Loans

9 Months Ended

Sep. 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. During third quarter 2021, Farmer Mac reclassified $301.6 million from loans held for investment to loans held for sale related to the FARM Series 2021-1 securitization. See note 11 for more information on the securitization. As of September 30, 2021 and December 31, 2020, Farmer Mac had $301.6 million and no loans held for sale, respectively. Farmer Mac did not record any lower of cost or fair value adjustments during the three or nine months ended September 30, 2021 related to its loans held for sale.

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

Table 5.1

	As of September 30, 2021						As of December 31, 2020
	Unsecuritized		In Consolidated Trusts		Total		Unsecuritized		In Consolidated Trusts		Total
	(in thousands)
Farm & Ranch	$	5,800,376	$	977,373	$	6,777,749	$	4,889,393	$	1,287,045	$	6,176,438
Rural Utilities	2,243,172		—		2,243,172		2,260,412		—		2,260,412
Total unpaid principal balance(1)	8,043,548		977,373		9,020,921		7,149,805		1,287,045		8,436,850
Unamortized premiums, discounts, fair value hedge basis adjustment, and other cost basis adjustments	16,288		—		16,288		112,128		—		112,128
Total loans	8,059,836		977,373		9,037,209		7,261,933		1,287,045		8,548,978
Allowance for losses	(13,621)		(673)		(14,294)		(12,943)		(889)		(13,832)
Total loans, net of allowance	$	8,046,215	$	976,700	$	9,022,915	$	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 September 30, 2021 and December 31, 2020:

Table 5.2

	September 30, 2021		December 31, 2020
	Allowance for Losses		Allowance for Losses
	(in thousands)
Loans:
Farm & Ranch	$	3,506	$	3,745
Rural Utilities	10,788		10,087
Total	$	14,294	$	13,832

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

Table 5.3

	For the Three Months Ended				For the Nine Months Ended
	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
	Allowance for Losses		Allowance for Losses		Allowance for Losses		Allowance for Losses
	(in thousands)
Farm & Ranch:
Beginning Balance	$	3,092	$	6,039	$	3,745	$	10,454
Cumulative effect adjustment from adoption of current expected credit loss standard	—		—		—		(3,909)
Adjusted Beginning Balance	3,092		6,039		3,745		6,545
Provision for/(release of) losses	414		(300)		(239)		(412)
Charge-offs	—		—		—		(394)
Ending Balance(1)	$	3,506	$	5,739	$	3,506	$	5,739
Rural Utilities:
Beginning Balance	$	10,908	$	8,900	$	10,087	$	—
Cumulative effect adjustment from adoption of current expected credit loss standard	—		—		—		5,378
Adjusted Beginning Balance	10,908		8,900		10,087		5,378
(Release of)/provision for losses	(120)		1,182		701		4,704
Charge-offs	—		—		—		—
Ending Balance(2)	$	10,788	$	10,082	$	10,788	$	10,082

(1)As of September 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 September 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 $0.1 million recorded during third quarter 2021 was primarily attributable to the impact of improving economic factor forecasts. The $0.4 million provision to the allowance for the Farm & Ranch portfolio during third quarter 2021 was primarily attributable to a decline in the economic factor forecast for commodity prices in Farmer Mac's fruit and nuts portfolio.

The net provision recorded to the allowance for the nine months ended September 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 net release from the allowance for the nine months ended September 30, 2021 was primarily a result of improving agricultural commodity prices on the Farm & Ranch portfolio in the first half of the year, partially offset by declines in the third quarter.

The provision to the allowance for loan losses of $0.9 million recorded during third quarter 2020 was

primarily due to the impact of net new loan volume in the Rural Utilities portfolio and credit downgrades

on existing volume during the quarter. 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 continued improvements in commodity prices and continued expectations for stable

farm land values.

The provision to the allowance for loan losses of $4.3 million recorded during the nine months ended

September 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 continued

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 September 30, 2021 and December 31, 2020:

Table 5.4

	As of September 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	$	6,633,343	$	2,345	$	482	$	3,655	$	6,482	$	137,924	$	6,777,749
Rural Utilities	2,243,172		—		—		—		—		—		2,243,172
Total	$	8,876,515	$	2,345	$	482	$	3,655	$	6,482	$	137,924	$	9,020,921

(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 $44.8 million of nonaccrual loans for which there was no associated allowance. During the three and nine months ended September 30, 2021, Farmer Mac received $1.4 million and $4.4 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 September 30, 2021 and December 31, 2020, by year of origination:

Table 5.5

	As of September 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	$	1,570,766	$	1,798,703	$	660,485	$	382,027	$	318,043	$	1,054,024	$	531,063	$	6,315,111
Special mention(2)	83,224		88,848		36,050		13,828		6,962		18,998		10,531		258,441
Substandard(3)	607		5,305		26,892		27,730		50,478		81,240		11,945		204,197
Total	$	1,654,597	$	1,892,856	$	723,427	$	423,585	$	375,483	$	1,154,262	$	553,539	$	6,777,749
For the Three Months Ended September 30, 2021:
Current period charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Current period recoveries	—		—		—		—		—		—		—		—
Current period Farm & Ranch net charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
For the Nine Months Ended September 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 September 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	$	60,793	$	619,772	$	784,153	$	8,100	$	89,263	$	628,903	$	28,988	$	2,219,972
Special mention(2)	—		—		—		—		—		—		—		—
Substandard(3)	—		23,200		—		—		—		—		—		23,200
Total	$	60,793	$	642,972	$	784,153	$	8,100	$	89,263	$	628,903	$	28,988	$	2,243,172
For the Three Months Ended September 30, 2021:
Current period charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Current period recoveries	—		—		—		—		—		—		—		—
Current period Rural Utilities net charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
For the Nine Months Ended September 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 September 30, 2020:
Current period charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Current period recoveries	—		—		—		—		—		—		—		—
Current period Farm & Ranch net charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
For the Nine Months Ended September 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 September 30, 2020:
Current period charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Current period recoveries	—		—		—		—		—		—		—		—
Current period Rural Utilities net charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
For the Nine Months Ended September 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.