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FINANCIAL DERIVATIVES
6 Months Ended
Jun. 30, 2025
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
FINANCIAL DERIVATIVES FINANCIAL DERIVATIVES
Farmer Mac enters into financial derivative transactions to protect against risk from the effects of market price, or interest rate movements, on the value of certain assets, future cash flows, or debt issuance, and not for trading or speculative purposes. Certain financial derivatives are designated as fair value hedges of fixed rate assets, classified as available-for-sale, to protect against fair value changes in the assets related to changes in a benchmark interest rate (e.g., SOFR). Certain other financial derivatives are designated as cash flow hedges to mitigate the volatility of future interest rate payments on floating rate debt. Certain financial derivatives are not designated in hedge accounting relationships.

Farmer Mac manages the interest rate risk related to loans it has committed to acquire, but has not yet permanently funded, primarily through the use of futures contracts involving U.S. Treasury securities. Farmer Mac aims to achieve a duration-matched hedge ratio between the hedged item and the hedge instrument. Gains or losses generated by these hedge transactions are expected to offset changes in funding costs. All financial derivatives are recorded on the balance sheet at fair value as a freestanding asset or liability.
The following tables summarize information related to Farmer Mac's financial derivatives on a gross basis without giving consideration to master netting arrangements. The table below includes accrued interest on cleared swaps, but excludes $21.9 million and $15.8 million of accrued interest receivable and $3.0 million and $4.9 million of accrued interest payable on uncleared swaps as of June 30, 2025 and December 31, 2024, respectively. The aforementioned accrued interest on uncleared swaps is included within Accrued Interest Receivable and Accrued Interest Payable on the Consolidated Balance Sheets.

Table 4.1
  As of June 30, 2025
  Fair ValueWeighted-
Average
Pay Rate
Weighted-
Average Receive Rate
Weighted-
Average
Forward
Price
Weighted-
Average
Remaining
Term (in years)
  Notional AmountAsset(Liability)
  (dollars in thousands)
Fair value hedges:
Interest rate swaps:
Receive fixed non-callable$6,408,185 $2,175 $(5,695)4.68%3.43%1.45
Pay fixed non-callable10,009,135 136 (15,527)2.79%4.51%8.75
Receive fixed callable4,834,383 18,655 (33,969)4.52%3.75%2.85
Cash flow hedges:
Interest rate swaps:
Pay fixed non-callable498,000 11,398 (295)1.87%4.85%3.20
No hedge designation:
Interest rate swaps:
Pay fixed non-callable151,854 493 (109)2.97%4.71%3.27
Receive fixed non-callable1,563,231 104 (6)4.49%4.13%0.46
Basis swaps640,384 — (386)4.65%4.51%3.42
Treasury futures12,500 — (21)111.96
Netting adjustments(1)
— (2,311)2,311 
Total financial derivatives$24,117,672 $30,650 $(53,697)      
(1)Amounts represent the application of the netting requirements that allow Farmer Mac to settle positive and negative positions, including accrued interest, held or placed with the same clearing agent.
  As of December 31, 2024
  Fair ValueWeighted-
Average
Pay Rate
Weighted-
Average Receive Rate
Weighted-
Average
Forward
Price
Weighted-
Average
Remaining
Term (in years)
  Notional AmountAsset(Liability)
  (dollars in thousands)
Fair value hedges:
Interest rate swaps:
Receive fixed non-callable$7,460,685 $174 $(12,165)4.71%3.40%1.53
Pay fixed non-callable9,657,181 5,134 (97)2.67%4.56%9.12
Receive fixed callable4,592,077 5,119 (65,167)4.54%3.67%2.65
Cash flow hedges:
Interest rate swaps:
Pay fixed non-callable540,000 16,903 (2)1.92%4.87%3.43
No hedge designation:
Interest rate swaps:
Pay fixed non-callable157,776 819 (1)2.92%4.75%3.40
Receive fixed non-callable1,803,328 48 (2)4.52%4.43%0.30
Basis swaps655,384 (354)4.69%4.52%3.83
Treasury futures29,900 46 — 108.91 
Netting adjustments(1)
— (462)462 
Total financial derivatives$24,896,331 $27,789 $(77,326)      
(1)Amounts represent the application of the netting requirements that allow Farmer Mac to settle positive and negative positions, including accrued interest, held or placed with the same clearing agent.


As of June 30, 2025, Farmer Mac expects to reclassify $8.4 million after-tax from accumulated other comprehensive income to earnings over the next twelve months related to cash flow hedges. This amount could differ from amounts actually recognized due to changes in interest rates, hedge de-designations, and the addition of other hedges after June 30, 2025.

The following tables summarize the net income/(expense) recognized in the Consolidated Statements of Operations related to derivatives for the three and six months ended June 30, 2025 and 2024:
Table 4.2
For the Three Months Ended June 30, 2025
Net Income/(Expense) Recognized in Consolidated Statement of Operations on Derivatives
Net Interest IncomeNon-Interest IncomeTotal
Interest Income Investments and Cash Equivalents Interest Income Farmer Mac Guaranteed Securities and USDA SecuritiesInterest Income LoansTotal Interest Expense
Gains on financial derivatives
(in thousands)
Total amounts presented in the Consolidated Statement of Operations
$88,985 $124,998 $185,039 $(302,225)$80 $96,877 
Income/(expense) related to interest settlements on fair value hedging relationships:
Recognized on derivatives7,261 21,746 12,499 (27,776)— 13,730 
Recognized on hedged items14,101 56,672 19,633 (100,215)— (9,809)
Premium/discount amortization recognized on hedged items796 — — (723)— 73 
Income/(expense) related to interest settlements on fair value hedging relationships$22,158 $78,418 $32,132 $(128,714)$— $3,994 
Gains/(losses) on fair value hedging relationships:
Recognized on derivatives$(19,260)$(37,476)$(8,027)$42,233 $— $(22,530)
Recognized on hedged items19,271 37,769 8,860 (40,661)— 25,239 
Gains/(losses) on fair value hedging relationships
$11 $293 $833 $1,572 $— $2,709 
Expense related to interest settlements on cash flow hedging relationships:
Interest settlements reclassified from AOCI into net income on derivatives$— $— $— $3,746 $— $3,746 
Recognized on hedged items— — — (6,108)— (6,108)
Discount amortization recognized on hedged items— — — (38)— (38)
Expense recognized on cash flow hedges$— $— $— $(2,400)$— $(2,400)
Gains on financial derivatives not designated in hedging relationships:
Losses on interest rate swaps
$— $— $— $— $(834)$(834)
Interest expense on interest rate swaps— — — — (208)(208)
Treasury futures— — — — 1,122 1,122 
Gains on financial derivatives not designated in hedge relationships
$— $— $— $— $80 $80 
For the Three Months Ended June 30, 2024
Net Income/(Expense) Recognized in Consolidated Statement of Operations on Derivatives
Net Interest IncomeNon-Interest IncomeTotal
Interest Income Investments and Cash Equivalents Interest Income Farmer Mac Guaranteed Securities and USDA SecuritiesInterest Income LoansTotal Interest ExpenseLosses on financial derivatives
(in thousands)
Total amounts presented in the Consolidated Statement of Operations:
$84,538 $166,063 $153,105 $(316,366)$(1,799)$85,541 
Income/(expense) related to interest settlements on fair value hedging relationships:
Recognized on derivatives10,408 39,134 17,827 (76,659)— (9,290)
Recognized on hedged items10,309 52,651 16,705 (107,290)— (27,625)
Premium/discount amortization recognized on hedged items
487 — — (721)— (234)
Income/(expense) related to interest settlements on fair value hedging relationships$21,204 $91,785 $34,532 $(184,670)$— $(37,149)
Gains/(losses) on fair value hedging relationships:
Recognized on derivatives$3,460 $6,926 $13,188 $30,872 $— $54,446 
Recognized on hedged items(3,361)(6,508)(12,112)(29,861)— (51,842)
Gains/(losses) on fair value hedging relationships$99 $418 $1,076 $1,011 $— $2,604 
Expense related to interest settlements on cash flow hedging relationships:
Interest settlements reclassified from AOCI into net income on derivatives$— $— $— $5,393 $— $5,393 
Recognized on hedged items— — — (8,014)— (8,014)
Discount amortization recognized on hedged items— — — (14)— (14)
Expense recognized on cash flow hedges$— $— $— $(2,635)$— $(2,635)
Losses on financial derivatives not designated in hedge relationships:
Losses on interest rate swaps$— $— $— $— $(26)$(26)
Interest expense on interest rate swaps— — — — (486)(486)
Treasury futures— — — — (1,287)(1,287)
Losses on financial derivatives not designated in hedge relationships$— $— $— $— $(1,799)$(1,799)
For the Six Months Ended June 30, 2025
Net Income/(Expense) Recognized in Consolidated Statement of Operations on Derivatives
Net Interest IncomeNon-Interest IncomeTotal
Interest Income Investments and Cash Equivalents Interest Income Farmer Mac Guaranteed Securities and USDA SecuritiesInterest Income LoansTotal Interest Expense
Losses on financial derivatives
(in thousands)
Total amounts presented in the Consolidated Statement of Operations
$172,293 $251,340 $356,803 $(592,700)$(2,556)$185,180 
Income/(expense) related to interest settlements on fair value hedging relationships:
Recognized on derivatives14,346 43,805 24,883 (56,270)— 26,764 
Recognized on hedged items27,231 112,543 38,601 (204,093)— (25,718)
Premium/discount amortization recognized on hedged items1,227 — — (1,383)— (156)
Income/(expense) related to interest settlements on fair value hedging relationships$42,804 $156,348 $63,484 $(261,746)$— $890 
(Losses)/gains on fair value hedging relationships:
Recognized on derivatives$(53,269)$(119,962)$(52,581)$117,833 $— $(107,979)
Recognized on hedged items53,249 119,787 53,840 (115,089)— 111,787 
(Losses)/gains on fair value hedging relationships
$(20)$(175)$1,259 $2,744 $— $3,808 
Expense related to interest settlements on cash flow hedging relationships:
Interest settlements reclassified from AOCI into net income on derivatives$— $— $— $7,571 $— $7,571 
Recognized on hedged items— — — (12,453)— (12,453)
Discount amortization recognized on hedged items— — — (38)— (38)
Expense recognized on cash flow hedges$— $— $— $(4,920)$— $(4,920)
Losses on financial derivatives not designated in hedging relationships:
Losses on interest rate swaps
$— $— $— $— $(3,537)$(3,537)
Interest expense on interest rate swaps— — — — 110 110 
Treasury futures— — — — 871 871 
Losses on financial derivatives not designated in hedge relationships
$— $— $— $— $(2,556)$(2,556)
For the Six Months Ended June 30, 2024
Net Income/(Expense) Recognized in Consolidated Statement of Operations on Derivatives
Net Interest IncomeNon-Interest IncomeTotal
Interest Income Investments and Cash Equivalents Interest Income Farmer Mac Guaranteed Securities and USDA SecuritiesInterest Income LoansTotal Interest ExpenseGains on financial derivatives
(in thousands)
Total amounts presented in the Consolidated Statement of Operations:
$169,462 $332,876 $297,685 $(626,315)$280 $173,988 
Income/(expense) related to interest settlements on fair value hedging relationships:
Recognized on derivatives20,705 79,467 35,676 (160,210)— (24,362)
Recognized on hedged items20,257 104,356 33,302 (213,723)— (55,808)
Premium/discount amortization recognized on hedged items
933 — — (1,468)— (535)
Income/(expense) related to interest settlements on fair value hedging relationships$41,895 $183,823 $68,978 $(375,401)$— $(80,705)
Gains/(losses) on fair value hedging relationships:
Recognized on derivatives$31,250 $88,512 $61,368 $(23,846)$— $157,284 
Recognized on hedged items(30,882)(87,251)(59,173)25,628 — (151,678)
Gains/(losses) on fair value hedging relationships$368 $1,261 $2,195 $1,782 $— $5,606 
Expense related to interest settlements on cash flow hedging relationships:
Interest settlements reclassified from AOCI into net income on derivatives$— $— $— $10,824 $— $10,824 
Recognized on hedged items— — — (16,105)— (16,105)
Discount amortization recognized on hedged items— — — (27)— (27)
Expense recognized on cash flow hedges$— $— $— $(5,308)$— $(5,308)
Gains on financial derivatives not designated in hedge relationships:
Gains on interest rate swaps$— $— $— $— $729 $729 
Interest expense on interest rate swaps— — — — (521)(521)
Treasury futures— — — — 72 72 
Gains on financial derivatives not designated in hedge relationships$— $— $— $— $280 $280 
The following table shows the carrying amount and associated cumulative basis adjustment related to the application of hedge accounting that is included in the carrying amount of hedged assets and liabilities in fair value hedging relationships as of June 30, 2025 and December 31, 2024:

Table 4.3
Hedged Items in Fair Value Relationship
Carrying Amount of Hedged Assets/(Liabilities)Cumulative Amount of Fair Value Hedging Adjustments included in the Carrying Amount of the Hedged Assets/(Liabilities)
June 30, 2025December 31, 2024June 30, 2025December 31, 2024
(in thousands)
Investment securities, Available-for-Sale, at fair value(1)
$1,681,016 $1,477,880 $(63,888)$(117,137)
Farmer Mac Guaranteed Securities, Available-for-Sale, at fair value(2)
5,694,675 5,478,484 (187,571)(307,358)
Loans held for investment, at amortized cost1,981,712 1,816,738 (318,603)(372,444)
Notes Payable(3)
(11,204,119)(11,899,049)33,909 148,999 
(1)Amortized cost of $1.8 billion and $1.6 billion as of June 30, 2025 and December 31, 2024, respectively.
(2)Amortized cost of $5.9 billion and $5.8 billion as of June 30, 2025 and December 31, 2024, respectively.
(3)Carrying amount represents amortized cost.

The following tables present the fair value of financial assets and liabilities, based on the terms of Farmer Mac's master netting arrangements as of June 30, 2025 and December 31, 2024:

Table 4.4
June 30, 2025
Gross Amount RecognizedGross Amounts offset in the Consolidated Balance Sheet
Net Amount Presented in the Consolidated Balance Sheet
Gross Amounts Not Offset in the Consolidated Balance Sheet
Netting AdjustmentsFinancial instruments pledged
Cash Collateral
Net Amount(1)
(in thousands)
Assets:
Uncleared derivatives$30,650 $— $30,650 $(22,991)$— $(7,659)$— 
Cleared derivatives2,311 (2,311)— — — — — 
Total$32,961 $(2,311)$30,650 $(22,991)$— $(7,659)$— 
Liabilities:
Uncleared derivatives$(39,992)$— $(39,992)$22,991 $— $12,727 $(4,274)
Cleared derivatives(16,016)2,311 (13,705)— 13,705 — — 
Total$(56,008)$2,311 $(53,697)$22,991 $13,705 $12,727 $(4,274)
(1)Any over-collateralization at an individual clearing agent and/or counterparty level is not included in the determination of the net amount. As of June 30, 2025, Farmer Mac had additional net exposure of $214.5 million due to instances where Farmer Mac's collateral to a counterparty exceeded the net derivative position and $14.0 million due to instances where Farmer Mac's collateral from a counterparty exceeded the net derivative position.
December 31, 2024
Gross Amount RecognizedGross Amounts offset in the Consolidated Balance SheetNet Amount Presented in the Consolidated Balance SheetGross Amounts Not Offset in the Consolidated Balance Sheet
Netting AdjustmentsFinancial instruments pledgedCash Collateral
Net Amount(1)
(in thousands)
Assets:
Uncleared derivatives$22,759 $— $22,759 $(22,061)$— $(652)$46 
Cleared derivatives5,492 (462)5,030 — (5,030)— — 
Total$28,251 $(462)$27,789 $(22,061)$(5,030)$(652)$46 
Liabilities:
Uncleared derivatives$(77,326)$— $(77,326)$22,061 $— $44,299 $(10,966)
Cleared derivatives(462)462 — — — — — 
Total$(77,788)$462 $(77,326)$22,061 $— $44,299 $(10,966)
(1)Any over-collateralization at an individual clearing agent and/or counterparty level is not included in the determination of the net amount. As of December 31, 2024, Farmer Mac had additional net exposure of $209.0 million due to instances where Farmer Mac's collateral to a counterparty exceeded the net derivative position and $4.7 million due to instances where Farmer Mac's collateral from a counterparty exceeded the net derivative position.

Farmer Mac records posted cash as a reduction in the outstanding balance of cash and cash equivalents and an increase in the balance of prepaid expenses and other assets. Any investment securities posted as collateral are included in the investment securities balances on the Consolidated Balance Sheets. If Farmer Mac had breached certain provisions of the derivative contracts as of June 30, 2025 or December 31, 2024, it could have been required to settle its obligations under the agreements, but would not have been required to post additional collateral. As of June 30, 2025 and December 31, 2024, there were no financial derivatives in a net payable position where Farmer Mac was required to pledge collateral which the counterparty had the right to sell or repledge.
Of Farmer Mac's $24.1 billion notional amount of interest rate swaps outstanding as of June 30, 2025, $18.4 billion were cleared through the swap clearinghouse, the Chicago Mercantile Exchange ("CME"). Of Farmer Mac's $24.9 billion notional amount of interest rate swaps outstanding as of December 31, 2024, $19.1 billion were cleared through the CME.