Loans

6 Months Ended

Jun. 30, 2021

Receivables [Abstract]

LOANS

LOANS

Farmer Mac classifies loans as either held for investment or held for sale. Loans held for investment are recorded at the unpaid principal balance, net of unamortized premium or discount and other cost basis adjustments. Loans held for sale are reported at the lower of cost or fair value determined on a pooled

basis. As of both June 30, 2021, and December 31, 2020, Farmer Mac had no loans held for sale.

The following table includes loans held for investment and displays the composition of the loan balances as of June 30, 2021 and December 31, 2020:

Table 5.1

	As of June 30, 2021						As of December 31, 2020
	Unsecuritized		In Consolidated Trusts		Total		Unsecuritized		In Consolidated Trusts		Total
	(in thousands)
Farm & Ranch	$	5,523,212	$	1,077,993	$	6,601,205	$	4,889,393	$	1,287,045	$	6,176,438
Rural Utilities	2,246,568		—		2,246,568		2,260,412		—		2,260,412
Total unpaid principal balance(1)	7,769,780		1,077,993		8,847,773		7,149,805		1,287,045		8,436,850
Unamortized premiums, discounts, fair value hedge basis adjustment, and other cost basis adjustments	26,932		—		26,932		112,128		—		112,128
Total loans	7,796,712		1,077,993		8,874,705		7,261,933		1,287,045		8,548,978
Allowance for losses	(13,290)		(710)		(14,000)		(12,943)		(889)		(13,832)
Total loans, net of allowance	$	7,783,422	$	1,077,283	$	8,860,705	$	7,248,990	$	1,286,156	$	8,535,146

(1)Unpaid principal balance is the basis of presentation in disclosures of outstanding balances for Farmer Mac's lines of business.

Allowance for Losses

The following table is a summary, by asset type, of the allowance for losses as of June 30, 2021 and December 31, 2020:

Table 5.2

	June 30, 2021		December 31, 2020
	Allowance for Losses		Allowance for Losses
	(in thousands)
Loans:
Farm & Ranch	$	3,092	$	3,745
Rural Utilities	10,908		10,087
Total	$	14,000	$	13,832

The following is a summary of the changes in the allowance for losses for the three and six month period ended June 30, 2021 and 2020:

Table 5.3

	For the Three Months Ended				For the Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
	Allowance for Losses		Allowance for Losses		Allowance for Losses		Allowance for Losses
	(in thousands)
Farm & Ranch:
Beginning Balance	$	3,718	$	7,353	$	3,745	$	10,454
Cumulative effect adjustment from adoption of current expected credit loss standard	—		—		—		(3,909)
Adjusted Beginning Balance	3,718		7,353		3,745		6,545
Release of losses	(626)		(920)		(653)		(112)
Charge-offs	—		(394)		—		(394)
Ending Balance(1)	$	3,092	$	6,039	$	3,092	$	6,039
Rural Utilities:
Beginning Balance	$	11,089	$	7,503	$	10,087	$	—
Cumulative effect adjustment from adoption of current expected credit loss standard	—		—		—		5,378
Adjusted Beginning Balance	11,089		7,503		10,087		5,378
(Release of)/provision for losses	(181)		1,397		821		3,522
Charge-offs	—		—		—		—
Ending Balance(2)	$	10,908	$	8,900	$	10,908	$	8,900

(1)As of June 30, 2021 and 2020, allowance for losses for Farm & Ranch includes no allowance and $1.8 million, respectively, for collateral dependent assets secured by agricultural real estate.

(2)As of both June 30, 2021 and 2020, allowance for losses for Rural Utilities includes no allowance for collateral dependent assets.

The release from the allowance for Rural Utilities loan losses of $0.2 million recorded during second quarter 2021 was primarily attributable to the impact of improving economic factor forecasts, specifically expectations for unemployment. The $0.6 million release from the allowance for the Farm & Ranch portfolio during second quarter 2021 was primarily attributable to improving economic factor forecasts, particularly agricultural commodity prices.

The small net provision recorded to the allowance for the six months ended June 30, 2021, was primarily a result of the impact of the Texas Arctic Freeze on the Rural Utilities portfolio, partially offset by improving economic factor forecasts.

The provision to the allowance for loan losses of $0.5 million recorded during second quarter 2020 was

primarily due to the impact of net new loan volume in the Rural Utilities portfolio of $311.8 million. The

impact of the Rural Utilities portfolio on the net increase to the provision was partially offset by

improving economic factors that uniquely impacted the Farm & Ranch portfolio, specifically

improvements in commodity prices and expectations for stable farm land values. In addition, there was a

$0.4 million charge-off to the allowance related to the acquisition of a new real estate owned property

("REO") during second quarter 2020.

The provision to the allowance for loan losses of $3.4 million recorded during the six months ended June

30, 2020 was primarily due to the impact of net new loan volume in the Rural Utilities portfolio and the

impact of economic factor forecasts on the Rural Utilities portfolio, especially expected higher

unemployment, as a result of the COVID-19 pandemic and the resulting economic volatility.

The following table presents the unpaid principal balances by delinquency status of Farmer Mac's loans and non-performing assets as of June 30, 2021 and December 31, 2020:

Table 5.4

	As of June 30, 2021
	Accruing
	Current		30-59 Days		60-89 Days		90 Days and Greater(2)		Total Past Due		Nonaccrual loans(3)(4)		Total Loans
	(in thousands)
Loans(1):
Farm & Ranch	$	6,475,467	$	1,501	$	525	$	5,418	$	7,444	$	118,294	$	6,601,205
Rural Utilities	2,236,568		10,000		—		—		10,000		—		2,246,568
Total	$	8,712,035	$	11,501	$	525	$	5,418	$	17,444	$	118,294	$	8,847,773

(1)Amounts represent unpaid principal balance of risk rated loans, which is the basis Farmer Mac uses to analyze its portfolio, and recorded investment of past due loans.

(2)Includes loans in consolidated trusts with beneficial interests owned by third parties that are 90 days or more past due.

(3)Includes loans that are 90 days or more past due, in foreclosure, or in bankruptcy with at least one missed payment, excluding loans performing under either their original loan terms or a court-approved bankruptcy plan.

(4)Includes $58.4 million of nonaccrual loans for which there was no associated allowance. During the three and six months ended June 30, 2021, Farmer Mac received $1.9 million and $3.0 million, respectively, in interest on nonaccrual loans.

	As of December 31, 2020
	Accruing
	Current		30-59 Days		60-89 Days		90 Days and Greater(2)		Total Past Due		Nonaccrual loans(3)(4)		Total Loans
	(in thousands)
Loans(1):
Farm & Ranch	$	6,055,154	$	4,582	$	632	$	1,072	$	6,286	$	114,998	$	6,176,438
Rural Utilities	2,260,412		—		—		—		—		—		2,260,412
Total	$	8,315,566	$	4,582	$	632	$	1,072	$	6,286	$	114,998	$	8,436,850

(1)Amounts represent unpaid principal balance of risk rated loans, which is the basis Farmer Mac uses to analyze its portfolio, and recorded investment of past due loans.

(2)Includes loans in consolidated trusts with beneficial interests owned by third parties that are 90 days or more past due.

(3)Includes loans that are 90 days or more past due, in foreclosure, or in bankruptcy with at least one missed payment, excluding loans performing under either their original loan terms or a court-approved bankruptcy plan.

(4)Includes $44.2 million of nonaccrual loans for which there was no associated allowance. During the year ended December 31, 2020, Farmer Mac received $4.4 million in interest on nonaccrual loans.

Credit Quality Indicators

The following tables present credit quality indicators related to Farm & Ranch loans and Rural Utilities loans held as of June 30, 2021 and December 31, 2020, by year of origination:

Table 5.5

	As of June 30, 2021
	Year of Origination:
	2021		2020		2019		2018		2017		Prior		Revolving Loans - Amortized Cost Basis		Total
	(in thousands)
Farm & Ranch(1):
Internally Assigned Risk Rating:
Acceptable	$	1,085,630	$	1,873,579	$	704,749	$	409,047	$	364,489	$	1,232,910	$	511,353	$	6,181,757
Special mention(2)	43,076		92,886		33,544		14,643		3,809		16,706		8,826		213,490
Substandard(3)	—		3,614		26,119		30,481		49,801		84,508		11,435		205,958
Total	$	1,128,706	$	1,970,079	$	764,412	$	454,171	$	418,099	$	1,334,124	$	531,614	$	6,601,205
For the Three Months Ended June 30, 2021:
Current period charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Current period recoveries	—		—		—		—		—		—		—		—
Current period Farm & Ranch net charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
For the Six Months Ended June 30, 2021:
Current period charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Current period recoveries	—		—		—		—		—		—		—		—
Current period Farm & Ranch net charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

(1)Amounts represent unpaid principal balance of risk-rated loans, which is the basis Farmer Mac uses to analyze its portfolio, and recorded investment of past due loans.

(2)Assets in the "Special mention" category generally have potential weaknesses due to performance issues but are currently considered to be adequately secured.  

(3)Substandard assets have a well-defined weakness or weaknesses and there is a distinct possibility that some loss will be sustained if deficiencies are not corrected.

	As of June 30, 2021
	Year of Origination:
	2021		2020		2019		2018		2017		Prior		Revolving Loans - Amortized Cost Basis		Total
	(in thousands)
Rural Utilities(1):
Internally Assigned Risk Rating:
Acceptable	$	21,022	$	635,342	$	792,333	$	8,180	$	89,488	$	648,818	$	28,185	$	2,223,368
Special mention(2)	—		—		—		—		—		—		—		—
Substandard(3)	—		23,200		—		—		—		—		—		23,200
Total	$	21,022	$	658,542	$	792,333	$	8,180	$	89,488	$	648,818	$	28,185	$	2,246,568
For the Three Months Ended June 30, 2021:
Current period charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Current period recoveries	—		—		—		—		—		—		—		—
Current period Rural Utilities net charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
For the Six Months Ended June 30, 2021:
Current period charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Current period recoveries	—		—		—		—		—		—		—		—
Current period Farm & Ranch net charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

(1)Amounts represent unpaid principal balance of risk-rated loans, which is the basis Farmer Mac uses to analyze its portfolio, and recorded investment of past due loans.

(2)Assets in the "Special mention" category generally have potential weaknesses due to performance issues but are currently considered to be adequately secured.  

(3)Substandard assets have a well-defined weakness or weaknesses and there is a distinct possibility that some loss will be sustained if deficiencies are not corrected.

	As of December 31, 2020
	Year of Origination:
	2020		2019		2018		2017		2016		Prior		Revolving Loans - Amortized Cost Basis		Total
	(in thousands)
Farm & Ranch(1):
Internally Assigned Risk Rating:
Acceptable	$	1,947,618	$	774,315	$	484,345	$	500,768	$	465,277	$	1,068,693	$	535,742	$	5,776,758
Special mention(2)	70,171		79,744		18,317		8,530		13,111		21,328		7,656		218,857
Substandard(3)	3,400		5,821		21,879		52,709		37,173		50,582		9,259		180,823
Total	$	2,021,189	$	859,880	$	524,541	$	562,007	$	515,561	$	1,140,603	$	552,657	$	6,176,438
For the Three Months Ended June 30, 2020:
Current period charge-offs	$	—	$	—	$	—	$	—	$	—	$	394	$	—	$	394
Current period recoveries	—		—		—		—		—		—		—		—
Current period Farm & Ranch net charge-offs	$	—	$	—	$	—	$	—	$	—	$	394	$	—	$	394
For the Six Months Ended June 30, 2020:
Current period charge-offs	$	—	$	—	$	—	$	—	$	—	$	394	$	—	$	394
Current period recoveries	—		—		—		—		—		—		—		—
Current period Farm & Ranch net charge-offs	$	—	$	—	$	—	$	—	$	—	$	394	$	—	$	394

(1)Amounts represent unpaid principal balance of risk-rated loans, which is the basis Farmer Mac uses to analyze its portfolio, and recorded investment of past due loans.

(2)Assets in the "Special mention" category generally have potential weaknesses due to performance issues but are currently considered to be adequately secured.  

(3)Substandard assets have a well-defined weakness or weaknesses and there is a distinct possibility that some loss will be sustained if deficiencies are not corrected.

	As of December 31, 2020
	Year of Origination:
	2020		2019		2018		2017		2016		Prior		Revolving Loans - Amortized Cost Basis		Total
	(in thousands)
Rural Utilities(1):
Internally Assigned Risk Rating:
Acceptable	$	667,489	$	809,921	$	8,260	$	89,842	$	31,275	$	641,145	$	12,480	$	2,260,412
Special mention(2)	—		—		—		—		—		—		—		—
Substandard(3)	—		—		—		—		—		—		—		—
Total	$	667,489	$	809,921	$	8,260	$	89,842	$	31,275	$	641,145	$	12,480	$	2,260,412
For the Three Months Ended June 30, 2020:
Current period charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Current period recoveries	—		—		—		—		—		—		—		—
Current period Rural Utilities net charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
For the Six Months Ended June 30, 2020:
Current period charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Current period recoveries	—		—		—		—		—		—		—		—
Current period Farm & Ranch net charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

(1)Amounts represent unpaid principal balance of risk-rated loans, which is the basis Farmer Mac uses to analyze its portfolio, and recorded investment of past due loans.

(2)Assets in the "Special mention" category generally have potential weaknesses due to performance issues but are currently considered to be adequately secured.  

(3)Substandard assets have a well-defined weakness or weaknesses and there is a distinct possibility that some loss will be sustained if deficiencies are not corrected.