Investment Securities

3 Months Ended

Mar. 31, 2021

Investments, Debt and Equity Securities [Abstract]

INVESTMENT SECURITIES

INVESTMENT SECURITIES

The following tables set forth information about Farmer Mac's available-for-sale and held-to-maturity investment securities as of March 31, 2021 and December 31, 2020:

Table 2.1

	As of March 31, 2021
	Amount Outstanding		Unamortized Premium/(Discount)		Amortized Cost(1)		Allowance for losses(2)		Unrealized Gains		Unrealized Losses		Fair Value
	(in thousands)
Available-for-sale:
Floating rate auction-rate certificates backed by Government guaranteed student loans	$	19,700	$	—	$	19,700	$	(61)	$	—	$	(493)	$	19,146
Floating rate Government/GSE guaranteed mortgage-backed securities	2,378,471		(35)		2,378,436		—		12,059		(2,937)		2,387,558
Fixed rate GSE guaranteed mortgage-backed securities	179		—		179		—		22		—		201
Fixed rate U.S. Treasuries	1,388,408		13,814		1,402,222		—		554		(49)		1,402,727
Total available-for-sale	3,786,758		13,779		3,800,537		(61)		12,635		(3,479)		3,809,632
Held-to-maturity:
Floating rate Government/GSE guaranteed mortgage-backed securities(3)	45,032		—		45,032		—		1,552		—		46,584
Total held-to-maturity	$	45,032	$	—	$	45,032	$	—	$	1,552	$	—	$	46,584

(1)Amounts presented exclude $6.4 million of accrued interest receivable on investment securities as of March 31, 2021.

(2)Represents the amount of impairment that has resulted from credit-related factors, and therefore was recognized in the consolidated statement of operations as a provision for losses. Amount excludes unrealized losses relating to non-credit factors.

(3)The held-to-maturity investment securities had a weighted average yield of 1.5% as of March 31, 2021.

	As of December 31, 2020
	Amount Outstanding		Unamortized Premium/(Discount)		Amortized Cost(1)		Allowance for losses(2)		Unrealized Gains		Unrealized Losses		Fair Value
	(in thousands)
Available-for-sale:
Floating rate auction-rate certificates backed by Government guaranteed student loans	$	19,700	$	—	$	19,700	$	(36)	$	—	$	(493)	$	19,171
Floating rate asset-backed securities	6,232		—		6,232		—		—		(1)		6,231
Floating rate Government/GSE guaranteed mortgage-backed securities	2,350,963		(44)		2,350,919		—		12,150		(3,043)		2,360,026
Fixed rate GSE guaranteed mortgage-backed securities	279		—		279		—		34		—		313
Fixed rate U.S. Treasuries	1,449,408		17,128		1,466,536		—		1,458		(43)		1,467,951
Total available-for-sale	3,826,582		17,084		3,843,666		(36)		13,642		(3,580)		3,853,692
Held-to-maturity:
Floating rate Government/GSE guaranteed mortgage-backed securities(3)	45,032		—		45,032		—		1,201		—		46,233
Total held-to-maturity	$	45,032	$	—	$	45,032	$	—	$	1,201	$	—	$	46,233

(1)Amounts presented exclude $9.0 million of accrued interest receivable on investment securities as of December 31, 2020.

(2)Represents the amount of impairment that has resulted from credit-related factors, and therefore was recognized in the consolidated statement of operations as a provision for losses. Amount excludes unrealized losses relating to non-credit factors.

(3)The held-to-maturity investment securities had a weighted average yield of 1.5% as of December 31, 2020.

Farmer Mac did not sell any securities from its available-for-sale investment portfolio during the three months ended March 31, 2021 and 2020.

As of March 31, 2021 and December 31, 2020, unrealized losses on available-for-sale investment securities were as follows:

Table 2.2

	As of March 31, 2021
	Available-for-Sale Securities
	Unrealized loss position for less than 12 months				Unrealized loss position for more than 12 months
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
	(dollars in thousands)
Floating rate auction-rate certificates backed by Government guaranteed student loans	$	—	$	—	$	19,146	$	(493)
Floating rate Government/GSE guaranteed mortgage-backed securities	142,747		(434)		293,876		(2,503)
Fixed rate U.S. Treasuries	278,420		(49)		—		—
Total	$	421,167	$	(483)	$	313,022	$	(2,996)
Number of securities in loss position			27				55

	As of December 31, 2020
	Available-for-Sale Securities
	Unrealized loss position for less than 12 months				Unrealized loss position for more than 12 months
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
	(dollars in thousands)
Floating rate auction-rate certificates backed by Government guaranteed student loans	$	—	$	—	$	19,171	$	(493)
Floating rate asset-backed securities	—		—		6,231		(1)
Floating rate Government/GSE guaranteed mortgage-backed securities	172,842		(593)		324,423		(2,450)
Fixed rate U.S. Treasuries	364,320		(43)		—		—
Total	$	537,162	$	(636)	$	349,825	$	(2,944)
Number of securities in loss position			27				62

The unrealized losses presented above are principally due to a general widening of market spreads and changes in the levels of interest rates from the dates of acquisition to March 31, 2021 and December 31, 2020, as applicable. The resulting decrease in fair values reflects an increase in the perceived risk by the financial markets related to those securities. As of both March 31, 2021 and December 31, 2020, all of the investment securities in an unrealized loss position either were backed by the full faith and credit of the U.S. government or had credit ratings of at least "AA+."

Securities in unrealized loss positions for 12 months or longer have a fair value as of March 31, 2021 that is, on average, approximately 99.1% of their amortized cost basis. Farmer Mac believes that all of these unrealized losses are recoverable within a reasonable period of time by way of maturity or changes in credit spreads.

The amortized cost, fair value, and weighted-average yield of available-for-sale investment securities by remaining contractual maturity as of March 31, 2021 are set forth below. Asset-backed and mortgage-backed securities are included based on their final maturities, although the actual maturities may differ due to prepayments of the underlying assets.

Table 2.3

	As of March 31, 2021
	Available-for-Sale Securities
	Amortized Cost		Fair Value		Weighted- Average Yield
	(dollars in thousands)
Due within one year	$	1,085,097	$	1,085,613	1.90%
Due after one year through five years	693,669		694,736		0.77%
Due after five years through ten years	1,205,894		1,212,911		0.56%
Due after ten years	815,877		816,372		0.63%
Total	$	3,800,537	$	3,809,632	1.00%

FARMER MAC GUARANTEED SECURITIES AND USDA SECURITIES

The following tables set forth information about on-balance sheet Farmer Mac Guaranteed Securities and USDA Securities as of March 31, 2021 and December 31, 2020:

Table 3.1

	As of March 31, 2021
	Unpaid Principal Balance		Unamortized Premium/(Discount)		Amortized Cost(1)		Allowance for losses(2)		Unrealized Gains		Unrealized Losses		Fair Value
	(in thousands)
Held-to-maturity:
AgVantage	$	1,126,914	$	(27)	$	1,126,887	$	(223)	$	18,994	$	(5,129)	$	1,140,529
Farmer Mac Guaranteed USDA Securities	32,050		78		32,128		—		1,385		—		33,513
Total Farmer Mac Guaranteed Securities	1,158,964		51		1,159,015		(223)		20,379		(5,129)		1,174,042
USDA Securities	2,464,803		24,697		2,489,500		—		129,775		(397)		2,618,878
Total held-to-maturity	$	3,623,767	$	24,748	$	3,648,515	$	(223)	$	150,154	$	(5,526)	$	3,792,920
Available-for-sale:
AgVantage	$	6,510,351	$	1,425	$	6,511,776	$	(127)	$	261,178	$	(9,618)	$	6,763,209
Trading:
USDA Securities(3)	$	5,344	$	165	$	5,509	$	—	$	72	$	(3)	$	5,578

(1)Amounts presented exclude $32.1 million, $36.9 million, and $0.1 million of accrued interest receivable on available-for-sale, held-to-maturity, and trading securities, respectively, as of March 31, 2021.

(2)Represents the amount of impairment that has resulted from credit-related factors, and therefore was recognized in the statement of financial operations as a provision for losses. Amount excludes unrealized losses relating to non-credit factors.

(3)The trading USDA securities had a weighted average yield of 5.03% as of March 31, 2021.

	As of December 31, 2020
	Unpaid Principal Balance		Unamortized Premium/(Discount)		Amortized Cost(1)		Allowance for losses(2)		Unrealized Gains		Unrealized Losses		Fair Value
	(in thousands)
Held-to-maturity:
AgVantage	$	1,141,430	$	(55)	$	1,141,375	$	(120)	$	23,986	$	(61)	$	1,165,180
Farmer Mac Guaranteed USDA Securities	34,456		81		34,537		—		1,273		—		35,810
Total Farmer Mac Guaranteed Securities	1,175,886		26		1,175,912		(120)		25,259		(61)		1,200,990
USDA Securities	2,446,550		27,076		2,473,626		—		157,748		(560)		2,630,814
Total held-to-maturity	$	3,622,436	$	27,102	$	3,649,538	$	(120)	$	183,007	$	(621)	$	3,831,804
Available-for-sale:
AgVantage	$	6,593,518	$	1,474	$	6,594,992	$	(310)	$	368,257	$	(15,238)	$	6,947,701
Trading:
USDA Securities(3)	$	6,413	$	198	$	6,611	$	—	$	84	$	—	$	6,695

(1)Amounts presented exclude $32.3 million, $44.7 million, and $0.2 million of accrued interest receivable on available-for-sale, held-to-maturity, and trading securities, respectively, as of December 31, 2020.

(2)Represents the amount of impairment that has resulted from credit-related factors, and therefore was recognized in the statement of financial operations as a provision for losses. Amount excludes unrealized losses relating to non-credit factors.

(3)The trading USDA securities had a weighted average yield of 5.05% as of December 31, 2020.

As of March 31, 2021 and December 31, 2020, unrealized losses on held-to-maturity and available-for-sale on-balance sheet Farmer Mac Guaranteed Securities and USDA Securities were as follows:

Table 3.2

	As of March 31, 2021
	Held-to-Maturity and Available-for-Sale Securities
	Unrealized loss position for less than 12 months				Unrealized loss position for more than 12 months
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
	(in thousands)
Held-to-maturity:
AgVantage	$	269,871	$	(5,129)	$	—	$	—
Farmer Mac Guaranteed USDA Securities	—		—		—		—
USDA Securities	—		—		18,024		(397)
Total held-to-maturity	$	269,871	$	(5,129)	$	18,024	$	(397)
Available-for-sale:
AgVantage	$	225,079	$	(8,801)	$	204,183	$	(817)

	As of December 31, 2020
	Held-to-Maturity and Available-for-Sale Securities
	Unrealized loss position for less than 12 months				Unrealized loss position for more than 12 months
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
	(in thousands)
Held-to-maturity:
AgVantage	$	49,939	$	(61)	$	—	$	—
Farmer Mac Guaranteed USDA Securities	—		—		—		—
USDA Securities	—		—		21,061		(560)
Total held-to-maturity	$	49,939	$	(61)	$	21,061	$	(560)
Available-for-sale:
AgVantage	$	133,703	$	(231)	$	981,757	$	(15,007)

The unrealized losses presented above are principally due to changes in interest rates from the date of acquisition to March 31, 2021 and December 31, 2020, as applicable. The unrealized losses on the held-to-maturity USDA Securities as of both March 31, 2021 and December 31, 2020 reflect their increased cost basis resulting from their transfer to held-to-maturity as of October 1, 2016.

The credit exposure related to Farmer Mac's USDA Guarantees line of business is covered by the full faith and credit guarantee of the United States of America.

The unrealized losses from AgVantage securities were on 7 and 11 available-for-sale securities as of March 31, 2021 and December 31, 2020, respectively. There were 4 and 2 held-to-maturity AgVantage securities with an unrealized loss as of March 31, 2021 and December 31, 2020, respectively. As of

March 31, 2021 and December 31, 2020, 2 and 7 available-for-sale AgVantage securities, respectively, had been in a loss position for more than 12 months.

During the three months ended March 31, 2021 and 2020, Farmer Mac had no sales of Farmer Mac Guaranteed Securities or USDA Securities and, therefore, Farmer Mac realized no gains or losses.

The amortized cost, fair value, and weighted-average yield of available-for-sale and held-to-maturity Farmer Mac Guaranteed Securities and USDA Securities by remaining contractual maturity as of March 31, 2021 are set forth below. The balances presented are based on their final maturities, although the actual maturities may differ due to prepayments of the underlying assets.

Table 3.3

	As of March 31, 2021
	Available-for-Sale Securities
	Amortized Cost(1)		Fair Value		Weighted- Average Yield
	(dollars in thousands)
Due within one year	$	1,289,615	$	1,293,004	1.43	%
Due after one year through five years	2,992,792		3,122,713		2.40	%
Due after five years through ten years	986,013		1,058,037		2.31	%
Due after ten years	1,243,356		1,289,455		2.75	%
Total	$	6,511,776	$	6,763,209	2.28	%

(1)Amounts presented exclude $32.1 million of accrued interest receivable.

	As of March 31, 2021
	Held-to-Maturity Securities
	Amortized Cost(1)		Fair Value		Weighted- Average Yield
	(dollars in thousands)
Due within one year	$	374,093	$	376,290	2.77	%
Due after one year through five years	812,373		825,702		2.55	%
Due after five years through ten years	260,383		272,256		2.79	%
Due after ten years	2,201,666		2,318,672		3.13	%
Total	$	3,648,515	$	3,792,920	2.92	%

(1)Amounts presented exclude $36.9 million of accrued interest receivable.