Financial Derivatives (Tables)

3 Months Ended

Mar. 31, 2020

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 March 31, 2020 and December 31, 2019:

Table 4.1


	As of March 31, 2020
			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	$	5,099,293	$	4,339	$	(6,583)	2.42%	1.54%		11.64
Receive fixed non-callable	2,201,500		1,303		(9,730)		1.66%	2.06%		2.22
Receive fixed callable	413,000		4,954		(26)		1.36%	1.95%		3.38
Cash flow hedges:
Interest rate swaps:
Pay fixed non-callable	458,000		1,434		(11,391)		2.31%	1.22%		5.36
No hedge designation:
Interest rate swaps:
Pay fixed non-callable	339,721		—		(22,683)		3.54%	1.69%		5.32
Receive fixed non-callable	3,111,639		—		—		1.17%	1.39%		1.01
Receive fixed callable	500,000		604		—		1.52%	1.75%		0.86
Basis swaps	2,850,000		58		(3,385)		1.49%	0.66%		0.91
Treasury futures	18,500				(114)				138.07
Credit valuation adjustment			—		117
Total financial derivatives	$	14,991,653	$	12,692	$	(53,795)
Collateral (held)/pledged			(2,525)		225,404
Net amount			$	10,167	$	171,609


	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

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 three months ended March 31, 2020 and 2019:

Table 4.2


	For the Three Months Ended March 31, 2020
	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 on financial derivatives
	(in thousands)
Total amounts presented in the consolidated statement of operations	$	71,517	$	60,596	$	(108,542)	$	(9,298)	$	14,273
Income/(expense) related to interest settlements on fair value hedging relationships:
Recognized on derivatives	(6,152)		(1,877)		1,634		—		(6,395)
Recognized on hedged items	31,826		8,677		(14,276)		—		26,227
Discount amortization recognized on hedged items	—		—		(180)		—		(180)
Income/(expense) related to interest settlements on fair value hedging relationships	$	25,674	$	6,800	$	(12,822)	$	—	$	19,652

(Losses)/gains on fair value hedging relationships:
Recognized on derivatives	$	(293,932)	$	(145,906)	$	58,934	$	—	$	(380,904)
Recognized on hedged items	290,379		145,409		(60,565)		—		375,223
(Losses)/gains on fair value hedging relationships	$	(3,553)	$	(497)	$	(1,631)	$	—	$	(5,681)

Expense related to interest settlements on cash flow hedging relationships:
Interest settlements reclassified from AOCI into net income on derivatives	$	—	$	—	$	(439)	$	—	$	(439)
Recognized on hedged items	—		—		(2,123)		—		(2,123)
Discount amortization recognized on hedged items	—		—		(1)		—		(1)
Expense recognized on cash flow hedges	$	—	$	—	$	(2,563)	$	—	$	(2,563)

Losses on financial derivatives not designated in hedging relationships:
Losses on interest rate swaps	$	—	$	—	$	—	$	(6,550)	$	(6,550)
Interest expense on interest rate swaps	—		—		—		(862)		(862)

Treasury futures	—		—		—		(1,886)		(1,886)
Losses on financial derivatives not designated in hedge relationships	$	—	$	—	$	—	$	(9,298)	$	(9,298)


	For The Three Months Ended March 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		Losses on financial derivatives
	(in thousands)
Total amounts presented in the consolidated statement of operations:	$	85,411	$	51,397	$	(114,916)	$	(360)	$	21,532
Income/(expense) related to interest settlements on fair value hedging relationships:
Recognized on derivatives	1,550		(22)		(3,218)		—		(1,690)
Recognized on hedged items	24,565		4,555		(9,922)		—		19,198
Discount amortization recognized on hedged items	—		—		(149)		—		(149)
Income/(expense) related to interest settlements on fair value hedging relationships	$	26,115	$	4,533	$	(13,289)	$	—	$	17,359

Gains/(losses) on fair value hedging relationships:
Recognized on derivatives	$	(58,987)	$	(20,082)	$	8,978	$	—	$	(70,091)
Recognized on hedged items	59,352		16,237		(8,197)		—		67,392
Gains/(losses) on fair value hedging relationships	$	365	$	(3,845)	$	781	$	—	$	(2,699)

Expense related to interest settlements on cash flow hedging relationships:
Interest settlements reclassified from AOCI into net income on derivatives	$	—	$	—	$	481	$	—	$	481
Recognized on hedged items	—		—		(2,688)		—		(2,688)
Discount amortization recognized on hedged items	—		—		(1)		—		(1)
Expense recognized on cash flow hedges	$	—	$	—	$	(2,208)	$	—	$	(2,208)

Losses on financial derivatives not designated in hedge relationships:
Gains on interest rate swaps	$	—	$	—	$	—	$	2,168	$	2,168
Interest expense on interest rate swaps	—		—		—		(2,300)		(2,300)

Treasury futures	—		—		—		(228)		(228)
Losses on financial derivatives not designated in hedge relationships	$	—	$	—	$	—	$	(360)	$	(360)

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 March 31, 2020 and December 31, 2019:

Table 4.3


	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)
	March 31, 2020		December 31, 2019		March 31, 2020		December 31, 2019
	(in thousands)
Farmer Mac Guaranteed Securities, Available-for-Sale, at fair value	$	4,281,350	$	4,092,611	$	470,588	$	180,215
Loans held for investment, at amortized cost	1,330,359		1,050,335		183,315		37,907

Notes Payable⁽¹⁾	(2,680,981)		(2,761,052)		(68,045)		(7,433)

⁽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 March 31, 2020 and December 31, 2019:

Table 4.4


	March 31, 2020
	Gross Amount Recognized⁽¹⁾		Counterparty Netting		Net Amount Presented in the Consolidated Balance Sheet
	(in thousands)
Assets:
Derivatives
Interest rate swap	$	118,349	$	116,517	$	1,832
Liabilities:
Derivatives
Interest rate swap	$	780,184	$	776,764	$	3,420

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


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

⁽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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