FAIR VALUE DISCLOSURES

3 Months Ended

Mar. 31, 2024

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 March 31, 2024 and December 31, 2023, 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 March 31, 2024
	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	$	—	$	—	$	19,281	$	19,281
Floating rate Government/GSE guaranteed mortgage-backed securities	—		2,380,066		—		2,380,066
Fixed rate GSE guaranteed mortgage-backed securities	—		1,672,388		—		1,672,388
Floating rate U.S. Treasuries	49,996		—		—		49,996
Fixed rate U.S. Treasuries	886,056		—		—		886,056
Total Available-for-sale Investment Securities	936,052		4,052,454		19,281		5,007,787
Farmer Mac Guaranteed Securities:
Available-for-sale:
AgVantage	—		—		5,457,197		5,457,197
Farmer Mac Guaranteed Securities	—		—		9,491		9,491
Total Farmer Mac Guaranteed Securities	—		—		5,466,688		5,466,688
USDA Securities:
Trading	—		—		1,066		1,066
Total USDA Securities	—		—		1,066		1,066
Financial derivatives	680		30,753		—		31,433
Guarantee Asset	—		—		5,733		5,733
Total Assets at fair value	$	936,732	$	4,083,207	$	5,492,768	$	10,512,707
Liabilities:
Financial derivatives	$	—	$	128,530	$	—	$	128,530
Total Liabilities at fair value	$	—	$	128,530	$	—	$	128,530

(1) Level 3 assets represent 18% of total assets and 52% of financial instruments measured at fair value.


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.

There were no material assets or liabilities measured at fair value on a non-recurring basis as of March 31, 2024 or December 31, 2023.

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 three months ended March 31, 2024 and 2023, 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 months ended March 31, 2024 and 2023.

Table 9.2


Level 3 Assets and Liabilities Measured at Fair Value for the Three Months Ended March 31, 2024
	Beginning Balance		Purchases		Settlements		Allowance for Losses		Realized and unrealized losses 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	$	19,082	$	—	$	—	$	1	$	—	$	198	$	19,281
Total available-for-sale	19,082		—		—		1		—		198		19,281
Farmer Mac Guaranteed Securities:
Available-for-sale:
AgVantage	5,522,712		50,000		(63,955)		27		(80,694)		29,107		5,457,197
Farmer Mac Guaranteed Securities	9,767		—		(177)		—		—		(99)		9,491
Total available-for-sale	5,532,479		50,000		(64,132)		27		(80,694)		29,008		5,466,688
USDA Securities:

Trading	1,241		—		(174)		—		(1)		—		1,066
Total USDA Securities	1,241		—		(174)		—		(1)		—		1,066
Guarantee and commitment obligations:
Guarantee Asset	5,831		—		(85)		—		(13)		—		5,733
Total Guarantee and commitment obligations	5,831		—		(85)		—		(13)		—		5,733
Total Assets at fair value	$	5,558,633	$	50,000	$	(64,391)	$	28	$	(80,708)	$	29,206	$	5,492,768


Level 3 Assets and Liabilities Measured at Fair Value for the Three Months Ended March 31, 2023
	Beginning Balance		Purchases		Settlements		Allowance for Losses		Realized and unrealized gains included in Income		Unrealized (losses)/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	$	—	$	—	$	4	$	—	$	—	$	19,031
Total available-for-sale	19,027		—		—		4		—		—		19,031
Farmer Mac Guaranteed Securities:
Available-for-sale:
AgVantage	7,599,379		687,650		(141,386)		32		93,342		(21,597)		8,217,420
Farmer Mac Guaranteed Securities	7,847		—		(433)		—		—		620		8,034
Total available-for-sale	7,607,226		687,650		(141,819)		32		93,342		(20,977)		8,225,454
USDA Securities:
Trading	1,767		—		(387)		—		25		—		1,405
Total USDA Securities	1,767		—		(387)		—		25		—		1,405
Guarantee and commitment obligations:
Guarantee Asset	4,467		—		(231)		—		334		—		4,570
Total Guarantee and commitment obligations	4,467		—		(231)		—		334		—		4,570
Total Assets at fair value	$	7,632,487	$	687,650	$	(142,437)	$	36	$	93,701	$	(20,977)	$	8,250,460

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 March 31, 2024 and December 31, 2023:

Table 9.3

As of March 31, 2024

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

19,281

Indicative bids

Range of broker quotes

98.0% - 98.0% (98.0%)

Farmer Mac Guaranteed Securities:

AgVantage

5,457,197

Discounted cash flow

Discount rate

5.0% - 5.8% (5.3%)

Farmer Mac Guaranteed Securities

9,491

Discounted cash flow

Discount rate

8.0%

CPR

USDA Securities

1,066

Discounted cash flow

Discount rate

5.7% - 5.8% (5.7%)

CPR

12% - 12% (12%)

Guarantee Asset

5,733

Discounted cash flow

Discount rate

8.0%

CPR

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

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

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.

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 March 31, 2024 and December 31, 2023:

Table 9.4


	As of March 31, 2024				As of December 31, 2023
	Fair Value		Carrying Amount		Fair Value		Carrying Amount
	(in thousands)
Financial assets:
Cash and cash equivalents	$	745,105	$	745,105	$	888,707	$	888,707
Investment securities	5,069,547		5,068,443		4,981,249		4,979,504
Farmer Mac Guaranteed Securities	9,889,495		9,921,620		9,710,074		9,745,548
USDA Securities	2,016,076		2,334,093		2,036,046		2,355,412
Loans	10,632,530		11,233,071		10,426,021		11,039,349
Financial derivatives	31,433		31,433		37,478		37,478
Guarantee and commitment fees receivable	55,856		48,130		58,465		49,832
Financial liabilities:
Notes payable	25,825,161		26,509,011		25,670,971		26,336,542
Debt securities of consolidated trusts held by third parties	1,244,879		1,325,289		1,268,563		1,351,069
Financial derivatives	128,530		128,530		117,131		117,131
Guarantee and commitment obligations	53,591		45,866		56,195		47,563

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