Interest rate swaps	$	78,437	$	64,568	$	13,869

⁽¹⁾Gross amount excludes netting arrangements and any adjustment for nonperformance risk, but includes accrued interest.

- Definition

Tabular disclosure of pertinent information about a derivative or group of derivatives on a disaggregated basis, such as for individual instruments, or small groups of similar instruments. May include a combination of the type of instrument, risks being hedged, notional amount, hedge designation, related hedged item, inception date, maturity date, or other relevant item.

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