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Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2021

Schedule of Consolidation of Variable Interest Entities

Table 1.1


	Consolidation of Variable Interest Entities
	As of March 31, 2021
	Farm & Ranch		USDA Guarantees		Corporate		Total
	(in thousands)
On-Balance Sheet:
Consolidated VIEs:
Loans held for investment in consolidated trusts, at amortized cost	$	1,174,525	$	—	$	—	$	1,174,525
Debt securities of consolidated trusts held by third parties (1)	1,188,521		—		—		1,188,521
Unconsolidated VIEs:
Farmer Mac Guaranteed Securities:
Carrying value (2)	—		32,128		—		32,128
Maximum exposure to loss (3)	—		32,050		—		32,050
Investment securities:
Carrying value (4)	—		—		1,963,903		1,963,903
Maximum exposure to loss (3) (4)	—		—		1,954,583		1,954,583
Off-Balance Sheet:
Unconsolidated VIEs:
Farmer Mac Guaranteed Securities:
Maximum exposure to loss (3) (5)	72,203		284,868		—		357,071

(1)Includes borrower remittances of $14.0 million. The borrower remittances had not been passed through to third party investors as of March 31, 2021.

(2)Includes $0.1 million of unamortized premiums and discounts and fair value adjustments related to the USDA Guarantees line of business.

(3)Farmer Mac uses unpaid principal balance and outstanding face amount of investment securities to represent maximum exposure to loss.

(4)Includes auction-rate certificates, government-sponsored enterprise ("GSE")-guaranteed mortgage-backed securities, and other mission related investments.

(5)The amount under the Farm & Ranch line of business relates to unconsolidated trusts where Farmer Mac determined it was not the primary beneficiary due to shared power with an unrelated party.


	Consolidation of Variable Interest Entities
	As of December 31, 2020
	Farm & Ranch		USDA Guarantees		Corporate		Total
	(in thousands)
On-Balance Sheet:
Consolidated VIEs:
Loans held for investment in consolidated trusts, at amortized cost	$	1,287,045	$	—	$	—	$	1,287,045
Debt securities of consolidated trusts held by third parties (1)	1,323,786		—		—		1,323,786
Unconsolidated VIEs:
Farmer Mac Guaranteed Securities:
Carrying value (2)	—		34,537		—		34,537
Maximum exposure to loss (3)	—		34,456		—		34,456
Investment securities:
Carrying value (4)	—		—		1,918,672		1,918,672
Maximum exposure to loss (3) (4)	—		—		1,909,535		1,909,535
Off-Balance Sheet:
Unconsolidated VIEs:
Farmer Mac Guaranteed Securities:
Maximum exposure to loss (3) (5)	79,312		299,298		—		378,610

(1)Includes borrower remittances of $36.7 million. The borrower remittances had not been passed through to third party investors as of December 31, 2020.

(2)Includes $0.1 million of unamortized premiums and discounts and fair value adjustments related to the USDA Guarantees line of business.

(3)Farmer Mac uses unpaid principal balance and outstanding face amount of investment securities to represent maximum exposure to loss.

(4)Includes auction-rate certificates, asset-backed securities, and government-sponsored enterprise ("GSE")-guaranteed mortgage-backed securities.

(5)The amount under the Farm & Ranch line of business relates to unconsolidated trusts where Farmer Mac determined it was not the primary beneficiary due to shared power with an unrelated party.

Basic and Diluted EPS

The following schedule reconciles basic and diluted EPS for the three months ended March 31, 2021 and 2020:

Table 1.2


	For the Three Months Ended
	March 31, 2021					March 31, 2020
	Net Income		Weighted-Average Shares	$ per Share		Net Income		Weighted-Average Shares	$ per Share
	(in thousands, except per share amounts)
Basic EPS
Net income attributable to common stockholders	$	27,958	10,738	$	2.60	$	9,399	10,712	$	0.88
Effect of dilutive securities(1)
SARs and restricted stock	—		81	(0.02)		—		70	(0.01)
Diluted EPS	$	27,958	10,819	$	2.58	$	9,399	10,782	$	0.87

(1)For the three months ended March 31, 2021 and 2020, SARs and restricted stock of 99,684 and 87,148, respectively, were outstanding but not included in the computation of diluted earnings per share of common stock because they were anti-dilutive. For the three months ended March 31, 2021 and 2020, contingent shares of unvested restricted stock of 18,183 and 12,680, respectively, were outstanding but not included in the computation of diluted earnings per share of common stock because performance conditions had not yet been met.

Schedule of Accumulated Other Comprehensive Income, Net of Tax

The following table presents the changes in accumulated other comprehensive income ("AOCI"), net of tax, by component for the three months ended March 31, 2021 and 2020.

Table 1.3


	As of March 31, 2021								As of March 31, 2020
	Available-for-Sale Securities		Held-to-Maturity Securities		Cash Flow Hedges		Total		Available-for-Sale Securities		Held-to-Maturity Securities		Cash Flow Hedges		Total
	(in thousands)
For the Three Months Ended:
Beginning Balance	$	(13,937)	$	22,829	$	(22,815)	$	(13,923)	$	(43,397)	$	32,845	$	(5,609)	$	(16,161)
Other comprehensive income/(loss) before reclassifications	53,211		—		13,562		66,773		(77,685)		—		(22,668)		(100,353)
Amounts reclassified from AOCI	(783)		(1,704)		1,381		(1,106)		(776)		(4,494)		347		(4,923)
Net comprehensive income/(loss)	52,428		(1,704)		14,943		65,667		(78,461)		(4,494)		(22,321)		(105,276)
Ending Balance	$	38,491	$	21,125	$	(7,872)	$	51,744	$	(121,858)	$	28,351	$	(27,930)	$	(121,437)

Schedule of Reclassification out of Accumulated Other Comprehensive Income

The following table presents other comprehensive income activity, the impact on net income of amounts reclassified from each component of AOCI, and the related tax impact for the three months ended March 31, 2021 and 2020:

Table 1.4


	For the Three Months Ended
	March 31, 2021						March 31, 2020
	Before Tax		Provision (Benefit)		After Tax		Before Tax		Provision (Benefit)		After Tax
	(in thousands)
Other comprehensive income:
Available-for-sale-securities:
Unrealized holding gains/(losses) on available-for-sale securities	$	67,356	$	14,145	$	53,211	$	(98,334)	$	(20,649)	$	(77,685)
Less reclassification adjustments included in:
Net interest income(1)	(984)		(207)		(777)		(969)		(203)		(766)

Other income(2)	(8)		(2)		(6)		(13)		(3)		(10)
Total	$	66,364	$	13,936	$	52,428	$	(99,316)	$	(20,855)	$	(78,461)
Held-to-maturity securities:
Less reclassification adjustments included in:
Net interest income(3)	(2,157)		(453)		(1,704)		(5,688)		(1,194)		(4,494)
Total	$	(2,157)	$	(453)	$	(1,704)	$	(5,688)	$	(1,194)	$	(4,494)
Cash flow hedges
Unrealized gains/(losses) on cash flow hedges	$	17,170	$	3,608	$	13,562	$	(28,695)	$	(6,027)	$	(22,668)
Less reclassification adjustments included in:
Net interest income(4)	1,746		365		1,381		439		92		347
Total	$	18,916	$	3,973	$	14,943	$	(28,256)	$	(5,935)	$	(22,321)
Other comprehensive income/(loss)	$	83,123	$	17,456	$	65,667	$	(133,260)	$	(27,984)	$	(105,276)

(1)Relates to the amortization of unrealized gains on hedged items prior to the application of fair value hedge accounting.

(2)Represents amortization of deferred gains related to certain available-for-sale USDA Securities and Farmer Mac Guaranteed USDA Securities.

(3)Relates to the amortization of unrealized gains or losses prior to the reclassification of these securities from available-for-sale to held-to-maturity. The amortization of unrealized gains or losses reported in AOCI for held-to-maturity securities will be offset by the amortization of the premium or discount created from the transfer into held-to-maturity securities, which occurred at fair value. These unrealized gains or losses will be recorded over the remaining life of the security with no impact on future net income.

(4)Relates to the recognition of unrealized gains and losses on cash flow hedges recorded in AOCI.

Recently Adopted Accounting Guidance


Standard	Description	Date of Adoption	Effect on Consolidated Financial Statements
ASU 2020-04 and 2021-01, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting	The amendments in this Update provide optional guidance for a limited period of time to ease the potential burden in accounting for reference rate reform on financial reporting. They provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.	January 1, 2020	Farmer Mac adopted optional expedients specific to discounting transition on a retrospective basis, and as a result of this election, the discounting transition did not have a material effect on Farmer Mac's financial position, results of operations, or cash flows.

- Definition

Tabular disclosure of the significant judgments and assumptions made in determining whether a variable interest (as defined) held by the entity requires the variable interest entity (VIE) (as defined) to be consolidated and (or) disclose information about its involvement with the VIE, individually or in aggregate (as applicable); the nature of restrictions, if any, on the consolidated VIE's assets and on the settlement of its liabilities reported by an entity in its statement of financial position, including the carrying amounts of such assets and liabilities; the nature of, and changes in, the risks associated with involvement in the VIE; how involvement with the VIE affects the entity's financial position, financial performance, and cash flows; the lack of recourse if creditors (or beneficial interest holders) of the consolidated VIE have no recourse to the general credit of the primary beneficiary (if applicable); the terms of arrangements, giving consideration to both explicit arrangements and implicit variable interests, if any, that could require the entity to provide financial support to the VIE, including events or circumstances that could expose the entity to a loss; the methodology used by the entity for determining whether or not it is the primary beneficiary of the variable interest entity; the significant factors considered and judgments made in determining that the power to direct the activities of a VIE that most significantly impact the VIE's economic performance are shared (as defined); the carrying amounts and classification of assets and liabilities of the VIE included in the statement of financial position; the entity's maximum exposure to loss, if any, as a result of its involvement with the VIE, including how the maximum exposure is determined and significant sources of the entity's exposure to the VIE; a comparison of the carrying amounts of the assets and liabilities and the entity's maximum exposure to loss; information about any liquidity arrangements, guarantees, and (or) other commitments by third parties that may affect the fair value or risk of the entity's variable interest in the VIE; whether or not the entity has provided financial support or other support (explicitly or implicitly) to the VIE that it was not previously contractually required to provide or whether the entity intends to provide that support, including the type and amount of the support and the primary reasons for providing the support; and supplemental information the entity determines necessary to provide.

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