Comprehensive Income

9 Months Ended

Sep. 30, 2011

Comprehensive Income

Note 4.  Comprehensive Income

Comprehensive income represents all changes in stockholders’ equity except those resulting from investments by or distributions to stockholders, and is comprised primarily of net income and unrealized gains and losses on securities available-for-sale, net of related taxes.

The following table sets forth Farmer Mac’s comprehensive income for the three and nine months ended September 30, 2011 and 2010:

	For the Three Months Ended						For the Nine Months Ended
	September 30,			September 30,			September 30,			September 30,
	2011			2010			2011			2010
	(in thousands)
Net (loss)/income	$	(16,766	)	$	12,263		$	19,261		$	33,942
Available-for-sale securities, net of tax:
Net unrealized holding gains		49,661			15,852			70,573			44,206
Reclassification adjustment for realized gains (1)		(383	)		(15	)		(3,133	)		(206	)
Net change from available-for-sale securities (2)		49,278			15,837			67,440			44,000
Financial derivatives, net of tax:
Reclassification for amortization of financial derivatives transition adjustment (3)		-			26			-			78
Other comprehensive income, net of tax		49,278			15,863			67,440			44,078
Comprehensive income		32,512			28,126			86,701			78,020
Less: Comprehensive income attributable to non-controlling interest		5,547			5,546			16,641			15,160
Total comprehensive income	$	26,965		$	22,580		$	70,060		$	62,860

(1) Includes the reclassification of deferred gains recognized on certain Farmer Mac II Guaranteed Securities and USDA Guaranteed Securities of $0.3 million and $3.0 million, after tax, for the three and nine months ended September 30, 2011, respectively.

(2) Unrealized gains on available for sale securities are shown net of income tax expense of $26.5 million and $8.5 million for the three months ended September 30, 2011 and 2010, respectively, and $36.3 million and $23.7 million for the nine months ended September 30, 2011 and 2010, respectively.

(3) Amortization of the financial derivatives transition adjustment is shown net of income tax expense of $14,000 and $42,000 for the three and nine months ended September 30, 2010, respectively.

During the three and nine months ended September 30, 2011, Farmer Mac reclassified $0.3 million and $3.0 million (of a total $7.0 million), respectively, of after-tax unrealized gains into earnings related to fair value changes of Farmer Mac II Guaranteed Securities and USDA Guaranteed Securities designated as available-for-sale that were transferred to Farmer Mac II LLC in January 2010.  Included in these reclassifications are amortization amounts of $1.8 million that relate to prior periods, beginning with first quarter 2010.  These gains are presented as “Other income” on the condensed consolidated statements of operations.  Farmer Mac will recognize in earnings the remainder of these deferred gains over the estimated remaining lives of the underlying USDA-guaranteed portions.  There will, however, be no net effect on income on a consolidated basis because these gains will be offset by the amortization of premium expense on the assets held by Farmer Mac II LLC.

 

The following table presents Farmer Mac’s accumulated other comprehensive income as of September 30, 2011 and December 31, 2010 and changes in the components of accumulated other comprehensive income for the nine months ended September 30, 2011 and the year ended December 31, 2010.

	September 30,		December 31,
	2011		2010
	(in thousands)
Available-for-sale securities:
Beginning balance	$	18,275	$	3,300
Net unrealized gains, net of tax		67,440		14,975
Ending balance	$	85,715	$	18,275
Financial derivatives:
Beginning balance	$	-	$	(46	)
Amortization of financial derivatives transition adjustment, net of tax		-		46
Ending balance	$	-	$	-
Accumulated other comprehensive income, net of tax	$	85,715	$	18,275