Loans

3 Months Ended

Mar. 31, 2023

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 March 31, 2023 and December 31, 2022, Farmer Mac had no loans held for sale.

Under the Agricultural Finance line of business, Farmer Mac has two segments – Farm & Ranch and Corporate AgFinance. The segments are characterized by similarities in risk attributes and the manner in which Farmer Mac monitors and assesses credit risk.

The following table includes loans held for investment and displays the composition of the loan balances as of March 31, 2023 and December 31, 2022:

Table 5.1

	As of March 31, 2023						As of December 31, 2022
	Unsecuritized		In Consolidated Trusts		Total		Unsecuritized		In Consolidated Trusts		Total
	(in thousands)
Agricultural Finance loans
Farm & Ranch	$	4,837,722	$	1,468,357	$	6,306,079	$	5,150,750	$	1,211,576	$	6,362,326
Corporate AgFinance	1,172,864		—		1,172,864		1,166,253		—		1,166,253
Total Agricultural Finance loans	6,010,586		1,468,357		7,478,943		6,317,003		1,211,576		7,528,579
Rural Infrastructure Finance loans	3,178,104		—		3,178,104		3,021,266		—		3,021,266
Total unpaid principal balance(1)	9,188,690		1,468,357		10,657,047		9,338,269		1,211,576		10,549,845
Unamortized premiums, discounts, fair value hedge basis adjustment, and other cost basis adjustments	(273,034)		—		(273,034)		(329,290)		—		(329,290)
Total loans	8,915,656		1,468,357		10,384,013		9,008,979		1,211,576		10,220,555
Allowance for losses	(15,171)		(502)		(15,673)		(14,629)		(460)		(15,089)
Total loans, net of allowance	$	8,900,485	$	1,467,855	$	10,368,340	$	8,994,350	$	1,211,116	$	10,205,466

(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 March 31, 2023 and December 31, 2022:

Table 5.2

	March 31, 2023		December 31, 2022
	Allowance for Losses		Allowance for Losses
	(in thousands)
Loans:
Agricultural Finance loans
Farm & Ranch	$	3,933	$	4,044
Corporate AgFinance	7,039		2,731
Total Agricultural Finance Loans	10,972		6,775
Rural Infrastructure Finance loans	4,701		8,314
Total	$	15,673	$	15,089

The following is a summary of the changes in the allowance for losses for the three months ended March 31, 2023 and 2022:

Table 5.3

	For the Three Months Ended
	March 31, 2023								March 31, 2022
	Agricultural Finance loans						Rural Infrastructure Finance loans(3)		Agricultural Finance loans						Rural Infrastructure Finance loans(3)
	Farm & Ranch(1)		Corporate AgFinance(2)		Total				Farm & Ranch(1)		Corporate AgFinance(2)		Total
	(in thousands)
Beginning Balance	$	4,044	$	2,731	$	6,775	$	8,314	$	2,882	$	560	$	3,442	$	10,599
Provision for/(release of) losses	(111)		4,308		4,197		(3,613)		77		513		590		(977)
Charge-offs	—		—		—		—		(84)		—		(84)		—
Ending Balance	$	3,933	$	7,039	$	10,972	$	4,701	$	2,875	$	1,073	$	3,948	$	9,622

(1)As of March 31, 2023 and 2022, allowance for losses for Agricultural Finance Farm & Ranch loans includes $1.1 million and no allowance for collateral dependent assets secured by agricultural real estate, respectively.

(2)As of March 31, 2023 and 2022, allowance for losses for Agricultural Finance Corporate AgFinance loans includes $4.6 million and no allowance for collateral dependent assets secured by agricultural real estate, respectively.

(3)As of both March 31, 2023 and 2022, allowance for losses for Rural Infrastructure Finance loans includes no allowance for collateral dependent assets.

The $3.6 million net release from the allowance for the Rural Infrastructure Finance portfolio during the quarter ended March 31, 2023 was primarily attributable to an updated estimate of expected losses based on newly available industry data. The $4.2 million net provision to the allowance for the Agricultural Finance mortgage loan portfolio during the quarter ended March 31, 2023 was primarily attributable to declining valuation of a single agricultural storage and processing loan, due to its ongoing bankruptcy proceedings and an updated estimate of expected losses based on additional availability of industry data.

The net release from the allowance for Rural Infrastructure Finance loan losses of $1.0 million recorded during first quarter 2022 was primarily attributable to a risk rating upgrade on a single loan related to the borrower's successful securitization of a large payable incurred as a result of the arctic freeze that struck Texas in February 2021, and was partially offset by new loan volume. The $0.6 million net provision to the allowance for the Agricultural Finance mortgage loan portfolio during first quarter 2022 was primarily attributable to a risk rating downgrade on a single agricultural storage and processing loan.

The following table presents the unpaid principal balances by delinquency status of Farmer Mac's loans and non-performing assets as of March 31, 2023 and December 31, 2022:

Table 5.4

	As of March 31, 2023
	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):
Agricultural Finance loans
Farm & Ranch	$	6,210,739	$	4,403	$	1,989	$	6,922	$	13,314	$	82,026	$	6,306,079
Corporate AgFinance	1,159,609		—		—		—		—		13,255		1,172,864
Total Agricultural Finance loans	7,370,348		4,403		1,989		6,922		13,314		95,281		7,478,943
Rural Infrastructure Finance loans	3,178,104		—		—		—		—		—		3,178,104
Total	$	10,548,452	$	4,403	$	1,989	$	6,922	$	13,314	$	95,281	$	10,657,047

(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 $16.1 million of nonaccrual loans for which there was no associated allowance. During the three months ended March 31, 2023, Farmer Mac received $0.5 million in interest on nonaccrual loans.

	As of December 31, 2022
	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):
Agricultural Finance loans
Farm & Ranch	$	6,287,326	$	10,066	$	392	$	1,140	$	11,598	$	63,402	$	6,362,326
Corporate AgFinance	1,150,690		—		—		—		—		15,563		1,166,253
Total Agricultural Finance loans	7,438,016		10,066		392		1,140		11,598		78,965		7,528,579
Rural Infrastructure Finance loans	3,021,266		—		—		—		—		—		3,021,266
Total	$	10,459,282	$	10,066	$	392	$	1,140	$	11,598	$	78,965	$	10,549,845

(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 $22.0 million of nonaccrual loans for which there was no associated allowance. During the year ended December 31, 2022, Farmer Mac received $5.6 million in interest on nonaccrual loans.

Credit Quality Indicators

The following tables present credit quality indicators related to Agricultural Finance mortgage loans and Rural Infrastructure Finance loans held as of March 31, 2023 and December 31, 2022, by year of origination:

Table 5.5

	As of March 31, 2023
	Year of Origination:
	2023		2022		2021		2020		2019		Prior		Revolving Loans - Amortized Cost Basis		Total
	(in thousands)
Agricultural Finance - Farm & Ranch loans(1):
Internally Assigned Risk Rating:
Acceptable	$	110,328	$	1,160,657	$	1,660,716	$	1,155,561	$	330,442	$	1,141,358	$	352,316	$	5,911,378
Special mention(2)	3,926		76,144		69,920		24,128		24,410		22,625		13,547		234,700
Substandard(3)	—		7,115		7,873		20,865		32,881		80,931		10,336		160,001
Total	$	114,254	$	1,243,916	$	1,738,509	$	1,200,554	$	387,733	$	1,244,914	$	376,199	$	6,306,079
For the Three Months Ended March 31, 2023:
Current period 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 March 31, 2023
	Year of Origination:
	2023		2022		2021		2020		2019		Prior		Revolving Loans - Amortized Cost Basis		Total
	(in thousands)
Agricultural Finance - Corporate AgFinance(1):
Internally Assigned Risk Rating:
Acceptable	$	91,825	$	144,361	$	280,569	$	124,825	$	107,234	$	119,813	$	216,575	$	1,085,202
Special mention(2)	—		—		—		51,737		20,525		—		2,145		74,407
Substandard(3)	11,099		—		—		1,128		—		—		1,028		13,255
Total	$	102,924	$	144,361	$	280,569	$	177,690	$	127,759	$	119,813	$	219,748	$	1,172,864
For the Three Months Ended March 31, 2023:
Current period 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 March 31, 2023
	Year of Origination:
	2023		2022		2021		2020		2019		Prior		Revolving Loans - Amortized Cost Basis		Total
	(in thousands)
Rural Infrastructure Finance loans(1):
Internally Assigned Risk Rating:
Acceptable	$	247,553	$	727,714	$	177,165	$	619,983	$	730,252	$	635,181	$	40,256	$	3,178,104
Special mention(2)	—		—		—		—		—		—		—		—
Substandard(3)	—		—		—		—		—		—		—		—
Total	$	247,553	$	727,714	$	177,165	$	619,983	$	730,252	$	635,181	$	40,256	$	3,178,104
For the Three Months Ended March 31, 2023:
Current period 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, 2022
	Year of Origination:
	2022		2021		2020		2019		2018		Prior		Revolving Loans - Amortized Cost Basis		Total
	(in thousands)
Agricultural Finance - Farm & Ranch loans(1):
Internally Assigned Risk Rating:
Acceptable	$	1,157,829	$	1,704,547	$	1,187,474	$	360,704	$	242,491	$	947,535	$	385,503	$	5,986,083
Special mention(2)	91,099		68,260		25,629		11,254		5,325		17,797		2,452		221,816
Substandard(3)	3,094		8,814		22,976		23,937		17,845		67,654		10,107		154,427
Total	$	1,252,022	$	1,781,621	$	1,236,079	$	395,895	$	265,661	$	1,032,986	$	398,062	$	6,362,326
For the Three Months Ended March 31, 2022:
Current period charge-offs	$	—	$	—	$	—	$	—	$	—	$	(84)	$	—	$	(84)

(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, 2022
	Year of Origination:
	2022		2021		2020		2019		2018		Prior		Revolving Loans - Amortized Cost Basis		Total
	(in thousands)
Agricultural Finance - Corporate AgFinance loans(1):
Internally Assigned Risk Rating:
Acceptable	$	145,263	$	299,729	$	221,560	$	108,230	$	76,454	$	44,827	$	232,107	$	1,128,170
Special mention(2)	—		—		—		20,698		—		—		2,145		22,843
Substandard(3)	—		—		4,598		—		—		—		10,642		15,240
Total	$	145,263	$	299,729	$	226,158	$	128,928	$	76,454	$	44,827	$	244,894	$	1,166,253
For the Three Months Ended March 31, 2022:
Current period 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, 2022
	Year of Origination:
	2022		2021		2020		2019		2018		Prior		Revolving Loans - Amortized Cost Basis		Total
	(in thousands)
Rural Infrastructure Finance loans(1):
Internally Assigned Risk Rating:
Acceptable	$	741,021	$	220,420	$	629,223	$	739,270	$	7,932	$	649,830	$	33,570	$	3,021,266
Special mention(2)	—		—		—		—		—		—		—		—
Substandard(3)	—		—		—		—		—		—		—		—
Total	$	741,021	$	220,420	$	629,223	$	739,270	$	7,932	$	649,830	$	33,570	$	3,021,266
For the Three Months Ended March 31, 2022:
Current period 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.