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Business Segment Reporting
 3 Months Ended
Mar. 31, 2013
Segment Reporting [Abstract]  
Business Segment Reporting
BUSINESS SEGMENT REPORTING

Management has determined that the Corporation's operations consist of three reportable segments – Farm & Ranch, USDA Guarantees, and Rural Utilities.  Farmer Mac uses these three segments to generate revenue and manage business risk, and each segment is based on distinct products and distinct business activities.  In addition to these three operating segments, a corporate segment is presented.  That segment represents activity in Farmer Mac's liquidity investment portfolio and other corporate activities.  The segment financial results include directly attributable revenues and expenses.  Corporate charges for administrative expenses that are not directly attributable to an operating segment are allocated based on headcount.

Farmer Mac uses core earnings to measure corporate economic performance and develop financial plans because, in management's view, core earnings is a useful alternative measure in understanding Farmer Mac's economic performance, transaction economics, and business trends.  Core earnings differs from GAAP net income by excluding the effects of fair value accounting guidance, which are not expected to have a permanent effect on capital. Core earnings also differs from GAAP net income by excluding specified infrequent or unusual transactions that Farmer Mac believes are not indicative of future operating results and that may not reflect the trends and economic financial performance of Farmer Mac's core business. This non-GAAP financial measure may not be comparable to similarly labeled non-GAAP financial measures disclosed by other companies.

The financial information presented below reflects the accounts of Farmer Mac and its subsidiaries on a consolidated basis.  Accordingly, the core earnings for Farmer Mac's reportable operating segments will differ from the stand-alone financial statements of Farmer Mac's subsidiaries.  These differences will be due to various factors, including the reversal of unrealized gains and losses related to fair value changes of trading assets and financial derivatives, as well as the allocation of certain expenses such as dividends and interest expense related to the issuance of capital and the incurrence of indebtedness managed at the corporate level.  The allocation of general and administrative expenses that are not directly attributable to an operating segment may also result in differences.  The assets of Farmer Mac's subsidiary Farmer Mac II LLC will only be available to creditors of Farmer Mac after all obligations owed to creditors of and equity holders in Farmer Mac II LLC have been satisfied.  As of March 31, 2013, Farmer Mac II LLC held assets with a fair value of $1.7 billion, had debt outstanding of $341.0 million, had preferred stock outstanding with a liquidation preference of $250.0 million, and had $1.0 billion of common stock outstanding held by Farmer Mac.

The following tables present core earnings for Farmer Mac's reportable operating segments and a reconciliation to GAAP net income for the three months ended March 31, 2013 and 2012:

Core Earnings by Business Segment
For the Three Months Ended March 31, 2013
 
Farm & Ranch
 
USDA Guarantees
 
Rural Utilities
 
Corporate
 
Reconciling
Adjustments
 
GAAP
Amounts
 
(in thousands)
Interest income (1)
$
28,814

 
$
13,341

 
$
14,889

 
$
5,734

 
$
(1,280
)
 
$
61,498

Interest income related to consolidated trusts owned by third parties reclassified to guarantee fee income
(180
)
 
—

 
—

 
—

 
180

 
—

Interest expense (2)
(12,585
)
 
(10,408
)
 
(11,875
)
 
(1,467
)
 
3,207

 
(33,128
)
Net effective spread
16,049

 
2,933

 
3,014

 
4,267

 
2,107

 
28,370

Guarantee and commitment fees
5,800

 
33

 
959

 
—

 
(180
)
 
6,612

Other income/(expense) (3)
595

 
200

 
—

 
(562
)
 
5,600

 
5,833

Non-interest income/(loss)
6,395

 
233

 
959

 
(562
)
 
5,420

 
12,445

 
 
 
 
 
 
 
 
 
 
 
 
Provision for loan losses
(430
)
 
—

 
—

 
—

 
—

 
(430
)
 
 
 
 
 
 
 
 
 
 
 
 
Provision for losses
(746
)
 
—

 
—

 
—

 
—

 
(746
)
Other non-interest expense
(3,972
)
 
(814
)
 
(1,413
)
 
(2,136
)
 
—

 
(8,335
)
Non-interest expense (4)
(4,718
)
 
(814
)
 
(1,413
)
 
(2,136
)
 
—

 
(9,081
)
Core earnings before income taxes
17,296

 
2,352

 
2,560

 
1,569

 
7,527

(5)
31,304

Income tax (expense)/benefit
(6,053
)
 
(823
)
 
(896
)
 
1,691

 
(2,635
)
 
(8,716
)
Core earnings before preferred stock dividends and attribution of income to non-controlling interest - preferred stock dividends
11,243

 
1,529

 
1,664

 
3,260

 
4,892

(5)
22,588

Preferred stock dividends
—

 
—

 
—

 
(851
)
 
—

 
(851
)
Non-controlling interest - preferred stock dividends
—

 
—

 
—

 
(5,547
)
 
—

 
(5,547
)
Segment core earnings
$
11,243

 
$
1,529

 
$
1,664

 
$
(3,138
)
 
$
4,892

(5)
$
16,190

 
 
 
 
 
 
 
 
 
 
 
 
Total assets at carrying value
$
5,309,083

 
$
1,701,413

 
$
2,620,213

 
$
3,261,963

 
$
—

 
$
12,892,672

Total on- and off-balance sheet program assets at principal balance
9,191,809

 
1,648,105

 
2,597,948

 
—

 
—

 
13,437,862

(1)
Includes reconciling adjustments for the amortization of premiums and discounts on assets consolidated at fair value to reflect core earnings amounts.
(2)
Based on effective funding cost determined for each operating segment, including expenses related to interest rate swaps not designated as hedges, which are included in "Gains on financial derivatives and hedging activities" on the GAAP financial statements.
(3)
Includes reconciling adjustments for the reclassification of expenses related to interest rate swaps not designated as hedges and fair value adjustments on financial derivatives and trading assets. Also includes a reconciling adjustment related to the recognition of deferred gains over the estimated lives of certain Farmer Mac Guaranteed Securities and USDA Guaranteed Securities.
(4)
Includes directly attributable costs and an allocation of indirectly attributable costs based on headcount.
(5)
Net  adjustments to reconcile core earnings before income taxes; core earnings before preferred stock dividends and attribution of income to non-controlling interest - preferred stock dividends; and segment core earnings to corresponding GAAP measures: income before income taxes, net income, and net income attributable to common stockholders, respectively.


Core Earnings by Business Segment
For the Three Months Ended March 31, 2012
 
Farm & Ranch
 
USDA Guarantees
 
Rural Utilities
 
Corporate
 
Reconciling
Adjustments
 
GAAP
Amounts
 
(in thousands)
Interest income (1)
$
40,746

 
$
14,315

 
$
13,496

 
$
6,232

 
$
(1,658
)
 
$
73,131

Interest income related to consolidated trusts owned by third parties reclassified to guarantee fee income
(730
)
 
—

 
—

 
—

 
730

 
—

Interest expense (2)
(25,142
)
 
(11,549
)
 
(10,319
)
 
(1,416
)
 
9,503

 
(38,923
)
Net effective spread
14,874

 
2,766

 
3,177

 
4,816

 
8,575

 
34,208

Guarantee and commitment fees
5,323

 
47

 
1,290

 
—

 
(730
)
 
5,930

Other income/(expense) (3)
437

 
102

 
1

 
(523
)
 
8,231

 
8,248

Non-interest income/(loss)
5,760

 
149

 
1,291

 
(523
)
 
7,501

 
14,178

 
 
 
 
 
 
 
 
 
 
 
 
Provision for loan losses
(420
)
 
—

 
—

 
—

 
—

 
(420
)
 
 
 
 
 
 
 
 
 
 
 
 
Provision for losses
(30
)
 
—

 
—

 
—

 
—

 
(30
)
Other non-interest expense
(3,492
)
 
(764
)
 
(1,382
)
 
(2,174
)
 
—

 
(7,812
)
Non-interest expense (4)
(3,522
)
 
(764
)
 
(1,382
)
 
(2,174
)
 
—

 
(7,842
)
Core earnings before income taxes
16,692

 
2,151

 
3,086

 
2,119

 
16,076

(5)
40,124

Income tax (expense)/benefit
(5,842
)
 
(753
)
 
(1,080
)
 
1,647

 
(5,626
)
 
(11,654
)
Core earnings before preferred stock dividends and attribution of income to non-controlling interest - preferred stock dividends
10,850

 
1,398

 
2,006

 
3,766

 
10,450

(5)
28,470

Preferred stock dividends
—

 
—

 
—

 
(720
)
 
—

 
(720
)
Non-controlling interest - preferred stock dividends
—

 
—

 
—

 
(5,547
)
 
—

 
(5,547
)
Segment core earnings
$
10,850

 
$
1,398

 
$
2,006

 
$
(2,501
)
 
$
10,450

(5)
$
22,203

 
 
 
 
 
 
 
 
 
 
 
 
Total assets at carrying value
$
5,019,070

 
$
1,567,693

 
$
2,314,162

 
$
3,410,486

 
$
—

 
$
12,311,411

Total on- and off-balance sheet program assets at principal balance
8,283,483

 
1,529,642

 
2,253,300

 
—

 
—

 
12,066,425

(1)
Includes reconciling adjustments for yield maintenance income and amortization of premiums on assets consolidated at fair value to reflect core earnings amounts.
(2)
Based on effective funding cost determined for each operating segment, including expenses related to interest rate swaps, which are included in "Gains on financial derivatives and hedging activities" on the GAAP financial statements.
(3)
Includes reconciling adjustments for the reclassification of yield maintenance income, expenses related to interest rate swaps and fair value adjustments on financial derivatives and trading assets. Also includes a reconciling adjustment related to the recognition of deferred gains over the estimated lives of certain Farmer Mac Guaranteed Securities and USDA Guaranteed Securities.
(4)
Includes directly attributable costs and an allocation of indirectly attributable costs based on headcount.
(5)
Net  adjustments to reconcile core earnings before income taxes; core earnings before preferred stock dividends and attribution of income to non-controlling interest - preferred stock dividends; and segment core earnings to corresponding GAAP measures: income before income taxes, net income, and net income attributable to common stockholders, respectively.