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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2023

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The interim unaudited consolidated financial statements of the Federal Agricultural Mortgage Corporation

("Farmer Mac") and subsidiaries have been prepared pursuant to the rules and regulations of the U.S.

Securities and Exchange Commission ("SEC"). These interim unaudited consolidated financial statements

reflect all normal and recurring adjustments that are, in the opinion of management, necessary to present a

fair statement of the financial position and the results of operations and cash flows of Farmer Mac and

subsidiaries for the interim periods presented. Certain information and footnote disclosures normally

included in the annual consolidated financial statements have been omitted as permitted by SEC rules and

regulations. The December 31, 2022 consolidated balance sheet presented in this report has been derived

from Farmer Mac's audited 2022 consolidated financial statements, as revised. Management believes that

the disclosures are adequate to present fairly the consolidated financial statements as of the dates and for

the periods presented. These interim unaudited consolidated financial statements should be read in

conjunction with the 2022 consolidated financial statements of Farmer Mac and subsidiaries included in

Farmer Mac's Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC

on February 24, 2023. Results for interim periods are not necessarily indicative of those that may be

expected for the fiscal year. Presented below are Farmer Mac's significant accounting policies that contain

updated information for the three and nine months ended September 30, 2023.

Principles of Consolidation

The consolidated financial statements include the accounts of Farmer Mac and its two subsidiaries: (1) Farmer Mac Mortgage Securities Corporation, whose principal activities are to facilitate the purchase and issuance of Farmer Mac Guaranteed Securities; and (2) Farmer Mac II LLC, whose principal activity is the operation of substantially all of the business related to the USDA Securities included in the Agricultural Finance line of business. The consolidated financial statements also include the accounts of Variable Interest Entities ("VIEs") in which Farmer Mac determined itself to be the primary beneficiary.

Table 1.1


	Consolidation of Variable Interest Entities
	As of September 30, 2023
	Agricultural Finance		Treasury		Total
	(in thousands)
On-Balance Sheet:
Consolidated VIEs:
Loans held for investment in consolidated trusts, at amortized cost	$	1,422,854	$	—	$	1,422,854
Debt securities of consolidated trusts held by third parties (1)(2)	1,334,014		—		1,334,014
Unconsolidated VIEs:
Farmer Mac Guaranteed Securities:
Carrying value	39,131		—		39,131
Maximum exposure to loss (3)	38,689		—		38,689
Investment securities:
Carrying value (4)	—		3,532,286		3,532,286
Maximum exposure to loss (3) (4)	—		3,809,871		3,809,871
Off-Balance Sheet:
Unconsolidated VIEs:
Farmer Mac Guaranteed Securities:
Maximum exposure to loss (3) (5)	455,681		—		455,681

(1)Includes borrower remittances of $0.4 million. The borrower remittances had not been passed through to third-party investors as of September 30, 2023.

(2)Includes $89.2 million in unamortized discount related to structured securitization transactions.

(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 Agricultural Finance line of business relates to unconsolidated trusts where it was determined that Farmer Mac was either not the primary beneficiary due to shared power with an unrelated party or a subordinate class majority holder has the unilateral right to remove Farmer Mac as Master Servicer without cause.


	Consolidation of Variable Interest Entities
	As of December 31, 2022
	Agricultural Finance		Treasury		Total
	(in thousands)
On-Balance Sheet:
Consolidated VIEs:
Loans held for investment in consolidated trusts, at amortized cost	$	1,211,576	$	—	$	1,211,576
Debt securities of consolidated trusts held by third parties (1)(2)	1,181,948		—		1,181,948
Unconsolidated VIEs:
Farmer Mac Guaranteed Securities:
Carrying value	28,466		—		28,466
Maximum exposure to loss (3)	31,208		—		31,208
Investment securities:
Carrying value (4)	—		3,138,619		3,138,619
Maximum exposure to loss (3) (4)	—		3,341,427		3,341,427
Off-Balance Sheet:
Unconsolidated VIEs:
Farmer Mac Guaranteed Securities:
Maximum exposure to loss (3) (5)	500,953		—		500,953

(1)Includes borrower remittances of $8.1 million. The borrower remittances had not been passed through to third-party investors as of December 31, 2022.

(2)Includes $37.7 million in unamortized discount related to a structured securitization transaction.

(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.

Earnings Per Common Share

Basic earnings per common share ("EPS") is based on the daily weighted-average number of shares of common stock outstanding. Diluted earnings per common share is based on the daily weighted-average number of shares of common stock outstanding adjusted to include all potentially dilutive stock appreciation rights ("SARs") and unvested restricted stock awards. The following schedule reconciles basic and diluted EPS for the three and nine months ended September 30, 2023 and 2022:

Table 1.2


	For the Three Months Ended
	September 30, 2023					September 30, 2022
	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	$	51,345	10,839	$	4.74	$	34,627	10,799	$	3.21
Effect of dilutive securities(1)
SARs and restricted stock	—		99	(0.05)		—		75	(0.03)
Diluted EPS	$	51,345	10,938	$	4.69	$	34,627	10,874	$	3.18

(1)For the three months ended September 30, 2023 and 2022, SARs and restricted stock of 16,761 and 18,432 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 September 30, 2023 and 2022, contingent shares of unvested restricted stock of 32,469 and 18,535 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.


	For the Nine Months Ended
	September 30, 2023					September 30, 2022
	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	$	132,010	10,825	$	12.20	$	114,352	10,787	$	10.61
Effect of dilutive securities(1)
SARs and restricted stock	—		99	(0.12)		—		88	(0.10)
Diluted EPS	$	132,010	10,924	$	12.08	$	114,352	10,875	$	10.51

(1)For the nine months ended September 30, 2023 and 2022, SARs and restricted stock of 37,990 and 37,120 respectively, were outstanding but not included in the computation of diluted earnings per share of common stock because they were anti-dilutive. For the nine months ended September 30, 2023 and 2022, contingent shares of unvested restricted stock of 32,407 and 18,535 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.

Comprehensive IncomeComprehensive income represents all changes in stockholders' equity except those resulting from investments by or distributions to stockholders, and is comprised of net income and unrealized gains and losses on available-for-sale securities, certain held-to-maturity securities transferred from the available-for-sale classification, and cash flow hedges, net of related taxes.

The following table presents the changes in accumulated other comprehensive income ("AOCI"), net of tax, by component for the three and nine months ended September 30, 2023 and 2022.

Table 1.3


	As of September 30, 2023								As of September 30, 2022
	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	$	(96,607)	$	15,486	$	46,770	$	(34,351)	$	(98,924)	$	16,818	$	32,622	$	(49,484)
Other comprehensive income/(loss) before reclassifications	17,443		(25,199)		10,376		2,620		(33,041)		—		20,277		(12,764)
Amounts reclassified from AOCI	(4)		294		(4,398)		(4,108)		(2)		(492)		(847)		(1,341)
Net comprehensive income/(loss)	17,439		(24,905)		5,978		(1,488)		(33,043)		(492)		19,430		(14,105)
Ending Balance	$	(79,168)	$	(9,419)	$	52,748	$	(35,839)	$	(131,967)	$	16,326	$	52,052	$	(63,589)

For the Nine Months Ended:
Beginning Balance	$	(115,561)	$	16,357	$	48,361	$	(50,843)	$	(6,932)	$	16,153	$	(5,368)	$	3,853
Other comprehensive income/(loss) before reclassifications	36,406		(25,199)		16,277		27,484		(125,027)		—		55,766		(69,261)
Amounts reclassified from AOCI	(13)		(577)		(11,890)		(12,480)		(8)		173		1,654		1,819
Net comprehensive income/(loss)	36,393		(25,776)		4,387		15,004		(125,035)		173		57,420		(67,442)
Ending Balance	$	(79,168)	$	(9,419)	$	52,748	$	(35,839)	$	(131,967)	$	16,326	$	52,052	$	(63,589)

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 and nine months ended September 30, 2023 and 2022:

Table 1.4


	For the Three Months Ended
	September 30, 2023						September 30, 2022
	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	$	22,081	$	4,638	$	17,443	$	(41,824)	$	(8,783)	$	(33,041)
Less reclassification adjustments included in:
Net interest income(1)	—		—		—		—		—		—

Other income(2)	(5)		(1)		(4)		(3)		(1)		(2)
Total	$	22,076	$	4,637	$	17,439	$	(41,827)	$	(8,784)	$	(33,043)
Held-to-maturity securities:
Change in fair value(3)	$	(31,898)	$	(6,699)	$	(25,199)	$	—	$	—	$	—
Less reclassification adjustments included in:
Net interest income(4)	373		79		294		(622)		(130)		(492)
Total	$	(31,525)	$	(6,620)	$	(24,905)	$	(622)	$	(130)	$	(492)
Cash flow hedges
Unrealized gains on cash flow hedges	$	13,135	$	2,759	$	10,376	$	25,668	$	5,391	$	20,277
Less reclassification adjustments included in:
Net interest income(5)	(5,569)		(1,171)		(4,398)		(1,072)		(225)		(847)
Total	$	7,566	$	1,588	$	5,978	$	24,596	$	5,166	$	19,430
Other comprehensive loss	$	(1,883)	$	(395)	$	(1,488)	$	(17,853)	$	(3,748)	$	(14,105)

(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)Represents the accumulated unrealized loss on the AgVantage Securities transferred from available-for-sale to held-to-maturity.

(4)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.

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


	For the Nine Months Ended
	September 30, 2023						September 30, 2022
	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	$	46,084	$	9,678	$	36,406	$	(158,263)	$	(33,236)	$	(125,027)
Less reclassification adjustments included in:
Net interest income(1)	—		—		—		—		—		—

Other income(2)	(16)		(3)		(13)		(10)		(2)		(8)
Total	$	46,068	$	9,675	$	36,393	$	(158,273)	$	(33,238)	$	(125,035)
Held-to-maturity securities:
Change in fair value(3)	$	(31,898)	$	(6,699)	$	(25,199)	$	—	$	—	$	—
Less reclassification adjustments included in:
Net interest income(4)	(730)		(153)		(577)		220		47		173
Total	$	(32,628)	$	(6,852)	$	(25,776)	$	220	$	47	$	173
Cash flow hedges
Unrealized gains on cash flow hedges	$	20,604	$	4,327	$	16,277	$	70,590	$	14,824	$	55,766
Less reclassification adjustments included in:
Net interest income(5)	(15,051)		(3,161)		(11,890)		2,094		440		1,654
Total	$	5,553	$	1,166	$	4,387	$	72,684	$	15,264	$	57,420
Other comprehensive income/(loss)	$	18,993	$	3,989	$	15,004	$	(85,369)	$	(17,927)	$	(67,442)

(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)Represents the accumulated unrealized loss on the AgVantage Securities transferred from available-for-sale to held-to-maturity.

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

New Accounting StandardsRecently 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	During the second quarter 2023, Farmer Mac adopted optional expedients including those relating to qualifying hedging relationships and contract modification relief, and as of June 30, 2023, has no further variable-rate exposure to LIBOR. To date, these elections did not have a material effect on Farmer Mac's financial position, results of operations, or cash flows. Farmer Mac does not expect to elect further expedients through the ending date of December 31, 2024.
ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848	The amendments in this Update deferred the sunset date in Topic 848 from December 31, 2022 to December 31, 2024.	December 21, 2022	Farmer Mac does not expect to elect further expedients through the ending date of December 31, 2024.
ASU 2022-02, Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures	The Update addresses and amends areas identified by the Financial Accounting Standards Board as part of its post-implementation review of the accounting standard that introduced the current expected credit losses (“CECL”) model. The amendments eliminate the accounting guidance for troubled debt restructurings by creditors that have adopted the CECL model and enhance the disclosure requirements for loan refinancings and restructurings made with borrowers experiencing financial difficulty. In addition, the amendments require disclosure of current-period gross write offs for financing receivables and net investment in leases by year of origination in the vintage disclosures.	January 1, 2023	The adoption of this Update did not have a material effect on Farmer Mac's financial position, results of operations, or cash flows.
ASU 2022-01, Fair Value Hedging - Portfolio Layer Method	The Update introduces the portfolio layer method, which expands the current single-layer method to allow multiple hedged layers of a single closed portfolio under the method (previously named, last-of-layer method). Additionally, it expands the scope of the portfolio layer method to include non-prepayable assets, specifies eligible hedging instruments in a single-layer hedge, provides additional guidance on the accounting for and disclosure of hedge basis adjustments under the portfolio layer method, specifies how hedge basis adjustments should be considered when determining credit losses for the assets included in the closed portfolio, and provides that an entity may reclassify HTM debt securities identified within 30 days of the date of adoption to AFS if the entity applies portfolio layer method hedging to those debt securities.	January 1, 2023	Farmer Mac adopted this guidance as of January 1, 2023. Farmer Mac does not currently hedge interest rate risk for single closed portfolios of financial assets, so adoption of this guidance had no effect on Farmer Mac's financial condition, results of operations, cash flows, or disclosures given current strategies.

(d) Reclassifications

Certain reclassifications of prior period information were made to conform to the current period presentation. The reclassifications of prior period information were not material to the consolidated financial statements.