What changed in this filing

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Item 1. Financial Statements

2021-11-08 compared with 2021-08-05 · 277 added, 220 removed, 1428 unchanged (26% of the section changed)

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

(in thousands)

15 unchanged sentences

Total USDA Securities 2,462,010 2,480,321

Loans held for sale, at lower of cost or fair value 301,551 —

Loans held for investment, at amortized cost 7,758,286 7,261,933

42 unchanged sentences

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended For the Six Months Ended

June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020

For the Three Months Ended For the Nine Months Ended

September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

(in thousands, except per share amounts)

6 unchanged sentences

Net interest income 55,005 44,661 163,385 134,321

Release of/(provision for) losses 761 ( 451 ) ( 152 ) ( 3,889 )

Provision for losses ( 366 ) ( 653 ) ( 518 ) ( 4,542 )

Net interest income after provision for losses 54,639 44,008 162,867 129,779

1 unchanged sentence

Guarantee and commitment fees 3,155 3,159 9,182 9,495

(Losses)/gains on financial derivatives ( 3,066 ) 6,523 1,227 ( 2,775 )

(Losses)/gains on trading securities ( 62 ) ( 21 ) ( 75 ) 85

Losses on financial derivatives ( 2,347 ) ( 564 ) ( 1,120 ) ( 3,339 )

Gains/(losses) on trading securities 37 ( 258 ) ( 38 ) ( 173 )

Gains on sale of available-for-sale investment securities 253 — 253 —

Gains on sale of real estate owned — — — 485

Release of reserve for losses 222 400 1,166 7

Release of/(provision for) reserve for losses 111 ( 547 ) 1,277 ( 540 )

Other income 582 594 1,600 2,639

9 unchanged sentences

Preferred stock dividends ( 6,774 ) ( 5,166 ) ( 17,885 ) ( 12,536 )

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

Net income attributable to common stockholders $ 24,289 $ 18,659 $ 77,691 $ 59,745

5 unchanged sentences

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Three Months Ended For the Six Months Ended

June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020

For the Three Months Ended For the Nine Months Ended

September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

(in thousands)

1 unchanged sentence

Other comprehensive income/(loss) before taxes:

Net unrealized (losses)/gains on available-for-sale securities ( 37,389 ) 42,527 28,975 ( 56,789 )

Net unrealized gains/(losses) on available-for-sale securities 991 47,235 29,966 ( 9,554 )

Net changes in held-to-maturity securities ( 2,385 ) ( 2,523 ) ( 6,195 ) ( 10,707 )

Net unrealized (losses)/gains on cash flow hedges ( 5,274 ) ( 2,132 ) 13,641 ( 30,388 )

Other comprehensive (loss)/income before tax ( 44,316 ) 37,899 38,806 ( 95,361 )

Income tax benefit/(expense) related to other comprehensive (loss)/income 9,305 ( 7,959 ) ( 8,150 ) 20,025

Other comprehensive (loss)/income net of tax ( 35,011 ) 29,940 30,656 ( 75,336 )

Comprehensive (loss)/income $ ( 3,725 ) $ 65,566 $ 95,169 $ ( 26,880 )

Net unrealized gains/(losses) on cash flow hedges 3,258 2,959 16,899 ( 27,429 )

Other comprehensive income/(loss) before tax 1,864 47,671 40,670 ( 47,690 )

Income tax (expense)/benefit related to other comprehensive income/(loss) ( 391 ) ( 10,011 ) ( 8,541 ) 10,014

Other comprehensive income/(loss) net of tax 1,473 37,660 32,129 ( 37,676 )

Comprehensive income $ 32,536 $ 63,152 $ 127,705 $ 36,272

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

27 unchanged sentences

Balance as of June 30, 2021 19,980 $ 484,531 10,765 $ 10,765 $ 124,148 $ 16,733 $ 544,038 $ 1,180,215

Net Income — — — — — — 31,063 31,063

Other comprehensive income, net of tax — — — — — 1,473 — 1,473

Cash dividends:

Preferred stock — — — — — — ( 6,774 ) ( 6,774 )

Common stock (cash dividend of $ 0.88 per share)

— — — — — — ( 9,474 ) ( 9,474 )

Issuance of Class C Common Stock — — 1 1 45 — — 46

Stock-based compensation cost — — — — 749 — — 749

Balance as of September 30, 2021 19,980 $ 484,531 10,766 $ 10,766 $ 124,942 $ 18,206 $ 558,853 $ 1,197,298

Additional Other

27 unchanged sentences

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

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

2 unchanged sentences

( unaudited )

For the Six Months Ended

June 30, 2021 June 30, 2020

For the Nine Months Ended

September 30, 2021 September 30, 2020

(in thousands)

6 unchanged sentences

Gain on sale of real estate owned — ( 485 )

Gain on the sale of available-for-sale investment securities ( 253 ) —

Total (release)/provision for allowance for losses ( 759 ) 5,083

2 unchanged sentences

Stock-based compensation expense 3,306 2,765

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 44,744 54,661

4 unchanged sentences

Accrued interest payable ( 9,475 ) ( 14,311 )

Custodial deposit liability 20,798 —

Other liabilities ( 8,346 ) ( 4,412 )

9 unchanged sentences

Proceeds from repayment of loans purchased as held for investment 1,500,239 1,272,603

Proceeds from sale of loans previously classified as held for investment 10,000 —

Proceeds from sale of available-for-sale investment securities 257,524 —

9 unchanged sentences

Proceeds from common stock issuance 71 44

Retirement of preferred stock — ( 60,000 )

Proceeds from preferred stock issuance, net of stock issuance costs 121,327 193,163

2 unchanged sentences

Dividends paid on common and preferred stock ( 45,048 ) ( 37,369 )

Net cash (used in)/provided by financing activities ( 301,375 ) 2,122,531

Net cash provided by financing activities 183,601 2,082,456

Net change in cash and cash equivalents ( 134,889 ) 306,211

5 unchanged sentences

Reclassification of defaulted loans from loans held for investment in consolidated trusts to loans held for investment 24,690 42,393

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

Reclassification of loans held for investment to loans held for sale 301,551 —

Capitalized interest 1,253 937

Purchases of securities - traded, not yet settled — 4,588

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

23 unchanged sentences

Presented below are Farmer Mac's significant accounting policies that contain

updated information for the three and six months ended June 30, 2021.

updated information for the three and nine months ended September 30, 2021.

Principles of Consolidation

The consolidated financial statements include the accounts of Farmer Mac and its two subsidiaries during the year:

(1) Farmer Mac Mortgage Securities Corporation ("FMMSC"), whose principal activities are to facilitate the purchase and issuance of Farmer Mac Guaranteed Securities;

(1) Farmer Mac Mortgage Securities Corporation, whose principal activities are to facilitate the purchase and issuance of Farmer Mac Guaranteed Securities;

and (2) Farmer Mac II LLC, whose principal activity is the operation of substantially all of the business related to the USDA Guarantees line of business – primarily the acquisition of USDA Securities.

1 unchanged sentence

Consolidation of Variable Interest Entities

As of June 30, 2021

As of September 30, 2021

Farm & Ranch USDA Guarantees Corporate Total

8 unchanged sentences

Carrying value — 28,265 — 28,265

— 28,798 — 28,798

Maximum exposure to loss (2)

11 unchanged sentences

(1) Includes borrower remittances of $ 13.6 million.

The borrower remittances had not been passed through to third party investors as of June 30, 2021.

(2) Includes $ 41,000 of unamortized premiums and discounts and fair value adjustments related to the USDA Guarantees line of business.

The borrower remittances had not been passed through to third party investors as of September 30, 2021.

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

35 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 six months ended June 30, 2021 and 2020:

The following schedule reconciles basic and diluted EPS for the three and nine months ended September 30, 2021 and 2020:

For the Three Months Ended

June 30, 2021 June 30, 2020

September 30, 2021 September 30, 2020

Income Weighted-Average Shares $ per

5 unchanged sentences

Diluted EPS $ 24,289 10,842 $ 2.24 $ 18,659 10,785 $ 1.73

(1) For the three months ended June 30, 2021 and 2020, SARs and restricted stock of 29,043 and 83,297 , 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 June 30, 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.

For the Six Months Ended

June 30, 2021 June 30, 2020

(1) For the three months ended September 30, 2021 and 2020, SARs and restricted stock of 28,575 and 66,445 , 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, 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.

For the Nine Months Ended

September 30, 2021 September 30, 2020

Income Weighted-Average Shares $ per

5 unchanged sentences

Diluted EPS $ 77,691 10,834 $ 7.17 $ 59,745 10,781 $ 5.54

(1) For the six months ended June 30, 2021 and 2020, SARs and restricted stock of 64,364 and 85,223 , respectively, were outstanding but not included in the computation of diluted earnings per share of common stock because they were anti-dilutive.

For the six months ended June 30, 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.

(1) For the nine months ended September 30, 2021 and 2020, SARs and restricted stock of 52,434 and 78,963 , 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, 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 six months ended June 30, 2021 and 2020.

As of June 30, 2021 As of June 30, 2020

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, 2021 and 2020.

As of September 30, 2021 As of September 30, 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

2 unchanged sentences

Beginning Balance $ 8,954 $ 19,819 $ ( 12,040 ) $ 16,733 $ ( 88,261 ) $ 26,379 $ ( 29,615 ) $ ( 91,497 )

Other comprehensive (loss)/income before reclassifications ( 28,751 ) — ( 5,570 ) ( 34,321 ) 34,374 — ( 2,920 ) 31,454

Other comprehensive income before reclassifications 1,275 — 1,049 2,324 38,099 — 904 39,003

Amounts reclassified from AOCI ( 493 ) ( 1,884 ) 1,526 ( 851 ) ( 783 ) ( 1,993 ) 1,433 ( 1,343 )

Net comprehensive (loss)/income ( 29,537 ) ( 1,306 ) ( 4,168 ) ( 35,011 ) 33,597 ( 1,972 ) ( 1,685 ) 29,940

Net comprehensive income/(loss) 782 ( 1,884 ) 2,575 1,473 37,316 ( 1,993 ) 2,337 37,660

Ending Balance $ 9,736 $ 17,935 $ ( 9,465 ) $ 18,206 $ ( 50,945 ) $ 24,386 $ ( 27,278 ) $ ( 53,837 )

For the Six Months Ended:

For the Nine Months Ended:

Beginning Balance $ ( 13,937 ) $ 22,829 $ ( 22,815 ) $ ( 13,923 ) $ ( 43,397 ) $ 32,845 $ ( 5,609 ) $ ( 16,161 )

3 unchanged sentences

Ending Balance $ 9,736 $ 17,935 $ ( 9,465 ) $ 18,206 $ ( 50,945 ) $ 24,386 $ ( 27,278 ) $ ( 53,837 )

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 six months ended June 30, 2021 and 2020:

For the Three Months Ended

June 30, 2021 June 30, 2020

September 30, 2021 September 30, 2020

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

2 unchanged sentences

Available-for-sale-securities:

Unrealized holding (losses)/gains on available-for-sale securities $ ( 36,395 ) $ ( 7,644 ) $ ( 28,751 ) $ 43,512 $ 9,138 $ 34,374

Unrealized holding gains on available-for-sale securities $ 1,614 $ 339 $ 1,275 $ 48,226 $ 10,127 $ 38,099

Less reclassification adjustments included in:

1 unchanged sentence

( 362 ) ( 76 ) ( 286 ) ( 976 ) ( 205 ) ( 771 )

Gains on sale of available-for-sale investment securities (2)

( 253 ) ( 53 ) ( 200 ) — — —

Other income (3)

7 unchanged sentences

Cash flow hedges

Unrealized losses on cash flow hedges $ ( 7,050 ) $ ( 1,480 ) $ ( 5,570 ) $ ( 3,695 ) $ ( 775 ) $ ( 2,920 )

Unrealized gains on cash flow hedges $ 1,326 $ 277 $ 1,049 $ 1,145 $ 241 $ 904

Less reclassification adjustments included in:

2 unchanged sentences

Total $ 3,258 $ 683 $ 2,575 $ 2,959 $ 622 $ 2,337

Other comprehensive (loss)/income $ ( 44,316 ) $ ( 9,305 ) $ ( 35,011 ) $ 37,899 $ 7,959 $ 29,940

Other comprehensive income $ 1,864 $ 391 $ 1,473 $ 47,671 $ 10,011 $ 37,660

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

(2) Represents unrealized gains and losses on sales of available-for-sale securities.

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

3 unchanged sentences

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

For the Six Months Ended

June 30, 2021 June 30, 2020

For the Nine Months Ended

September 30, 2021 September 30, 2020

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

6 unchanged sentences

( 2,333 ) ( 490 ) ( 1,843 ) ( 2,916 ) ( 612 ) ( 2,304 )

Gains on sale of available-for-sale investment securities (2)

( 253 ) ( 53 ) ( 200 ) — — —

Other income (3)

14 unchanged sentences

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

(2) Represents unrealized gains and losses on sales of available-for-sale securities.

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

3 unchanged sentences

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

During the third quarter, Farmer Mac acquired the loan servicing rights for a sizeable portion of its Farm & Ranch loan and USDA Guaranteed Securities portfolios.

In connection with this acquisition, Farmer Mac now collects cash from borrowers in advance of the borrower's contractual payment date.

Farmer Mac's policy is to include the cash in the consolidated balance sheet as "Cash and cash equivalents" with an offsetting liability to "Accounts payable and accrued expenses" until the contractual payment is due, at which point the payment is applied to the loan.

The net change in the amount of this custodial cash will also be disclosed in the consolidated statements of cash flows as "Custodial deposit liability".

(d) New Accounting Standards

Recently Adopted Accounting Guidance

6 unchanged sentences

INVESTMENT SECURITIES

The following tables set forth information about Farmer Mac's available-for-sale and held-to-maturity investment securities as of June 30, 2021 and December 31, 2020:

As of June 30, 2021

The following tables set forth information about Farmer Mac's available-for-sale and held-to-maturity investment securities as of September 30, 2021 and December 31, 2020:

As of September 30, 2021

Amount Outstanding Unamortized Premium/(Discount) Amortized

14 unchanged sentences

Total held-to-maturity $ 45,032 $ — $ 45,032 $ — $ 996 $ — $ 46,028

(1) Amounts presented exclude $ 6.2 million of accrued interest receivable on investment securities as of June 30, 2021.

(1) Amounts presented exclude $ 4.7 million of accrued interest receivable on investment securities as of September 30, 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 June 30, 2021.

(3) The held-to-maturity investment securities had a weighted average yield of 1.5 % as of September 30, 2021.

As of December 31, 2020

20 unchanged sentences

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

During the three and six months ended June 30, 2021, Farmer Mac received proceeds of $ 25.6 million from the sale of securities from its available-for-sale investment portfolio, resulting in a loss of $ 2,900 .

Farmer Mac did no t sell any securities from its available-for-sale investment portfolio during the three and six months ended June 30, 2020.

As of June 30, 2021 and December 31, 2020, unrealized losses on available-for-sale investment securities were as follows:

As of June 30, 2021

During the three and nine months ended September 30, 2021, Farmer Mac received proceeds of $ 232.0 million and $ 257.5 million, respectively, from the sale of securities from its available-for-sale investment portfolio, resulting in gains of $ 0.3 million and $ 0.3 million, respectively.

Farmer Mac did no t sell any securities from its available-for-sale investment portfolio during the three and nine months ended September 30, 2020.

As of September 30, 2021 and December 31, 2020, unrealized losses on available-for-sale investment securities were as follows:

As of September 30, 2021

Available-for-Sale Securities

7 unchanged sentences

Floating rate Government/GSE guaranteed mortgage-backed securities 155,001 ( 1,823 ) 29,211 ( 430 )

Fixed rate Government/GSE guaranteed mortgage-backed securities 28,706 ( 85 ) — —

Fixed rate U.S.

17 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 June 30, 2021 and December 31, 2020, 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 September 30, 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 June 30, 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.

As of both September 30, 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 June 30, 2021 that is, on average, approximately 98.6 % of their amortized cost basis.

Securities in unrealized loss positions for 12 months or longer have a fair value as of September 30, 2021 that is, on average, approximately 98.8 % 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 June 30, 2021 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 September 30, 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 June 30, 2021

As of September 30, 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 June 30, 2021 and December 31, 2020:

As of June 30, 2021

The following tables set forth information about on-balance sheet Farmer Mac Guaranteed Securities and USDA Securities as of September 30, 2021 and December 31, 2020:

As of September 30, 2021

Unpaid Principal Balance Unamortized Premium/(Discount) Amortized

13 unchanged sentences

$ 4,632 $ 115 $ 4,747 $ — $ 48 $ ( 2 ) $ 4,793

(1) Amounts presented exclude $ 32.0 million, $ 31.2 million, and $ 0.1 million of accrued interest receivable on available-for-sale, held-to-maturity, and trading securities, respectively, as of June 30, 2021.

(1) Amounts presented exclude $ 30.4 million, $ 37.5 million, and $ 0.1 million of accrued interest receivable on available-for-sale, held-to-maturity, and trading securities, respectively, as of September 30, 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 5.06 % as of June 30, 2021.

(3) The trading USDA securities had a weighted average yield of 5.13 % as of September 30, 2021.

As of December 31, 2020

18 unchanged sentences

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

As of June 30, 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 June 30, 2021

As of September 30, 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 September 30, 2021

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

7 unchanged sentences

AgVantage $ 1,596,866 $ ( 8,134 ) $ — $ —

Farmer Mac Guaranteed USDA Securities 12,902 ( 178 ) — —

USDA Securities — — 16,671 ( 791 )

16 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 June 30, 2021 and December 31, 2020, as applicable.

The unrealized losses on the held-to-maturity USDA Securities as of both June 30, 2021 and December 31, 2020 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 September 30, 2021 and December 31, 2020, as applicable.

The unrealized losses on the held-to-maturity USDA Securities as of both September 30, 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.

The unrealized losses from AgVantage securities were on 13 and 11 available-for-sale securities as of June 30, 2021 and December 31, 2020, respectively.

There were 4 and 2 held-to-maturity AgVantage securities with an unrealized loss as of June 30, 2021 and December 31, 2020, respectively.

As of June 30, 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 and six months ended June 30, 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 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 June 30, 2021 are set forth below.

The unrealized losses from AgVantage securities were on 11 available-for-sale securities as of both September 30, 2021 and December 31, 2020.

There were 8 and 2 held-to-maturity AgVantage securities with an unrealized loss as of September 30, 2021 and December 31, 2020, respectively.

As of September 30, 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 and nine months ended September 30, 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 June 30, 2021

As of September 30, 2021

Available-for-Sale Securities

7 unchanged sentences

(1) Amounts presented exclude $ 30.4 million of accrued interest receivable.

As of June 30, 2021

As of September 30, 2021

Held-to-Maturity Securities

12 unchanged sentences

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 June 30, 2021 and December 31, 2020:

As of June 30, 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 September 30, 2021 and December 31, 2020:

As of September 30, 2021

Fair Value Weighted-

50 unchanged sentences

Net amount $ 16,123 $ 182,371

As of June 30, 2021, Farmer Mac expects to reclassify $ 5.7 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 June 30, 2021.

During the three and six months ended June 30, 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 and six months ended June 30, 2021 and 2020:

For the Three Months Ended June 30, 2021

As of September 30, 2021, Farmer Mac expects to reclassify $ 5.7 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, 2021.

During the three and nine months ended September 30, 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 and nine months ended September 30, 2021 and 2020:

For the Three Months Ended September 30, 2021

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

22 unchanged sentences

Losses on financial derivatives not designated in hedge relationships $ — $ — $ — $ — $ ( 2,347 ) $ ( 2,347 )

For The Three Months Ended June 30, 2020

For The Three Months Ended September 30, 2020

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

1 unchanged sentence

Interest Income

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

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

(in thousands)

15 unchanged sentences

Expense recognized on cash flow hedges $ — $ — $ ( 2,529 ) $ — $ ( 2,529 )

Gains on financial derivatives not designated in hedge relationships:

Gains on interest rate swaps $ — $ — $ — $ 8,427 $ 8,427

Losses on financial derivatives not designated in hedge relationships:

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

Interest expense on interest rate swaps — — — 3,800 3,800

Treasury futures — — — ( 72 ) ( 72 )

Gains on financial derivatives not designated in hedge relationships $ — $ — $ — $ 6,523 $ 6,523

For the Six Months Ended June 30, 2021

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

For the Nine Months Ended September 30, 2021

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

Net Interest Income Non-Interest Income Total

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

Interest Income Investments and Cash Equivalents Interest Income Farmer Mac Guaranteed Securities and USDA Securities Interest Income Loans Total Interest Expense Losses on financial derivatives

(in thousands)

14 unchanged sentences

Expense recognized on cash flow hedges $ — $ — $ — $ ( 7,462 ) $ — $ ( 7,462 )

Gains on financial derivatives not designated in hedging relationships:

Losses on financial derivatives not designated in hedging relationships:

Losses on interest rate swaps $ — $ — $ — $ — $ ( 4,363 ) $ ( 4,363 )

1 unchanged sentence

Treasury futures — — — — ( 246 ) ( 246 )

Gains on financial derivatives not designated in hedge relationships $ — $ — $ — $ — $ 1,227 $ 1,227

For The Six Months Ended June 30, 2020

Losses on financial derivatives not designated in hedge relationships $ — $ — $ — $ — $ ( 1,120 ) $ ( 1,120 )

For The Nine Months Ended September 30, 2020

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

20 unchanged sentences

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

Gains on interest rate swaps $ — $ — $ — $ 1,878 $ 1,878

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

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

1 unchanged sentence

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

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 June 30, 2021 and December 31, 2020:

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)

June 30, 2021 December 31, 2020 June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020 September 30, 2021 December 31, 2020

(in thousands)

6 unchanged sentences

( 5,730,114 ) ( 3,006,140 ) ( 14,136 ) ( 53,240 )

(1) Includes $ 1.4 million and $ 1.6 million of hedging adjustments on discontinued hedging relationships as of June 30, 2021 and December 31, 2020, respectively.

(2) Includes $ 1.4 million of hedging adjustments on a discontinued hedging relationship as of both June 30, 2021 and December 31, 2020.

(1) Includes $ 1.4 million and $ 1.6 million of hedging adjustments on discontinued hedging relationships as of September 30, 2021 and December 31, 2020, respectively.

(2) Includes $ 1.2 million and $ 1.4 million of hedging adjustments on a discontinued hedging relationship as of September 30, 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 June 30, 2021 and December 31, 2020:

June 30, 2021

The following table shows Farmer Mac's credit exposure to interest rate swap counterparties as of September 30, 2021 and December 31, 2020:

September 30, 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 June 30, 2021, Farmer Mac held $ 2.6 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 $ 8.4 million cash and $ 168.8 million of investment securities as of June 30, 2021 and posted $ 11.2 million cash and $ 201.1 million investment securities as of December 31, 2020.

As of September 30, 2021, Farmer Mac held $ 2.2 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 $ 6.0 million cash and $ 169.2 million of investment securities as of September 30, 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 June 30, 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 June 30, 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 $ 16.0 billion notional amount of interest rate swaps outstanding as of June 30, 2021, $ 13.6 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 September 30, 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 September 30, 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 $ 15.8 billion notional amount of interest rate swaps outstanding as of September 30, 2021, $ 13.2 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 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.

During the first nine months of 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

As of both June 30, 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 June 30, 2021 and December 31, 2020:

As of June 30, 2021 As of December 31, 2020

During third quarter 2021, Farmer Mac reclassified $ 301.6 million from loans held for investment to loans held for sale related to the FARM Series 2021-1 securitization.

See note 11 for more information on the securitization.

As of September 30, 2021 and December 31, 2020, Farmer Mac had $ 301.6 million and no loans held for sale, respectively.

Farmer Mac did not record any lower of cost or fair value adjustments during the three or nine months ended September 30, 2021 related to its loans held for sale.

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, 2021 and December 31, 2020:

As of September 30, 2021 As of December 31, 2020

Unsecuritized In Consolidated Trusts Total Unsecuritized In Consolidated Trusts Total

10 unchanged sentences

Allowance for Losses

The following table is a summary, by asset type, of the allowance for losses as of June 30, 2021 and December 31, 2020:

June 30, 2021 December 31, 2020

The following table is a summary, by asset type, of the allowance for losses as of September 30, 2021 and December 31, 2020:

September 30, 2021 December 31, 2020

Allowance for Losses Allowance for Losses

3 unchanged sentences

Total $ 14,294 $ 13,832

The following is a summary of the changes in the allowance for losses for the three and six month period ended June 30, 2021 and 2020:

For the Three Months Ended For the Six Months Ended

June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020

The following is a summary of the changes in the allowance for losses for the three and nine month period ended September 30, 2021 and 2020:

For the Three Months Ended For the Nine Months Ended

September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

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

4 unchanged sentences

Adjusted Beginning Balance 3,092 6,039 3,745 6,545

Release of losses ( 626 ) ( 920 ) ( 653 ) ( 112 )

Provision for/(release of) losses 414 ( 300 ) ( 239 ) ( 412 )

Charge-offs — — — ( 394 )

9 unchanged sentences

$ 10,788 $ 10,082 $ 10,788 $ 10,082

(1) As of June 30, 2021 and 2020, allowance for losses for Farm & Ranch includes no allowance and $ 1.8 million, respectively, for collateral dependent assets secured by agricultural real estate.

(2) As of both June 30, 2021 and 2020, allowance for losses for Rural Utilities includes no allowance for collateral dependent assets.

The release from the allowance for Rural Utilities loan losses of $ 0.2 million recorded during second quarter 2021 was primarily attributable to the impact of improving economic factor forecasts, specifically expectations for unemployment.

The $ 0.6 million release from the allowance for the Farm & Ranch portfolio during second quarter 2021 was primarily attributable to improving economic factor forecasts, particularly agricultural commodity prices.

The small net provision recorded to the allowance for the six months ended June 30, 2021, was primarily a result of the impact of the Texas Arctic Freeze on the Rural Utilities portfolio, partially offset by improving economic factor forecasts.

The provision to the allowance for loan losses of $ 0.5 million recorded during second quarter 2020 was

primarily due to the impact of net new loan volume in the Rural Utilities portfolio of $ 311.8 million.

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

improvements in commodity prices and expectations for stable farm land values.

In addition, there was a

$ 0.4 million charge-off to the allowance related to the acquisition of a new real estate owned property

("REO") during second quarter 2020.

The provision to the allowance for loan losses of $ 3.4 million recorded during the six months ended June

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 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 Farmer Mac's loans and non-performing assets as of June 30, 2021 and December 31, 2020:

As of June 30, 2021

(1) As of September 30, 2021 and 2020, allowance for losses for Farm & Ranch includes no allowance and $ 1.8 million, respectively, for collateral dependent assets secured by agricultural real estate.

(2) As of both September 30, 2021 and 2020, allowance for losses for Rural Utilities includes no allowance for collateral dependent assets.

The release from the allowance for Rural Utilities loan losses of $ 0.1 million recorded during third quarter 2021 was primarily attributable to the impact of improving economic factor forecasts.

The $ 0.4 million provision to the allowance for the Farm & Ranch portfolio during third quarter 2021 was primarily attributable to a decline in the economic factor forecast for commodity prices in Farmer Mac's fruit and nuts portfolio.

The net provision recorded to the allowance for the nine months ended September 30, 2021 was primarily a result of the impact of the Texas Arctic Freeze on the Rural Utilities portfolio, partially offset by improving economic factor forecasts.

The net release from the allowance for the nine months ended September 30, 2021 was primarily a result of improving agricultural commodity prices on the Farm & Ranch portfolio in the first half of the year, partially offset by declines in the third quarter.

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

The following table presents the unpaid principal balances by delinquency status of Farmer Mac's loans and non-performing assets as of September 30, 2021 and December 31, 2020:

As of September 30, 2021

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

8 unchanged sentences

(4) Includes $ 44.8 million of nonaccrual loans for which there was no associated allowance.

During the three and six months ended June 30, 2021, Farmer Mac received $ 1.9 million and $ 3.0 million, respectively, in interest on nonaccrual loans.

During the three and nine months ended September 30, 2021, Farmer Mac received $ 1.4 million and $ 4.4 million, respectively, in interest on nonaccrual loans.

As of December 31, 2020

11 unchanged sentences

Credit Quality Indicators

The following tables present credit quality indicators related to Farm & Ranch loans and Rural Utilities loans held as of June 30, 2021 and December 31, 2020, by year of origination:

As of June 30, 2021

The following tables present credit quality indicators related to Farm & Ranch loans and Rural Utilities loans held as of September 30, 2021 and December 31, 2020, by year of origination:

As of September 30, 2021

Year of Origination:

9 unchanged sentences

Total $ 1,654,597 $ 1,892,856 $ 723,427 $ 423,585 $ 375,483 $ 1,154,262 $ 553,539 $ 6,777,749

For the Three Months Ended June 30, 2021:

For the Three Months Ended September 30, 2021:

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

1 unchanged sentence

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

For the Six Months Ended June 30, 2021:

For the Nine Months Ended September 30, 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 June 30, 2021

As of September 30, 2021

Year of Origination:

9 unchanged sentences

Total $ 60,793 $ 642,972 $ 784,153 $ 8,100 $ 89,263 $ 628,903 $ 28,988 $ 2,243,172

For the Three Months Ended June 30, 2021:

For the Three Months Ended September 30, 2021:

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

1 unchanged sentence

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

For the Six Months Ended June 30, 2021:

For the Nine Months Ended September 30, 2021:

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

16 unchanged sentences

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 June 30, 2020:

For the Three Months Ended September 30, 2020:

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

1 unchanged sentence

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

For the Six Months Ended June 30, 2020:

For the Nine Months Ended September 30, 2020:

Current period charge-offs $ — $ — $ — $ — $ — $ 394 $ — $ 394

16 unchanged sentences

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

For the Three Months Ended June 30, 2020:

For the Three Months Ended September 30, 2020:

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

1 unchanged sentence

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

For the Six Months Ended June 30, 2020:

For the Nine Months Ended September 30, 2020:

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.

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 June 30, 2021 and December 31, 2020, not including offsets provided by any recourse provisions, recoveries from third parties, or collateral for the underlying loans:

GUARANTEES AND COMMITMENTS

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, 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 June 30, 2021 As of December 31, 2020

As of September 30, 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 Six Months Ended

June 30, 2021 June 30, 2020

For the Nine Months Ended

September 30, 2021 September 30, 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 June 30, 2021 As of December 31, 2020

As of September 30, 2021 As of December 31, 2020

(dollars in thousands)

4 unchanged sentences

Long-Term Standby Purchase Commitments

Farmer Mac has recorded a liability for its obligation to stand ready under the guarantee in the guarantee and commitment obligation on the consolidated balance sheets.

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 June 30, 2021 As of December 31, 2020

Farmer Mac has recorded a liability for its obligation to stand ready under the commitment in the guarantee and commitment obligation on the consolidated balance sheets.

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 Long-Term Standby Purchase Commitments ("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, 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 June 30, 2021 and December 31, 2020:

June 30, 2021 December 31, 2020

The following table is a summary, by asset type, of the reserve for losses as of September 30, 2021 and December 31, 2020:

September 30, 2021 December 31, 2020

Reserve for Losses Reserve for Losses

5 unchanged sentences

Total $ 2,000 $ 3,277

The following is a summary of the changes in the reserve for losses for the three and six month period ended June 30, 2021 and 2020:

For the Three Months Ended For the Six Months Ended

June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020

The following is a summary of the changes in the reserve for losses for the three and nine month period ended September 30, 2021 and 2020:

For the Three Months Ended For the Nine Months Ended

September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

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

4 unchanged sentences

Adjusted Beginning Balance 1,194 1,650 2,097 2,016

Release of losses ( 172 ) ( 370 ) ( 903 ) ( 366 )

(Release of)/provision for losses ( 91 ) 628 ( 994 ) 262

Charge-offs — — — —

7 unchanged sentences

Ending Balance $ 897 $ 1,290 $ 897 $ 1,290

The release from the reserve for losses in the Rural Utilities LTSPC portfolio recorded during the three and six months ended June 30, 2021 was primarily due to improving economic factor forecasts and ratings upgrades.

The release from the reserve for losses in the Rural Utilities LTSPC portfolio recorded during the three and nine months ended September 30, 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 release from the reserve for losses recorded during the three and six months ended June 30, 2020 was

primarily due to the net decreases in LTSPC volume of $ 58.5 million and $ 119.3 million, respectively.

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 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 June 30, 2021 and December 31, 2020:

As of June 30, 2021

Farm & Ranch Farmer Mac Guaranteed Securities, Rural Utilities loans underlying LTSPCs, and non-performing assets as of September 30, 2021 and December 31, 2020:

As of September 30, 2021

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

16 unchanged sentences

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 June 30, 2021 and December 31, 2020, by year of origination:

As of June 30, 2021

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, 2021 and December 31, 2020, by year of origination:

As of September 30, 2021

Year of Origination:

9 unchanged sentences

Total $ 306,664 $ 314,073 $ 207,382 $ 201,521 $ 241,553 $ 1,158,061 $ 238,356 $ 2,667,610

For the Three Months Ended June 30, 2021:

For the Three Months Ended September 30, 2021:

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

1 unchanged sentence

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

For the Six Months Ended June 30, 2021:

For the Nine Months Ended September 30, 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 June 30, 2021

As of September 30, 2021

Year of Origination:

9 unchanged sentences

Total $ — $ — $ — $ — $ — $ 511,743 $ 62,512 $ 574,255

For the Three Months Ended June 30, 2021:

For the Three Months Ended September 30, 2021:

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

1 unchanged sentence

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

For the Six Months Ended June 30, 2021:

For the Nine Months Ended September 30, 2021:

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

15 unchanged sentences

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

For the Three Months Ended June 30, 2020:

For the Three Months Ended September 30, 2020:

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

1 unchanged sentence

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

For the Six Months Ended June 30, 2020:

For the Nine Months Ended September 30, 2020:

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

15 unchanged sentences

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

For the Three Months Ended June 30, 2020:

For the Three Months Ended September 30, 2020:

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

1 unchanged sentence

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

For the Six Months Ended June 30, 2020:

For the Nine Months Ended September 30, 2020:

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

6 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 25.0 years.

The following tables set forth information related to Farmer Mac's borrowings as of June 30, 2021 and December 31, 2020:

June 30, 2021

Outstanding as of June 30 Average Outstanding During the Quarter

The following tables set forth information related to Farmer Mac's borrowings as of September 30, 2021 and December 31, 2020:

September 30, 2021

Outstanding as of September 30 Average Outstanding During the Quarter

Amount Weighted- Average Rate Amount Weighted- Average Rate

36 unchanged sentences

Total $ 21,848,917

The maximum amount of Farmer Mac's discount notes outstanding at any month end during the six months ended June 30, 2021 and 2020 was $ 1.9 billion and $ 2.6 billion, respectively.

The maximum amount of Farmer Mac's discount notes outstanding at any month end during the nine months ended September 30, 2021 and 2020 was $ 2.4 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 2021 as of June 30, 2021:

Debt Callable in 2021 as of June 30, 2021, by Maturity

The following table summarizes by maturity date the amounts and costs for Farmer Mac debt callable in 2021 as of September 30, 2021:

Debt Callable in 2021 as of September 30, 2021, by Maturity

Amount Weighted-Average Rate

6 unchanged sentences

Total $ 1,184,302 1.10 %

The following schedule summarizes the earliest interest rate reset date, or debt maturities, of total borrowings outstanding as of June 30, 2021, 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 September 30, 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

9 unchanged sentences

Total principal net of discounts $ 22,350,985 0.87 %

During the six months ended June 30, 2021 and 2020, Farmer Mac called $ 1.6 billion and $ 1.9 billion of callable medium-term notes, respectively.

During the nine months ended September 30, 2021 and 2020, Farmer Mac called $ 1.7 billion and $ 2.7 billion of callable medium-term notes, respectively.

Authority to Borrow from the U.S.

8 unchanged sentences

Treasury within a reasonable time.

As of June 30, 2021, Farmer Mac had not used this borrowing authority.

As of September 30, 2021, Farmer Mac had not used this borrowing authority.

Gains on Repurchase of Outstanding Debt

No outstanding debt repurchases were made in the six months ended June 30, 2021 or 2020.

During the three and nine months ended September 30, 2021, Farmer Mac repurchased $ 23.0 million of outstanding debt at a gain of $ 14,000 ;

no outstanding debt repurchases were made in the three and nine months ended September 30, 2020.

Preferred Stock

8 unchanged sentences

time on any dividend payment date on and after July 17, 2026.

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

During each of the first, second, and third quarters in 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.

4 unchanged sentences

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.

Farmer Mac did no t repurchase any shares of its Class C non-voting common stock during the first half of 2021.

As of June 30, 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.

Farmer Mac did no t repurchase any shares of its Class C non-voting common stock during the first nine months of 2021.

As of September 30, 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 June 30, 2021 and December 31, 2020, the minimum capital requirement was greater than the risk-based capital requirement.

As of both September 30, 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 June 30, 2021, Farmer Mac's minimum capital requirement was $ 680.8 million and its core capital level was $ 1.2 billion, which was $ 482.6 million above the minimum capital requirement as of that date.

As of September 30, 2021, Farmer Mac's minimum capital requirement was $ 699.6 million and its core capital level was $ 1.2 billion, which was $ 479.5 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.

2 unchanged sentences

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 June 30, 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 June 30, 2021

The following tables present information about Farmer Mac's assets and liabilities measured at fair value on a recurring basis as of September 30, 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 September 30, 2021

Level 1 Level 2 Level 3 (1)

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Total Liabilities at fair value $ — $ 25,633 $ — $ 25,633

Non-recurring:

Loans held for sale $ — $ — $ 324,246 $ 324,246

Total non-recurring assets at fair value $ — $ — $ 324,246 $ 324,246

(1) Level 3 assets represent 26 % of total assets and 64 % of financial instruments measured at fair value.

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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 June 30, 2021 or December 31, 2020.

There were no significant assets or liabilities measured at fair value on a non-recurring basis as of September 30, 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 six months ended June 30, 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.

During the nine months ended September 30, 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 six months ended June 30, 2021 and 2020.

Level 3 Assets and Liabilities Measured at Fair Value for the Three Months Ended June 30, 2021

There were no liabilities measured at fair value using significant unobservable inputs during the three and nine months ended September 30, 2021 and 2020.

Level 3 Assets and Liabilities Measured at Fair Value for the Three Months Ended September 30, 2021

Beginning Balance Purchases Sales Settlements Allowance for Losses Realized and

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Total Assets at fair value $ 6,901,703 $ — $ — $ ( 709,176 ) $ ( 64 ) $ ( 31,425 ) $ 2,014 $ 6,163,052

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

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

Beginning Balance Purchases Sales Settlements Allowance for Losses Realized and

unrealized gains/(losses) included

in Income Unrealized gains

in Income Unrealized gains/(losses)

included in Other

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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 Six Months Ended June 30, 2021

Level 3 Assets and Liabilities Measured at Fair Value for the Nine Months Ended September 30, 2021

Beginning Balance Purchases Sales Settlements Allowance for Losses Realized and

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Total Assets at fair value $ 6,973,567 $ 578,115 $ — $ ( 1,264,981 ) $ 3 $ ( 150,303 ) $ 26,651 $ 6,163,052

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

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

Beginning Balance Purchases Sales Settlements Allowance for Losses Realized and

unrealized gains included

in Income Unrealized losses

unrealized gains/(losses) included

in Income Unrealized gains/(losses)

included in Other

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Total Assets at fair value $ 7,170,850 $ 958,368 $ — $ ( 828,290 ) $ ( 367 ) $ 257,424 $ ( 20,445 ) $ 7,537,540

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 June 30, 2021 and December 31, 2020:

As of June 30, 2021

As of September 30, 2021

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

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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 June 30, 2021 and December 31, 2020:

As of June 30, 2021 As of December 31, 2020

The following table sets forth the estimated fair values and carrying values for financial assets, liabilities, and guarantees and commitments as of September 30, 2021 and December 31, 2020:

As of September 30, 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 six months ended June 30, 2021 and 2020:

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, 2021 and 2020:

Core Earnings by Business Segment

For the Three Months Ended June 30, 2021

For the Three Months Ended September 30, 2021

Farm & Ranch USDA Guarantees Rural

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Non-interest income/(loss) 4,236 318 322 5 128 ( 3,329 ) 1,680

Release of/(provision for) losses 626 — 181 ( 49 ) 3 — 761

(Provision for)/release of losses ( 414 ) — 120 ( 78 ) 6 — ( 366 )

Release of reserve for losses 91 — 20 — — — 111

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(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.

(3) Includes the reclassification of interest expense related to interest rate swaps not designated as hedges, which are included in "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.

4 unchanged sentences

Core Earnings by Business Segment

For the Three Months Ended June 30, 2020

For the Three Months Ended September 30, 2020

Farm & Ranch USDA Guarantees Rural

11 unchanged sentences

Non-interest income/(loss) 4,554 348 328 7 ( 125 ) ( 2,181 ) 2,931

Provision for loan losses 920 — ( 1,397 ) 41 ( 15 ) — ( 451 )

Provision for reserve for losses 370 — 30 — — — 400

Release of/(provision for) losses 300 — ( 1,182 ) 228 1 — ( 653 )

(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 )

5 unchanged sentences

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)

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

4 unchanged sentences

Core Earnings by Business Segment

For the Six Months Ended June 30, 2021

For the Nine Months Ended September 30, 2021

Farm & Ranch USDA Guarantees Rural

20 unchanged sentences

Preferred stock dividends — — — — ( 17,885 ) — ( 17,885 )

Loss on retirement of preferred stock — — — — — — —

Segment core earnings/(losses) $ 51,251 $ 11,122 $ 11,463 $ 32,167 $ ( 22,460 ) $ ( 5,852 ) (5)

3 unchanged sentences

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

4 unchanged sentences

Core Earnings by Business Segment

For the Six Months Ended June 30, 2020

For the Nine Months Ended September 30, 2020

Farm & Ranch USDA Guarantees Rural

11 unchanged sentences

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

Provision for loan losses 112 — ( 3,522 ) ( 450 ) ( 29 ) — ( 3,889 )

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

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

6 unchanged sentences

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)

3 unchanged sentences

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

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

SUBSEQUENT EVENT

On October 14, 2021, Farmer Mac completed a structured and syndicated agricultural mortgage-backed securitization (AMBS).

The underlying mortgage pool for FARM Series 2021-1 consisted of 384 agricultural mortgage loans with an aggregate outstanding principal balance of approximately $ 302.7 million.

The loans in the pool were underwritten to Farmer Mac’s standards and acquired by Farmer Mac between July 2019 and December 2020.

This transaction included a $ 280.0 million senior tranche guaranteed by Farmer Mac and a $ 22.7 million unguaranteed subordinate tranche.

During fourth quarter 2021, Farmer Mac expects to record a gain on this transaction of approximately $ 4 million after-tax.

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