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Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2022

Schedule of Consolidation of Variable Interest Entities

Table 1.1


	Consolidation of Variable Interest Entities
	As of September 30, 2022
	Agricultural Finance		Treasury		Total
	(in thousands)
On-Balance Sheet:
Consolidated VIEs:
Loans held for investment in consolidated trusts, at amortized cost	$	1,120,403	$	—	$	1,120,403
Debt securities of consolidated trusts held by third parties (1)(2)	1,090,539		—		1,090,539
Unconsolidated VIEs:
Farmer Mac Guaranteed Securities:
Carrying value	29,471		—		29,471
Maximum exposure to loss (3)	32,348		—		32,348
Investment securities:
Carrying value (4)	—		2,906,158		2,906,158
Maximum exposure to loss (3) (4)	—		3,083,631		3,083,631
Off-Balance Sheet:
Unconsolidated VIEs:
Farmer Mac Guaranteed Securities:
Maximum exposure to loss (3) (5)	509,114		—		509,114

(1)Includes borrower remittances of $9.3 million. The borrower remittances had not been passed through to third-party investors as of September 30, 2022.

(2)Includes $39.1 million in unamortized discount related to a structured securitization transaction.

(3)Farmer Mac uses unpaid principal balance and outstanding face amount of investment securities to represent maximum exposure to loss.

(4)Includes auction-rate certificates, government-sponsored enterprise ("GSE")-guaranteed mortgage-backed securities, and other mission related investments.

(5)The amount under the Agricultural Finance line of business relates to unconsolidated trusts where it was determined that Farmer Mac was either not the primary beneficiary due to shared power with an unrelated party or a subordinate class majority holder has the unilateral right to remove Farmer Mac as Master Servicer without cause.


	Consolidation of Variable Interest Entities
	As of December 31, 2021
	Agricultural Finance		Treasury		Total
	(in thousands)
On-Balance Sheet:
Consolidated VIEs:
Loans held for investment in consolidated trusts, at amortized cost	$	948,623	$	—	$	948,623
Debt securities of consolidated trusts held by third parties (1)	981,379		—		981,379
Unconsolidated VIEs:
Farmer Mac Guaranteed Securities:
Carrying value	42,298		—		42,298
Maximum exposure to loss (2)	42,155		—		42,155
Investment securities:
Carrying value (3)	—		2,258,219		2,258,219
Maximum exposure to loss (2) (3)	—		2,246,272		2,246,272
Off-Balance Sheet:
Unconsolidated VIEs:
Farmer Mac Guaranteed Securities:
Maximum exposure to loss (2) (4)	578,358		—		578,358

(1)Includes borrower remittances of $32.8 million. The borrower remittances had not been passed through to third-party investors as of December 31, 2021.

(2)Farmer Mac uses unpaid principal balance and outstanding face amount of investment securities to represent maximum exposure to loss.

(3)Includes auction-rate certificates, government-sponsored enterprise ("GSE")-guaranteed mortgage-backed securities, and other mission related investments.

(4)The amount under the Agricultural Finance line of business relates to unconsolidated trusts where it was determined that Farmer Mac was either not the primary beneficiary due to shared power with an unrelated party or a subordinate class majority holder has the unilateral right to remove Farmer Mac as Master Servicer without cause.

Schedule of Basic and Diluted EPS

The following schedule reconciles basic and diluted EPS for the three and nine months ended September 30, 2022 and 2021:

Table 1.2


	For the Three Months Ended
	September 30, 2022					September 30, 2021
	Net Income		Weighted-Average Shares	$ per Share		Net Income		Weighted-Average Shares	$ per Share
	(in thousands, except per share amounts)
Basic EPS
Net income attributable to common stockholders	$	34,627	10,799	$	3.21	$	28,531	10,766	$	2.65
Effect of dilutive securities(1)
SARs and restricted stock	—		75	(0.03)		—		76	(0.02)
Diluted EPS	$	34,627	10,874	$	3.18	$	28,531	10,842	$	2.63

(1)For the three months ended September 30, 2022 and 2021, SARs and restricted stock of 18,432 and 28,575, respectively, were outstanding but not included in the computation of diluted earnings per share of common stock because they were anti-dilutive. For the three months ended September 30, 2022 and 2021 contingent shares of unvested restricted stock of 18,535 and 18,183 respectively, were outstanding but not included in the computation of diluted earnings per share of common stock because performance conditions had not yet been met.


	For the Nine Months Ended
	September 30, 2022					September 30, 2021
	Net Income		Weighted-Average Shares	$ per Share		Net Income		Weighted-Average Shares	$ per Share
	(in thousands, except per share amounts)
Basic EPS
Net income attributable to common stockholders	$	114,352	10,787	$	10.61	$	84,351	10,756	$	7.84
Effect of dilutive securities(1)
SARs and restricted stock	—		88	(0.10)		—		78	(0.05)
Diluted EPS	$	114,352	10,875	$	10.51	$	84,351	10,834	$	7.79

(1)For the nine months ended September 30, 2022 and 2021, SARs and restricted stock of 37,120 and 52,434, respectively, were outstanding but not included in the computation of diluted earnings per share of common stock because they were anti-dilutive. For the nine months ended September 30, 2022 and 2021 contingent shares of unvested restricted stock of 18,535 and 18,183 respectively, were outstanding but not included in the computation of diluted earnings per share of common stock because performance conditions had not yet been met.

Schedule of Accumulated Other Comprehensive Income, Net of Tax

The following table presents the changes in accumulated other comprehensive income ("AOCI"), net of tax, by component for the three and nine months ended September 30, 2022 and 2021.

Table 1.3


	As of September 30, 2022								As of September 30, 2021
	Available-for-Sale Securities		Held-to-Maturity Securities		Cash Flow Hedges		Total		Available-for-Sale Securities		Held-to-Maturity Securities		Cash Flow Hedges		Total
	(in thousands)
For the Three Months Ended:
Beginning Balance	$	(98,924)	$	16,818	$	32,622	$	(49,484)	$	8,954	$	19,819	$	(12,040)	$	16,733
Other comprehensive (loss)/income before reclassifications	(33,041)		—		20,277		(12,764)		1,275		—		1,049		2,324
Amounts reclassified from AOCI	(2)		(492)		(847)		(1,341)		(493)		(1,884)		1,526		(851)
Net comprehensive (loss)/income	(33,043)		(492)		19,430		(14,105)		782		(1,884)		2,575		1,473
Ending Balance	$	(131,967)	$	16,326	$	52,052	$	(63,589)	$	9,736	$	17,935	$	(9,465)	$	18,206

For the Nine Months Ended:
Beginning Balance	$	(6,932)	$	16,153	$	(5,368)	$	3,853	$	(13,937)	$	22,829	$	(22,815)	$	(13,923)
Other comprehensive (loss)/income before reclassifications	(125,027)		—		55,766		(69,261)		25,734		—		9,041		34,775
Amounts reclassified from AOCI	(8)		173		1,654		1,819		(2,061)		(4,894)		4,309		(2,646)
Net comprehensive (loss)/income	(125,035)		173		57,420		(67,442)		23,673		(4,894)		13,350		32,129
Ending Balance	$	(131,967)	$	16,326	$	52,052	$	(63,589)	$	9,736	$	17,935	$	(9,465)	$	18,206

Schedule of Reclassification out of Accumulated Other Comprehensive Income

The following table presents other comprehensive income activity, the impact on net income of amounts reclassified from each component of AOCI, and the related tax impact for the three and nine months ended September 30, 2022 and 2021:

Table 1.4


	For the Three Months Ended
	September 30, 2022						September 30, 2021
	Before Tax		Provision (Benefit)		After Tax		Before Tax		Provision (Benefit)		After Tax
	(in thousands)
Other comprehensive income:
Available-for-sale-securities:
Unrealized holding (losses)/gains on available-for-sale securities	$	(41,824)	$	(8,783)	$	(33,041)	$	1,614	$	339	$	1,275
Less reclassification adjustments included in:
Net interest income(1)	—		—		—		(362)		(76)		(286)
Gains on sale of available-for-sale investment securities(2)	—		—		—		(253)		(53)		(200)
Other income(3)	(3)		(1)		(2)		(8)		(1)		(7)
Total	$	(41,827)	$	(8,784)	$	(33,043)	$	991	$	209	$	782
Held-to-maturity securities:
Less reclassification adjustments included in:
Net interest income(4)	(622)		(130)		(492)		(2,385)		(501)		(1,884)
Total	$	(622)	$	(130)	$	(492)	$	(2,385)	$	(501)	$	(1,884)
Cash flow hedges
Unrealized gains on cash flow hedges	$	25,668	$	5,391	$	20,277	$	1,326	$	277	$	1,049
Less reclassification adjustments included in:
Net interest income(5)	(1,072)		(225)		(847)		1,932		406		1,526
Total	$	24,596	$	5,166	$	19,430	$	3,258	$	683	$	2,575
Other comprehensive (loss)/income	$	(17,853)	$	(3,748)	$	(14,105)	$	1,864	$	391	$	1,473

(1)Relates to the amortization of unrealized gains on hedged items prior to the application of fair value hedge accounting.

(2)Represents unrealized gains and losses on sales of available-for-sale securities.

(3)Represents amortization of deferred gains related to certain available-for-sale USDA Securities and Farmer Mac Guaranteed USDA Securities.

(4)Relates to the amortization of unrealized gains or losses prior to the reclassification of these securities from available-for-sale to held-to-maturity. The amortization of unrealized gains or losses reported in AOCI for held-to-maturity securities will be offset by the amortization of the premium or discount created from the transfer into held-to-maturity securities, which occurred at fair value. These unrealized gains or losses will be recorded over the remaining life of the security with no impact on future net income.

(5)Relates to the recognition of unrealized gains and losses on cash flow hedges recorded in AOCI.


	For the Nine Months Ended
	September 30, 2022						September 30, 2021
	Before Tax		Provision (Benefit)		After Tax		Before Tax		Provision (Benefit)		After Tax
	(in thousands)
Other comprehensive income:
Available-for-sale-securities:
Unrealized holding (losses)/gains on available-for-sale securities	$	(158,263)	$	(33,236)	$	(125,027)	$	32,574	$	6,840	$	25,734
Less reclassification adjustments included in:
Net interest income(1)	—		—		—		(2,333)		(490)		(1,843)
Gains on sale of available-for-sale investment securities(2)	—		—		—		(253)		(53)		(200)
Other income(3)	(10)		(2)		(8)		(22)		(4)		(18)
Total	$	(158,273)	$	(33,238)	$	(125,035)	$	29,966	$	6,293	$	23,673
Held-to-maturity securities:
Less reclassification adjustments included in:
Net interest income(4)	220		47		173		(6,195)		(1,301)		(4,894)
Total	$	220	$	47	$	173	$	(6,195)	$	(1,301)	$	(4,894)
Cash flow hedges
Unrealized gains on cash flow hedges	$	70,590	$	14,824	$	55,766	$	11,445	$	2,404	$	9,041
Less reclassification adjustments included in:
Net interest income(5)	2,094		440		1,654		5,454		1,145		4,309
Total	$	72,684	$	15,264	$	57,420	$	16,899	$	3,549	$	13,350
Other comprehensive (loss)/income	$	(85,369)	$	(17,927)	$	(67,442)	$	40,670	$	8,541	$	32,129

(1)Relates to the amortization of unrealized gains on hedged items prior to the application of fair value hedge accounting.

(2)Represents unrealized gains and losses on sales of available-for-sale securities.

(3)Represents amortization of deferred gains related to certain available-for-sale USDA Securities and Farmer Mac Guaranteed USDA Securities.

(5)Relates to the recognition of unrealized gains and losses on cash flow hedges recorded in AOCI.

Schedule of Recently Adopted Accounting Guidance

Recently Adopted Accounting Guidance


Standard	Description	Date of Adoption	Effect on Consolidated Financial Statements
ASU 2020-04 and 2021-01, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting	The amendments in this Update provide optional guidance for a limited period of time to ease the potential burden in accounting for reference rate reform on financial reporting. They provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.	January 1, 2020	Farmer Mac adopted optional expedients specific to discounting transition on a retrospective basis, and as a result of this election, the discounting transition did not have a material effect on Farmer Mac's financial position, results of operations, or cash flows. Farmer Mac is exploring the adoption of additional optional expedients, including contract modification relief, and is not expected to have a material effect on Farmer Mac's financial position, results of operations, or cash flows.

Recently Issued Accounting Guidance


Standard	Description	Effect on Consolidated Financial Statements
ASU 2022-02, Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures	The Update addresses and amends areas identified by the Financial Accounting Standards Board ("FASB") as part of its post-implementation review of the accounting standard that introduced the current expected credit losses (“CECL”) model. The amendments eliminate the accounting guidance for troubled debt restructurings by creditors that have adopted the CECL model and enhance the disclosure requirements for loan refinancings and restructurings made with borrowers experiencing financial difficulty. In addition, the amendments require disclosure of current-period gross writeoffs for financing receivables and net investment in leases by year of origination in the vintage disclosures. ASU 2022-02 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years for entities that have adopted the CECL accounting standard. Early adoption, however, is permitted if an entity has adopted the CECL accounting standard.	Farmer Mac is still assessing the impact of the new accounting standard but does not expect that adoption of the new guidance will have a material effect on Farmer Mac's financial position, results of operations, or cash flows.

- Definition

Tabular disclosure of the significant judgments and assumptions made in determining whether a variable interest (as defined) held by the entity requires the variable interest entity (VIE) (as defined) to be consolidated and (or) disclose information about its involvement with the VIE, individually or in aggregate (as applicable); the nature of restrictions, if any, on the consolidated VIE's assets and on the settlement of its liabilities reported by an entity in its statement of financial position, including the carrying amounts of such assets and liabilities; the nature of, and changes in, the risks associated with involvement in the VIE; how involvement with the VIE affects the entity's financial position, financial performance, and cash flows; the lack of recourse if creditors (or beneficial interest holders) of the consolidated VIE have no recourse to the general credit of the primary beneficiary (if applicable); the terms of arrangements, giving consideration to both explicit arrangements and implicit variable interests, if any, that could require the entity to provide financial support to the VIE, including events or circumstances that could expose the entity to a loss; the methodology used by the entity for determining whether or not it is the primary beneficiary of the variable interest entity; the significant factors considered and judgments made in determining that the power to direct the activities of a VIE that most significantly impact the VIE's economic performance are shared (as defined); the carrying amounts and classification of assets and liabilities of the VIE included in the statement of financial position; the entity's maximum exposure to loss, if any, as a result of its involvement with the VIE, including how the maximum exposure is determined and significant sources of the entity's exposure to the VIE; a comparison of the carrying amounts of the assets and liabilities and the entity's maximum exposure to loss; information about any liquidity arrangements, guarantees, and (or) other commitments by third parties that may affect the fair value or risk of the entity's variable interest in the VIE; whether or not the entity has provided financial support or other support (explicitly or implicitly) to the VIE that it was not previously contractually required to provide or whether the entity intends to provide that support, including the type and amount of the support and the primary reasons for providing the support; and supplemental information the entity determines necessary to provide.

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