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Item 1. Financial Statements

2021-05-06 compared with 2020-11-09 · 296 added, 728 removed, 1062 unchanged (49% of the section changed)

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

(in thousands)

4 unchanged sentences

Held-to-maturity, at amortized cost 45,032 45,032

Other investments 403 —

Total Investment Securities 3,855,067 3,898,724

8 unchanged sentences

Total USDA Securities 2,495,078 2,480,321

Loans held for sale, at lower of cost or fair value 20,000 —

Loans held for investment, at amortized cost 7,341,912 7,261,933

17 unchanged sentences

Accounts payable and accrued expenses 36,770 28,879

Deferred tax liability, net 521 —

Reserve for losses 2,333 3,277

2 unchanged sentences

Preferred stock:

Series A, par value $ 25 per share, 2,400,000 shares authorized, issued and outstanding as of December 31, 2019 (redemption value $ 60,000,000 )

Series C, par value $ 25 per share, 3,000,000 shares authorized, issued and outstanding

3 unchanged sentences

Series E, par value $ 25 per share, 3,180,000 shares authorized, issued and outstanding

77,003 77,003

Series F, par value $ 25 per share, 4,800,000 shares authorized, issued and outstanding

116,160 116,160

Common stock:

3 unchanged sentences

Additional paid-in capital 123,718 122,899

Accumulated other comprehensive loss, net of tax ( 53,837 ) ( 16,161 )

Accumulated other comprehensive income/(loss), net of tax 51,744 ( 13,923 )

Retained earnings 528,068 509,560

4 unchanged sentences

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended For the Nine Months Ended

September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019

For the Three Months Ended

March 31, 2021 March 31, 2020

(in thousands, except per share amounts)

10 unchanged sentences

Guarantee and commitment fees 3,030 3,196

(Losses)/gains on financial derivatives ( 564 ) ( 7,360 ) ( 3,339 ) 1,193

Gains/(losses) on financial derivatives 4,293 ( 9,298 )

(Losses)/gains on trading securities ( 13 ) 106

Gains on sale of real estate owned — 485

(Provision)/release of reserve for losses ( 547 ) 137 ( 540 ) 424

Release of/(provision for) reserve for losses 944 ( 393 )

Other income 583 816

4 unchanged sentences

Regulatory fees 750 725

Real estate owned operating costs, net — — — 64

Operating expenses 18,881 16,215

3 unchanged sentences

Preferred stock dividends ( 5,269 ) ( 3,431 )

Loss on retirement of preferred stock ( 1,667 ) — ( 1,667 ) ( 1,956 )

Net income attributable to common stockholders $ 27,958 $ 9,399

5 unchanged sentences

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Three Months Ended For the Nine Months Ended

September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019

For the Three Months Ended

March 31, 2021 March 31, 2020

(in thousands)

17 unchanged sentences

Cumulative effect adjustment from adoption of current expected credit loss standard — — — — — — ( 2,099 ) ( 2,099 )

Balance as of January 1, 2020 9,400 $ 228,374 10,712 $ 10,712 $ 119,304 $ ( 16,161 ) $ 454,948 $ 797,177

Balances as of January 1, 2020 9,400 $ 228,374 10,712 $ 10,712 $ 119,304 $ ( 16,161 ) $ 454,948 $ 797,177

Net Income — — — — — — 12,830 12,830

9 unchanged sentences

Balance as of March 31, 2020 9,400 $ 228,374 10,723 $ 10,723 $ 120,412 $ ( 121,437 ) $ 455,545 $ 693,617

Net income — — — — — — 35,626 35,626

Other comprehensive income, net of tax — — — — — 29,940 — 29,940

Cash dividends:

Preferred stock — — — — — — ( 3,939 ) ( 3,939 )

Common stock (cash dividend of $ 0.80 per share)

— — — — — — ( 8,585 ) ( 8,585 )

Issuance of Series E preferred stock 3,180 77,003 — — — — — 77,003

Issuance of Class C common stock — — 10 10 17 — — 27

Stock-based compensation cost — — — — 719 — — 719

Other stock-based award activity — — — — ( 292 ) — — ( 292 )

Balance as of June 30, 2020 12,580 $ 305,377 10,733 $ 10,733 $ 120,856 $ ( 91,497 ) $ 478,647 $ 824,116

Net income — — — — — — 25,492 25,492

Other comprehensive income, net of tax — — — — — 37,660 — 37,660

Cash dividends:

Preferred stock — — — — — — ( 5,166 ) ( 5,166 )

Common stock (cash dividend of $ 0.80 per share)

— — — — — — ( 8,589 ) ( 8,589 )

Issuance of Series F preferred stock 4,800 116,160 — — — — — 116,160

Redemption of Series A preferred stock ( 2,400 ) ( 58,333 ) — — — — — ( 58,333 )

Loss on retirement of preferred stock — — — — — — ( 1,667 ) ( 1,667 )

Issuance of Class C common stock — — 3 3 8 — — 11

Stock-based compensation cost — — — — 753 — — 753

Other stock-based award activity — — — — ( 92 ) — — ( 92 )

Balance as of September 30, 2020 14,980 $ 363,204 10,736 $ 10,736 $ 121,525 $ ( 53,837 ) $ 488,717 $ 930,345

Additional Other

Preferred Stock Common Stock Paid-In Comprehensive Retained Total

Shares Amount Shares Amount Capital Income/(Loss) Earnings Equity

(in thousands)

Balance as of December 31, 2020 14,980 $ 363,204 10,737 $ 10,737 $ 122,899 $ ( 13,923 ) $ 509,560 $ 992,477

Net Income — — — — — — 33,227 33,227

Other comprehensive loss, net of tax — — — — — ( 3,702 ) — ( 3,702 )

Other comprehensive income, net of tax — — — — — 65,667 — 65,667

Cash dividends:

6 unchanged sentences

Balance as of March 31, 2021 14,980 $ 363,204 10,758 $ 10,758 $ 123,718 $ 51,744 $ 528,068 $ 1,077,492

Net income — — — — — — 34,045 34,045

Other comprehensive loss, net of tax — — — — — ( 34,097 ) — ( 34,097 )

Cash dividends:

Preferred stock — — — — — — ( 3,785 ) ( 3,785 )

Common stock (cash dividend of $ 0.70 per share)

— — — — — — ( 7,490 ) ( 7,490 )

Issuance of Series D Preferred Stock 4,000 96,659 — — — 96,659

Redemption of Series B Preferred Stock ( 3,000 ) ( 73,044 ) — — — — — ( 73,044 )

Loss on retirement of preferred stock — — — — — — ( 1,956 ) ( 1,956 )

Issuance of Class C Common Stock — — 11 11 3 — — 14

Stock-based compensation cost — — — — 533 — — 533

Other stock-based award activity — — — — ( 435 ) — — ( 435 )

Balance as of June 30, 2019 9,400 $ 228,374 10,700 $ 10,700 $ 118,942 $ ( 12,843 ) $ 428,569 $ 773,742

Net Income — — — — — — 17,833 17,833

Other comprehensive loss, net of tax — — — — — ( 30,181 ) — ( 30,181 )

Cash dividends:

Preferred stock — — — — — — ( 3,427 ) ( 3,427 )

Common stock (cash dividend of $ 0.70 per share)

— — — — — — ( 7,496 ) ( 7,496 )

Issuance of Class C Common Stock — — 10 10 19 — — 29

Stock-based compensation cost — — — — 407 — — 407

Other stock-based award activity — — — — ( 648 ) — — ( 648 )

Balance as of September 30, 2019 9,400 $ 228,374 10,710 $ 10,710 $ 118,720 $ ( 43,024 ) $ 435,479 $ 750,259

The accompanying notes are an integral part of these consolidated financial statements.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended

September 30, 2020 September 30, 2019

( unaudited )

For the Three Months Ended

March 31, 2021 March 31, 2020

(in thousands)

6 unchanged sentences

Gain on sale of real estate owned — ( 485 )

Total provision for allowance for losses 5,083 650

Total (release)/provision for allowance for losses ( 31 ) 3,831

Excess tax benefits related to stock-based awards 190 ( 508 )

1 unchanged sentence

Stock-based compensation expense 1,665 1,293

Purchases of loans held for sale ( 59,150 ) —

Proceeds from the sale of loans held for sale 15,000 —

Proceeds from repayment of loans purchased as held for sale 25,374 20,674

5 unchanged sentences

Other liabilities ( 322 ) 2,884

Net cash used in operating activities ( 225,408 ) ( 138,076 )

Net cash provided by/(used in) operating activities 397,796 ( 330,311 )

Cash flows from investing activities:

Purchases of available-for-sale investment securities ( 400,701 ) ( 704,306 )

Purchases of other investment securities ( 403 ) —

Purchases of Farmer Mac Guaranteed Securities and USDA Securities ( 599,833 ) ( 657,959 )

6 unchanged sentences

Proceeds from sale of real estate owned — 2,191

Net cash used in investing activities ( 1,550,837 ) ( 2,062,969 )

Net cash provided by/(used in) investing activities 64,598 ( 426,895 )

Cash flows from financing activities:

5 unchanged sentences

Proceeds from common stock issuance 12 19

Retirement of preferred stock ( 60,000 ) ( 75,000 )

Proceeds from preferred stock issuance, net of stock issuance costs 193,163 96,659

Tax payments related to share-based awards ( 126 ) ( 189 )

1 unchanged sentence

Dividends paid on common and preferred stock ( 14,719 ) ( 12,002 )

Net cash provided by financing activities 2,082,456 2,363,730

Net cash (used in)/provided by financing activities ( 483,794 ) 1,384,410

Net change in cash and cash equivalents ( 21,400 ) 627,204

5 unchanged sentences

Reclassification of defaulted loans from loans held for investment in consolidated trusts to loans held for investment 23,463 4,742

Reclassification of loans held for sale to loans held for investment 24,150 —

Capitalized interest 782 —

4 unchanged sentences

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.

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, 2019 consolidated balance sheet presented in this report has been derived from Farmer Mac's audited 2019 consolidated financial statements.

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 2019 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, 2019, as filed with the SEC on February 25, 2020.

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, 2020.

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

The December 31, 2020 consolidated balance sheet presented in this report has been derived

from Farmer Mac's audited 2020 consolidated financial statements.

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 2020 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, 2020, as filed with the SEC

on February 25, 2021.

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 months ended March 31, 2021.

Principles of Consolidation

3 unchanged sentences

The consolidated financial statements also include the accounts of Variable Interest Entities ("VIEs") in which Farmer Mac determined itself to be the primary beneficiary .

The following tables present, by line of business, details about the consolidation of VIEs:

Consolidation of Variable Interest Entities

As of September 30, 2020

As of March 31, 2021

Farm & Ranch USDA Guarantees Corporate Total

22 unchanged sentences

(1) Includes borrower remittances of $ 14.0 million.

The borrower remittances had not been passed through to third party investors as of September 30, 2020.

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, asset-backed securities, and government-sponsored enterprise ("GSE")-guaranteed mortgage-backed securities.

(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.

33 unchanged sentences

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, 2020 and 2019:

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

For the Three Months Ended

September 30, 2020 September 30, 2019

Income Weighted-Average Shares $ per

(in thousands, except per share amounts)

Net income attributable to common stockholders $ 18,659 10,734 $ 1.74 $ 14,406 10,706 $ 1.34

Effect of dilutive securities (1)

SARs and restricted stock — 51 ( 0.01 ) — 70 ( 0.01 )

Diluted EPS $ 18,659 10,785 $ 1.73 $ 14,406 10,776 $ 1.33

(1) For the three months ended September 30, 2020 and 2019, SARs and restricted stock of 66,445 and 26,768 , 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, 2020 and 2019, contingent shares of unvested restricted stock of 12,680 and 8,414 , 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, 2020 September 30, 2019

March 31, 2021 March 31, 2020

Income Weighted-Average Shares $ per

5 unchanged sentences

Diluted EPS $ 27,958 10,819 $ 2.58 $ 9,399 10,782 $ 0.87

(1) For the nine months ended September 30, 2020 and 2019, SARs and restricted stock of 78,963 and 48,801 , 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, 2020 and 2019, contingent shares of unvested restricted stock of 12,680 and 10,994 , 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.

(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.

(b) Comprehensive Income

Comprehensive 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, 2020 and 2019:

As of September 30, 2020 As of September 30, 2019

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.

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

6 unchanged sentences

Ending Balance $ 38,491 $ 21,125 $ ( 7,872 ) $ 51,744 $ ( 121,858 ) $ 28,351 $ ( 27,930 ) $ ( 121,437 )

For the Nine Months Ended:

Beginning Balance $ ( 43,397 ) $ 32,845 $ ( 5,609 ) $ ( 16,161 ) $ ( 25,360 ) $ 43,443 $ 6,873 $ 24,956

Other comprehensive loss before reclassifications ( 5,210 ) — ( 24,684 ) ( 29,894 ) ( 37,308 ) — ( 16,679 ) ( 53,987 )

Amounts reclassified from AOCI ( 2,338 ) ( 8,459 ) 3,015 ( 7,782 ) ( 2,407 ) ( 10,591 ) ( 995 ) ( 13,993 )

Net comprehensive loss ( 7,548 ) ( 8,459 ) ( 21,669 ) ( 37,676 ) ( 39,715 ) ( 10,591 ) ( 17,674 ) ( 67,980 )

Ending Balance $ ( 50,945 ) $ 24,386 $ ( 27,278 ) $ ( 53,837 ) $ ( 65,075 ) $ 32,852 $ ( 10,801 ) $ ( 43,024 )

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, 2020 and 2019:

For the Three Months Ended

September 30, 2020 September 30, 2019

March 31, 2021 March 31, 2020

Before Tax Provision (Benefit) After Tax Before Tax Provision (Benefit) After Tax

27 unchanged sentences

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

For the Nine Months Ended

September 30, 2020 September 30, 2019

Before Tax Provision (Benefit) After Tax Before Tax Provision (Benefit) After Tax

(in thousands)

Other comprehensive income:

Available-for-sale-securities:

Unrealized holding losses on available-for-sale securities $ ( 6,596 ) $ ( 1,386 ) $ ( 5,210 ) $ ( 47,225 ) $ ( 9,917 ) $ ( 37,308 )

Less reclassification adjustments included in:

Net interest income (1)

( 2,916 ) ( 612 ) ( 2,304 ) ( 2,870 ) ( 603 ) ( 2,267 )

Other income (2)

( 42 ) ( 8 ) ( 34 ) ( 177 ) ( 37 ) ( 140 )

Total $ ( 9,554 ) $ ( 2,006 ) $ ( 7,548 ) $ ( 50,272 ) $ ( 10,557 ) $ ( 39,715 )

Held-to-maturity securities:

Less reclassification adjustments included in:

Net interest income (3)

( 10,707 ) ( 2,248 ) ( 8,459 ) ( 13,406 ) ( 2,815 ) ( 10,591 )

Total $ ( 10,707 ) $ ( 2,248 ) $ ( 8,459 ) $ ( 13,406 ) $ ( 2,815 ) $ ( 10,591 )

Cash flow hedges

Unrealized losses on cash flow hedges $ ( 31,246 ) $ ( 6,562 ) $ ( 24,684 ) $ ( 21,113 ) $ ( 4,434 ) $ ( 16,679 )

Less reclassification adjustments included in:

Net interest income (4)

3,817 802 3,015 ( 1,260 ) ( 265 ) ( 995 )

Total $ ( 27,429 ) $ ( 5,760 ) $ ( 21,669 ) $ ( 22,373 ) $ ( 4,699 ) $ ( 17,674 )

Other comprehensive loss $ ( 47,690 ) $ ( 10,014 ) $ ( 37,676 ) $ ( 86,051 ) $ ( 18,071 ) $ ( 67,980 )

(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.

On January 1, 2020, Farmer Mac adopted Accounting Standards Update 2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments, ("CECL").

Under CECL, Farmer Mac's allowance for credit losses represents the difference between the carrying amount of the related financial instruments and the present value of their expected cash flows discounted at their effective interest rates, as of the respective balance sheet date.

Under CECL, Farmer Mac's reserve for credit losses represents the difference between the outstanding amount of off-balance sheet credit exposures and the present value of their expected cash flows discounted at their effective interest rates.

Farmer Mac maintains an allowance for credit losses to cover current expected credit losses as of the balance sheet date for on-balance sheet investment securities, loans held for investment, and Farmer Mac Guaranteed Securities (collectively referred to as "allowance for losses").

Additionally, Farmer Mac maintains a reserve for credit losses to cover current expected credit losses as of the balance sheet date for off-balance sheet loans underlying LTSPCs and off-balance sheet Farmer Mac Guaranteed Securities (collectively referred to as "reserve for losses").

Both the allowance for losses and reserve for losses are based on historical information and reasonable and supportable forecasts.

Farmer Mac has never experienced a credit loss in its Rural Utilities line of business.

Upon the adoption of CECL, Farmer Mac is now required to measure its expected credit losses for the expected life of all financial instruments, including its Rural Utilities loans.

To estimate expected credit losses on these loans, Farmer Mac relies upon industry historical credit loss data from ratings agencies and publicly available information as disclosed in the securities filings of other major lenders who serve the utilities industry.

The allowance for losses increases through periodic provisions for loan losses that are charged against net interest income and the reserve for losses increases through provisions for losses that are charged to non-interest expense.

Both the allowance for losses and reserve for losses are decreased by charge-offs for realized losses, net of recoveries.

Releases from the allowance for losses or reserve for losses occur when the estimate of expected credit losses as of the end of a period is less than the estimate at the beginning of the period.

The total allowance for losses consists of the allowance for losses and the reserve for losses.

Farmer Mac records a charge-off against the allowance for losses principally when a loss has been confirmed through the receipt of assets, generally the underlying collateral, in full satisfaction of the loan.

The loss equals the excess of the recorded investment in the loan over the fair value of the collateral less estimated selling costs.

Estimation Methodology

Farmer Mac bases its methodology for determining its current estimate of expected losses on a statistical model, which incorporates credit loss history and reasonable and supportable forecasts.

Farmer Mac's estimation methodology is comprised of the following key components:

• An economic model for each portfolio, including Farm & Ranch, Rural Utilities, and Institutional Credit;

• A migration matrix for each portfolio that reasonably predicts the movement of each financial asset among various risk categories over the course of each asset's expected life.

The migration matrix forms the basis for our estimate of the probability of default of each financial asset;

• A loss-given-default ("LGD") model that reasonably predicts the amount of loss that Farmer Mac would incur upon the default of each financial asset;

• An economic factor forecast that updates the migration matrix model and the LGD model with current assumptions for the economic indicators that Farmer Mac has determined are most correlated with or relevant to the performance of each portfolio of assets;

including Gross Domestic Product ("GDP"), credit spreads, unemployment rates, land values, and commodity prices;

• A discounted cash flow analysis, which relies upon each of the above model outputs, plus the contractual terms of each financial asset, and the effective interest rate of each financial asset.

Management evaluates these assumptions by considering many relevant factors, including:

• economic conditions;

• geographic and agricultural commodity/product concentrations in the portfolio;

• the credit profile of the portfolio, including risk ratings and financial metrics;

• delinquency trends of the portfolio;

• historical charge-off and recovery activities of the portfolio;

• other factors to capture current portfolio trends and characteristics that differ from historical experience.

Management believes that its methodology produces a reasonable estimate of expected credit losses, as of the balance sheet date, for the expected life of all of its financial assets.

Allowance for Loss on Available-for-Sale (AFS) Securities

To measure current expected credit losses on impaired AFS securities, Farmer Mac first considers those impaired securities that:

1) Farmer Mac does not intend to sell, and 2) it is not more likely than not that Farmer Mac will be required to sell before recovering its amortized cost basis.

In assessing whether a credit loss exists, Farmer Mac compares the present value, discounted at the security's effective interest rate, of cash flows expected to be collected from an impaired AFS debt security to its amortized cost basis.

If the present value of cash flows expected to be collected is less than the amortized cost basis of the impaired security, a credit loss exists and Farmer Mac records an allowance for loss for that credit loss.

However, the amount of that allowance is limited by the amount that the security’s fair value is less than its amortized cost basis.

Accrued interest receivable is recorded separately on the Consolidated Balance Sheet, and the allowance for credit losses excludes uncollectible accrued interest receivable.

Collateral Dependent Assets ("CDAs")

CDAs are loans, loans underlying LTSPCs, or off-balance sheet credit exposures in which the borrower is either in foreclosure or is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral by Farmer Mac.

Farmer Mac estimates the current expected credit loss on CDAs based upon the appraised value of the collateral, the costs to sell it, and any applicable credit protection such as a guarantee.

COVID-19 Payment Deferments

The Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was signed into law on March 27, 2020.

Section 4013 of the CARES Act titled “Temporary Relief from Troubled Debt Restructurings” provides financial institutions the option to temporarily suspend certain requirements under U.S.

GAAP related to troubled debt restructurings (“TDRs”) for a limited period of time to account for the effects of the novel coronavirus disease 2019 ("COVID-19").

On April 10, 2020, Farmer Mac’s prudential regulator, the Office of Secondary Market Oversight (OSMO) within the Farm Credit Administration (FCA), issued guidance to Farmer Mac on loan servicing and reporting TDRs for lines of business affected by the COVID-19 outbreak.

This guidance was consistent with the guidance provided by other financial regulatory agencies and the Financial Accounting Standards Board that short-term modifications made on a good faith basis in response to the COVID-19 national emergency are not TDRs when the borrower was not past due on loan payments before the March 13, 2020 presidential proclamation declaring the COVID-19 outbreak a national emergency.

During second quarter 2020, Farmer Mac implemented the guidance from FCA by granting up to 6-month payment deferments to borrowers who have been economically impacted by COVID-19.

Farmer Mac deems loans under a COVID-19 payment deferment not to be past due and continues to accrue interest on those loans.

Furthermore, Farmer Mac does not consider a payment deferment on any such loan to be a troubled debt restructuring.

For the purpose of estimating expected credit losses on Farm & Ranch loans held for investment, Farmer Mac does consider payment deferments along with other available credit and economic information that pertains to that portfolio.

(d) New Accounting Standards

Recently Adopted Accounting Guidance

Standard Description Date of Adoption Effect on Consolidated Financial Statements

ASU 2016-13 , Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments

This Update required entities to measure all expected credit losses for financial assets held at amortized cost at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts, as well as requiring entities to use forward-looking information to form their credit loss estimates.

January 1, 2020 In first quarter 2020 Farmer Mac adopted the new guidance.

The cumulative-effect adjustment to retained earnings as of January 1, 2020 reflected application of the new guidance and did not have a material effect on Farmer Mac's financial position, results of operations, or cash flows.

For more information on the transition adjustment see Table 1.5 below.

ASU 2017-08 , Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20):

Premium Amortization on Purchased Callable Debt Securities

The amendments in this Update shorten the amortization period for certain callable debt securities held at a premium by requiring the premium to be amortized to the earliest call date.

There is no required accounting change for securities held at a discount in this Update.

January 1, 2020 The adoption of this Update did not have a material effect on Farmer Mac's financial position, results of operations, or cash flows.

ASU 2018-13 , Fair Value Measurement (Topic 820):

Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement

The amendments in this Update modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurements, including the consideration of costs and benefits.

Certain disclosure requirements were either removed, modified, or added.

January 1, 2020 The adoption of this Update did not have a material effect on Farmer Mac's financial position, results of operations, or cash flows.

The following table presents the impact of adopting CECL on January 1, 2020 on our allowance and retained earnings:

December 31, 2019 Transition Adjustment January 1, 2020

(in thousands)

Farm & Ranch:

Loans $ 10,454 $ ( 3,909 ) $ 6,545

Long-term standby purchase commitments and guarantees 2,164 ( 148 ) 2,016

Rural Utilities:

Loans — 5,378 5,378

Long-term standby purchase commitments — 1,011 1,011

Farmer Mac Guaranteed Securities:

AgVantage — 315 315

Investment Securities — 9 9

Total Allowance $ 12,618 $ 2,656 $ 15,274

Retained Earnings $ 457,047 $ ( 2,099 ) $ 454,948

Recently Issued Accounting Guidance, Not Yet Adopted Within Our Consolidated Financial Statements

Standard Description Date of Planned Adoption Effect on Consolidated Financial Statements

ASU 2020-04 , Reference Rate Reform (Topic 848):

ASU 2020-04 and 2021-01 , Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting

1 unchanged sentence

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.

The amendments in this Update are effective for all entities as of March 12, 2020 through December 31, 2022.

Farmer Mac is currently evaluating the impact of the discontinuation of LIBOR on the consolidated financial statements and the applicability of the optional guidance provided by this Update.

(e) Reclassifications

Certain reclassifications of prior period information were made to conform to the current period presentation.

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.

INVESTMENT SECURITIES

The following tables set forth information about Farmer Mac's investment securities as of September 30, 2020 and December 31, 2019:

As of September 30, 2020

The following tables set forth information about Farmer Mac's available-for-sale and held-to-maturity investment securities as of March 31, 2021 and December 31, 2020:

As of March 31, 2021

Amount Outstanding Unamortized Premium/(Discount) Amortized

5 unchanged sentences

Floating rate auction-rate certificates backed by Government guaranteed student loans $ 19,700 $ — $ 19,700 $ ( 61 ) $ — $ ( 493 ) $ 19,146

Floating rate asset-backed securities 9,205 — 9,205 — — ( 4 ) 9,201

Floating rate Government/GSE guaranteed mortgage-backed securities 2,378,471 ( 35 ) 2,378,436 — 12,059 ( 2,937 ) 2,387,558

6 unchanged sentences

45,032 — 45,032 — 1,552 — 46,584

Total investment securities $ 3,558,267 $ 9,439 $ 3,567,706 $ ( 37 ) $ 14,462 $ ( 3,756 ) $ 3,578,375

(1) Amounts presented exclude $ 5.7 million of accrued interest receivable on investment securities as of September 30, 2020.

Total held-to-maturity $ 45,032 $ — $ 45,032 $ — $ 1,552 $ — $ 46,584

(1) Amounts presented exclude $ 6.4 million of accrued interest receivable on investment securities as of March 31, 2021.

(2) Represents the amount of impairment that has resulted from credit-related factors, and therefore was recognized in the consolidated statement of operations as a provision for losses.

Amount excludes unrealized losses relating to non-credit factors.

(3) The held-to-maturity investment securities had a weighted average yield of 1.5 % as of September 30, 2020.

(3) The held-to-maturity investment securities had a weighted average yield of 1.5 % as of March 31, 2021.

As of December 31, 2020

Amount Outstanding Unamortized Premium/(Discount) Amortized

Cost Unrealized

Allowance for losses (2)

Gains Unrealized

12 unchanged sentences

45,032 — 45,032 — 1,201 — 46,233

Total investment securities $ 3,005,080 $ 1,382 $ 3,006,462 $ 4,912 $ ( 5,546 ) $ 3,005,828

Total held-to-maturity $ 45,032 $ — $ 45,032 $ — $ 1,201 $ — $ 46,233

(1) Amounts presented exclude $ 9.0 million of accrued interest receivable on investment securities as of December 31, 2020.

(2) Represents the amount of impairment that has resulted from credit-related factors, and therefore was recognized in the consolidated statement of operations as a provision for losses.

Amount excludes unrealized losses relating to non-credit factors.

(3) The held-to-maturity investment securities had a weighted average yield of 1.5 % as of December 31, 2020.

Farmer Mac did not sell any securities from its available-for-sale investment portfolio during the three and nine months ended September 30, 2020 and 2019.

As of September 30, 2020 and December 31, 2019, unrealized losses on available-for-sale investment securities were as follows:

As of September 30, 2020

Farmer Mac did not sell any securities from its available-for-sale investment portfolio during the three months ended March 31, 2021 and 2020.

As of March 31, 2021 and December 31, 2020, unrealized losses on available-for-sale investment securities were as follows:

As of March 31, 2021

Available-for-Sale Securities

6 unchanged sentences

Floating rate auction-rate certificates backed by Government guaranteed student loans $ — $ — $ 19,146 $ ( 493 )

Floating rate asset-backed securities — — 6,873 ( 4 )

Floating rate Government/GSE guaranteed mortgage-backed securities 142,747 ( 434 ) 293,876 ( 2,503 )

18 unchanged sentences

Number of securities in loss position 27 62

The unrealized losses presented above are principally due to a general widening of market spreads and changes in the levels of interest rates from the dates of acquisition to September 30, 2020 and December 31, 2019, as applicable.

The unrealized losses presented above are principally due to a general widening of market spreads and changes in the levels of interest rates from the dates of acquisition to March 31, 2021 and December 31, 2020, as applicable.

The resulting decrease in fair values reflects an increase in the perceived risk by the financial markets related to those securities.

As of both September 30, 2020 and December 31, 2019, all of the investment securities in an unrealized loss position either were backed by the full faith and credit of the U.S.

As of both March 31, 2021 and December 31, 2020, all of the investment securities in an unrealized loss position either were backed by the full faith and credit of the U.S.

government or had credit ratings of at least "AA+."

Securities in unrealized loss positions for 12 months or longer have a fair value as of September 30, 2020 that is, on average, approximately 99.2 % of their amortized cost basis.

Securities in unrealized loss positions for 12 months or longer have a fair value as of March 31, 2021 that is, on average, approximately 99.1 % of their amortized cost basis.

Farmer Mac believes that all of these unrealized losses are recoverable within a reasonable period of time by way of maturity or changes in credit spreads.

The amortized cost, fair value, and weighted-average yield of available-for-sale investment securities by remaining contractual maturity as of September 30, 2020 are set forth below.

The amortized cost, fair value, and weighted-average yield of available-for-sale investment securities by remaining contractual maturity as of March 31, 2021 are set forth below.

Asset-backed and mortgage-backed securities are included based on their final maturities, although the actual maturities may differ due to prepayments of the underlying assets.

As of September 30, 2020

As of March 31, 2021

Available-for-Sale Securities

7 unchanged sentences

FARMER MAC GUARANTEED SECURITIES AND USDA SECURITIES

The following tables set forth information about on-balance sheet Farmer Mac Guaranteed Securities and USDA Securities as of September 30, 2020 and December 31, 2019:

As of September 30, 2020

The following tables set forth information about on-balance sheet Farmer Mac Guaranteed Securities and USDA Securities as of March 31, 2021 and December 31, 2020:

As of March 31, 2021

Unpaid Principal Balance Unamortized Premium/(Discount) Amortized

13 unchanged sentences

$ 5,344 $ 165 $ 5,509 $ — $ 72 $ ( 3 ) $ 5,578

(1) Amounts presented exclude $ 32.7 million, $ 41.1 million, and $ 0.1 million of accrued interest receivable on available-for-sale, held-to-maturity, and trading securities, respectively, as of September 30, 2020.

(1) Amounts presented exclude $ 32.1 million, $ 36.9 million, and $ 0.1 million of accrued interest receivable on available-for-sale, held-to-maturity, and trading securities, respectively, as of March 31, 2021.

(2) Represents the amount of impairment that has resulted from credit-related factors, and therefore was recognized in the statement of financial operations as a provision for losses.

Amount excludes unrealized losses relating to non-credit factors.

(3) The trading USDA securities had a weighted average yield of 5.09 % as of September 30, 2020.

(3) The trading USDA securities had a weighted average yield of 5.03 % as of March 31, 2021.

As of December 31, 2020

Unpaid Principal Balance Unamortized Premium/(Discount) Amortized

Cost Unrealized

Allowance for losses (2)

Gains Unrealized

11 unchanged sentences

$ 6,413 $ 198 $ 6,611 $ — $ 84 $ — $ 6,695

(1) Amounts presented exclude $ 32.3 million, $ 44.7 million, and $ 0.2 million of accrued interest receivable on available-for-sale, held-to-maturity, and trading securities, respectively, as of December 31, 2020.

(2) Represents the amount of impairment that has resulted from credit-related factors, and therefore was recognized in the statement of financial operations as a provision for losses.

Amount excludes unrealized losses relating to non-credit factors.

(3) The trading USDA securities had a weighted average yield of 5.05 % as of December 31, 2020.

As of September 30, 2020 and December 31, 2019, unrealized losses on held-to-maturity and available-for-sale on-balance sheet Farmer Mac Guaranteed Securities and USDA Securities were as follows:

As of September 30, 2020

As of March 31, 2021 and December 31, 2020, unrealized losses on held-to-maturity and available-for-sale on-balance sheet Farmer Mac Guaranteed Securities and USDA Securities were as follows:

As of March 31, 2021

Held-to-Maturity and Available-for-Sale Securities

22 unchanged sentences

AgVantage $ 49,939 $ ( 61 ) $ — $ —

Farmer Mac Guaranteed USDA Securities — — — —

USDA Securities — — 21,061 ( 560 )

2 unchanged sentences

AgVantage $ 133,703 $ ( 231 ) $ 981,757 $ ( 15,007 )

The unrealized losses presented above are principally due to changes in interest rates from the date of acquisition to September 30, 2020 and December 31, 2019, as applicable.

The unrealized losses on the held-to-maturity USDA Securities as of both September 30, 2020 and December 31, 2019 reflect their increased cost basis resulting from their transfer to held-to-maturity as of October 1, 2016.

The unrealized losses presented above are principally due to changes in interest rates from the date of acquisition to March 31, 2021 and December 31, 2020, as applicable.

The unrealized losses on the held-to-maturity USDA Securities as of both March 31, 2021 and December 31, 2020 reflect their increased cost basis resulting from their transfer to held-to-maturity as of October 1, 2016.

The credit exposure related to Farmer Mac's USDA Guarantees line of business is covered by the full faith and credit guarantee of the United States of America.

As of September 30, 2020, Farmer Mac had executed COVID-19 payment deferments on loans with unpaid principal balances of $ 83.8 million underlying USDA Securities.

The unrealized losses from AgVantage securities were on 12 and 17 available-for-sale securities as of September 30, 2020 and December 31, 2019, respectively.

There were 2 and 4 held-to-maturity AgVantage securities with an unrealized loss as of September 30, 2020 and December 31, 2019,

respectively.

As of September 30, 2020 and December 31, 2019, 7 and 13 available-for-sale AgVantage securities, respectively, had been in a loss position for more than 12 months.

During the three and nine months ended September 30, 2020 and 2019, Farmer Mac had no sales of Farmer Mac Guaranteed Securities or USDA Securities and, therefore, Farmer Mac realized no gains or losses.

The amortized cost, fair value, and weighted-average yield of available-for-sale and held-to-maturity Farmer Mac Guaranteed Securities and USDA Securities by remaining contractual maturity as of September 30, 2020 are set forth below.

The unrealized losses from AgVantage securities were on 7 and 11 available-for-sale securities as of March 31, 2021 and December 31, 2020, respectively.

There were 4 and 2 held-to-maturity AgVantage securities with an unrealized loss as of March 31, 2021 and December 31, 2020, respectively.

March 31, 2021 and December 31, 2020, 2 and 7 available-for-sale AgVantage securities, respectively, had been in a loss position for more than 12 months.

During the three months ended March 31, 2021 and 2020, Farmer Mac had no sales of Farmer Mac Guaranteed Securities or USDA Securities and, therefore, Farmer Mac realized no gains or losses.

The balances presented are based on their final maturities, although the actual maturities may differ due to prepayments of the underlying assets.

As of September 30, 2020

As of March 31, 2021

Available-for-Sale Securities

7 unchanged sentences

(1) Amounts presented exclude $ 32.1 million of accrued interest receivable.

As of September 30, 2020

As of March 31, 2021

Held-to-Maturity Securities

9 unchanged sentences

Farmer Mac enters into financial derivative transactions to protect against risk from the effects of market price, or interest rate movements, on the value of certain assets, future cash flows, or debt issuance, and not for trading or speculative purposes.

For more information about Farmer Mac's financial derivatives, see Note 6 in Farmer Mac's Annual Report on Form 10-K for the fiscal year ended December 31, 2019 filed with the SEC on February 25, 2020.

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 September 30, 2020 and December 31, 2019:

As of September 30, 2020

For more information about Farmer Mac's financial derivatives,

see Note 6 in Farmer Mac's Annual Report on Form 10-K for the fiscal year ended December 31, 2020, as

filed with the SEC on February 25, 2021.

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, 2021 and December 31, 2020:

As of March 31, 2021

Fair Value Weighted-

51 unchanged sentences

Net amount $ 16,123 $ 182,371

As of September 30, 2020, Farmer Mac expects to reclassify $ 5.3 million after tax from accumulated other comprehensive income to earnings over the next twelve months.

This amount could differ from amounts actually recognized due to changes in interest rates, hedge de-designations, and the addition of other hedges after September 30, 2020.

During the three and nine months ended September 30, 2020 and 2019, there were no gains or losses from interest rate swaps designated as cash flow hedges reclassified to earnings because it was probable that the originally forecasted transactions would occur.

The following table summarizes the net income/(expense) recognized in the consolidated statements of operations related to derivatives for the three and nine months ended September 30, 2020 and 2019:

For the Three Months Ended September 30, 2020

As of March 31, 2021, Farmer Mac expects to reclassify $ 5.2 million after tax from accumulated other comprehensive income to earnings over the next twelve months.

This amount could differ from amounts actually recognized due to changes in interest rates, hedge de-designations, and the addition of other hedges after March 31, 2021.

During the three months ended March 31, 2021 and 2020, there were no gains or losses from interest rate swaps designated as cash flow hedges reclassified to earnings because it was probable that the originally forecasted transactions would occur.

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, 2021 and 2020:

For the Three Months Ended March 31, 2021

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

Interest Income Farmer Mac Guaranteed Securities and USDA Securities Interest Income Loans Total Interest Expense Gains on financial derivatives

(in thousands)

14 unchanged sentences

Expense recognized on cash flow hedges $ — $ — $ ( 2,408 ) $ — $ ( 2,408 )

Losses on financial derivatives not designated in hedging relationships:

Losses on interest rate swaps $ — $ — $ — $ ( 4,292 ) $ ( 4,292 )

Gains on financial derivatives not designated in hedging relationships:

Gains on interest rate swaps $ — $ — $ — $ 1,470 $ 1,470

Interest expense on interest rate swaps — — — 2,223 2,223

Treasury futures — — — 600 600

Losses on financial derivatives not designated in hedge relationships $ — $ — $ — $ ( 564 ) $ ( 564 )

For The Three Months Ended September 30, 2019

Gains on financial derivatives not designated in hedge relationships $ — $ — $ — $ 4,293 $ 4,293

For The Three Months Ended March 31, 2020

Net Income/(Expense) Recognized in Consolidated Statement of Operations on Derivatives

24 unchanged sentences

Losses on financial derivatives not designated in hedge relationships $ — $ — $ — $ ( 9,298 ) $ ( 9,298 )

For the Nine Months Ended September 30, 2020

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 $ 178,644 $ 172,230 $ ( 251,789 ) $ ( 3,339 ) $ 95,746

Income/(expense) related to interest settlements on fair value hedging relationships:

Recognized on derivatives ( 38,781 ) ( 12,607 ) 16,671 — ( 34,717 )

Recognized on hedged items 95,366 29,454 ( 39,325 ) — 85,495

Discount amortization recognized on hedged items — — ( 552 ) — ( 552 )

Income/(expense) related to interest settlements on fair value hedging relationships $ 56,585 $ 16,847 $ ( 23,206 ) $ — $ 50,226

(Losses)/gains on fair value hedging relationships:

Recognized on derivatives $ ( 264,797 ) $ ( 124,322 ) $ 52,991 $ — $ ( 336,128 )

Recognized on hedged items 257,575 119,072 ( 53,628 ) — 323,019

(Losses)/gains on fair value hedging relationships $ ( 7,222 ) $ ( 5,250 ) $ ( 637 ) $ — $ ( 13,109 )

Expense related to interest settlements on cash flow hedging relationships:

Interest settlements reclassified from AOCI into net income on derivatives $ — $ — $ ( 3,817 ) $ — $ ( 3,817 )

Recognized on hedged items — — ( 3,863 ) — ( 3,863 )

Discount amortization recognized on hedged items — — ( 6 ) — ( 6 )

Expense recognized on cash flow hedges $ — $ — $ ( 7,686 ) $ — $ ( 7,686 )

(Losses)/gains on financial derivatives not designated in hedging relationships:

Losses on interest rate swaps $ — $ — $ — $ ( 2,415 ) $ ( 2,415 )

Interest expense on interest rate swaps — — — 1,143 1,143

Treasury futures — — — ( 2,067 ) ( 2,067 )

(Losses)/gains on financial derivatives not designated in hedge relationships $ — $ — $ — $ ( 3,339 ) $ ( 3,339 )

For The Nine Months Ended September 30, 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 Gains on financial derivatives

(in thousands)

Total amounts presented in the consolidated statement of operations:

$ 252,629 $ 167,792 $ ( 358,374 ) $ 1,193 $ 63,240

Income/(expense) related to interest settlements on fair value hedging relationships:

Recognized on derivatives 1,665 ( 808 ) ( 6,751 ) — ( 5,894 )

Recognized on hedged items 86,628 18,199 ( 32,594 ) — 72,233

Discount amortization recognized on hedged items — — ( 460 ) — ( 460 )

Income/(expense) related to interest settlements on fair value hedging relationships $ 88,293 $ 17,391 $ ( 39,805 ) $ — $ 65,879

Gains/(losses) on fair value hedging relationships:

Recognized on derivatives $ ( 262,886 ) $ ( 89,631 ) $ 27,101 $ — $ ( 325,416 )

Recognized on hedged items 258,155 83,524 ( 24,880 ) — 316,799

Gains/(losses) on fair value hedging relationships $ ( 4,731 ) $ ( 6,107 ) $ 2,221 $ — $ ( 8,617 )

Expense related to interest settlements on cash flow hedging relationships:

Interest settlements reclassified from AOCI into net income on derivatives $ — $ — $ 1,260 $ — $ 1,260

Recognized on hedged items — — ( 8,142 ) — ( 8,142 )

Discount amortization recognized on hedged items — — ( 3 ) — ( 3 )

Expense recognized on cash flow hedges $ — $ — $ ( 6,885 ) $ — $ ( 6,885 )

Gains on financial derivatives not designated in hedge relationships:

Gains on interest rate swaps $ — $ — $ — $ 5,920 $ 5,920

Interest expense on interest rate swaps — — — ( 3,321 ) ( 3,321 )

Treasury futures — — — ( 1,406 ) ( 1,406 )

Gains on financial derivatives not designated in hedge relationships $ — $ — $ — $ 1,193 $ 1,193

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 September 30, 2020 and December 31, 2019:

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)

September 30, 2020 December 31, 2019 September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020 March 31, 2021 December 31, 2020

(in thousands)

5 unchanged sentences

( 3,986,760 ) ( 3,006,140 ) ( 23,739 ) ( 53,240 )

(1) Includes $ 1.6 million of hedging adjustments on discontinued hedging relationships as of September 30, 2020.

(2) Includes $ 1.4 million of hedging adjustments on a discontinued hedging relationship as of September 30, 2020.

(3) Includes $ 0.2 million as of September 30, 2020 in fair value adjustment, currently included in "Prepaid expenses and other assets" related to hedge accounting designations of purchase commitments

(1) Includes $ 1.5 million and $1.6 million of hedging adjustments on discontinued hedging relationships as of March 31, 2021 and December 31, 2020, respectively.

(2) Includes $ 1.3 million and $1.4 million of hedging adjustments on a discontinued hedging relationship as of March 31, 2021 and December 31, 2020, respectively.

(3) Carrying amount represents amortized cost.

The following table shows Farmer Mac's credit exposure to interest rate swap counterparties as of September 30, 2020 and December 31, 2019:

September 30, 2020

The following table shows Farmer Mac's credit exposure to interest rate swap counterparties as of March 31, 2021 and December 31, 2020:

March 31, 2021

Gross Amount Recognized (1)

11 unchanged sentences

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

As of September 30, 2020, Farmer Mac held $ 0.6 million of cash and no investment securities as collateral for its derivatives in net asset positions, compared to $ 2.7 million of cash and no investment securities as collateral for its derivatives in net asset positions as of December 31, 2019.

Farmer Mac posted $ 13.6 million cash and $ 212.1 million of investment securities as of September 30, 2020 and posted $ 0.5 million cash and $ 131.7 million investment securities as of December 31, 2019.

As of March 31, 2021, Farmer Mac held $ 4.9 million of cash and no investment securities as collateral for its derivatives in net asset positions, compared to $ 1.3 million of cash and no investment securities as collateral for its derivatives in net asset positions as of December 31, 2020.

Farmer Mac posted $ 8.2 million cash and $ 190.0 million of investment securities as of March 31, 2021 and posted $ 11.2 million cash and $ 201.1 million investment securities as of December 31, 2020.

Farmer Mac records posted cash as a reduction in the outstanding balance of cash and cash equivalents and an increase in the balance of prepaid expenses and other assets.

Any investment securities posted as collateral are included in the investment securities balances on the consolidated balance sheets.

If Farmer Mac had breached certain provisions of the derivative contracts as of September 30, 2020 and December 31, 2019, it could have been required to settle its obligations under the agreements, but would not have been required to post additional collateral.

As of September 30, 2020 and December 31, 2019, there were no financial derivatives in a net payable position where Farmer Mac was required to pledge collateral which the counterparty had the right to sell or repledge.

Of Farmer Mac's $ 15.1 billion notional amount of interest rate swaps outstanding as of September 30, 2020, $ 12.4 billion were cleared through the swap clearinghouse, the Chicago Mercantile Exchange ("CME").

If Farmer Mac had breached certain provisions of the derivative contracts as of March 31, 2021 and December 31, 2020, it could have been required to settle its obligations under the agreements, but would not have been required to post additional collateral.

As of March 31, 2021 and December 31, 2020, there were no financial derivatives in a net payable position where Farmer Mac was required to pledge collateral which the counterparty had the right to sell or repledge.

Of Farmer Mac's $ 15.7 billion notional amount of interest rate swaps outstanding as of March 31, 2021, $ 13.5 billion were cleared through the swap clearinghouse, the Chicago Mercantile Exchange ("CME").

Of Farmer Mac's $ 15.4 billion notional amount of interest rate swaps outstanding as of December 31, 2020, $ 12.8 billion were cleared through the CME.

During the first half of 2020 and throughout 2019, Farmer Mac increased its use of non-cleared basis swaps as it began to prepare for the transition away from the use of LIBOR as a reference rate.

For more information about interest rate swaps cleared through a clearinghouse, see Note 6 in Farmer Mac's Annual Report on Form 10-K for the fiscal year ended December 31, 2019 filed with the SEC on February 25, 2020.

During first quarter 2021, Farmer Mac continued the use of non-cleared basis swaps to prepare for the transition away from the use of LIBOR as a reference rate.

Farmer Mac classifies loans as either held for investment or held for sale.

1 unchanged sentence

Loans held for sale are reported at the lower of cost or fair value determined on a pooled

During the three months ended September 30, 2020, Farmer Mac acquired $ 59.2 million in loans held for sale, of which it sold $ 15.0 million during the quarter, and reclassified $ 24.2 million as loans held for investment.

As of September 30, 2020 and December 31, 2019, Farmer Mac had $ 20.0 million and no loans held for sale, respectively.

The following table includes loans held for investment and loans held for sale and displays the composition of the loan balances as of September 30, 2020 and December 31, 2019:

As of September 30, 2020 (1)

As of December 31, 2019 (2)

As of both March 31, 2021, and December 31, 2020, Farmer Mac had no loans held for sale.

The following table includes loans held for investment and displays the composition of the loan balances as of March 31, 2021 and December 31, 2020:

As of March 31, 2021 As of December 31, 2020

Unsecuritized In Consolidated Trusts Total Unsecuritized In Consolidated Trusts Total

8 unchanged sentences

Total loans, net of allowance $ 7,327,891 $ 1,173,739 $ 8,501,630 $ 7,248,990 $ 1,286,156 $ 8,535,146

(1) Allowance for losses reflects the adoption of ASU 2016-13, "Financial Instruments - Credit Losses," effective January 1, 2020.

(2) Prior to the adoption of ASU 2016-13, "Financial Instruments - Credit Losses," effective January 1, 2020, Farmer Mac maintained an allowance for losses to cover estimated probable incurred losses on loans held.

(1) Unpaid principal balance is the basis of presentation in disclosures of outstanding balances for Farmer Mac's lines of business.

Allowance for Losses

The following table is a summary, by asset type, of the allowance for losses as of September 30, 2020 and December 31, 2019:

September 30, 2020 (1)

December 31, 2019 (2)

The following table is a summary, by asset type, of the allowance for losses as of March 31, 2021 and December 31, 2020:

March 31, 2021 December 31, 2020

Allowance for Losses Allowance for Losses

3 unchanged sentences

Total $ 14,807 $ 13,832

(1) Allowance for losses reflects the adoption of ASU 2016-13, "Financial Instruments - Credit Losses," effective January 1, 2020.

(2) Prior to the adoption of ASU 2016-13, "Financial Instruments - Credit Losses," effective January 1, 2020, Farmer Mac maintained an allowance for loan losses to cover estimated probable incurred losses on loans held.

The following is a summary of the changes in the allowance for losses for the three and nine month period ended September 30, 2020 and 2019:

For the Three Months Ended For the Nine Months Ended

September 30, 2020 (1)

September 30, 2019 (2)

September 30, 2020 (1)

September 30, 2019 (2)

Allowance for Losses Allowance for Losses Allowance for Losses Allowance for Losses

The following is a summary of the changes in the allowance for losses for the three month period ended March 31, 2021 and 2020:

For the Three Months Ended

March 31, 2021 March 31, 2020

Allowance for Losses Allowance for Losses

(in thousands)

Farm & Ranch:

Beginning Balance $ 6,039 $ 7,264 $ 10,454 $ 7,017

Balance as of December 31 $ 3,745 $ 10,454

Cumulative effect adjustment from adoption of current expected credit loss standard — ( 3,909 )

Adjusted Beginning Balance 6,039 7,264 6,545 7,017

Balance as of January 1 3,745 6,545

(Release of)/provision for losses $ ( 27 ) $ 808

3 unchanged sentences

Rural Utilities:

Beginning Balance $ 8,900 $ — $ — $ —

Balance as of December 31 $ 10,087 $ —

Cumulative effect adjustment from adoption of current expected credit loss standard — 5,378

Adjusted Beginning Balance 8,900 — 5,378 —

Balance as of January 1 10,087 5,378

Provision for losses $ 1,002 $ 2,125

2 unchanged sentences

$ 11,089 $ 7,503

(1) Allowance for losses reflects the adoption of ASU 2016-13, "Financial Instruments - Credit Losses," effective January 1, 2020.

(3) Allowance for losses includes $ 1.8 million for collateral dependent assets secured by agricultural real estate.

(4) Allowance for losses includes no allowance for collateral dependent assets.

The cumulative transition adjustment decrease of $ 3.9 million in the Farm & Ranch portfolio was primarily driven by differences in the way that the two loss models measure the impact of low loan-to-value ratios in that portfolio.

Under the previous accounting standard, Farmer Mac's estimated incurred loss model was based on historical weighted-average loss rates from realized losses within commodities and risk ratings.

The historical weighted average loss rates were then applied to sub-portfolios, as disaggregated by commodity and risk rating, to calculate the general allowance.

Under the CECL accounting standard, Farmer Mac's current expected credit losses are calculated individually based on the expected probability of default and the expected loss-given-default for each loan.

The low loan-to-value ratios in the Farm & Ranch portfolio result in low individual losses-given-default.

Thus, our expected credit losses as of January 1, 2020 were less than our estimate of incurred losses as of December 31, 2019.

The cumulative transition adjustment increase of $ 5.4 million in the Rural Utilities portfolio was primarily driven by the change from measuring incurred probable credit losses to measuring expected credit losses over the expected lives of these loans.

Farmer Mac has never experienced a credit loss in its Rural Utilities portfolio.

Additionally, these loans have strong credit ratings and performance, which supported Farmer Mac's estimate of no incurred credit losses under the previous accounting standard.

Upon the adoption of CECL, Farmer Mac is now required to measure its expected credit losses for the entire expected life of all

financial instruments, including its Rural Utilities loans.

To estimate expected credit losses on these loans, Farmer Mac relies upon industry data from ratings agencies and publicly available information as disclosed in the securities filings of other major lenders who serve the utilities industry.

Under the CECL accounting standard, Farmer Mac's loss allowance model for these loans is primarily impacted by the long-term maturities of the loans and their low probability of prepayment.

In addition, the highly-specialized nature of power generation and transmission and other rural infrastructure facilities results in significant expected losses given default even though the probability of default is low.

Thus, the long-term expected lives of these loans combined with high losses given default result in an estimate of expected losses although we have never incurred a credit loss in this portfolio.

The provision to the allowance for loan losses of $ 0.9 million recorded during third quarter 2020 was primarily due to the impact of net new loan volume in the Rural Utilities portfolio and credit downgrades on existing volume during the quarter.

The impact of the Rural Utilities portfolio on the net increase to the provision was partially offset by improving economic factors that uniquely impacted the Farm & Ranch portfolio, specifically continued improvements in commodity prices and continued expectations for stable farm land values.

The provision to the allowance for loan losses of $ 4.3 million recorded during the nine months ended September 30, 2020 was primarily due to the impact of net new loan volume in the Rural Utilities portfolio and the impact of economic factor forecasts on the Rural Utilities portfolio, especially continued expected higher unemployment, as a result of the COVID-19 pandemic and the resulting economic volatility.

The provision for the allowance for loan losses recorded during three and nine months ended September 30, 2019 was attributable to a decrease in the portfolio credit quality, primarily related to idiosyncratic factors of a few large loans and less related to systemic, macroeconomic factors.

The $ 0.1 million charge-off that occurred during the nine months ended September 30, 2019 related to the foreclosure of one part-time farm loan.

The following table presents the unpaid principal balances by delinquency status of Farmer Mac's loans and non-performing assets as of September 30, 2020:

As of September 30, 2020

30-59 Days 60-89 Days 90 Days and Greater (2)

(1) As of March 31, 2021 and 2020, allowance for losses for Farm & Ranch includes no allowance and $ 2.2 million, respectively, for collateral dependent assets secured by agricultural real estate.

(2) As of both March 31, 2021 and 2020, allowance for losses for Rural Utilities includes no allowance for collateral dependent assets.

The provision to the allowance for Rural Utilities loan losses of $ 1.0 million recorded during first quarter 2021 was primarily attributable to the impact of ratings downgrades on multiple rural utilities that were negatively impacted by the polar vortex that struck Texas in February 2021.

The small release from the allowance for the Farm & Ranch portfolio during first quarter 2021 was primarily attributable to ratings upgrades and updated loss-given-default assumptions, offset by net growth in our loan portfolio.

The provision to the allowance for loan losses recorded during first quarter 2020 was primarily due to the

impact of updated economic factor forecasts, particularly higher credit spreads and expected higher

unemployment, as a result of the COVID-19 pandemic and the resulting economic volatility.

economic factor forecasts for lower commodity prices impacted the Farm & Ranch portfolio.

The following table presents the unpaid principal balances by delinquency status of Farmer Mac's loans and non-performing assets as of March 31, 2021 and December 31, 2020:

As of March 31, 2021

Current 30-59 Days 60-89 Days 90 Days and Greater (2)

Total Past Due Nonaccrual loans (3)(4)

7 unchanged sentences

(4) Includes $ 58.1 million of nonaccrual loans for which there was no associated allowance.

During the three and nine months ended September 30, 2020, Farmer Mac received $ 1.2 million and $ 3.5 million, respectively, in interest on nonaccrual loans.

(5) Includes $ 105.3 million of unpaid principal balance related to Farm & Ranch loans that Farmer Mac has executed a COVID-19 payment deferment.

The following tables present the unpaid principal balances of loans held and the related total allowance for losses by impairment method and commodity type as of December 31, 2019:

As of December 31, 2019

Crops Permanent

Plantings Livestock Part-time

Processing Other Total

(in thousands)

Ending Balance:

Collectively evaluated for impairment $ 2,664,362 $ 1,161,900 $ 871,341 $ 356,920 $ 10,360 $ 4,597 $ 5,069,480

Individually evaluated for impairment 108,815 51,256 39,962 7,044 — — 207,077

Total Farm & Ranch loans $ 2,773,177 $ 1,213,156 $ 911,303 $ 363,964 $ 10,360 $ 4,597 $ 5,276,557

Allowance for Losses:

Collectively evaluated for impairment $ 1,880 $ 1,362 $ 714 $ 249 $ 47 $ 4 $ 4,256

Individually evaluated for impairment 2,628 1,008 2,447 115 — — 6,198

Total Farm & Ranch loans $ 4,508 $ 2,370 $ 3,161 $ 364 $ 47 $ 4 $ 10,454

The following tables present by commodity type the unpaid principal balances, recorded investment, and specific allowance for losses related to impaired loans and the recorded investment in loans on nonaccrual status as of December 31, 2019:

During the three months ended March 31, 2021, Farmer Mac received $ 1.1 million in interest on nonaccrual loans.

As of December 31, 2020

Crops Permanent

Plantings Livestock Part-time

Processing Other Total

(in thousands)

Impaired Loans:

With no specific allowance:

Recorded investment $ 30,846 $ 16,696 $ 3,195 $ 1,398 $ — $ 56 $ 52,191

Unpaid principal balance 30,741 16,638 3,185 1,394 — 56 52,014

With a specific allowance:

Recorded investment (1)

84,044 36,852 47,113 6,376 — — 174,385

Unpaid principal balance 83,772 36,732 46,984 6,356 — — 173,844

Associated allowance 2,725 1,051 2,636 129 — — 6,541

Recorded investment 114,890 53,548 50,308 7,774 — 56 226,576

Unpaid principal balance 114,513 53,370 50,169 7,750 — 56 225,858

Associated allowance 2,725 1,051 2,636 129 — — 6,541

Recorded investment of loans on nonaccrual status (2)

$ 34,037 $ 22,849 $ 28,441 $ 2,454 $ — $ — $ 87,781

(1) Impairment analysis was performed in the aggregate in consideration of similar risk characteristics of the assets and historical statistics on $ 159.1 million ( 70 %) of impaired loans as of December 31, 2019, which resulted in a specific allowance of $ 3.0 million.

(2) Includes $ 30.1 million of loans that are less than 90 days delinquent but which have not met Farmer Mac's performance criteria for returning to accrual status.

The following table presents by commodity type the average recorded investment and interest income recognized on impaired loans for the three and nine months ended September 30, 2019:

September 30, 2019

Crops Permanent

Plantings Livestock Part-time

Processing Other Total

(in thousands)

For the Three Months Ended:

Average recorded investment in impaired loans $ 106,535 $ 45,197 $ 36,859 $ 8,265 $ — $ 58 $ 196,914

Income recognized on impaired loans 178 166 87 105 — — 536

For the Nine Months Ended:

Average recorded investment in impaired loans $ 93,088 $ 41,524 $ 31,189 $ 8,079 $ — $ 63 $ 173,943

Income recognized on impaired loans 879 586 504 227 — — 2,196

Net credit losses and 90-day delinquencies as of and for the periods indicated for loans held are presented in the table below.

As of December 31, 2019, there were no delinquencies and no probable losses inherent in Farmer Mac's Rural Utilities loan portfolio and Farmer Mac had not experienced credit losses on any Rural Utilities loans.

90-Day Delinquencies (1)

Net Credit Losses

As of For the Nine Months Ended

December 31, 2019 September 30, 2019

Current 30-59 Days 60-89 Days 90 Days and Greater (2)

Total Past Due Nonaccrual loans (3)(4)

(in thousands)

Farm & Ranch loans $ 57,719 $ 131

(1) Includes loans that are 90 days or more past due, in foreclosure, or in bankruptcy with at least one missed payment, excluding loans performing under either their original loan terms or a court-approved bankruptcy plan.

Of the $ 57.7 million of on-balance sheet loans reported as 90-day delinquencies as of December 31, 2019, no loans were subject to "removal-of-account" provisions.

Farm & Ranch $ 6,055,154 $ 4,582 $ 632 $ 1,072 $ 6,286 $ 114,998 $ 6,176,438

Rural Utilities 2,260,412 — — — — — 2,260,412

As of December 31, 2019, no allowance for losses had been provided for Farmer Mac's Rural Utilities line of business based on the performance of the loans in this line of business and the credit quality of the collateral supporting these loans, as well as Farmer Mac's counterparty risk analysis.

As of December 31, 2019, there were no delinquencies or probable losses inherent in Farmer Mac's Rural Utilities loans held or underlying LTSPCs.

Total $ 8,315,566 $ 4,582 $ 632 $ 1,072 $ 6,286 $ 114,998 $ 8,436,850

(1) Amounts represent unpaid principal balance of risk rated loans, which is the basis Farmer Mac uses to analyze its portfolio, and recorded investment of past due loans.

(2) Includes loans in consolidated trusts with beneficial interests owned by third parties that are 90 days or more past due.

(3) Includes loans that are 90 days or more past due, in foreclosure, or in bankruptcy with at least one missed payment, excluding loans performing under either their original loan terms or a court-approved bankruptcy plan.

(4) Includes $ 44.2 million of nonaccrual loans for which there was no associated allowance.

During the year ended December 31, 2020, Farmer Mac received $ 4.4 million in interest on nonaccrual loans.

Credit Quality Indicators

The following tables present credit quality indicators related to Farm & Ranch loans and Rural Utilities loans held as of September 30, 2020, by year of origination:

As of September 30, 2020

The following tables present credit quality indicators related to Farm & Ranch loans and Rural Utilities loans held as of March 31, 2021 and December 31, 2020, by year of origination:

As of March 31, 2021

Year of Origination:

9 unchanged sentences

Total $ 558,717 $ 2,029,701 $ 805,952 $ 489,046 $ 460,291 $ 1,452,339 $ 506,921 $ 6,302,967

For the Three Months Ended:

Current period charge-offs $ — $ — $ — $ — $ — $ — $ — $ —

Current period recoveries — — — — — — — —

Current period Farm & Ranch net charge-offs $ — $ — $ — $ — $ — $ — $ — $ —

For the Nine Months Ended:

For the Three Months Ended March 31, 2021:

Current period charge-offs $ — $ — $ — $ — $ — $ — $ — $ —

4 unchanged sentences

(3) Substandard assets have a well-defined weakness or weaknesses and there is a distinct possibility that some loss will be sustained if deficiencies are not corrected.

As of September 30, 2020

As of March 31, 2021

Year of Origination:

9 unchanged sentences

Total $ 10,979 $ 663,330 $ 801,799 $ 8,181 $ 89,621 $ 650,486 $ 22,708 $ 2,247,104

For the Three Months Ended:

For the Three Months Ended March 31, 2021:

Current period charge-offs $ — $ — $ — $ — $ — $ — $ — $ —

1 unchanged sentence

Current period Rural Utilities net charge-offs $ — $ — $ — $ — $ — $ — $ — $ —

For the Nine Months Ended:

(1) Amounts represent unpaid principal balance of risk-rated loans, which is the basis Farmer Mac uses to analyze its portfolio, and recorded investment of past due loans.

(2) Assets in the "Special mention" category generally have potential weaknesses due to performance issues but are currently considered to be adequately secured.

(3) Substandard assets have a well-defined weakness or weaknesses and there is a distinct possibility that some loss will be sustained if deficiencies are not corrected.

As of December 31, 2020

Year of Origination:

2020 2019 2018 2017 2016 Prior Revolving Loans - Amortized Cost Basis Total

(in thousands)

Farm & Ranch (1) :

Internally Assigned Risk Rating:

Acceptable $ 1,947,618 $ 774,315 $ 484,345 $ 500,768 $ 465,277 $ 1,068,693 $ 535,742 $ 5,776,758

Special mention (2)

70,171 79,744 18,317 8,530 13,111 21,328 7,656 218,857

Substandard (3)

3,400 5,821 21,879 52,709 37,173 50,582 9,259 180,823

Total $ 2,021,189 $ 859,880 $ 524,541 $ 562,007 $ 515,561 $ 1,140,603 $ 552,657 $ 6,176,438

For the Three Months Ended March 31, 2020:

Current period charge-offs $ — $ — $ — $ — $ — $ — $ — $ —

Current period recoveries — — — — — — — —

Current period Rural Utilities net charge-offs $ — $ — $ — $ — $ — $ — $ — $ —

Current period Farm & Ranch net charge-offs $ — $ — $ — $ — $ — $ — $ — $ —

(1) Amounts represent unpaid principal balance of risk-rated loans, which is the basis Farmer Mac uses to analyze its portfolio, and recorded investment of past due loans.

1 unchanged sentence

(3) Substandard assets have a well-defined weakness or weaknesses and there is a distinct possibility that some loss will be sustained if deficiencies are not corrected.

The following table presents credit quality indicators related to Farm & Ranch loans held as of December 31, 2019:

As of December 31, 2020

Crops Permanent

Plantings Livestock Part-time

Processing Other Total

Year of Origination:

2020 2019 2018 2017 2016 Prior Revolving Loans - Amortized Cost Basis Total

(in thousands)

Rural Utilities (1) :

Internally Assigned Risk Rating:

5 unchanged sentences

Total $ 667,489 $ 809,921 $ 8,260 $ 89,842 $ 31,275 $ 641,145 $ 12,480 $ 2,260,412

Commodity analysis of past due loans (1)

$ 21,167 $ 15,828 $ 19,354 $ 1,370 $ — $ — $ 57,719

For the Three Months Ended March 31, 2020:

Current period charge-offs $ — $ — $ — $ — $ — $ — $ — $ —

Current period recoveries — — — — — — — —

Current period Rural Utilities net charge-offs $ — $ — $ — $ — $ — $ — $ — $ —

(1) Amounts represent unpaid principal balance of risk-rated loans, which is the basis Farmer Mac uses to analyze its portfolio, and recorded investment of past due loans.

1 unchanged sentence

(3) Substandard assets have a well-defined weakness or weaknesses and there is a distinct possibility that some loss will be sustained if deficiencies are not corrected.

The following table presents the maximum principal amount of potential undiscounted future payments that Farmer Mac could be required to make under all off-balance sheet Farmer Mac Guaranteed Securities as of September 30, 2020 and December 31, 2019, not including offsets provided by any recourse provisions, recoveries from third parties, or collateral for the underlying loans:

The following table presents the maximum principal amount of potential undiscounted future payments that Farmer Mac could be required to make under all off-balance sheet Farmer Mac Guaranteed Securities as of March 31, 2021 and December 31, 2020, not including offsets provided by any recourse provisions, recoveries from third parties, or collateral for the underlying loans:

Outstanding Balance of Off-Balance Sheet Farmer Mac Guaranteed Securities

As of September 30, 2020 As of December 31, 2019

As of March 31, 2021 As of December 31, 2020

(in thousands)

8 unchanged sentences

The following table summarizes the significant cash flows received from and paid to trusts used for Farmer Mac securitizations:

For the Nine Months Ended

September 30, 2020 September 30, 2019

For the Three Months Ended

March 31, 2021 March 31, 2020

(in thousands)

3 unchanged sentences

The following table presents the liability and the weighted-average remaining maturity of all loans underlying off-balance sheet Farmer Mac Guaranteed Securities:

As of September 30, 2020 As of December 31, 2019

As of March 31, 2021 As of December 31, 2020

(dollars in thousands)

6 unchanged sentences

The following table presents the liability, the maximum principal amount of potential undiscounted future payments that Farmer Mac could be requested to make under all LTSPCs, not including offsets provided by any recourse provisions, recoveries from third parties, or collateral for the underlying loans, as well as the weighted-average remaining maturity of all loans underlying LTSPCs:

As of September 30, 2020 As of December 31, 2019

As of March 31, 2021 As of December 31, 2020

(dollars in thousands)

5 unchanged sentences

Reserve for Losses

The following table is a summary, by asset type, of the reserve for losses as of September 30, 2020 and December 31, 2019:

September 30, 2020 (1)

December 31, 2019 (2)

The following table is a summary, by asset type, of the reserve for losses as of March 31, 2021 and December 31, 2020:

March 31, 2021 December 31, 2020

Reserve for Losses Reserve for Losses

5 unchanged sentences

Total $ 2,333 $ 3,277

(1) Reserve for losses reflects the adoption of ASU 2016-13, "Financial Instruments - Credit Losses," in first quarter 2020.

(2) Prior to the adoption of ASU 2016-13, "Financial Instruments - Credit Losses," in first quarter 2020, Farmer Mac maintained a reserve for losses to cover estimated probable incurred losses on loans underlying LTSPCs and off-balance sheet Farm & Ranch Farmer Mac Guaranteed Securities.

The following is a summary of the changes in the reserve for losses for the three and nine month period ended September 30, 2020 and 2019:

For the Three Months Ended For the Nine Months Ended

September 30, 2020 (1)

September 30, 2019 (2)

September 30, 2020 (1)

September 30, 2019 (2)

Reserve for Losses Reserve for Losses Reserve for Losses Reserve for Losses

The following is a summary of the changes in the reserve for losses for the three month period ended March 31, 2021 and 2020:

For the Three Months Ended

March 31, 2021 March 31, 2020

Reserve for Losses Reserve for Losses

(in thousands)

Farm & Ranch:

Beginning Balance $ 1,650 $ 1,880 $ 2,164 $ 2,167

Balance as of December 31, $ 2,097 $ 2,164

Cumulative effect adjustment from adoption of current expected credit loss standard — ( 148 )

Adjusted Beginning Balance 2,097 2,016

Provision for/(release of) losses $ 628 $ ( 137 ) $ 262 $ ( 424 )

(Release of)/provision for losses $ ( 731 ) $ 4

Charge-offs — —

Ending Balance $ 1,366 $ 2,020

Rural Utilities:

Beginning Balance $ 1,370 $ — $ — $ —

Balance as of December 31, $ 1,180 $ —

Cumulative effect adjustment from adoption of current expected credit loss standard — 1,011

1 unchanged sentence

(Release of)/provision for losses $ ( 213 ) $ 389

Charge-offs — —

Ending Balance $ 967 $ 1,400

(1) Reserve for losses reflects the adoption of ASU 2016-13, "Financial Instruments - Credit Losses," in first quarter 2020.

The provision to the reserve for losses recorded during the three and nine months ended September 30, 2020 was primarily due to credit downgrades in the LTSPC portfolio.

The release from the reserve for losses recorded during third quarter 2019 was primarily attributable to a net volume decrease in off-balance sheet Farm & Ranch LTSPCs and slight improvements in off-balance sheet portfolio credit quality.

The release from the reserve for losses in the Rural Utilities LTSPC portfolio recorded during first quarter 2021 was primarily due to improving economic factor forecasts and ratings upgrades.

The release in the Farm & Ranch LTSPC portfolio was primarily due to ratings upgrades and updated loss-given-default assumptions.

The provision to the reserve for losses recorded during first quarter 2020 was primarily due to the impact of economic factor forecasts, particularly higher credit spreads and expected higher unemployment, as a result of the COVID-19 pandemic and the resulting economic volatility.

The following table presents the unpaid principal balances by delinquency status of Farm & Ranch loans underlying LTSPCs.

Farm & Ranch Farmer Mac Guaranteed Securities, Rural Utilities loans underlying LTSPCs, and non-performing assets as of September 30, 2020:

As of September 30, 2020

30-59 Days 60-89 Days 90 Days and Greater (1)

Farm & Ranch Farmer Mac Guaranteed Securities, Rural Utilities loans underlying LTSPCs, and non-performing assets as of March 31, 2021:

As of March 31, 2021

Current 30-59 Days 60-89 Days 90 Days and Greater (1)

Total Past Due Total Loans

5 unchanged sentences

(1) Includes loans underlying off-balance sheet Farm & Ranch Guaranteed Securities and LTSPCs that are 90 days of more past due, in foreclosure, or in bankruptcy with at least one missed payment, excluding loans performing under either their original loan terms or a court-approved bankruptcy plan.

(2) Includes $ 185.4 million of unpaid principal balance related to Farm & Ranch LTSPCs for which the lender has notified Farmer Mac of an executed COVID-19 payment deferment.

The following tables present the unpaid principal balances of Farm & Ranch loans underlying LTSPCs and off-balance sheet Farmer Mac Guaranteed Securities (excluding AgVantage securities) and the related reserve for losses by impairment method and commodity type as of December 31, 2019:

As of December 31, 2020

Crops Permanent

Plantings Livestock Part-time

Processing Other Total

(in thousands)

Ending Balance:

Collectively evaluated for impairment:

$ 1,151,983 $ 511,991 $ 581,377 $ 167,395 $ 66,106 $ 2,760 $ 2,481,612

Individually evaluated for impairment:

5,698 2,114 10,207 706 — 56 18,781

Total Farm & Ranch $ 1,157,681 $ 514,105 $ 591,584 $ 168,101 $ 66,106 $ 2,816 $ 2,500,393

Allowance for Losses:

Collectively evaluated for impairment:

$ 599 $ 96 $ 308 $ 50 $ 767 $ 1 $ 1,821

Individually evaluated for impairment:

97 43 189 14 — — 343

Total Farm & Ranch $ 696 $ 139 $ 497 $ 64 $ 767 $ 1 $ 2,164

Net credit losses and 90-day delinquencies as of and for the periods indicated for loans underlying off-balance sheet securities representing interests in pools of eligible Farm & Ranch LTSPCs are presented in the table below.

As of December 31, 2019, there were no delinquencies and no probable losses inherent in Farmer Mac's Rural Utilities LTSPCs portfolio and Farmer Mac had not experienced credit losses on any Rural Utilities LTSPCs.

90-Day Delinquencies (1)

Net Credit Losses/(Recoveries)

As of For the Nine Months Ended

December 31, 2019 September 30, 2019

Current 30-59 Days 60-89 Days 90 Days and Greater (1)

Total Past Due Total Loans

(in thousands)

Farm & Ranch LTSPCs and Farmer Mac Guaranteed Securities $ 3,235 $ —

(1) Includes loans underlying off-balance sheet Farm & Ranch Guaranteed Securities and LTSPCs that are 90 days or more past due, in foreclosure, or in bankruptcy with at least one missed payment, excluding loans performing under either their original loan terms or a court-approved bankruptcy plan.

Farm and Ranch:

LTSPCs and Farmer Mac Guaranteed Securities $ 2,389,777 $ 2,189 $ 1,344 $ 11,433 $ 14,966 $ 2,404,743

Rural Utilities:

LTSPCs $ 556,425 $ — $ — $ — $ — $ 556,425

Credit Quality Indicators

The following tables present credit quality indicators related to Farm & Ranch loans underlying LTSPCs, Farm & Ranch Farmer Mac Guaranteed Securities, and Rural Utilities loans underlying LTSPCs as of September 30, 2020, by year of origination:

As of September 30, 2020

As of March 31, 2021

Year of Origination:

9 unchanged sentences

Total $ 83,222 $ 193,946 $ 196,288 $ 191,962 $ 236,881 $ 1,201,958 $ 222,128 $ 2,326,385

For the Three Months Ended:

Current period charge-offs $ — $ — $ — $ — $ — $ — $ — $ —

Current period recoveries — — — — — — — —

Current period Farm & Ranch net charge-offs $ — $ — $ — $ — $ — $ — $ — $ —

For the Nine Months Ended:

For the Three Months Ended March 31, 2021:

Current period charge-offs $ — $ — $ — $ — $ — $ — $ — $ —

3 unchanged sentences

(2) Substandard assets have a well-defined weakness or weaknesses and there is a distinct possibility that some loss will be sustained if deficiencies are not corrected.

As of September 30, 2020

As of March 31, 2021

Year of Origination:

9 unchanged sentences

Total $ — $ — $ — $ — $ — $ 538,541 $ 18,792 $ 557,333

For the Three Months Ended

For the Three Months Ended March 31, 2021:

Current period charge-offs $ — $ — $ — $ — $ — $ — $ — $ —

1 unchanged sentence

Current period Rural Utilities net charge-offs $ — $ — $ — $ — $ — $ — $ — $ —

For the Nine Months Ended:

(1) Assets in the "Special mention" category generally have potential weaknesses due to performance issues but are currently considered to be adequately secured.

(2) Substandard assets have a well-defined weakness or weaknesses and there is a distinct possibility that some loss will be sustained if deficiencies are not corrected.

As of December 31, 2020

Year of Origination:

2020 2019 2018 2017 2016 Prior Revolving Loans - Amortized Cost Basis Total

(in thousands)

Farm & Ranch LTSPCs and Farmer Mac Guaranteed Securities:

Internally Assigned Risk Rating:

Acceptable $ 178,213 $ 213,620 $ 183,948 $ 237,042 $ 207,296 $ 969,860 $ 211,620 $ 2,201,599

Special mention (1)

3,920 1,742 1,502 5,603 19,644 50,004 10,058 92,473

Substandard (2)

264 10,250 12,611 14,578 7,841 60,602 4,525 110,671

Total $ 182,397 $ 225,612 $ 198,061 $ 257,223 $ 234,781 $ 1,080,466 $ 226,203 $ 2,404,743

For the Three Months Ended March 31, 2020:

Current period charge-offs $ — $ — $ — $ — $ — $ — $ — $ —

Current period recoveries — — — — — — — —

Current period Rural Utilities net charge-offs $ — $ — $ — $ — $ — $ — $ — $ —

Current period Farm & Ranch net charge-offs $ — $ — $ — $ — $ — $ — $ — $ —

(1) Assets in the "Special mention" category generally have potential weaknesses due to performance issues but are currently considered to be adequately secured.

(2) Substandard assets have a well-defined weakness or weaknesses and there is a distinct possibility that some loss will be sustained if deficiencies are not corrected.

The following table presents credit quality indicators related to Farm & Ranch loans underlying LTSPCs and off-balance sheet Farm & Ranch Farmer Mac Guaranteed Securities as of December 31, 2019:

As of December 31, 2020

Crops Permanent

Plantings Livestock Part-time

Processing Other Total

Year of Origination:

2020 2019 2018 2017 2016 Prior Revolving Loans - Amortized Cost Basis Total

(in thousands)

Rural Utilities LTSPCs:

Internally Assigned Risk Rating:

5 unchanged sentences

Total $ — $ — $ — $ — $ — $ 549,405 $ 7,020 $ 556,425

Commodity analysis of past due loans (1)

$ 1,493 $ 196 $ 1,066 $ 480 $ — $ — $ 3,235

(1) Amounts represent unpaid principal balance of risk-rated loans, which is the basis Farmer Mac uses to analyze its portfolio, and recorded investment of past due loans.

For the Three Months Ended March 31, 2020:

Current period charge-offs $ — $ — $ — $ — $ — $ — $ — $ —

Current period recoveries — — — — — — — —

Current period Rural Utilities net charge-offs $ — $ — $ — $ — $ — $ — $ — $ —

(1) Assets in the "Special mention" category generally have potential weaknesses due to performance issues but are currently considered to be adequately secured.

3 unchanged sentences

Discount notes generally have original maturities of 1.0 year or less, whereas medium-term notes generally have maturities of 0.5 years to 15.0 years.

The following tables set forth information related to Farmer Mac's borrowings as of September 30, 2020 and December 31, 2019:

September 30, 2020

Outstanding as of September 30 Average Outstanding During the First Nine Months

The following tables set forth information related to Farmer Mac's borrowings as of March 31, 2021 and December 31, 2020:

March 31, 2021

Outstanding as of March 31 Average Outstanding During the Quarter

Amount Weighted- Average Rate Amount Weighted- Average Rate

13 unchanged sentences

Total due after one year $ 11,943,094 1.25 %

Total principal net of discounts $ 21,536,571 0.91 %

Hedging adjustments 23,739

Total $ 21,560,310

16 unchanged sentences

Total due after one year $ 11,049,295 1.37 %

Total principal net of discounts $ 21,795,677 0.98 %

Hedging adjustments 53,240

Total $ 21,848,917

During the nine months ended September 30, 2020, Farmer Mac increased its use of short-term funding in order to fund the growth of short-term assets in its liquidity portfolio.

The maximum amount of Farmer Mac's discount notes outstanding at any month end during the nine months ended September 30, 2020 and 2019 was $ 2.6 billion and $ 2.2 billion, respectively.

The maximum amount of Farmer Mac's discount notes outstanding at any month end during the three months ended March 31, 2021 and 2020 was $ 1.8 billion and $ 2.6 billion, respectively.

Callable medium-term notes give Farmer Mac the option to redeem the debt at par value on a specified call date or at any time on or after a specified call date.

The following table summarizes by maturity date the amounts and costs for Farmer Mac debt callable in 2020 as of September 30, 2020:

Debt Callable in 2020 as of September 30, 2020, by Maturity

The following table summarizes by maturity date the amounts and costs for Farmer Mac debt callable in 2021 as of March 31, 2021:

Debt Callable in 2021 as of March 31, 2021, by Maturity

Amount Weighted-Average Rate

6 unchanged sentences

Total $ 1,882,294 0.98 %

The following schedule summarizes the earliest interest rate reset date, or debt maturities, of total borrowings outstanding as of September 30, 2020, including callable and non-callable medium-term notes, assuming callable notes are redeemed at the initial call date:

The following schedule summarizes the earliest interest rate reset date, or debt maturities, of total borrowings outstanding as of March 31, 2021, including callable and non-callable medium-term notes, assuming callable notes are redeemed at the initial call date:

Earliest Interest Rate Reset Date, or Debt Maturities, of Borrowings Outstanding

8 unchanged sentences

Thereafter 3,520,003 1.82 %

Total $ 21,589,285 1.05 %

During the nine months ended September 30, 2020 and 2019, Farmer Mac called $ 2.7 billion and $ 0.7 billion of callable medium-term notes, respectively.

The decrease in market interest rates throughout 2019 and continuing into the first half of 2020 led to an increase in called medium-term notes compared to the prior year.

Total principal net of discounts $ 21,536,571 0.91 %

During the three months ended March 31, 2021 and 2020, Farmer Mac called $ 1.0 billion and $ 0.8 billion of callable medium-term notes, respectively.

Authority to Borrow from the U.S.

2 unchanged sentences

Any funds borrowed from the U.S.

Treasury may be used solely for the purpose of fulfilling Farmer Mac's guarantee obligations.

Treasury may be used solely to fulfill Farmer Mac's guarantee obligations.

Any debt obligations issued by Farmer Mac under this authority would bear interest at a rate determined by the U.S.

2 unchanged sentences

Treasury within a reasonable time.

As of September 30, 2020, Farmer Mac had not used this borrowing authority.

As of March 31, 2021, Farmer Mac had not used this borrowing authority.

Gains on Repurchase of Outstanding Debt

No outstanding debt repurchases were made in the nine months ended September 30, 2020 or 2019.

Preferred Stock

On August 20, 2020, Farmer Mac issued 4.8 million shares of 5.250 % Non-Cumulative Preferred Stock, Series F ("Series F Preferred Stock"), which has a par value and liquidation preference of $ 25.00 per share, or $120.0 million aggregate outstanding.

Farmer Mac incurred direct costs of $ 3.8 million related to the issuance of the Series F Preferred Stock.

The dividend rate on the Series F Preferred Stock will remain at a non-cumulative, fixed rate of 5.250 % per year, when, as, and if a dividend is declared by the Board of Directors of Farmer Mac, for so long as the Series F Preferred Stock remains outstanding.

The Series F Preferred Stock has no maturity date, but Farmer Mac has the option to redeem the Series F Preferred Stock at any time on any dividend payment date on and after October 17, 2025.

On September 19, 2020, Farmer Mac used part of the net proceeds from the sale of the Series F Preferred Stock to redeem and repurchase all $ 60.0 million aggregate outstanding of Farmer Mac's 5.875 % Non-Cumulative Preferred Stock, Series A ("Series A Preferred Stock"), plus any declared and unpaid dividends through and including the redemption date.

As a result of the retirement of the Series A Preferred Stock, Farmer Mac recognized $ 1.7 million of deferred issuance costs, which is presented as "Loss on retirement of preferred stock" on the consolidated statements of operations.

In May 2020, Farmer Mac issued 3.18 million shares of 5.750 % Non-Cumulative Preferred Stock, Series E ("Series E Preferred Stock"), which has a par value and liquidation preference of $ 25.00 per share, or $79.5 million aggregate outstanding.

Farmer Mac incurred direct costs of $ 2.5 million related to the issuance of the Series E Preferred Stock.

The dividend rate on the Series E Preferred Stock will remain at a non-cumulative, fixed rate of 5.750 % per year, when, as, and if a dividend is declared by the Board of Directors of Farmer Mac, for so long as the Series E Preferred Stock remains outstanding.

The Series E Preferred Stock has no maturity date, but Farmer Mac has the option to redeem the preferred stock at any time on any dividend payment date on and after July 17, 2025.

During each of the first, second, and third quarters in 2020, Farmer Mac paid a quarterly dividend of $ 0.80 per share on all classes of its common stock.

For each quarter in 2019, Farmer Mac paid a quarterly dividend of $ 0.70 per share on all classes of its common stock.

No outstanding debt repurchases were made in the three months ended March 31, 2021 or 2020.

During first quarter 2021, Farmer Mac paid a quarterly dividend of $ 0.88 per share on all classes of its

common stock.

For each quarter in 2020, Farmer Mac paid a quarterly dividend of $ 0.80 per share on all

classes of its common stock.

Farmer Mac's board of directors approved a share repurchase program during third quarter 2015 authorizing Farmer Mac to repurchase up to $ 25.0 million of its outstanding Class C non-voting common stock.

The share repurchase program, last modified on March 14, 2019, authorized Farmer Mac to repurchase up to $ 10.0 million of Farmer Mac's outstanding Class C non-voting common stock.

The share repurchase program, last modified on March 14, 2019, authorized Farmer Mac to

repurchase up to $ 10.0 million of Farmer Mac's outstanding Class C non-voting common stock.

During first quarter 2020, Farmer Mac repurchased approximately 4,000 shares of Class C non-voting common stock at a cost of approximately $ 0.2 million.

Shortly after these repurchases were completed, Farmer Mac indefinitely suspended its share repurchase program in an effort to preserve capital and liquidity in view of market volatility and uncertainty caused by the COVID-19 pandemic.

As of September 30, 2020, Farmer Mac had repurchased approximately 673,000 shares of Class C non-voting common stock at a cost of approximately $ 19.8 million under the share repurchase program since 2015.

The program expires at the end of March 2021.

In March 2021, Farmer Mac's board of directors reinstated the share repurchase program on its previous terms (with a remaining authorization of up to $ 9.8 million in stock repurchases) and extended the expiration date of the program to March 2023.

As of March 31, 2021, Farmer Mac had repurchased approximately 673,000 shares of Class C non-voting common stock at a cost of approximately $ 19.8 million under the share repurchase program since 2015.

Capital Requirements

Farmer Mac is required to comply with the higher of the minimum capital requirement and the risk-based capital requirement.

As of both September 30, 2020 and December 31, 2019, the minimum capital requirement was greater than the risk-based capital requirement.

As of both March 31, 2021 and December 31, 2020, the minimum capital requirement was greater than the risk-based capital requirement.

Farmer Mac's ability to declare and pay dividends could be restricted if it fails to comply with applicable capital requirements.

As of September 30, 2020, Farmer Mac's minimum capital requirement was $ 670.0 million and its core capital level was $ 984.2 million, which was $ 314.2 million above the minimum capital requirement as of that date.

As of December 31, 2019, Farmer Mac's minimum capital requirement was $ 618.8 million and its core capital level was $ 815.4 million, which was $ 196.6 million above the minimum capital requirement as of that date.

As of March 31, 2021, Farmer Mac's minimum capital requirement was $ 677.6 million and its core capital level was $ 1.0 billion, which was $ 348.1 million above the minimum capital requirement as of that date.

As of December 31, 2020, Farmer Mac's minimum capital requirement was $ 680.9 million and its core capital level was $ 1.0 billion, which was $ 325.5 million above the minimum capital requirement as of that date.

In accordance with the Farm Credit Administration's rule on Farmer Mac's capital planning, and as part of Farmer Mac's capital plan, Farmer Mac has adopted a policy for maintaining a sufficient level of Tier 1 capital (consisting of retained earnings, paid-in-capital, common stock, and qualifying preferred stock) and imposing restrictions on Tier 1-eligible dividends and any discretionary bonus payments in the event that this capital falls below specified thresholds.

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Fair Value Classification and Transfers

The following tables present information about Farmer Mac's assets and liabilities measured at fair value on a recurring basis as of September 30, 2020 and December 31, 2019, respectively, and indicate the fair value hierarchy of the valuation techniques used by Farmer Mac to determine such fair value:

Assets and Liabilities Measured at Fair Value as of September 30, 2020

The following tables present information about Farmer Mac's assets and liabilities measured at fair value on a recurring basis as of March 31, 2021 and December 31, 2020, respectively, and indicate the fair value hierarchy of the valuation techniques used by Farmer Mac to determine such fair value:

Assets and Liabilities Measured at Fair Value as of March 31, 2021

Level 1 Level 2 Level 3 (1)

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Floating rate auction-rate certificates backed by Government guaranteed student loans $ — $ — $ 19,146 $ 19,146

Floating rate asset-backed securities — 9,201 — 9,201

Floating rate Government/GSE guaranteed mortgage-backed securities — 2,387,558 — 2,387,558

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Treasuries 1,402,727 — — 1,402,727

Total Investment Securities 1,217,566 2,295,552 19,072 3,532,190

Total Available-for-sale Investment Securities 1,402,727 2,387,759 19,146 3,809,632

Farmer Mac Guaranteed Securities:

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Total Liabilities at fair value $ — $ 28,345 $ — $ 28,345

Non-recurring:

Loans held for sale $ — $ — $ 22,086 $ 22,086

Total non-recurring assets at fair value $ — $ — $ 22,086 $ 22,086

(1) Level 3 assets represent 28 % of total assets and 64 % of financial instruments measured at fair value.

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Treasuries 1,467,951 — — 1,467,951

Total available-for-sale 1,296,923 1,644,008 18,912 2,959,843

Total Available-for-sale Investment Securities 1,467,951 2,366,570 19,171 3,853,692

Farmer Mac Guaranteed Securities:

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(1) Level 3 assets represent 29 % of total assets and 65 % of financial instruments measured at fair value.

There were no significant assets or liabilities measured at fair value on a non-recurring basis as of September 30, 2020 or December 31, 2019.

There were no significant assets or liabilities measured at fair value on a non-recurring basis as of March 31, 2021 or December 31, 2020.

Transfers in and/or out of the different levels within the fair value hierarchy are based on the fair values of the assets and liabilities as of the beginning of the reporting period.

During the first nine months of 2020 and 2019, there were no transfers within the fair value hierarchy for fair value measurements of Farmer Mac's investment securities, Farmer Mac Guaranteed Securities, USDA Securities, and financial derivatives.

During the three months ended March 31, 2021 and 2020, there were no transfers within the fair value hierarchy for fair value measurements of Farmer Mac's investment securities, Farmer Mac Guaranteed Securities, USDA Securities, and financial derivatives.

The following tables present additional information about assets and liabilities measured at fair value on a recurring basis for which Farmer Mac has used significant unobservable inputs to determine fair value.

Net transfers in and/or out of Level 3 are based on the fair values of the assets and liabilities as of the beginning of the reporting period.

There were no liabilities measured at fair value using significant unobservable inputs during the three and nine months ended September 30, 2020 and 2019.

Level 3 Assets and Liabilities Measured at Fair Value for the Three Months Ended September 30, 2020

Balance Purchases Sales Settlements Allowance for losses Realized and

unrealized gains/(losses) included

in Income Unrealized gains/(losses)

included in Other

Comprehensive

Income Ending

(in thousands)

Investment Securities:

Available-for-sale:

Floating rate auction-rate certificates backed by Government guaranteed student loans $ 18,283 $ — $ — $ — $ 1 $ — $ 788 $ 19,072

Total available-for-sale 18,283 — — — 1 — 788 19,072

Farmer Mac Guaranteed Securities:

Available-for-sale:

AgVantage 7,898,387 122,892 — ( 513,864 ) ( 96 ) ( 41,832 ) 46,151 7,511,638

Total available-for-sale 7,898,387 122,892 — ( 513,864 ) ( 96 ) ( 41,832 ) 46,151 7,511,638

USDA Securities:

Trading 7,786 — — ( 697 ) — ( 259 ) — 6,830

Total USDA Securities 7,786 — — ( 697 ) ( 259 ) — 6,830

Total Assets at fair value $ 7,924,456 $ 122,892 $ — $ ( 514,561 ) $ ( 95 ) $ ( 42,091 ) $ 46,939 $ 7,537,540

Level 3 Assets and Liabilities Measured at Fair Value for the Three Months Ended September 30, 2019

Balance Purchases Sales Settlements Realized and

unrealized gains/(losses) included

in Income Unrealized gains/(losses)

included in Other

Comprehensive

Income Ending

(in thousands)

Investment Securities:

Available-for-sale:

Floating rate auction-rate certificates backed by Government guaranteed student loans $ 19,208 $ — $ — $ — $ — $ — $ 19,208

Total available-for-sale 19,208 — — — — — 19,208

Farmer Mac Guaranteed Securities:

Available-for-sale:

AgVantage 7,035,668 340,148 — ( 254,593 ) 84,164 ( 22,846 ) 7,182,541

Total available-for-sale 7,035,668 340,148 — ( 254,593 ) 84,164 ( 22,846 ) 7,182,541

USDA Securities:

Available-for-sale — 9,506 ( 9,506 ) — — — —

Trading 9,201 — — ( 307 ) 49 — 8,943

Total USDA Securities 9,201 9,506 ( 9,506 ) ( 307 ) 49 — 8,943

Total Assets at fair value $ 7,064,077 $ 349,654 $ ( 9,506 ) $ ( 254,900 ) $ 84,213 $ ( 22,846 ) $ 7,210,692

Level 3 Assets and Liabilities Measured at Fair Value for the Nine Months Ended September 30, 2020

There were no liabilities measured at fair value using significant unobservable inputs during the three months ended March 31, 2021 and 2020.

Level 3 Assets and Liabilities Measured at Fair Value for the Three Months Ended March 31, 2021

Beginning Balance Purchases Sales Settlements Allowance for Losses Realized and

unrealized gains/(losses) included

in Income Unrealized gains/(losses)

unrealized losses included

in Income Unrealized gains

included in Other

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Total Assets at fair value $ 6,973,567 $ 160,615 $ — $ ( 244,935 ) $ 157 $ ( 168,756 ) $ 67,285 $ 6,787,933

Level 3 Assets and Liabilities Measured at Fair Value for the Nine Months Ended September 30, 2019

Balance Purchases Sales Settlements Realized and

unrealized gains/(losses) included

in Income Unrealized gains/(losses)

Level 3 Assets and Liabilities Measured at Fair Value for the Three Months Ended March 31, 2020

Beginning Balance Purchases Sales Settlements Allowance for Losses Realized and

unrealized gains included

in Income Unrealized losses

included in Other

Comprehensive

Income Ending

Income Ending Balance

(in thousands)

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USDA Securities:

Available-for-sale — 57,853 ( 57,853 ) — — — —

Trading 8,913 — — ( 611 ) — 106 — 8,408

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Total Assets at fair value $ 7,170,850 $ 483,580 $ — $ ( 227,866 ) $ ( 190 ) $ 290,486 $ ( 104,545 ) $ 7,612,315

The following tables present additional information about the significant unobservable inputs, such as discount rates and constant prepayment rates ("CPR"), used in the fair value measurements categorized in Level 3 of the fair value hierarchy as of September 30, 2020 and December 31, 2019:

As of September 30, 2020

As of March 31, 2021

Financial Instruments Fair Value Valuation Technique Unobservable Input Range (Weighted-Average)

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Conversely, in a declining interest rate environment, Farmer Mac would expect average discount rates to decrease.

Prepayment rates are not presented in the table above for AgVantage securities because they generally have fixed maturity dates when the secured general obligations are due and don't prepay.

Prepayment rates are not presented in the table above for AgVantage securities because they generally have fixed maturity dates when the secured general obligations are due and do not prepay.

The significant unobservable inputs used in the fair value measurements of USDA Securities are the prepayment rate and discount rate commensurate with the risks involved.

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Disclosures on Fair Value of Financial Instruments

The following table sets forth the estimated fair values and carrying values for financial assets, liabilities, and guarantees and commitments as of September 30, 2020 and December 31, 2019:

As of September 30, 2020 As of December 31, 2019

The following table sets forth the estimated fair values and carrying values for financial assets, liabilities, and guarantees and commitments as of March 31, 2021 and December 31, 2020:

As of March 31, 2021 As of December 31, 2020

Fair Value Carrying

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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 and nine months ended September 30, 2020 and 2019:

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, 2021 and 2020:

Core Earnings by Business Segment

For the Three Months Ended September 30, 2020

For the Three Months Ended March 31, 2021

Farm & Ranch USDA Guarantees Rural

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Release of/(provision for) losses 27 — ( 1,002 ) 87 ( 25 ) — ( 913 )

(Provision for)/release of reserve for losses ( 628 ) — 81 — — — ( 547 )

Other non-interest expense ( 5,381 ) ( 1,643 ) ( 1,438 ) ( 2,160 ) ( 3,938 ) — ( 14,560 )

Non-interest expense (4)

( 6,009 ) ( 1,643 ) ( 1,357 ) ( 2,160 ) ( 3,938 ) — ( 15,107 )

Core earnings before income taxes 16,870 4,570 4,728 16,676 ( 1,690 ) ( 9,322 ) (5)

Income tax (expense)/benefit ( 3,543 ) ( 960 ) ( 993 ) ( 3,502 ) 701 1,957 ( 6,340 )

Core earnings before preferred stock dividends 13,327 3,610 3,735 13,174 ( 989 ) ( 7,365 ) (5)

Preferred stock dividends — — — — ( 5,166 ) — ( 5,166 )

Loss on retirement of preferred stock — — — — — ( 1,667 ) ( 1,667 )

Segment core earnings/(losses) $ 13,327 $ 3,610 $ 3,735 $ 13,174 $ ( 6,155 ) $ ( 9,032 ) (5)

Total assets at carrying value $ 5,961,307 $ 2,487,687 $ 2,256,011 $ 8,716,923 $ 4,576,909 $ — $ 23,998,837

Total on- and off-balance sheet program assets at principal balance $ 8,249,349 $ 2,735,128 $ 2,685,309 $ 8,319,502 $ — $ — $ 21,989,288

(1) Includes 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 "(Losses)/gains on financial derivatives" on the consolidated financial statements, to determine the effective funding cost for each operating segment.

(4) Includes directly attributable costs and an allocation of indirectly attributable costs based on employee headcount.

(5) 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 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 September 30, 2019

Farm & Ranch USDA Guarantees Rural

Utilities Institutional Credit Corporate Reconciling

Consolidated Net Income

(in thousands)

Net interest income $ 15,345 $ 4,491 $ 2,602 $ 14,853 $ 2,821 $ — $ 40,112

reconciling adjustments (1)(2)(3)

( 2,164 ) ( 177 ) 1,900 2,954 ( 164 ) ( 2,349 ) —

Net effective spread 13,181 4,314 4,502 17,807 2,657 ( 2,349 ) —

Guarantee and commitment fees (2)

4,523 250 348 87 — ( 1,859 ) 3,349

Other income/(expense) (3)

390 92 17 — ( 110 ) ( 7,170 ) ( 6,781 )

Non-interest income/(loss) 4,913 342 365 87 ( 110 ) ( 9,029 ) ( 3,432 )

Provision for loan losses ( 760 ) — — — — — ( 760 )

Release of reserve for losses 731 — 213 — — — 944

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(4) Includes directly attributable costs and an allocation of indirectly attributable costs based on employee headcount.

(5) 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 reconciled to net income;

and segment core earnings reconciled to net income attributable to common stockholders.

Core Earnings by Business Segment

For the Nine Months Ended September 30, 2020

Farm & Ranch USDA Guarantees Rural

Institutional Credit Corporate Reconciling

Adjustments Consolidated Net Income

(in thousands)

Net interest income $ 53,768 $ 14,691 $ 12,778 $ 48,059 $ 5,025 $ — $ 134,321

reconciling adjustments (1)(2)(3)

( 4,072 ) 488 4,597 7,026 74 ( 8,113 ) —

Net effective spread 49,696 15,179 17,375 55,085 5,099 ( 8,113 ) —

Guarantee and commitment fees (2)

12,822 658 995 23 — ( 5,003 ) 9,495

Other income/(expense) (3)

2,197 864 12 — ( 413 ) ( 3,048 ) ( 388 )

Non-interest income/(loss) 15,019 1,522 1,007 23 ( 413 ) ( 8,051 ) 9,107

(Release of)/provision for losses 412 — ( 4,704 ) ( 222 ) ( 28 ) — ( 4,542 )

Provision for reserve for losses ( 262 ) — ( 278 ) — — — ( 540 )

Other non-interest expense ( 16,632 ) ( 5,045 ) ( 4,428 ) ( 6,606 ) ( 12,171 ) — ( 44,882 )

Non-interest expense (4)

( 16,894 ) ( 5,045 ) ( 4,706 ) ( 6,606 ) ( 12,171 ) — ( 45,422 )

Core earnings before income taxes 48,233 11,656 8,972 48,280 ( 7,513 ) ( 16,164 ) (5)

Income tax (expense)/benefit ( 10,129 ) ( 2,448 ) ( 1,884 ) ( 10,139 ) 1,689 3,395 ( 19,516 )

Core earnings before preferred stock dividends 38,104 9,208 7,088 38,141 ( 5,824 ) ( 12,769 ) (5)

Preferred stock dividends — — — — ( 12,536 ) — ( 12,536 )

Loss on retirement of preferred stock — — — — — ( 1,667 ) ( 1,667 )

Segment core earnings/(losses) $ 38,104 $ 9,208 $ 7,088 $ 38,141 $ ( 18,360 ) $ ( 14,436 ) (5)

Total assets at carrying value $ 5,961,307 $ 2,487,687 $ 2,256,011 $ 8,716,923 $ 4,576,909 $ — $ 23,998,837

Total on- and off-balance sheet program assets at principal balance $ 8,249,349 $ 2,735,128 $ 2,685,309 $ 8,319,502 $ — $ — $ 21,989,288

(1) Includes the amortization of premiums and discounts on assets consolidated at fair value, originally included in interest income, to reflect core earnings amounts.

(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" on the consolidated financial statements, to determine the effective funding cost for each operating segment.

(4) Includes directly attributable costs and an allocation of indirectly attributable costs based on employee headcount.

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Core Earnings by Business Segment

For the Nine Months Ended September 30, 2019

For the Three Months Ended March 31, 2020

Farm & Ranch USDA Guarantees Rural

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Provision for loan losses ( 808 ) — ( 2,125 ) ( 491 ) ( 14 ) — ( 3,438 )

Release of reserve for losses 424 — — — — — 424

Provision for reserve for losses ( 4 ) — ( 389 ) — — — ( 393 )

Other non-interest expense ( 5,997 ) ( 1,818 ) ( 1,604 ) ( 2,363 ) ( 4,433 ) — ( 16,215 )

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Preferred stock dividends — — — — ( 3,431 ) — ( 3,431 )

Loss on retirement of preferred stock — — — — — ( 1,956 ) ( 1,956 )

Segment core earnings/(losses) $ 10,756 $ 2,492 $ 904 $ 11,737 $ ( 5,746 ) $ ( 10,744 ) (5)

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(4) Includes directly attributable costs and an allocation of indirectly attributable costs based on employee headcount.

4 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements