FAIR VALUE DISCLOSURES

12 Months Ended

Dec. 31, 2023

Fair Value Disclosures [Abstract]

FAIR VALUE DISCLOSURES

FAIR VALUE DISCLOSURES

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 December 31, 2023 and 2022, respectively, and indicate the fair value hierarchy of the valuation techniques used by Farmer Mac to determine such fair value:

Table 13.1

Assets and Liabilities Measured at Fair Value as of December 31, 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	$	—	$	—	$	19,082	$	19,082
Floating rate Government/GSE guaranteed mortgage-backed securities	—		2,424,434		—		2,424,434
Fixed rate GSE guaranteed mortgage-backed securities	—		1,569,615		—		1,569,615
Floating rate U.S. Treasuries	49,968		—		—		49,968
Fixed rate U.S. Treasuries	855,832		—		—		855,832
Total Available-for-sale Investment Securities	905,800		3,994,049		19,082		4,918,931
Farmer Mac Guaranteed Securities:
Available-for-sale:
AgVantage	—		—		5,522,712		5,522,712
Farmer Mac Guaranteed Securities	—		—		9,767		9,767
Total Farmer Mac Guaranteed Securities	—		—		5,532,479		5,532,479
USDA Securities:
Trading	—		—		1,241		1,241
Total USDA Securities	—		—		1,241		1,241
Financial derivatives	11		37,467		—		37,478
Guarantee Asset	—		—		5,831		5,831
Total Assets at fair value	$	905,811	$	4,031,516	$	5,558,633	$	10,495,960
Liabilities:
Financial derivatives	$	91	$	117,040	$	—	$	117,131
Total Liabilities at fair value	$	91	$	117,040	$	—	$	117,131

(1) Level 3 assets represent 19% of total assets and 52% 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 December 31, 2023 or 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 years ended December 31, 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 years ended December 31, 2023, 2022, and 2021.

Table 13.2

Level 3 Assets and Liabilities Measured at Fair Value for the Year Ended December 31, 2023
	Beginning Balance		Purchases		Settlements		Allowance for Losses		Realized and unrealized (losses)/gains included in Income		Unrealized gains included in Other Comprehensive Income		Transfers Out(1)		Ending Balance
	(in thousands)
Recurring:
Assets:
Investment Securities:
Available-for-sale:
Floating rate auction-rate certificates backed by Government guaranteed student loans	$	19,027	$	—	$	—	$	6	$	—	$	49	$	—	$	19,082
Total available-for-sale	19,027		—		—		6		—		49		—		19,082
Farmer Mac Guaranteed Securities:
Available-for-sale:
AgVantage	7,599,379		2,084,650		(1,561,507)		230		89,629		(5,573)		(2,684,096)		5,522,712
Farmer Mac Guaranteed Securities	7,847		—		(1,213)		—		—		3,133		—		9,767
Total available-for-sale	7,607,226		2,084,650		(1,562,720)		230		89,629		(2,440)		(2,684,096)		5,532,479
USDA Securities:
Trading	1,767		—		(550)		—		24		—		—		1,241
Total USDA Securities	1,767		—		(550)		—		24		—		—		1,241
Guarantee and commitment obligations:
Guarantee Asset	4,467		—		(590)		—		1,954		—		—		5,831
Total Guarantee and commitment obligations	4,467		—		(590)		—		1,954		—		—		5,831
Total Assets at fair value	$	7,632,487	$	2,084,650	$	(1,563,860)	$	236	$	91,607	$	(2,391)	$	(2,684,096)	$	5,558,633

(1) Includes $2.7 billion of AgVantage Securities transferred from available-for-sale to held-to-maturity on July 1, 2023.

Level 3 Assets and Liabilities Measured at Fair Value for the Year Ended December 31, 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	$	—	$	—	$	19	$	—	$	(246)	$	19,027
Total available-for-sale	19,254		—		—		19		—		(246)		19,027
Farmer Mac Guaranteed Securities:
Available-for-sale:
AgVantage	6,316,145		3,411,665		(1,526,303)		(283)		(552,907)		(48,938)		7,599,379
Farmer Mac Guaranteed Securities	12,414		—		(1,675)		—		—		(2,892)		7,847
Total available-for-sale	6,328,559		3,411,665		(1,527,978)		(283)		(552,907)		(51,830)		7,607,226
USDA Securities:
Trading	4,401		—		(2,583)		—		(51)		—		1,767
Total USDA Securities	4,401		—		(2,583)		—		(51)		—		1,767
Guarantee and commitment obligations:
Guarantee Asset	6,237		—		(903)		—		(867)		—		4,467
Total Guarantee and commitment obligations	6,237		—		(903)		—		(867)		—		4,467
Total Assets at fair value	$	6,358,451	$	3,411,665	$	(1,531,464)	$	(264)	$	(553,825)	$	(52,076)	$	7,632,487

Level 3 Assets and Liabilities Measured at Fair Value for the Year Ended December 31, 2021
	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	$	19,171	$	—	$	—	$	(16)	$	—	$	99	$	19,254
Total available-for-sale	19,171		—		—		(16)		—		99		19,254
Farmer Mac Guaranteed Securities:
Available-for-sale:
AgVantage	6,947,701		1,143,115		(1,614,598)		47		(176,064)		15,944		6,316,145
Farmer Mac Guaranteed Securities	—		12,560		(263)		—		—		117		12,414
Total available-for-sale	6,947,701		1,155,675		(1,614,861)		47		(176,064)		16,061		6,328,559
USDA Securities:
Trading	6,695		—		(2,178)		—		(116)		—		4,401
Total USDA Securities	6,695		—		(2,178)		—		(116)		—		4,401
Guarantee and commitment obligations:
Guarantee Asset	—		6,237		—		—		—		—		6,237
Total Guarantee and commitment obligations	—		6,237		—		—		—		—		6,237
Total Assets at fair value	$	6,973,567	$	1,161,912	$	(1,617,039)	$	31	$	(176,180)	$	16,160	$	6,358,451

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 December 31, 2023 and 2022:

Table 13.3

	As of December 31, 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	$	19,082	Indicative bids	Range of broker quotes	97.0% - 97.0% (97.0%)
Farmer Mac Guaranteed Securities:
AgVantage	$	5,522,712	Discounted cash flow	Discount rate	4.7% - 5.4% (5.0%)
Farmer Mac Guaranteed Securities	$	9,767	Discounted cash flow	Discount rate	8.3%
				CPR	3%
USDA Securities	$	1,241	Discounted cash flow	Discount rate	5.4% - 5.4% (5.4%)
				CPR	12% - 12% (12%)
Guarantee Asset	$	5,831	Discounted cash flow	Discount rate	8.3%
				CPR	3%

	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	8%
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	8%

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. CPR 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 December 31, 2023 and 2022:

Table 13.4

	As of December 31, 2023				As of December 31, 2022
	Fair Value		Carrying Amount		Fair Value		Carrying Amount
	(in thousands)
Financial assets:
Cash and cash equivalents	$	888,707	$	888,707	$	861,002	$	861,002
Investment securities	4,981,249		4,979,504		4,630,701		4,628,268
Farmer Mac Guaranteed Securities	9,710,074		9,745,548		8,573,781		8,628,380
USDA Securities	2,036,046		2,355,412		2,099,445		2,411,601
Loans	10,426,021		11,039,349		9,666,710		10,205,466
Financial derivatives	37,478		37,478		37,409		37,409
Guarantee and commitment fees receivable	58,465		49,832		50,653		47,151
Financial liabilities:
Notes payable	25,670,971		26,336,542		23,591,330		24,469,113
Debt securities of consolidated trusts held by third parties	1,268,563		1,351,069		1,106,837		1,181,948
Financial derivatives	117,131		117,131		175,326		175,326
Guarantee and commitment obligations	56,195		47,563		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.