Business Segment Reporting (Tables)

12 Months Ended

Dec. 31, 2019

Schedule of Segment Reporting Information, by Segment

The following tables present core earnings for Farmer Mac's operating segments and a reconciliation to consolidated net income for the years ended December 31, 2019, 2018, and 2017:

Table 14.1


Core Earnings by Business Segment
For the Year Ended December 31, 2019
	Farm & Ranch		USDA Guarantees		Rural Utilities		Institutional Credit		Corporate		Reconciling Adjustments			Consolidated Net Income
	(in thousands)


Net interest income	$	65,098	$	17,470	$	10,459	$	69,039	$	11,069	$	—		$	173,135
Less: reconciling adjustments^(1)(2)(3)	(9,471)		(732)		6,143		520		(987)		4,527			—
Net effective spread	55,627		16,738		16,602		69,559		10,082		4,527			—
Guarantee and commitment fees⁽²⁾	18,593		958		1,412		372		—		(7,669)			13,666
Other income/(expense)⁽³⁾	1,397		174		38		—		166		5,501			7,276
Non-interest income/(loss)	19,990		1,132		1,450		372		166		(2,168)			20,942

Provision for loan losses	(3,504)		—		—		—		—		—			(3,504)

Release of reserve for losses	3		—		—		—		—		—			3
Other non-interest expense	(19,375)		(5,757)		(3,898)		(8,390)		(14,505)		—			(51,925)
Non-interest expense⁽⁴⁾	(19,372)		(5,757)		(3,898)		(8,390)		(14,505)		—			(51,922)
Core earnings before income taxes	52,741		12,113		14,154		61,541		(4,257)		2,359		⁽⁵⁾	138,651
Income tax (expense)/benefit	(11,076)		(2,545)		(2,972)		(12,924)		907		(495)			(29,105)
Core earnings before preferred stock dividends	41,665		9,568		11,182		48,617		(3,350)		1,864		⁽⁵⁾	109,546
Preferred stock dividends	—		—		—		—		(13,940)		—			(13,940)
Loss on retirement of preferred stock	—		—		—		—		—		(1,956)			(1,956)
Segment core earnings/(losses)	$	41,665	$	9,568	$	11,182	$	48,617	$	(17,290)	$	(92)	⁽⁵⁾	$	93,650

Total assets at carrying value	$	5,408,302	$	2,311,932	$	1,717,405	$	8,606,912	$	3,664,823	$	—		$	21,709,374
Total on- and off-balance sheet program assets at principal balance	$	7,776,950	$	2,620,175	$	2,280,571	$	8,440,246	$	—	$	—		$	21,117,942

⁽¹⁾Includes the amortization of premiums and discounts on assets consolidated at fair value, originally included in interest income, to reflect core earnings amounts.

⁽²⁾Includes the reclassification of interest income and interest expense from consolidated trusts owned by third parties to guarantee and commitment fees, to reflect management's view that the net interest income Farmer Mac earns is effectively a guarantee fee.

⁽³⁾Includes the reclassification of interest expense related to interest rate swaps not designated as hedges, which are included in "Gains/(losses) on financial derivatives" on the consolidated financial statements, to determine the effective funding cost for each operating segment.

⁽⁴⁾Includes directly attributable costs and an allocation of indirectly attributable costs based on employee headcount.

⁽⁵⁾Net adjustments to reconcile to the corresponding income measures: core earnings before income taxes reconciled to income before income taxes; core earnings before preferred stock dividends reconciled to net income; and segment core earnings reconciled to net income attributable to common stockholders.


Core Earnings by Business Segment
For the Year Ended December 31, 2018
	Farm & Ranch		USDA Guarantees		Rural Utilities		Institutional Credit		Corporate		Reconciling Adjustments			Consolidated Net Income
	(in thousands)


Net interest income	$	62,951	$	20,554	$	12,505	$	69,321	$	9,105	$	—		$	174,436
Less: reconciling adjustments^(1)(2)(3)	(9,889)		(2,499)		(922)		(7,884)		(2,047)		23,241			—
Net effective spread	53,062		18,055		11,583		61,437		7,058		23,241			—
Guarantee and commitment fees⁽²⁾	17,976		797		1,599		360		—		(6,756)			13,976
Other income/(expense)⁽³⁾	1,371		20		33		—		(913)		(2,747)			(2,236)
Non-interest income/(loss)	19,347		817		1,632		360		(913)		(9,503)			11,740

Provision for loan losses	(238)		—		—		—		—		—			(238)

Provision for reserve for losses	(97)		—		—		—		—		—			(97)
Other non-interest expense	(19,026)		(5,309)		(3,062)		(8,011)		(14,411)		—			(49,819)
Non-interest expense⁽⁴⁾	(19,123)		(5,309)		(3,062)		(8,011)		(14,411)		—			(49,916)
Core earnings before income taxes	53,048		13,563		10,153		53,786		(8,266)		13,738		⁽⁵⁾	136,022
Income tax (expense)/benefit	(11,140)		(2,848)		(2,133)		(11,295)		2,361		(2,887)			(27,942)
Core earnings before preferred stock dividends	41,908		10,715		8,020		42,491		(5,905)		10,851		⁽⁵⁾	108,080
Preferred stock dividends	—		—		—		—		(13,182)		—			(13,182)
Segment core earnings/(losses)	$	41,908	$	10,715	$	8,020	$	42,491	$	(19,087)	$	10,851	⁽⁵⁾	$	94,898

Total assets at carrying value	$	4,701,736	$	2,240,906	$	945,282	$	8,089,410	$	2,716,994	$	—		$	18,694,328
Total on- and off-balance sheet program assets at principal balance	$	7,233,972	$	2,515,620	$	1,592,115	$	8,382,817	$	—	$	—		$	19,724,524

⁽¹⁾Includes the amortization of premiums and discounts on assets consolidated at fair value, originally included in interest income, to reflect core earnings amounts.

⁽⁴⁾Includes directly attributable costs and an allocation of indirectly attributable costs based on employee headcount.


Core Earnings by Business Segment
For the Year Ended December 31, 2017
	Farm & Ranch		USDA Guarantees		Rural Utilities		Institutional Credit		Corporate		Reconciling Adjustments			Consolidated Net Income
	(in thousands)


Net interest income	$	54,290	$	21,106	$	11,598	$	59,842	$	10,811	$	—		$	157,647
Less: reconciling adjustments^(1)(2)(3)	(8,922)		(2,287)		(539)		(3,505)		(1,091)		16,344			—
Net effective spread	45,368		18,819		11,059		56,337		9,720		16,344			—
Guarantee and commitment fees⁽²⁾	17,175		456		1,914		805		—		(6,236)			14,114
Other income⁽³⁾⁽⁴⁾	2,449		43		20		—		171		715			3,398
Non-interest income/(loss)	19,624		499		1,934		805		171		(5,521)			17,512

Provision for loan losses	(1,708)		—		—		—		—		—			(1,708)

Provision for reserve for losses	(50)		—		—		—		—		—			(50)
Other non-interest expense	(16,554)		(4,384)		(2,430)		(6,439)		(12,908)		—			(42,715)
Non-interest expense⁽⁵⁾	(16,604)		(4,384)		(2,430)		(6,439)		(12,908)		—			(42,765)
Core earnings before income taxes	46,680		14,934		10,563		50,703		(3,017)		10,823		⁽⁶⁾	130,686
Income tax (expense)/benefit	(16,338)		(5,227)		(3,696)		(17,746)		1,792		(5,154)			(46,369)
Core earnings before preferred stock dividends and attribution of income to non-controlling interest	30,342		9,707		6,867		32,957		(1,225)		5,669		⁽⁶⁾	84,317
Preferred stock dividends	—		—		—		—		(13,182)		—			(13,182)
Non-controlling interest	—		—		—		—		165		—			165
Segment core earnings/(losses)	$	30,342	$	9,707	$	6,867	$	32,957	$	(14,242)	$	5,669	⁽⁶⁾	$	71,300

Total assets at carrying value	$	4,274,693	$	2,195,189	$	1,088,986	$	7,627,749	$	2,605,657	$	—		$	17,792,274
Total on- and off-balance sheet program assets at principal balance	$	6,867,586	$	2,352,214	$	1,882,633	$	7,904,878	—		—			$	19,007,311

⁽¹⁾Includes the amortization of premiums and discounts on assets consolidated at fair value, originally included in interest income, to reflect core earnings amounts.

⁽⁴⁾Includes reconciling adjustments for 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.

⁽⁵⁾Includes directly attributable costs and an allocation of indirectly attributable costs based on employee headcount.

⁽⁶⁾Net adjustments to reconcile to the corresponding income measures: core earnings before income taxes reconciled to income before income taxes; core earnings before preferred stock dividends and attribution of income to non-controlling interest reconciled to net income; and segment core earnings reconciled to net income attributable to common stockholders.