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Business Segment Reporting
 3 Months Ended
Mar. 31, 2017
Segment Reporting [Abstract]  
Business Segment Reporting Disclosure
BUSINESS SEGMENT REPORTING

The following tables present core earnings for Farmer Mac's operating segments and a reconciliation to consolidated net income for the three months ended March 31, 2017 and 2016:

Table 9.1

Core Earnings by Business Segment
For the Three Months Ended March 31, 2017
 
Farm & Ranch
 
USDA Guarantees
 
Rural 
Utilities
 
Institutional Credit
 
Corporate
 
Reconciling
Adjustments
 
Consolidated Net Income
 
(in thousands)
Net interest income
$
12,754

 
$
5,283

 
$
2,948

 
$
13,502

 
$
2,584

 
$
—

 
$
37,071

Less: reconciling adjustments(1)(2)(3)
(2,070
)
 
(580
)
 
(309
)
 
(921
)
 
(325
)
 
4,205

 
—

Net effective spread
10,684

 
4,703

 
2,639

 
12,581

 
2,259

 
4,205

 
—

Guarantee and commitment fees(2)
4,295

 
74

 
492

 
455

 
—

 
(1,472
)
 
3,844

Other income/(expense)(3)(4)
194

 
14

 
5

 
—

 
843

 
1,896

 
2,952

Non-interest income/(loss)
4,489

 
88

 
497

 
455

 
843

 
424

 
6,796

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Provision for loan losses
(637
)
 
—

 
—

 
—

 
—

 
—

 
(637
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Release of reserve for losses
193

 
—

 
—

 
—

 
—

 
—

 
193

Other non-interest expense
(4,065
)
 
(1,087
)
 
(587
)
 
(1,521
)
 
(3,482
)
 
—

 
(10,742
)
Non-interest expense(5)
(3,872
)
 
(1,087
)
 
(587
)
 
(1,521
)
 
(3,482
)
 
—

 
(10,549
)
Core earnings before income taxes
10,664

 
3,704

 
2,549

 
11,515

 
(380
)
 
4,629

(6) 
32,681

Income tax (expense)/benefit
(3,732
)
 
(1,296
)
 
(892
)
 
(4,030
)
 
785

 
(1,621
)
 
(10,786
)
Core earnings before preferred stock dividends and attribution of income to non-controlling interest
6,932

 
2,408

 
1,657

 
7,485

 
405

 
3,008

(6) 
21,895

Preferred stock dividends
—

 
—

 
—

 
—

 
(3,295
)
 
—

 
(3,295
)
Non-controlling interest
—

 
—

 
—

 
—

 
15

 
—

 
15

Segment core earnings/(losses)
$
6,932

 
$
2,408

 
$
1,657

 
$
7,485

 
$
(2,875
)
 
$
3,008

(6) 
$
18,615

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets at carrying value
$
3,693,360

 
$
2,109,264

 
$
1,005,187

 
$
6,315,591

 
$
2,808,355

 
$
—

 
$
15,931,757

Total on- and off-balance sheet program assets at principal balance
$
6,240,467

 
$
2,149,697

 
$
1,868,794

 
$
7,585,583

 


 
—

 
$
17,844,541

(1) 
Excludes the amortization of premiums and discounts on assets consolidated at fair value, originally included in interest income, to reflect core earnings amounts.
(2) 
Includes the reclassification of interest income and interest expense from consolidated trusts owned by third parties to guarantee and commitment fees, to reflect management's view that the net interest income Farmer Mac earns is effectively a guarantee fee.
(3) 
Includes the reclassification of interest expense related to interest rate swaps not designated as hedges, which are included in "Gains/(losses) on financial derivatives and hedging activities" on the consolidated financial statements, to determine the effective funding cost for each operating segment.
(4) 
Includes reconciling adjustments for 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 Securities. In 2016 and prior periods, fair value adjustments on financial derivatives included variation margin payment amounts because those amounts were considered to be collateral of the related exposure and were accounted for as unrealized gains or losses. However, effective first quarter 2017, CME implemented a change in its rules related to the exchange of variation margin, whereby variation margin payments are considered to be a partial settlement of the respective derivatives contracts rather than as pledged collateral, and accounted for as realized gains and losses. See Note 4 for more information about this rule change. Farmer Mac believes that even though these variation margin amounts are now accounted for as realized gains or losses on financial derivatives and hedging activities as a result of the CME rule change, their economic character will remain the same as they were before the change. The exchange of variation margin, whether considered a partial settlement of or the pledge of collateral under a derivatives contract, is not expected to have a cumulative net impact on Farmer Mac's financial condition or results of operations reported in accordance with GAAP because the related financial instruments are expected to be held to maturity. Therefore, beginning in 2017, this reconciling adjustment includes realized gains and losses on financial derivatives centrally cleared through CME resulting from the exchange of variation margin. As a result, core earnings subsequent to 2016 will be presented on a consistent basis with core earnings in 2016 and prior periods.
(5) 
Includes directly attributable costs and an allocation of indirectly attributable costs based on staffing.
(6) 
Net adjustments to reconcile to the corresponding income measures: core earnings before income taxes reconciled to income before income taxes; core earnings before preferred stock dividends and attribution of income to non-controlling interest reconciled to net income; and segment core earnings reconciled to net income attributable to common stockholders.

Core Earnings by Business Segment
For the Three Months Ended March 31, 2016
 
Farm & Ranch
 
USDA Guarantees
 
Rural 
Utilities
 
Institutional Credit
 
Corporate
 
Reconciling
Adjustments
 
Consolidated Net Income
 
(in thousands)
Net interest income
$
11,127

 
$
5,052

 
$
2,864

 
$
11,749

 
$
2,848

 
$
—

 
$
33,640

Less: reconciling adjustments(1)(2)(3)
(1,666
)
 
(744
)
 
(326
)
 
(659
)
 
(296
)
 
3,691

 
—

Net effective spread
9,461

 
4,308

 
2,538

 
11,090

 
2,552

 
3,691

 
—

Guarantee and commitment fees(2)
3,909

 
7

 
295

 
458

 
—

 
(1,043
)
 
3,626

Other income/(expense)(3)(4)
97

 
58

 
—

 
—

 
(672
)
 
(5,815
)
 
(6,332
)
Non-interest income/(loss)
4,006

 
65

 
295

 
458

 
(672
)
 
(6,858
)
 
(2,706
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Provision for loan losses
(49
)
 
—

 
—

 
—

 
—

 
—

 
(49
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Release of reserve for losses
(14
)
 
—

 
—

 
—

 
—

 
—

 
(14
)
Other non-interest expense
(4,161
)
 
(1,093
)
 
(831
)
 
(539
)
 
(3,328
)
 
—

 
(9,952
)
Non-interest expense(5)
(4,175
)
 
(1,093
)
 
(831
)
 
(539
)
 
(3,328
)
 
—

 
(9,966
)
Core earnings before income taxes
9,243

 
3,280

 
2,002

 
11,009

 
(1,448
)
 
(3,167
)
(6) 
20,919

Income tax (expense)/benefit
(3,236
)
 
(1,148
)
 
(701
)
 
(3,852
)
 
493

 
1,109

 
(7,335
)
Core earnings before preferred stock dividends and attribution of income to non-controlling interest
6,007

 
2,132

 
1,301

 
7,157

 
(955
)
 
(2,058
)
(6) 
13,584

Preferred stock dividends
—

 
—

 
—

 
—

 
(3,295
)
 
—

 
(3,295
)
Non-controlling interest
—

 
—

 
—

 
—

 
28

 
—

 
28

Segment core earnings/(losses)
$
6,007

 
$
2,132

 
$
1,301

 
$
7,157

 
$
(4,222
)
 
$
(2,058
)
(6) 
$
10,317

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets at carrying value
$
3,115,749

 
$
1,987,855

 
$
1,002,691

 
$
5,731,346

 
$
4,318,387

 
$
—

 
$
16,156,028

Total on- and off-balance sheet program assets at principal balance
$
5,713,789

 
$
1,929,582

 
$
1,510,575

 
$
7,061,626

 
 
 
—

 
$
16,215,572

(1) 
Excludes the amortization of premiums and discounts on assets consolidated at fair value, originally included in interest income, to reflect core earnings amounts.
(2) 
Includes the reclassification of interest income and interest expense from consolidated trusts owned by third parties to guarantee and commitment fees, to reflect management's view that the net interest income Farmer Mac earns is effectively a guarantee fee.
(3) 
Includes the reclassification of interest expense related to interest rate swaps not designated as hedges, which are included in "Gains/(losses) on financial derivatives and hedging activities" on the consolidated financial statements, to determine the effective funding cost for each operating segment.
(4) 
Includes reconciling adjustments for 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 Securities.
(5) 
Includes directly attributable costs and an allocation of indirectly attributable costs based on staffing.
(6) 
Net adjustments to reconcile to the corresponding income measures: core earnings before income taxes reconciled to income before income taxes; core earnings before preferred stock dividends and attribution of income to non-controlling interest reconciled to net income; and segment core earnings reconciled to net income attributable to common stockholders.