Financial Derivatives (Tables)

6 Months Ended

Jun. 30, 2022

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 June 30, 2022 and December 31, 2021:

Table 4.1

	As of June 30, 2022
			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	$	7,292,155	$	6,060	$	(1,665)	2.07%	1.44%		11.57
Receive fixed non-callable	7,686,279		1,971		(7,136)		1.44%	1.20%		1.99
Receive fixed callable	1,993,577		—		(117,102)		1.32%	1.17%		3.66
Cash flow hedges:
Interest rate swaps:
Pay fixed non-callable	617,000		21,061		(102)		1.94%	1.89%		5.39
No hedge designation:
Interest rate swaps:
Pay fixed non-callable	211,147		317		(463)		3.26%	1.23%		4.56
Receive fixed non-callable	724,750		—		—		1.43%	0.36%		0.98
Basis swaps	1,793,911		252		(484)		1.26%	1.44%		2.80
Treasury futures	97,500		350		(1,046)				117.82
Credit valuation adjustment			—		15
Total financial derivatives	$	20,416,319	$	30,011	$	(127,983)
Collateral (held)/pledged			—		288,224
Net amount			$	30,011	$	160,241

	As of December 31, 2021
			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	$	6,238,438	$	11,554	$	(583)	2.06%	0.13%		11.64
Receive fixed non-callable	5,884,529		15		(8,383)		0.17%	0.88%		2.27
Receive fixed callable	1,571,577		103		(17,612)		0.01%	0.80%		4.17
Cash flow hedges:
Interest rate swaps:
Pay fixed non-callable	570,000		6,905		(2,763)		1.93%	0.49%		5.72
No hedge designation:
Interest rate swaps:
Pay fixed non-callable	229,062		—		(4,641)		3.22%	0.16%		4.95
Receive fixed non-callable	1,377,250		—		—		0.13%	0.43%		0.97
Basis swaps	1,608,911		489		(280)		0.17%	0.20%		3.31
Treasury futures	67,600		73		—				130.58
Credit valuation adjustment			—		14
Total financial derivatives	$	17,547,367	$	19,139	$	(34,248)
Collateral (held)/pledged			—		194,519
Net amount			$	19,139	$	160,271

Schedule of Net Income/(Expense) Recognized

The following tables summarize the net income/(expense) recognized in the consolidated statements of operations related to derivatives for the three and six months ended June 30, 2022 and 2021:

Table 4.2

	For the Three Months Ended June 30, 2022
	Net Income/(Expense) Recognized in Consolidated Statement of Operations on Derivatives
	Net Interest Income								Non-Interest Income		Total
	Interest Income Investments and Cash Equivalents		Interest Income Farmer Mac Guaranteed Securities and USDA Securities		Interest Income Loans		Total Interest Expense		Gains on financial derivatives
	(in thousands)
Total amounts presented in the consolidated statement of operations	$	11,200	$	57,104	$	76,632	$	(75,534)	$	3,418	$	72,820
Income/(expense) related to interest settlements on fair value hedging relationships:
Recognized on derivatives	(1,008)		(15,693)		(4,459)		4,648		—		(16,512)
Recognized on hedged items	3,219		34,431		13,669		(23,443)		—		27,876
Premium/discount amortization recognized on hedged items	(343)		—		—		(484)		—		(827)
Income/(expense) related to interest settlements on fair value hedging relationships	$	1,868	$	18,738	$	9,210	$	(19,279)	$	—	$	10,537
Gains/(losses) on fair value hedging relationships:
Recognized on derivatives	$	24,138	$	153,670	$	109,419	$	(86,481)	$	—	$	200,746
Recognized on hedged items	(22,969)		(149,266)		(107,347)		84,873		—		(194,709)
Gains/(losses) on fair value hedging relationships	$	1,169	$	4,404	$	2,072	$	(1,608)	$	—	$	6,037
Expense related to interest settlements on cash flow hedging relationships:
Interest settlements reclassified from AOCI into net income on derivatives	$	—	$	—	$	—	$	(1,155)	$	—	$	(1,155)
Recognized on hedged items	—		—		—		(1,821)		—		(1,821)
Discount amortization recognized on hedged items	—		—		—		(15)		—		(15)
Expense recognized on cash flow hedges	$	—	$	—	$	—	$	(2,991)	$	—	$	(2,991)
Gains on financial derivatives not designated in hedging relationships:
Gains on interest rate swaps	$	—	$	—	$	—	$	—	$	3,911	$	3,911
Interest expense on interest rate swaps	—		—		—		—		(1,955)		(1,955)
Treasury futures	—		—		—		—		1,462		1,462
Gains on financial derivatives not designated in hedge relationships	$	—	$	—	$	—	$	—	$	3,418	$	3,418

	For the Three Months Ended June 30, 2021
	Net Income/(Expense) Recognized in Consolidated Statement of Operations on Derivatives
	Net Interest Income								Non-Interest Income		Total
	Interest Income Investments and Cash Equivalents		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	$	4,457	$	42,414	$	60,214	$	(51,956)	$	(3,066)	$	52,063
Income/(expense) related to interest settlements on fair value hedging relationships:
Recognized on derivatives	(35)		(21,604)		(6,704)		9,811		—		(18,532)
Recognized on hedged items	67		30,565		11,635		(12,141)		—		30,126
Discount amortization recognized on hedged items	—		—		—		(257)		—		(257)
Income/(expense) related to interest settlements on fair value hedging relationships	$	32	$	8,961	$	4,931	$	(2,587)	$	—	$	11,337
Gains/(losses) on fair value hedging relationships:
Recognized on derivatives	$	(176)	$	(48,680)	$	(65,147)	$	(2,657)	$	—	$	(116,660)
Recognized on hedged items	188		49,878		63,978		891		—		114,935
Gains/(losses) on fair value hedging relationships	$	12	$	1,198	$	(1,169)	$	(1,766)	$	—	$	(1,725)
Expense related to interest settlements on cash flow hedging relationships:
Interest settlements reclassified from AOCI into net income on derivatives	$	—	$	—	$	—	$	(1,776)	$	—	$	(1,776)
Recognized on hedged items	—		—		—		(643)		—		(643)
Discount amortization recognized on hedged items	—		—		—		(8)		—		(8)
Expense recognized on cash flow hedges	$	—	$	—	$	—	$	(2,427)	$	—	$	(2,427)
Losses on financial derivatives not designated in hedging relationships:
Losses on interest rate swaps	$	—	$	—	$	—	$	—	$	(3,739)	$	(3,739)
Interest expense on interest rate swaps	—		—		—		—		1,098		1,098
Treasury futures	—		—		—		—		(425)		(425)
Losses on financial derivatives not designated in hedge relationships	$	—	$	—	$	—	$	—	$	(3,066)	$	(3,066)

	For the Six Months Ended June 30, 2022
	Net Income/(Expense) Recognized in Consolidated Statement of Operations on Derivatives
	Net Interest Income								Non-Interest Income		Total
	Interest Income Investments and Cash Equivalents		Interest Income Farmer Mac Guaranteed Securities and USDA Securities		Interest Income Loans		Total Interest Expense		Gains on financial derivatives
	(in thousands)
Total amounts presented in the consolidated statement of operations	$	16,916	$	96,361	$	143,879	$	(125,879)	$	19,492	$	150,769
Income/(expense) related to interest settlements on fair value hedging relationships:
Recognized on derivatives	(2,492)		(37,337)		(11,405)		18,848		—		(32,386)
Recognized on hedged items	5,816		66,359		26,288		(41,599)		—		56,864
Premium/discount amortization recognized on hedged items	(757)		—		—		(924)		—		(1,681)
Income/(expense) related to interest settlements on fair value hedging relationships	$	2,567	$	29,022	$	14,883	$	(23,675)	$	—	$	22,797
Gains/(losses) on fair value hedging relationships:
Recognized on derivatives	$	57,562	$	363,858	$	241,351	$	(323,494)	$	—	$	339,277
Recognized on hedged items	(55,694)		(359,914)		(236,953)		321,687		—		(330,874)
Gains/(losses) on fair value hedging relationships	$	1,868	$	3,944	$	4,398	$	(1,807)	$	—	$	8,403
Expense related to interest settlements on cash flow hedging relationships:
Interest settlements reclassified from AOCI into net income on derivatives	$	—	$	—	$	—	$	(3,166)	$	—	$	(3,166)
Recognized on hedged items	—		—		—		(2,608)		—		(2,608)
Discount amortization recognized on hedged items	—		—		—		(29)		—		(29)
Expense recognized on cash flow hedges	$	—	$	—	$	—	$	(5,803)	$	—	$	(5,803)
Gains on financial derivatives not designated in hedging relationships:
Gains on interest rate swaps	$	—	$	—	$	—	$	—	$	4,614	$	4,614
Interest expense on interest rate swaps	—		—		—		—		(2,883)		(2,883)
Treasury futures	—		—		—		—		17,761		17,761
Gains on financial derivatives not designated in hedge relationships	$	—	$	—	$	—	$	—	$	19,492	$	19,492

	For the Six Months Ended June 30, 2021
	Net Income/(Expense) Recognized in Consolidated Statement of Operations on Derivatives
	Net Interest Income								Non-Interest Income		Total
	Interest Income Investments and Cash Equivalents		Interest Income Farmer Mac Guaranteed Securities and USDA Securities		Interest Income Loans		Total Interest Expense		Gains on financial derivatives
			(in thousands)
Total amounts presented in the consolidated statement of operations:	$	9,986	$	84,818	$	119,708	$	(106,132)	$	1,227	$	109,607
Income/(expense) related to interest settlements on fair value hedging relationships:
Recognized on derivatives	(35)		(43,041)		(13,275)		19,292		—		(37,059)
Recognized on hedged items	67		61,341		23,122		(23,949)		—		60,581
Discount amortization recognized on hedged items	—		—		—		(478)		—		(478)
Income/(expense) related to interest settlements on fair value hedging relationships	$	32	$	18,300	$	9,847	$	(5,135)	$	—	$	23,044
Gains/(losses) on fair value hedging relationships:
Recognized on derivatives	$	(176)	$	119,396	$	80,624	$	(32,111)	$	—	$	167,733
Recognized on hedged items	188		(118,922)		(80,770)		30,392		—		(169,112)
Gains/(losses) on fair value hedging relationships	$	12	$	474	$	(146)	$	(1,719)	$	—	$	(1,379)
Expense related to interest settlements on cash flow hedging relationships:
Interest settlements reclassified from AOCI into net income on derivatives	$	—	$	—	$	—	$	(3,523)	$	—	$	(3,523)
Recognized on hedged items	—		—		—		(1,298)		—		(1,298)
Discount amortization recognized on hedged items	—		—		—		(15)		—		(15)
Expense recognized on cash flow hedges	$	—	$	—	$	—	$	(4,836)	$	—	$	(4,836)
(Losses)/gains on financial derivatives not designated in hedge relationships:
Losses on interest rate swaps	$	—	$	—	$	—	$	—	$	(2,271)	$	(2,271)
Interest expense on interest rate swaps	—		—		—		—		3,322		3,322
Treasury futures	—		—		—		—		176		176
Gains on financial derivatives not designated in hedge relationships	$	—	$	—	$	—	$	—	$	1,227	$	1,227

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 June 30, 2022 and December 31, 2021:

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)
	June 30, 2022		December 31, 2021		June 30, 2022		December 31, 2021
	(in thousands)
Investment securities, Available-for-Sale, at fair value	$	677,549	$	458,653	$	(56,912)	$	(1,218)
Farmer Mac Guaranteed Securities, Available-for-Sale, at fair value(1)	4,393,401		4,276,002		(153,395)		206,520
Loans held for investment, at amortized cost(2)	1,675,794		1,668,142		(223,069)		13,832
Notes Payable(3)	(9,162,760)		(7,083,535)		364,064		42,377

(1)Includes $1.2 million and $1.3 million of hedging adjustments on discontinued hedging relationships as of June 30, 2022 and December 31, 2021, respectively.

(2)Includes $1.1 million and $1.2 million of hedging adjustments on a discontinued hedging relationship as of June 30, 2022 and December 31, 2021, respectively.

(3)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 June 30, 2022 and December 31, 2021:

Table 4.4

	June 30, 2022
	Gross Amount Recognized(1)		Counterparty Netting		Net Amount Presented in the Consolidated Balance Sheet
	(in thousands)
Assets:
Derivatives
Interest rate swap	$	466,602	$	466,602	$	—
Liabilities:
Derivatives
Interest rate swap	$	388,191	$	350,366	$	37,825

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

	December 31, 2021
	Gross Amount Recognized(1)		Counterparty Netting		Net Amount Presented in the Consolidated Balance Sheet
	(in thousands)
Assets:
Derivatives
Interest rate swaps	$	91,130	$	91,130	$	—
Liabilities:
Derivatives
Interest rate swaps	$	404,063	$	386,249	$	17,814

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