Financial Derivatives (Tables)

3 Months Ended

Mar. 31, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Derivative Instruments in Statement of Financial Position

The following tables summarize information related to Farmer Mac's financial derivatives on a gross basis without giving consideration to master netting arrangements as of March 31, 2019 and December 31, 2018:

Table 4.1

	As of March 31, 2019
			Fair Value						Weighted- Average Pay Rate	Weighted- Average Receive Rate	Weighted- Average Forward Price	Weighted- Average Remaining Term (in years)
	Notional Amount		Asset			(Liability)
	(dollars in thousands)
Fair value hedges:
Interest rate swaps:
Pay fixed non-callable	$	4,085,824	$	1,489		$	(5,981	)	2.49%	2.63%		11.95
Receive fixed non-callable	1,760,200		807			(4,163		)	2.61%	1.88%		1.42
Receive fixed callable	370,000		617			(1		)	2.36%	2.63%		2.48
Cash flow hedges:
Interest rate swaps:
Pay fixed non-callable	373,000		2,043			(144		)	2.40%	2.91%		5.87
No hedge designation:
Interest rate swaps:
Pay fixed non-callable	316,534		281			(11,785		)	3.69%	2.74%		6.00
Receive fixed non-callable	2,886,621		—			—			2.56%	2.36%		0.97
Basis swaps	2,004,000		841			(74		)	2.58%	2.56%		1.22
Treasury futures	12,300					(94		)			123.46
Credit valuation adjustment			(25		)	39
Total financial derivatives	$	11,808,479	$	6,053		$	(22,203	)
Collateral (held)/pledged			(3,900		)	90,420
Net amount			$	2,153		$	68,217

	As of December 31, 2018
			Fair Value						Weighted- Average Pay Rate	Weighted- Average Receive Rate	Weighted- Average Forward Price	Weighted- Average Remaining Term (in years)
	Notional Amount		Asset			(Liability)
	(dollars in thousands)
Fair value hedges:
Interest rate swaps:
Pay fixed non-callable	$	3,097,084	$	3,004		$	(4,326	)	2.42%	2.58%		9.75
Receive fixed non-callable	1,871,200		547			(4,484		)	2.50%	1.84%		1.58
Receive fixed callable	160,000		338			(28		)	2.35%	3.06%		2.91
Cash flow hedges:
Interest rate swaps:
Pay fixed non-callable	373,000		2,441			(99		)	2.40%	2.83%		6.12
No hedge designation:
Interest rate swaps:
Pay fixed non-callable	316,664		796			(10,399		)	3.69%	2.52%		6.25
Receive fixed non-callable	2,347,371		—			—			2.37%	2.10%		0.86
Basis swaps	1,770,026		421			(130		)	2.45%	2.49%		1.27
Treasury futures	20,400		—			(188		)			121.09
Credit valuation adjustment			(60		)	21
Total financial derivatives	$	9,955,745	$	7,487		$	(19,633	)
Collateral (held)/pledged			(1,778		)	47,018
Net amount			$	5,709		$	27,385

Schedule of Net Income/(Expense) Recognized

The following table summarizes the net income/(expense) recognized in the consolidated statements of operations related to derivatives for the three months ended March 31, 2019and 2018:

Table 4.2

	For the Three Months Ended March 31, 2019
	Net Income/(Expense) Recognized in Consolidated Statement of Operations on Derivatives
	Net Interest Income									Non-Interest Income			Total
	Interest Income Farmer Mac Guaranteed Securities and USDA Securities			Interest Income Loans			Total Interest Expense			Losses on financial derivatives
	(in thousands)
Total amounts presented in the consolidated statement of operations:	$	85,411		$	51,397		$	(114,916	)	$	(360	)	$	21,532
Income/(expense) related to interest settlements on fair value hedging relationships:
Recognized on derivatives	1,550			(22		)	(3,218		)	—			(1,690		)
Recognized on hedged items	24,565			4,555			(9,922		)	—			19,198
Discount amortization recognized on hedged items	—			—			(149		)	—			(149		)
Income/(expense) related to interest settlements on fair value hedging relationships	$	26,115		$	4,533		$	(13,289	)	$	—		$	17,359
Gains/(losses) on fair value hedging relationships:
Recognized on derivatives	(58,987		)	(20,082		)	8,978			—			(70,091		)
Recognized on hedged items	59,352			16,237			(8,197		)	—			67,392
Gains/(losses) on fair value hedging relationships	$	365		$	(3,845	)	$	781		$	—		$	(2,699	)
Expense related to interest settlements on cash flow hedging relationships:
Interest settlements reclassified from AOCI into net income on derivatives	—			—			481			—			481
Recognized on hedged items	—			—			(2,688		)	—			(2,688		)
Discount amortization recognized on hedged items	—			—			(1		)	—			(1		)
Expense recognized on cash flow hedges	$	—		$	—		$	(2,208	)	$	—		$	(2,208	)
Losses on financial derivatives not designated in hedge relationships:
Gains on interest rate swaps	—			—			—			2,168			2,168
Interest expense on interest rate swaps	—			—			—			(2,300		)	(2,300		)
Treasury futures	—			—			—			(228		)	(228		)
Losses on financial derivatives not designated in hedge relationships	$	—		$	—		$	—		$	(360	)	$	(360	)

	For the Three Months Ended March 31, 2018
	Net Income/(Expense) Recognized in Consolidated Statement of Operations on Derivatives
	Net Interest Income									Non-Interest Income			Total
	Interest Income Farmer Mac Guaranteed Securities and USDA Securities			Interest Income Loans			Total Interest Expense			Losses on financial derivatives
	(in thousands)
Total amounts presented in the consolidated statement of operations	$	62,430		$	45,653		$	(76,317	)	$	(3,850	)	$	27,916
Income/(expense) related to interest settlements on fair value hedging relationships:
Recognized on derivatives	(1,488		)	(297		)	294			—			(1,491		)
Recognized on hedged items	13,597			1,414			(7,915		)	—			7,096
Discount amortization recognized on hedged items	—			—			(155		)	—			(155		)
Income/(expense) related to interest settlements on fair value hedging relationships	$	12,109		$	1,117		$	(7,776	)	$	—		$	5,450
Gains/(losses) on fair value hedging relationships:
Recognized on derivatives	20,449			6,419			(9,647		)	—			17,221
Recognized on hedged items	(18,948		)	(6,572		)	11,137			—			(14,383		)
Gains/(losses) on fair value hedging relationships	$	1,501		$	(153	)	$	1,490		$	—		$	2,838
Expense related to interest settlements on cash flow hedging relationships:
Interest settlements reclassified from AOCI into net income on derivatives	$	—		$	—		$	(267	)	$	—		$	(267	)
Recognized on hedged items	—			—			(1,780		)	—			(1,780		)
Discount amortization recognized on hedged items	—			—			(2		)	—			(2		)
Expense recognized on cash flow hedges	$	—		$	—		$	(2,049	)	$	—		$	(2,049	)
Losses on financial derivatives not designated in hedging relationships:
Losses on interest rate swaps	$	—		$	—		$	—		$	(2,088	)	$	(2,088	)
Interest expense on interest rate swaps	—			—			—			(1,987		)	(1,987		)
Treasury futures	—			—			—			225			225
Losses on financial derivatives not designated in hedge relationships	$	—		$	—		$	—		$	(3,850	)	$	(3,850	)

Schedule of Hedged Items in Fair Value Hedging Relationships

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 March 31, 2019 and December 31, 2018:

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)
	March 31, 2019			December 31, 2018			March 31, 2019		December 31, 2018
	(in thousands)
Farmer Mac Guaranteed Securities, Available-for-Sale, at fair value	$	3,360,615		$	2,882,919		$	58,445	$	(906	)
Loans held for investment, at amortized cost	726,169			194,617			8,968		(5,287		)
Other Assets	1,981			—			1,981		—
Notes Payable, due after one year(1)(2)	(2,103,633		)	(2,021,356		)	541		8,785

⁽¹⁾  Carrying amount represents amortized cost.

⁽²⁾  Includes $0.2 million and $0.3 million of hedging adjustments on a discontinued hedging relationship as of March 31, 2019 and December 31, 2018, respectively.

Schedule of Credit Exposure to Interest Rate Swap Counterparties

The following table shows Farmer Mac's credit exposure to interest rate swap counterparties as of March 31, 2019 and December 31, 2018:

Table 4.4

	March 31, 2019
	Gross Amount Recognized(1)		Counterparty Netting		Net Amount Presented in the Consolidated Balance Sheet
	(in thousands)
Assets:
Derivatives
Interest rate swap	$	42,551	$	38,417	$	4,134
Liabilities:
Derivatives
Interest rate swap	$	139,843	$	133,793	$	6,050

⁽¹⁾  Gross amount excludes netting arrangements and any adjustment for nonperformance risk, but includes accrued interest.

	December 31, 2018
	Gross Amount Recognized(1)		Counterparty Netting		Net Amount Presented in the Consolidated Balance Sheet
	(in thousands)
Assets:
Derivatives
Interest rate swaps	$	51,267	$	48,124	$	3,143
Liabilities:
Derivatives
Interest rate swaps	$	78,437	$	64,568	$	13,869

⁽¹⁾  Gross amount excludes netting arrangements and any adjustment for nonperformance risk, but includes accrued interest.