XML 27 R17.htm IDEA: XBRL DOCUMENT

Fair Value Disclosures

6 Months Ended

Jun. 30, 2023

Fair Value Classification and Transfers

The following tables present information about Farmer Mac's assets and liabilities measured at fair value on a recurring basis as of June 30, 2023 and December 31, 2022, respectively, and indicate the fair value hierarchy of the valuation techniques used by Farmer Mac to determine such fair value:

Table 9.1


Assets and Liabilities Measured at Fair Value as of June 30, 2023
	Level 1		Level 2		Level 3(1)		Total
	(in thousands)
Recurring:
Assets:
Investment Securities:
Available-for-sale:
Floating rate auction-rate certificates backed by Government guaranteed student loans	$	—	$	—	$	19,032	$	19,032


Floating rate Government/GSE guaranteed mortgage-backed securities	—		2,442,610		—		2,442,610
Fixed rate GSE guaranteed mortgage-backed securities	—		1,360,784		—		1,360,784

Floating rate U.S. Treasuries	49,998		—		—		49,998
Fixed rate U.S. Treasuries	845,195		—		—		845,195
Total Available-for-sale Investment Securities	895,193		3,803,394		19,032		4,717,619
Farmer Mac Guaranteed Securities:
Available-for-sale:
AgVantage	—		—		7,737,810		7,737,810
Farmer Mac Guaranteed Securities	—		—		7,605		7,605
Total Farmer Mac Guaranteed Securities	—		—		7,745,415		7,745,415
USDA Securities:
Trading	—		—		1,348		1,348
Total USDA Securities	—		—		1,348		1,348
Financial derivatives	71		26,753		—		26,824
Guarantee Asset	—		—		4,331		4,331
Total Assets at fair value	$	895,264	$	3,830,147	$	7,770,126	$	12,495,537
Liabilities:
Financial derivatives	$	—	$	188,652	$	—	$	188,652
Total Liabilities at fair value	$	—	$	188,652	$	—	$	188,652

(1) Level 3 assets represent 28% of total assets and 61% of financial instruments measured at fair value.


Assets and Liabilities Measured at Fair Value as of December 31, 2022
	Level 1		Level 2		Level 3(1)		Total
	(in thousands)
Recurring:
Assets:
Investment Securities:
Available-for-sale:
Floating rate auction-rate certificates backed by Government guaranteed student loans	$	—	$	—	$	19,027	$	19,027

Floating rate Government/GSE guaranteed mortgage-backed securities	—		2,392,540		—		2,392,540
Fixed rate GSE guaranteed mortgage-backed securities	—		1,048,386		—		1,048,386
Fixed rate U.S. Treasuries	1,119,611		—		—		1,119,611
Total Available-for-sale Investment Securities	1,119,611		3,440,926		19,027		4,579,564
Farmer Mac Guaranteed Securities:
Available-for-sale:
AgVantage	—		—		7,599,379		7,599,379
Farmer Mac Guaranteed Securities	—		—		7,847		7,847
Total Farmer Mac Guaranteed Securities	—		—		7,607,226		7,607,226
USDA Securities:
Trading	—		—		1,767		1,767
Total USDA Securities	—		—		1,767		1,767
Financial derivatives	—		37,409		—		37,409
Guarantee Asset	—		—		4,467		4,467
Total Assets at fair value	$	1,119,611	$	3,478,335	$	7,632,487	$	12,230,433
Liabilities:
Financial derivatives	$	142	$	175,184	$	—	$	175,326
Total Liabilities at fair value	$	142	$	175,184	$	—	$	175,326

(1) Level 3 assets represent 28% of total assets and 62% of financial instruments measured at fair value.

There were no material assets or liabilities measured at fair value on a non-recurring basis as of June 30, 2023 or December 31, 2022.

Transfers in and/or out of the different levels within the fair value hierarchy are based on the fair values of the assets and liabilities as of the beginning of the reporting period. During the six months ended June 30, 2023 and 2022, there were no transfers within the fair value hierarchy.

The following tables present additional information about assets and liabilities measured at fair value on a recurring basis for which Farmer Mac has used significant unobservable inputs to determine fair value. Net transfers in and/or out of Level 3 are based on the fair values of the assets and liabilities as of the beginning of the reporting period. There were no liabilities measured at fair value using significant unobservable inputs during the three and six months ended June 30, 2023 and 2022.

Table 9.2


Level 3 Assets and Liabilities Measured at Fair Value for the Three Months Ended June 30, 2023
	Beginning Balance		Purchases		Settlements		Allowance for Losses		Realized and unrealized losses included in Income		Unrealized gains included in Other Comprehensive Income		Ending Balance
	(in thousands)
Recurring:
Assets:
Investment Securities:
Available-for-sale:
Floating rate auction-rate certificates backed by Government guaranteed student loans	$	19,031	$	—	$	—	$	1	$	—	$	—	$	19,032
Total available-for-sale	19,031		—		—		1		—		—		19,032
Farmer Mac Guaranteed Securities:
Available-for-sale:
AgVantage	8,217,420		852,000		(1,257,413)		8		(101,872)		27,667		7,737,810
Farmer Mac Guaranteed Securities	8,034		—		(441)		—		—		12		7,605
Total available-for-sale	8,225,454		852,000		(1,257,854)		8		(101,872)		27,679		7,745,415
USDA Securities:

Trading	1,405		—		(48)		—		(9)		—		1,348
Total USDA Securities	1,405		—		(48)		—		(9)		—		1,348
Guarantee and commitment obligations:
Guarantee Asset	4,570		—		(191)		—		(48)		—		4,331
Total Guarantee and commitment obligations	4,570		—		(191)		—		(48)		—		4,331
Total Assets at fair value	$	8,250,460	$	852,000	$	(1,258,093)	$	9	$	(101,929)	$	27,679	$	7,770,126


Level 3 Assets and Liabilities Measured at Fair Value for the Three Months Ended June 30, 2022
	Beginning Balance		Purchases		Settlements		Allowance for Losses		Realized and unrealized (losses)/gains included in Income		Unrealized gains/(losses) included in Other Comprehensive Income		Ending Balance
	(in thousands)
Recurring:
Assets:
Investment Securities:
Available-for-sale:
Floating rate auction-rate certificates backed by Government guaranteed student loans	$	18,961	$	—	$	—	$	1	$	—	$	99	$	19,061
Total available-for-sale	18,961		—		—		1		—		99		19,061
Farmer Mac Guaranteed Securities:
Available-for-sale:
AgVantage	6,589,224		520,000		(513,342)		84		(149,205)		(6,365)		6,440,396
Farmer Mac Guaranteed Securities	11,022		—		(358)		—		—		(848)		9,816
Total available-for-sale	6,600,246		520,000		(513,700)		84		(149,205)		(7,213)		6,450,212
USDA Securities:

Trading	3,386		—		(1,140)		—		29		—		2,275
Total USDA Securities	3,386		—		(1,140)		—		29		—		2,275
Guarantee and commitment obligations:
Guarantee Asset	6,138		—		(188)		—		(314)		—		5,636
Total Guarantee and commitment obligations	6,138		—		(188)		—		(314)		—		5,636
Total Assets at fair value	$	6,628,731	$	520,000	$	(515,028)	$	85	$	(149,490)	$	(7,114)	$	6,477,184


Level 3 Assets and Liabilities Measured at Fair Value for the Six Months Ended June 30, 2023
	Beginning Balance		Purchases		Settlements		Allowance for Losses		Realized and unrealized (losses)/gains included in Income		Unrealized gains included in Other Comprehensive Income		Ending Balance
	(in thousands)
Recurring:
Assets:
Investment Securities:
Available-for-sale:
Floating rate auction-rate certificates backed by Government guaranteed student loans	$	19,027	$	—	$	—	$	5	$	—	$	—	$	19,032
Total available-for-sale	19,027		—		—		5		—		—		19,032
Farmer Mac Guaranteed Securities:
Available-for-sale:
AgVantage	7,599,379		1,539,650		(1,398,799)		40		(8,530)		6,070		7,737,810
Farmer Mac Guaranteed Securities	7,847		—		(874)		—		—		632		7,605
Total available-for-sale	7,607,226		1,539,650		(1,399,673)		40		(8,530)		6,702		7,745,415
USDA Securities:

Trading	1,767		—		(435)		—		16		—		1,348
Total USDA Securities	1,767		—		(435)		—		16		—		1,348
Guarantee and commitment obligations:
Guarantee Asset	4,467		—		(422)		—		286		—		4,331
Total Guarantee and commitment obligations	4,467		—		(422)		—		286		—		4,331
Total Assets at fair value	$	7,632,487	$	1,539,650	$	(1,400,530)	$	45	$	(8,228)	$	6,702	$	7,770,126


Level 3 Assets and Liabilities Measured at Fair Value for the Six Months Ended June 30, 2022
	Beginning Balance		Purchases		Settlements		Allowance for Losses		Realized and unrealized losses included in Income		Unrealized losses included in Other Comprehensive Income		Ending Balance
	(in thousands)
Recurring:
Assets:
Investment Securities:
Available-for-sale:
Floating rate auction-rate certificates backed by Government guaranteed student loans	$	19,254	$	—	$	—	$	3	$	—	$	(196)	$	19,061
Total available-for-sale	19,254		—		—		3		—		(196)		19,061
Farmer Mac Guaranteed Securities:
Available-for-sale:
AgVantage	6,316,145		1,352,750		(808,626)		(334)		(359,792)		(59,747)		6,440,396
Farmer Mac Guaranteed Securities	12,414		—		(737)		—		—		(1,861)		9,816
Total available-for-sale	6,328,559		1,352,750		(809,363)		(334)		(359,792)		(61,608)		6,450,212
USDA Securities:

Trading	4,401		—		(2,092)		—		(34)		—		2,275
Total USDA Securities	4,401		—		(2,092)		—		(34)		—		2,275
Guarantee and commitment obligations:
Guarantee Asset	6,237		—		(443)		—		(158)		—		5,636
Total Guarantee and commitment obligations	6,237		—		(443)		—		(158)		—		5,636
Total Assets at fair value	$	6,358,451	$	1,352,750	$	(811,898)	$	(331)	$	(359,984)	$	(61,804)	$	6,477,184

The following tables present additional information about the significant unobservable inputs, such as discount rates and constant prepayment rates ("CPR"), used in the fair value measurements categorized in Level 3 of the fair value hierarchy as of June 30, 2023 and December 31, 2022:

Table 9.3

As of June 30, 2023

Financial Instruments

Fair Value

Valuation Technique

Unobservable Input

Range (Weighted-Average)

(in thousands)

Assets:

Investment securities:

Floating rate auction-rate certificates backed by Government guaranteed student loans

19,032

Indicative bids

Range of broker quotes

96.8% - 96.8% (96.8%)

Farmer Mac Guaranteed Securities:

AgVantage

7,737,810

Discounted cash flow

Discount rate

4.9% - 6.9% (5.5%)

Farmer Mac Guaranteed Securities

7,605

Discounted cash flow

Discount rate

4.9% - 5.4% (5.2%)

CPR

USDA Securities

1,348

Discounted cash flow

Discount rate

5.6% - 5.9% (5.6%)

CPR

12% - 13% (13%)

Guarantee Asset

4,331

Discounted cash flow

Discount rate

5.5% - 6.0% (5.7%)

CPR

As of December 31, 2022

Financial Instruments

Fair Value

Valuation Technique

Unobservable Input

Range (Weighted-Average)

(in thousands)

Assets:

Investment securities:

Floating rate auction-rate certificates backed by Government guaranteed student loans

19,027

Indicative bids

Range of broker quotes

96.8% - 96.8% (96.8%)

Farmer Mac Guaranteed Securities:

AgVantage

7,599,379

Discounted cash flow

Discount rate

4.7% - 6.1% (5.1%)

Farmer Mac Guaranteed Securities

7,847

Discounted cash flow

Discount rate

4.8% - 5.3% (5.1%)

CPR

USDA Securities

1,767

Discounted cash flow

Discount rate

5.1% - 5.7% (5.3%)

CPR

19% - 27% (25%)

Guarantee Asset

4,467

Discounted cash flow

Discount rate

5.4% - 5.9% (5.7%)

CPR

The significant unobservable input used in the fair value measurements of AgVantage Farmer Mac Guaranteed Securities is the discount rate commensurate with the risks involved. Typically, significant increases (decreases) in this input in isolation may result in materially lower (higher) fair value measurements. Generally, in a rising interest rate environment, Farmer Mac would expect average discount rates to increase. Conversely, in a declining interest rate environment, Farmer Mac would expect average discount rates to decrease. Prepayment rates are not presented in the table above for AgVantage

securities because they generally have fixed maturity dates when the secured general obligations are due and do not prepay.

The significant unobservable inputs used in the fair value measurements of USDA Securities are the prepayment rate and discount rate commensurate with the risks involved. Typically, significant increases (decreases) in any of these inputs in isolation may result in materially lower (higher) fair value measurements. Generally, in a rising interest rate environment, Farmer Mac would expect average discount rates to increase and would likely expect a corresponding decrease in forecasted prepayment rates. Conversely, in a declining interest rate environment, Farmer Mac would expect average discount rates to decrease and would likely expect a corresponding increase in forecasted prepayment rates.

Disclosures on Fair Value of Financial Instruments

The following table sets forth the estimated fair values and carrying values for financial assets, liabilities, and guarantees and commitments as of June 30, 2023 and December 31, 2022:

Table 9.4


	As of June 30, 2023				As of December 31, 2022
	Fair Value		Carrying Amount		Fair Value		Carrying Amount
	(in thousands)
Financial assets:
Cash and cash equivalents	$	874,090	$	874,090	$	861,002	$	861,002
Investment securities	4,768,052		4,767,815		4,630,701		4,628,268
Farmer Mac Guaranteed Securities	8,548,230		8,595,243		8,573,781		8,628,380
USDA Securities	2,063,660		2,337,560		2,099,445		2,411,601
Loans	10,128,329		10,560,608		9,666,710		10,205,466
Financial derivatives	26,824		26,824		37,409		37,409
Guarantee and commitment fees receivable	52,818		46,181		50,653		47,151
Financial liabilities:
Notes payable	23,713,528		24,510,004		23,591,330		24,469,113
Debt securities of consolidated trusts held by third parties	1,309,257		1,357,763		1,106,837		1,181,948
Financial derivatives	188,652		188,652		175,326		175,326
Guarantee and commitment obligations	52,509		45,873		50,083		46,582

The carrying value of cash and cash equivalents is a reasonable estimate of their approximate fair value and is classified as Level 1. The fair value of investments in U.S. Treasuries are valued based on unadjusted quoted prices in active markets and are classified as Level 1. A significant portion of Farmer Mac's investment portfolio is valued using a reputable nationally recognized third-party pricing service. The prices obtained are non-binding and generally representative of recent market trades and are classified as Level 2. Farmer Mac internally models the fair value of its loan portfolio, including loans held for investment and loans held for investment in consolidated trusts, Farmer Mac Guaranteed Securities, and USDA Securities by discounting the projected cash flows of these instruments at projected interest rates. The fair values are based on the present value of expected cash flows using management's best estimate of certain key assumptions, which include prepayment speeds, forward yield curves and discount rates commensurate with the risks involved. These fair value measurements do not take into consideration the fair value of the underlying property and are classified as Level 3. Financial derivatives primarily are valued using the market standard methodology of netting the discounted future fixed cash payments (or

receipts) and the discounted expected variable cash receipts (or payments) and are classified as Level 2. The fair value of the guarantee fees receivable/obligation and debt securities of consolidated trusts are estimated based on the present value of expected future cash flows of the underlying mortgage assets using management's best estimate of certain key assumptions, which include prepayments speeds, forward yield curves, and discount rates commensurate with the risks involved and are classified as Level 3. Notes payable are valued by discounting the expected cash flows of these instruments using a yield curve derived from market prices observed for similar agency securities and are also classified as Level 3. Because the cash flows of Farmer Mac's financial instruments may be interest rate path dependent, estimated fair values and projected discount rates for Level 3 financial instruments are derived using a Monte Carlo simulation model. Different market assumptions and estimation methodologies could significantly affect estimated fair value amounts.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details