FEDERAL AGRICULTURAL MORTGAGE CORP 10-Q

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The objective of this section of the report is to provide a discussion and analysis, from management’s perspective, of the material information necessary to assess Farmer Mac's financial condition and results of operations for the quarter ended September 30, 2021. Financial information included in this report is consolidated to include the accounts of Farmer Mac and its two subsidiaries – Farmer Mac Mortgage Securities Corporation and Farmer Mac II LLC. This discussion and analysis of financial condition and results of operations should be read together with: (1) the interim unaudited consolidated financial statements and the related notes that appear elsewhere in this report; and (2) 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 "2020 Annual Report"). Updates to Critical Accounting Estimates None. FORWARD-LOOKING STATEMENTS In this report, the words "Farmer Mac," "we," "our," and "us" refer to the Federal Agricultural Mortgage Corporation unless otherwise stated or unless the context otherwise requires. Some statements made in this report, such as in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section, are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995 about management's current expectations for Farmer Mac's future financial results, business prospects, and business developments. Forward-looking statements include, without limitation, any statement, including statements about the COVID-19 pandemic and its impact on Farmer Mac, that may predict, forecast, indicate, or imply future results, performance, or achievements. These statements typically include terms such as "anticipates," "believes," "continues," "estimates," "expects," "forecasts," "intends," "outlook," "plans," "potential," "project," "target" and similar terms, and future or conditional tense verbs like "could," "may," "might," "should," "will," and "would." This report includes forward-looking statements addressing Farmer Mac's: • prospects for earnings; • prospects for growth in business volume; • assessment of the effect of the COVID-19 pandemic on our business, financial results, financial condition, and business plans and strategies; • trends in net interest income and net effective spread; • trends in portfolio credit quality, delinquencies, substandard assets, credit losses, and provisions for losses; • assessment of economic and market trends; • trends in expenses; • trends in investment securities; • prospects for asset impairments and allowance for losses; • changes in capital position; • future dividend payments; and • other business and financial matters. 59 Management's expectations for Farmer Mac's future necessarily involve assumptions, estimates, and the evaluation of risks and uncertainties. Various factors or events, both known and unknown, could cause Farmer Mac's actual results to differ materially from the expectations as expressed or implied by the forward-looking statements, including the factors discussed under "Risk Factors" in Part II, Item 1A of this report and in Part I, Item 1A of the 2020 Annual Report, as well as uncertainties about: • the duration, spread, and severity of the COVID-19 pandemic and its effects on the business operations of agricultural and rural borrowers, the capital markets, and Farmer Mac's business operations; • the actions taken to address the COVID-19 pandemic, including government actions to mitigate the economic impact of the pandemic, how quickly and to what extent normal economic and operating conditions can resume, the possibility of future disruptions to economic recovery caused by any further outbreaks, regulatory measures or voluntary actions to limit the spread of COVID-19, and the duration and efficacy of any restrictions that may be imposed; • the availability to Farmer Mac of debt and equity financing and, if available, the reasonableness of rates and terms; • legislative or regulatory developments that could affect Farmer Mac, its sources of business, or agricultural or rural infrastructure industries; • fluctuations in the fair value of assets held by Farmer Mac and its subsidiaries; • the level of lender interest in Farmer Mac's products and the secondary market provided by Farmer Mac; • the general rate of growth in agricultural mortgage and rural utilities indebtedness; • the effect of economic conditions and geopolitics on agricultural mortgage or rural utilities lending, borrower repayment capacity, or collateral values, including fluctuations in interest rates, changes in U.S. trade policies, fluctuations in export demand for U.S. agricultural products, supply chain disruptions, increases in input costs, labor availability, and volatility in commodity prices; • the degree to which Farmer Mac is exposed to interest rate risk resulting from fluctuations in Farmer Mac's borrowing costs relative to market indexes; • developments in the financial markets, including possible investor, analyst, and rating agency reactions to events involving government-sponsored enterprises, including Farmer Mac; • the effect of any changes in Farmer Mac's executive leadership; and • other factors that could hinder agricultural mortgage lending or borrower repayment capacity, including the effects of severe weather or fluctuations in agricultural real estate values. Considering these potential risks and uncertainties, no undue reliance should be placed on any forward-looking statements expressed in this report. Farmer Mac undertakes no obligation to release publicly the results of revisions to any forward-looking statements to reflect new information or any future events or circumstances, except as otherwise required by applicable law. The information in this report is not necessarily indicative of future results. 60 Overview Farmer Mac is a mission-focused, purpose-driven company determined to improve the economic opportunity in rural America by increasing the availability and affordability of credit. As the nation’s secondary market for agricultural and rural infrastructure loans, we provide a broad array of financial solutions to lenders that support flexible low-cost financing to farmers, ranchers, agribusinesses, renewable energy projects, rural utilities, and other institutions. Farmer Mac also serves as a critical investment tool for states, counties, municipalities, pension funds, banks, public trust funds, and credit unions by providing diversification in their investment portfolios, issuance structure flexibility, and a safe, competitive return on their investment dollars. During third quarter 2021: • we closed on a strategic acquisition that enhanced our operations by expanding our internal loan servicing function and acquiring the loan servicing rights for a sizeable portion of our Farm & Ranch loan and USDA Guaranteed Securities portfolios; • we continued to operate effectively while nearly all employees worked remotely; • we provided $2.5 billion in liquidity and lending capacity to lenders serving rural America; • we maintained uninterrupted access to the debt capital markets and a strong capital position; and • we maintained strong liquidity in our investment portfolio well above regulatory requirements. Farmer Mac’s performance during third quarter 2021 described in more detail in this report reflects the success of our continued focus on pursuing new channels and innovative ways to further our mission to help build a strong and vital rural America. The discussion below of Farmer Mac's financial information includes "non-GAAP measures," which are measures of financial performance not presented in accordance with generally accepted accounting principles in the United States ("GAAP"). For more information about the non-GAAP measures Farmer Mac uses, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Use of Non-GAAP Measures." Net Income and Core Earnings The following table shows our net income attributable to common stockholders and core earnings for the periods presented. Core earnings and core earnings per share are non-GAAP measures that differ from net income attributable to common stockholders and earnings per common share, respectively, by excluding the effects of fair value fluctuations and specified infrequent or unusual transactions. Table 1 For the Three Months Ended September 30, 2021 June 30, 2021 September 30, 2020 (in thousands) Net income attributable to common stockholders $ 24,289 $ 25,444 $ 18,659 Core earnings 27,646 29,986 27,691 The $1.2 million sequential decrease in net income attributable to common stockholders was primarily due to a $1.0 million after-tax increase in our provision for credit losses and a $0.9 million increase in 61 preferred stock dividends, which was partially offset by a $0.6 million after-tax increase in the fair value of undesignated financial derivatives due to fluctuations in long-term interest rates. The $5.6 million year-over-year increase in net income attributable to common stockholders was due to an $8.2 million after-tax increase in net interest income, the absence of a $1.7 million after-tax loss on the retirement of preferred stock recorded in the comparable prior period, and a $0.7 million after-tax decrease in the provision for credit losses. These factors were partially offset by a $2.0 million after-tax increase in operating expenses, a $1.4 million after-tax decrease in the fair value of undesignated financial derivatives due to fluctuations in long-term interest rates, and a $1.6 million increase in preferred stock dividends. The $2.3 million sequential decrease in core earnings was primarily due to a $1.0 million after-tax increase in our provision for credit losses and a $0.9 million increase in preferred stock dividends. Year-over-year core earnings were approximately equivalent because a $3.3 million after-tax increase in net effective spread and a $0.7 million after-tax decrease in the provision for credit losses, were partially offset by a $2.0 million after-tax increase in operating expenses, a $1.6 million increase in preferred stock dividends, and a $0.3 million after-tax decrease in guarantee fees. For more information about net income attributable to common stockholders, the composition of core earnings, and a reconciliation of net income attributable to common stockholders to core earnings, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations." For more information about the non-GAAP measures Farmer Mac uses, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Use of Non-GAAP Measures." Net Interest Income and Net Effective Spread The following table shows our net interest income and net effective spread in both dollars and percentage yield or spread for the periods presented. Farmer Mac uses net effective spread, a non-GAAP measure, as an alternative to net interest income because management believes it is a useful metric that reflects the economics of the net spread between all the assets owned by Farmer Mac and all related funding, including any associated derivatives, some of which may not be included in net interest income. Table 2 For the Three Months Ended September 30, 2021 June 30, 2021 September 30, 2020 (in thousands) Net interest income $ 55,005 $ 55,129 $ 44,661 Net interest yield % 0.94 % 0.94 % 0.78 % Net effective spread 55,925 56,551 51,802 Net effective spread % 0.99 % 1.01 % 0.96 % Sequential net interest income, in both dollars and percentage, was approximately equivalent because there were no significant fluctuations in the composition of net interest income. The $10.3 million year-over-year increase in net interest income was primarily due to a $4.5 million decrease in funding costs, a $2.9 million increase related to new business volume, and a $3.1 million increase in the fair value of derivatives designated in fair value hedge accounting relationships (designated 62 financial derivatives). In percentage terms, the year-over-year 0.16% increase was primarily attributable to a decrease of 0.06% in funding costs, an increase of 0.05% in net fair value changes from designated financial derivatives, and an increase of 0.03% in new business volume. The $0.6 million sequential decrease in net effective spread was from a $1.3 million decrease attributable to an increase in non-GAAP funding costs and lower cash-basis interest income, partially offset by $0.7 million in new business volume. In percentage terms, the decrease of 0.02% was primarily attributable to the decrease of 0.01% related to lower cash-basis interest income and the increase of 0.01% related to non-GAAP funding costs. The $4.1 million year-over-year increase in net effective spread in dollars was primarily due to an increase of $2.9 million from new business volume and a $1.0 million decrease in non-GAAP funding costs. In percentage terms, the year-over-year increase of 0.03% was primarily attributable to new business volume. For more information about Farmer Mac's use of net effective spread as a financial measure, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Use of Non-GAAP Measures." For a reconciliation of net interest income to net effective spread, see Table 11 in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Net Interest Income." Business Volume Our outstanding business volume was $23.1 billion as of September 30, 2021, a net increase of $0.9 billion from June 30, 2021 after taking into account all new business, maturities, and paydowns on existing assets. The net increase was primarily attributable to net increases of $499.2 million in the Institutional Credit line of business, $389.2 million in the Farm & Ranch line of business, and $37.4 million in the Rural Utilities line of business, partially offset by a net decrease of $4.2 million in the USDA Guarantees line of business. For more information about Farmer Mac's business volume, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Business Volume." Capital Table 3 As of September 30, 2021 December 31, 2020 (in thousands) Core capital $ 1,179,092 $ 1,006,400 Capital in excess of minimum capital level required 479,506 325,455 The increase in capital in excess of the minimum capital level required was primarily due to the issuance of the Series G Preferred Stock in May 2021 and an increase in retained earnings. 63 Credit Quality The following table presents Farm & Ranch substandard assets, in dollars and as a percentage of the Farm & Ranch portfolio, for both on- and off-balance sheet assets as of September 30, 2021, June 30, 2021, and December 31, 2020: Table 4 Farm & Ranch Line of Business On-Balance Sheet Off-Balance Sheet Substandard Assets % of Portfolio Substandard Assets % of Portfolio (dollars in thousands) September 30, 2021 $ 204,197 3.0 % $ 74,077 2.8 % June 30, 2021 205,958 3.1 % 93,168 3.8 % December 31, 2020 180,823 2.9 % 110,671 4.6 % Increase/(decrease) from prior quarter-ending $ (1,761) (0.1) % $ (19,091) (1.0) % Increase/(decrease) from prior year-ending $ 23,374 0.1 % $ (36,594) (1.8) % The decrease of $1.8 million in on-balance sheet substandard assets during third quarter 2021 was primarily driven by credit upgrades during the quarter, particularly livestock. The on-balance sheet Farm & Ranch portfolio grew by $176.5 million, which, when coupled with credit upgrades, caused the percentage of substandard assets to decrease. The $19.1 million decrease in substandard assets in our off-balance sheet Farm & Ranch portfolio during third quarter 2021 was primarily due to credit upgrades in the livestock and crops portfolios during the quarter. There was one substandard asset in the Rural Utilities portfolio as of both September 30, 2021 and June 30, 2021, and none as of December 31, 2020. For an analysis of current loan-to-value ratios across substandard and other internally assigned risk ratings, see Table 26 in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk—Loans and Guarantees." 64 The following table presents Farm & Ranch 90-day delinquencies, in dollars and as a percentage of the Farm & Ranch portfolio, for both on- and off-balance sheet assets as of September 30, 2021, June 30, 2021, and December 31, 2020: Table 5 Farm & Ranch Line of Business On-Balance Sheet Off-Balance Sheet 90-Day Delinquencies % of Portfolio 90-Day Delinquencies % of Portfolio (dollars in thousands) September 30, 2021 $ 52,625 0.78 % $ 2,167 0.08 % June 30, 2021 56,790 0.86 % 6,286 0.26 % December 31, 2020 34,799 0.56 % 11,433 0.48 % Increase/(decrease) from prior quarter-ending $ (4,165) (0.08) % $ (4,119) (0.18) % Increase/(decrease) from prior year-ending $ 17,826 0.22 % $ (9,266) (0.40) % On-balance sheet Farm & Ranch loans 90 or more days delinquent decreased in crops. Off-balance sheet Farm & Ranch loans 90 days or more delinquent decreased in crops and livestock. The top ten borrower exposures over 90 days delinquent in either the on- or off-balance sheet portfolio represented over half of the aggregate 90-day delinquencies as of September 30, 2021. As of both September 30, 2021 and December 31, 2020, there were no delinquencies in Farmer Mac's portfolio of Rural Utilities loans. As of June 30, 2021, there was one delinquent loan in the amount of $10.0 million in that portfolio. For more information about Farmer Mac's credit metrics, including 90-day delinquencies, the total allowance for losses, and substandard assets, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk—Loans and Guarantees." Use of Non-GAAP Measures In the accompanying analysis of its financial information, Farmer Mac uses "non-GAAP measures," which are measures of financial performance that are not presented in accordance with GAAP. Specifically, Farmer Mac uses the following non-GAAP measures: "core earnings," "core earnings per share," and "net effective spread." Farmer Mac uses these non-GAAP measures to measure corporate economic performance and develop financial plans because, in management's view, they are useful alternative measures in understanding Farmer Mac's economic performance, transaction economics, and business trends. The non-GAAP financial measures that Farmer Mac uses may not be comparable to similarly labeled non-GAAP financial measures disclosed by other companies. Farmer Mac's disclosure of these non-GAAP measures is intended to be supplemental in nature and is not meant to be considered in isolation from, as a substitute for, or as more important than, the related financial information prepared in accordance with GAAP. 65 Core Earnings and Core Earnings Per Share The main difference between core earnings and core earnings per share (non-GAAP measures) and net income attributable to common stockholders and earnings per common share (GAAP measures) is that those non-GAAP measures exclude the effects of fair value fluctuations. These fluctuations are not expected to have a cumulative net impact on Farmer Mac's financial condition or results of operations reported in accordance with GAAP if the related financial instruments are held to maturity, as is expected. Another difference is that these two non-GAAP measures exclude specified infrequent or unusual transactions that we believe are not indicative of future operating results and that may not reflect the trends and economic financial performance of Farmer Mac's core business. For example, we have excluded from core earnings and core earnings per share any losses on retirement of preferred stock. For a reconciliation of Farmer Mac's net income attributable to common stockholders to core earnings and of earnings per common share to core earnings per share, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations." Net Effective Spread Farmer Mac uses net effective spread to measure the net spread Farmer Mac earns between its interest-earning assets and the related net funding costs of these assets. As further explained below, net effective spread differs from net interest income and net interest yield by excluding certain items from net interest income and net interest yield and including certain other items that net interest income and net interest yield do not contain. Farmer Mac excludes from net effective spread the premiums and discounts on assets consolidated at fair value because they either do not reflect actual cash premiums paid for the assets at acquisition or are not expected to have an economic effect on Farmer Mac's financial performance if the assets are held to maturity, as is expected. Farmer Mac also excludes from net effective spread the interest income and interest expense associated with the consolidated trusts and the average balance of the loans underlying these trusts to reflect management's view that the net interest income Farmer Mac earns on the related Farmer Mac Guaranteed Securities owned by third parties is effectively a guarantee fee. Accordingly, the excluded interest income and interest expense associated with consolidated trusts is reclassified to guarantee and commitment fees in determining Farmer Mac's core earnings. Farmer Mac also excludes from net effective spread the fair value changes of financial derivatives and the corresponding assets or liabilities designated in fair value hedge accounting relationships because they are not expected to have an economic effect on Farmer Mac's financial performance, as we expect to hold the financial derivatives and corresponding hedged items to maturity. Net effective spread also differs from net interest income and net interest yield because it includes the accrual of income and expense related to the contractual amounts due on financial derivatives that are not designated in hedge accounting relationships ("undesignated financial derivatives"). Farmer Mac uses interest rate swaps to manage its interest rate risk exposure by synthetically modifying the interest rate reset or maturity characteristics of certain assets and liabilities. The accrual of the contractual amounts due on interest rate swaps designated in hedge accounting relationships is included as an adjustment to the yield or cost of the hedged item and is included in net interest income. For undesignated financial derivatives, Farmer Mac records the income or expense related to the accrual of the contractual amounts due in "Losses on financial derivatives" on the consolidated statements of operations. However, the accrual of the contractual amounts due for undesignated financial derivatives are included in Farmer Mac's calculation of net effective spread. 66 Net effective spread also differs from net interest income and net interest yield because it includes the net effects of terminations or net settlements on financial derivatives, which consist of: (1) the net effects of cash settlements on agency forward contracts on the debt of other GSEs and U.S. Treasury security futures that we use as short-term economic hedges on the issuance of debt; and (2) the net effects of initial cash payments that Farmer Mac receives upon the inception of certain swaps. The inclusion of these items in net effective spread is intended to reflect our view of the complete net spread between an asset and all of its related funding, including any associated derivatives, whether or not they are designated in a hedge accounting relationship. For a reconciliation of net interest income and net interest yield to net effective spread, see Table 11 in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Net Interest Income." Results of Operations Reconciliations of Farmer Mac's net income attributable to common stockholders to core earnings and core earnings per share are presented in the following tables along with information about the composition of core earnings: 67 Table 6 Reconciliation of Net Income Attributable to Common Stockholders to Core Earnings For the Three Months Ended September 30, 2021 September 30, 2020 (in thousands, except per share amounts) Net income attributable to common stockholders $ 24,289 $ 18,659 Less reconciling items: Losses on undesignated financial derivatives due to fair value changes (see Table 14) (1,864) (4,149) Losses on hedging activities due to fair value changes (2,093) (5,245) Unrealized gains/(losses) on trading securities 36 (258) Net effects of amortization of premiums/discounts and deferred gains on assets consolidated at fair value 23 97 Net effects of terminations or net settlements on financial derivatives (351) 233 Issuance costs on the retirement of preferred stock — (1,667) Income tax effect related to reconciling items 892 1,957 Sub-total (3,357) (9,032) Core earnings $ 27,646 $ 27,691 Composition of Core Earnings: Revenues: Net effective spread (1) $ 55,925 $ 51,802 Guarantee and commitment fees (2) 4,322 4,659 Other (3) 687 453 Total revenues 60,934 56,914 Credit related expense (GAAP): Provision for losses 255 1,200 Total credit related expense 255 1,200 Operating expenses (GAAP): Compensation and employee benefits 10,027 8,791 General and administrative 6,330 5,044 Regulatory fees 750 725 Total operating expenses 17,107 14,560 Net earnings 43,572 41,154 Income tax expense (4) 9,152 8,297 Preferred stock dividends (GAAP) 6,774 5,166 Core earnings $ 27,646 $ 27,691 Core earnings per share: Basic $ 2.57 $ 2.58 Diluted 2.55 2.57 Weighted-average shares: Basic 10,766 10,734 Diluted 10,842 10,785 (1) Net effective spread is a non-GAAP measure. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Use of Non-GAAP Measures—Net Effective Spread" for an explanation of net effective spread. See Table 11 for a reconciliation of net interest income to net effective spread. (2) Includes interest income and interest expense related to consolidated trusts owned by third parties reclassified from net interest income to guarantee and commitment fees to reflect management's view that the net interest income Farmer Mac earns is effectively a guarantee fee on the consolidated Farmer Mac Guaranteed Securities. 68 (3) Reflects reconciling adjustments for the reclassification to exclude expenses related to interest rate swaps not designated as hedges and terminations or net settlements on financial derivatives, and reconciling adjustments to exclude fair value adjustments on financial derivatives and trading assets and the recognition of deferred gains over the estimated lives of certain Farmer Mac Guaranteed Securities and USDA Securities. (4) Includes the tax impact of non-GAAP reconciling items between net income attributable to common stockholders and core earnings. 69 Reconciliation of Net Income Attributable to Common Stockholders to Core Earnings For the Nine Months Ended September 30, 2021 September 30, 2020 (in thousands, except per share amounts) Net income attributable to common stockholders $ 77,691 $ 59,745 Less reconciling items: Losses on undesignated financial derivatives due to fair value changes (see Table 14) (3,890) (1,933) Losses on hedging activities due to fair value changes (4,461) (13,846) Unrealized losses on trading securities (39) (173) Net effects of amortization of premiums/discounts and deferred gains on assets consolidated at fair value 59 135 Net effects of terminations or net settlements on financial derivatives 923 (346) Issuance costs on the retirement of preferred stock — (1,667) Income tax effect related to reconciling items 1,556 3,394 Sub-total (5,852) (14,436) Core earnings $ 83,543 $ 74,181 Composition of Core Earnings: Revenues: Net effective spread (1) $ 166,335 $ 142,434 Guarantee and commitment fees (2) 12,896 14,498 Other (3) 1,439 2,175 Total revenues 180,670 159,107 Credit related expense (GAAP): (Release of)/provision for losses (759) 5,082 Gains on sale of REO — (485) Total credit related expense (759) 4,597 Operating expenses (GAAP): Compensation and employee benefits 31,601 27,005 General and administrative 19,015 15,702 Regulatory fees 2,250 2,175 Total operating expenses 52,866 44,882 Net earnings 128,563 109,628 Income tax expense (4) 27,135 22,911 Preferred stock dividends (GAAP) 17,885 12,536 Core earnings $ 83,543 $ 74,181 Core earnings per share: Basic $ 7.77 $ 6.92 Diluted 7.71 6.88 Weighted-average shares: Basic 10,756 10,725 Diluted 10,834 10,781 (1) Net effective spread is a non-GAAP measure. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Use of Non-GAAP Measures—Net Effective Spread" for an explanation of net effective spread. See Table 11 for a reconciliation of net interest income to net effective spread. (2) Includes interest income and interest expense related to consolidated trusts owned by third parties reclassified from net interest income to guarantee and commitment fees to reflect management's view that the net interest income Farmer Mac earns is effectively a guarantee fee on the consolidated Farmer Mac Guaranteed Securities. 70 (3) Reflects reconciling adjustments for the reclassification to exclude expenses related to interest rate swaps not designated as hedges and terminations or net settlements on financial derivatives, and reconciling adjustments to exclude fair value adjustments on financial derivatives and trading assets and the recognition of deferred gains over the estimated lives of certain Farmer Mac Guaranteed Securities and USDA Securities. (4) Includes the tax impact of non-GAAP reconciling items between net income attributable to common stockholders and core earnings. Table 7 Reconciliation of GAAP Basic Earnings Per Share to Core Earnings - Basic Earnings Per Share 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) GAAP - Basic EPS $ 2.26 $ 1.74 $ 7.22 $ 5.57 Less reconciling items: Losses on undesignated financial derivatives due to fair value changes (see Table 14) (0.17) (0.39) (0.36) (0.18) Losses on hedging activities due to fair value changes (0.19) (0.49) (0.42) (1.29) Unrealized losses on trading securities — (0.02) — (0.02) Net effects of amortization of premiums/discounts and deferred gains on assets consolidated at fair value — 0.01 0.01 0.01 Net effects of terminations or net settlements on financial derivatives (0.03) 0.02 0.08 (0.03) Issuance costs on the retirement of preferred stock — (0.15) — (0.16) Income tax effect related to reconciling items 0.08 0.18 0.14 0.32 Sub-total (0.31) (0.84) (0.55) (1.35) Core Earnings - Basic EPS $ 2.57 $ 2.58 $ 7.77 $ 6.92 Shares used in per share calculation (GAAP and Core Earnings) 10,766 10,734 10,756 10,725 Reconciliation of GAAP Diluted Earnings Per Share to Core Earnings - Diluted Earnings Per Share 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) GAAP - Diluted EPS $ 2.24 $ 1.73 $ 7.17 $ 5.54 Less reconciling items: Losses on undesignated financial derivatives due to fair value changes (see Table 14) (0.17) (0.39) (0.36) (0.18) Losses on hedging activities due to fair value changes (0.19) (0.49) (0.42) (1.28) Unrealized losses on trading securities — (0.02) — (0.02) Net effects of amortization of premiums/discounts and deferred gains on assets consolidated at fair value — 0.01 0.01 0.01 Net effects of terminations or net settlements on financial derivatives (0.03) 0.02 0.09 (0.03) Issuance costs on the retirement of preferred stock — (0.15) — (0.15) Income tax effect related to reconciling items 0.08 0.18 0.14 0.31 Sub-total (0.31) (0.84) (0.54) (1.34) Core Earnings - Diluted EPS $ 2.55 $ 2.57 $ 7.71 $ 6.88 Shares used in per share calculation (GAAP and Core Earnings) 10,842 10,785 10,834 10,781 71 The non-GAAP reconciling items between net income attributable to common stockholders and core earnings are: 1. Losses on financial derivatives due to fair value changes are presented by two reconciling items in Table 6 above: (a) Losses on undesignated financial derivatives due to fair value changes; and (b) Losses on hedging activities due to fair value changes. The table below calculates the non-GAAP reconciling item for losses on hedging activities due to fair value changes: Table 8 Non-GAAP Reconciling Items for (Losses)/Gains on Hedging Activities due to Fair Value Changes For the Three Months Ended For the Nine Months Ended September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020 (in thousands) Losses due to fair value changes (see Table 4.2) $ (1,920) $ (5,047) $ (3,299) $ (13,109) Initial cash payment (received) at inception of swap (173) (198) (1,162) (737) Losses on hedging activities due to fair value changes $ (2,093) $ (5,245) $ (4,461) $ (13,846) 2. Unrealized gains/(losses) on trading securities. The unrealized gains/(losses) on trading securities are reported on Farmer Mac's consolidated statements of operations, which represent changes during the period in fair values for trading assets remaining on Farmer Mac's balance sheet as of the end of the reporting period. 3. The net effects of amortization of premiums/discounts and deferred gains on assets consolidated at fair value. The amount of this non-GAAP reconciling item is the recorded amount of premium, discount, or deferred gain amortization during the reporting period on those assets for which the premium, discount, or deferred gain was based on the application of an accounting principle (e.g., consolidation of variable interest entities) rather than on a cash transaction (e.g., a purchase price premium or discount). 4. The net effects of terminations or net settlements on financial derivatives. These terminations or net settlements relate to: • Forward contracts on the debt of other GSEs and futures contracts on U.S. Treasury securities. These contracts are used as a short-term economic hedge of the issuance of debt. For GAAP purposes, realized gains or losses on settlements of these contracts are reported in the consolidated statements of operations in the period in which they occur. For core earnings purposes, these realized gains or losses are deferred and amortized as net yield adjustments over the term of the related debt, which generally ranges from 3 to 15 years. • Initial cash payments received by Farmer Mac upon the inception of certain swaps. When there is no direct payment arrangement between a swap dealer counterparty and a debt dealer issuing Farmer Mac's medium-term notes for a particular transaction, Farmer Mac may receive an initial cash payment from the swap dealer at the inception of the swap to offset dollar-for-dollar the amount of the discount on the associated hedged debt. For GAAP purposes, changes in fair value of the swaps are recognized in "Gains on financial derivatives," while the economically offsetting discount on the associated hedged debt is amortized over the term of the debt as an adjustment to its yield. For purposes of core earnings, these initial cash payments are deferred and amortized as net yield adjustments over the term of the related debt, which generally ranges from 3 to 25 years. 72 The following sections provide more detail about specific components of Farmer Mac's results of operations. Net Interest Income . The following table provides information about interest-earning assets and funding for the nine months ended September 30, 2021 and 2020. The average balance of non-accruing loans is included in the average balance of loans, Farmer Mac Guaranteed Securities, and USDA Securities presented, though the related income is accounted for on a cash basis. Therefore, as the average balance of non-accruing loans and the income received increases or decreases, the net interest income and yield will fluctuate accordingly. The average balance of loans in consolidated trusts with beneficial interests owned by third parties is disclosed in the net effect of consolidated trusts and is not included in the average balances of interest-earning assets and interest-bearing liabilities. The interest income and expense associated with these trusts are shown in the net effect of consolidated trusts. Table 9 For the Nine Months Ended September 30, 2021 September 30, 2020 Average Balance Income/ Expense Average Rate Average Balance Income/ Expense Average Rate (dollars in thousands) Interest-earning assets: Cash and investments $ 4,752,815 $ 14,107 0.40 % $ 3,965,371 $ 35,236 1.18 % Loans, Farmer Mac Guaranteed Securities and USDA Securities (1) 17,614,644 274,783 2.08 % 16,780,558 309,051 2.46 % Total interest-earning assets 22,367,459 288,890 1.72 % 20,745,929 344,287 2.21 % Funding: Notes payable due within one year 3,991,539 3,235 0.11 % 3,626,550 21,654 0.80 % Notes payable due after one year (2) 17,623,610 125,983 0.95 % 16,828,032 193,315 1.53 % Total interest-bearing liabilities (3) 21,615,149 129,218 0.80 % 20,454,582 214,969 1.40 % Net non-interest-bearing funding 752,310 — 291,347 — Total funding 22,367,459 129,218 0.77 % 20,745,929 214,969 1.38 % Net interest income/yield prior to consolidation of certain trusts 22,367,459 159,672 0.95 % 20,745,929 129,318 0.83 % Net effect of consolidated trusts (4) 1,083,729 3,713 0.46 % 1,436,353 5,003 0.46 % Net interest income/yield $ 23,451,188 $ 163,385 0.93 % $ 22,182,282 $ 134,321 0.81 % (1) Excludes interest income of $30.1 million and $41.8 million in the first nine months of 2021 and 2020, respectively, related to consolidated trusts with beneficial interests owned by third parties. (2) Includes current portion of long-term notes. (3) Excludes interest expense of $26.4 million and $36.8 million in the first nine months of 2021 and 2020, respectively, related to consolidated trusts with beneficial interests owned by third parties. (4) Includes the effect of consolidated trusts with beneficial interests owned by third parties. The $29.1 million year-over-year increase in net interest income was primarily due to a $14.1 million increase related to new business volume, a $9.8 million increase in the fair value of derivatives designated in fair value hedge accounting relationships (designated financial derivatives), and a $5.7 million decrease in funding costs. In percentage terms, the 0.12% increase in net interest income was primarily attributable to an increase of 0.06% in net fair value changes from designated financial derivatives and an increase of 0.05% in new business volume. 73 The following table sets forth information about changes in the components of Farmer Mac's net interest income prior to consolidation of certain trusts for the periods indicated. For each category, information is provided on changes attributable to changes in volume (change in volume multiplied by old rate), and changes in rate (change in rate multiplied by old volume), and then allocated based on the relative size of rate and volume changes from the prior period. Table 10 For the Nine Months Ended September 30, 2021 Compared to Same Period in 2020 Increase/(Decrease) Due to Rate Volume Total (in thousands) Income from interest-earning assets: Cash and investments $ (27,056) $ 5,927 $ (21,129) Loans, Farmer Mac Guaranteed Securities and USDA Securities (49,053) 14,785 (34,268) Total (76,109) 20,712 (55,397) Expense from other interest-bearing liabilities (97,336) 11,585 (85,751) Change in net interest income prior to consolidation of certain trusts (1) $ 21,227 $ 9,127 $ 30,354 (1) Excludes the effect of debt in consolidated trusts with beneficial interests owned by third parties. The following table presents a reconciliation of net interest income and net interest yield to net effective spread. Net effective spread is measured by: including (1) expenses related to undesignated financial derivatives, which consists of income or expense related to contractual amounts due on financial derivatives not designated in hedge relationships (the income or expense related to financial derivatives designated in hedge accounting relationships is already included in net interest income), and (2) the amortization of losses due to terminations or net settlements of financial derivatives; and excluding (3) the amortization of premiums and discounts on assets consolidated at fair value, (4) the net effects of consolidated trusts with beneficial interests owned by third parties, and (5) the fair value changes of financial derivatives and corresponding financial assets or liabilities in fair value hedge relationships. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Use of Non-GAAP Measures—Net Effective Spread" for more information about net effective spread. Table 11 For the Three Months Ended For the Nine Months Ended September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020 Dollars Yield Dollars Yield Dollars Yield Dollars Yield (dollars in thousands) Net interest income/yield $ 55,005 0.94 % $ 44,661 0.78 % $ 163,385 0.93 % $ 134,321 0.80 % Net effects of consolidated trusts (1,167) 0.02 % (1,500) 0.02 % (3,713) 0.02 % (5,003) 0.03 % Expense related to undesignated financial derivatives 117 — % 3,613 0.07 % 3,154 0.02 % 9 — % Amortization of premiums/discounts on assets consolidated at fair value (15) — % (81) — % (36) — % (92) — % Amortization of losses due to terminations or net settlements on financial derivatives 65 — % 62 — % 246 — % 90 — % Fair value changes on fair value hedge relationships 1,920 0.03 % 5,047 0.09 % 3,299 0.02 % 13,109 0.09 % Net effective spread $ 55,925 0.99 % $ 51,802 0.96 % $ 166,335 0.99 % $ 142,434 0.92 % 74 The $23.9 million year-over-year increase in net effective spread in dollars was primarily due to an increase of $14.1 million from new business volume, a $8.9 million decrease in non-GAAP funding costs, and a $1.2 million increase in cash collections on non-accrual loans. In percentage terms, the increase of 0.07% was primarily attributable to the increase of 0.05% related to net new business volume, the decrease in non-GAAP funding costs of 0.03%, and the increase of 0.01% related to cash collections on non-accrual loans. See Note 10 to the consolidated financial statements for more information about net interest income and net effective spread from Farmer Mac's individual business segments. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Supplemental Information" for quarterly net effective spread by line of business. Provision for and Release of Allowance for Losses and Reserve for Losses . The following table summarizes the components of Farmer Mac's total allowance for losses for the three and nine months ended September 30, 2021 and 2020: Table 12 As of September 30, 2021 As of September 30, 2020 Allowance for Losses Reserve for Losses Total Allowance for Losses Allowance for Losses Reserve for Losses Total Allowance for Losses (in thousands) For the Three Months Ended: Beginning balance $ 14,450 $ 2,111 $ 16,561 $ 15,758 $ 3,020 $ 18,778 Provision for/(release of) losses 366 (111) 255 646 548 1,194 Ending balance $ 14,816 $ 2,000 $ 16,816 $ 16,404 $ 3,568 $ 19,972 For the Nine Months Ended: Beginning balance $ 14,298 $ 3,277 $ 17,575 $ 10,454 $ 2,164 $ 12,618 Cumulative effect adjustment from adoption of current expected credit loss standard — — — 1,793 863 2,656 Adjusted beginning balance 14,298 3,277 17,575 12,247 3,027 15,274 Provision for/(release of) losses 518 (1,277) (759) 4,551 541 5,092 Charge-offs — — — (394) — (394) Ending balance $ 14,816 $ 2,000 $ 16,816 $ 16,404 $ 3,568 $ 19,972 See Notes 5 and 6 to the consolidated financial statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk—Loans and Guarantees." Guarantee and Commitment Fees . The following table presents guarantee and commitment fees, which compensate Farmer Mac for assuming the credit risk on loans underlying off-balance sheet Farmer Mac Guaranteed Securities and LTSPCs, for the three and nine months ended September 30, 2021 and 2020: 75 Table 13 For the Three Months Ended For the Nine Months Ended Change Change September 30, 2021 September 30, 2020 $ % September 30, 2021 September 30, 2020 $ % (dollars in thousands) Guarantee and commitment fees $ 3,155 $ 3,159 $ (4) — % $ 9,182 $ 9,495 $ (313) (3) % The decrease in guarantee and commitment fees for the nine months ended September 30, 2021 compared to the same period in 2020 was primarily due to a decrease in the average outstanding balance of LTSPCs and off-balance sheet Farmer Mac Guaranteed Securities during 2021. As adjusted for the core earnings presentation, guarantee and commitment fees were $4.3 million and $12.9 million for the three and nine months ended September 30, 2021, respectively, compared to $4.7 million and $14.5 million for the three and nine months ended September 30, 2020, respectively. In Farmer Mac's presentation of core earnings, guarantee and commitment fees include interest income and interest expense related to consolidated trusts owned by third parties to reflect management's view that the net interest income Farmer Mac earns is effectively a guarantee fee on the consolidated Farmer Mac Guaranteed Securities. For more information about net income attributable to common stockholders, the composition of core earnings, and a reconciliation of net income attributable to common stockholders to core earnings, see Table 6 in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations." For more information about the non-GAAP measures Farmer Mac uses, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Use of Non-GAAP Measures." Losses on financial derivatives . The components of gains and losses on financial derivatives for the three and nine months ended September 30, 2021 and 2020 are summarized in the following table: Table 14 For the Three Months Ended For the Nine Months Ended Change Change September 30, 2021 September 30, 2020 $ % September 30, 2021 September 30, 2020 $ % (dollars in thousands) Losses due to fair value changes $ (1,864) $ (4,149) $ 2,285 (55) % $ (3,890) $ (1,933) $ (1,957) (101) % Accrual of contractual payments 117 3,613 (3,496) (97) % 3,154 10 3,144 31440 % Losses due to terminations or net settlements (600) (28) (572) (2043) % (384) (1,416) 1,032 73 % Losses on financial derivatives $ (2,347) $ (564) $ (1,783) (316) % $ (1,120) $ (3,339) $ 2,219 66 % These changes in fair value are primarily the result of fluctuations in long-term interest rates. The accrual of periodic cash settlements for interest paid or received from Farmer Mac's interest rate swaps that are undesignated financial derivatives is shown as expense related to financial derivatives. Payments or receipts to terminate undesignated derivative positions or net cash settled forward sales contracts on the debt of other GSEs and undesignated U.S. Treasury security futures and initial cash payments received upon the inception of certain undesignated swaps are included in "Losses due to terminations or net 76 settlements" in the table above. For undesignated swaps, when there is no direct payment arrangement between a swap dealer counterparty and a debt dealer issuing Farmer Mac's medium-term notes for a particular transaction, Farmer Mac may receive an initial cash payment from the swap dealer at the inception of the swap to offset dollar-for-dollar the amount of the discount on the associated hedged debt. Changes in the fair value of these swaps are recognized immediately in "Losses on financial derivatives," while the offsetting discount on the hedged debt is amortized over the term of the debt as an adjustment to its yield. The amounts of initial cash payments received by Farmer Mac vary depending on the number of the aforementioned type of swaps it executes during a quarter. Other Income . The following table presents other income for the three and nine months ended September 30, 2021 and 2020: Table 15 For the Three Months Ended For the Nine Months Ended Change Change September 30, 2021 September 30, 2020 $ % September 30, 2021 September 30, 2020 $ % (dollars in thousands) Late fees $ 266 $ 236 $ 30 13 % $ 805 $ 1,124 $ (319) (28) % Other 316 358 (42) (12) % 795 1,515 (720) (48) % Total other income $ 582 $ 594 $ (12) (2) % $ 1,600 $ 2,639 $ (1,039) (39) % The decrease in other income for the nine months ended September 30, 2021 compared to the same period in 2020 is primarily due to a decrease in rate modification fees on Farm & Ranch loans. Operating Expenses . The components of operating expenses for the three and nine months ended September 30, 2021 and 2020 are summarized in the following table: Table 16 For the Three Months Ended For the Nine Months Ended Change Change September 30, 2021 September 30, 2020 $ % September 30, 2021 September 30, 2020 $ % (dollars in thousands) Compensation and employee benefits $ 10,027 $ 8,791 $ 1,236 14 % $ 31,601 $ 27,005 $ 4,596 17 % General and administrative 6,330 5,044 1,286 25 % 19,015 15,702 3,313 21 % Regulatory fees 750 725 25 3 % 2,250 2,175 75 3 % Total Operating Expenses $ 17,107 $ 14,560 $ 2,547 17 % $ 52,866 $ 44,882 $ 7,984 18 % a. Compensation and Employee Benefits . The increase in compensation and employee benefits expenses for 2021 compared to 2020 was due to increased headcount. We hired ten new employees in connection with the strategic acquisition of loan servicing rights in August 2021. b. General and Administrative Expenses (G&A) . The increase in G&A expenses for 2021 compared to 2020 was primarily due to increased spending on software licenses and information technology consultants to support growth and strategic initiatives. We entered into a transition services agreement in connection with the strategic acquisition of loan servicing rights in August 2021. 77 Under that agreement, we have agreed to pay $1.25 million to the seller of the servicing rights in installments through December 31, 2022 for continuing transition assistance. Income Tax Expense . The following table presents income tax expense and the effective income tax rate for the three and nine months ended September 30, 2021 and 2020: Table 17 For the Three Months Ended For the Nine Months Ended Change Change September 30, 2021 September 30, 2020 $ % September 30, 2021 September 30, 2020 $ % (dollars in thousands) Income tax expense $ 8,260 $ 6,340 $ 1,920 30 % $ 25,579 $ 19,516 $ 6,063 31 % Effective tax rate 21.0 % 19.9 % 1.1 % 21.1 % 20.9 % 0.2 % Business Volume . The following table sets forth the net growth or decrease in Farmer Mac's four lines of business for the three and nine months ended September 30, 2021 and 2020: Table 18 Net New Business Volume – Farmer Mac Loan Purchases, Guarantees, LTSPCs, and AgVantage Securities For the Three Months Ended For the Nine Months Ended September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020 Net Growth/(Decrease) Net Growth/(Decrease) Net Growth/(Decrease) Net Growth/(Decrease) (in thousands) Farm & Ranch: Loans $ 277,164 $ 399,495 $ 910,983 $ 905,277 Loans held in trusts: Beneficial interests owned by third party investors (100,621) (159,683) (309,672) (324,509) LTSPCs 212,664 (8,313) 262,868 (108,368) USDA Guarantees: USDA Securities 6,552 76,949 (24,611) 193,487 Farmer Mac Guaranteed USDA Securities (10,759) (19,626) (39,405) (78,533) Rural Utilities: Loans (3,396) 7,786 (17,240) 438,062 LTSPCs 40,796 (14,100) 17,830 (33,326) Institutional Credit: AgVantage securities 499,230 (335,328) 393,944 (120,744) Total purchases, guarantees, LTSPCs, and AgVantage securities $ 921,630 $ (52,820) $ 1,194,697 $ 871,346 78 Our outstanding business volume was $23.1 billion as of September 30, 2021, a net increase of $0.9 billion from June 30, 2021 after taking into account all new business, maturities, and paydowns on existing assets. The net increase was primarily attributable to a net increases of $499.2 million in the Institutional Credit line of business, $389.2 million in the Farm & Ranch line of business, and $37.4 million in the Rural Utilities line of business, partially offset by a net decrease of $4.2 million in the USDA Guarantees line of business. The $389.2 million net increase in our Farm & Ranch line of business reflected a $277.2 million net increase in outstanding loan purchase volume and a $212.7 million net increase in loans underlying LTSPCs and off-balance sheet Farmer Mac Guaranteed Securities, which was partially offset by a net decrease of $100.6 million in loans held in consolidated trusts. Our net growth of 15.7% in the Farm & Ranch on-balance sheet portfolio over the twelve months ended September 30, 2021 is significantly higher than the 6.6% net growth of the overall agricultural mortgage loan market over the twelve months ended June 30, 2021 (based on our analysis of call report data from commercial banks, -1.6% growth, and Farm Credit System, 12.7% growth). The $499.2 million net increase in the Institutional Credit line of business reflects $1.4 billion in gross volume, partially offset by $0.9 billion of paydowns and maturities. Within the $1.4 billion of gross volume is $1.2 billion of short-term funding that will mature in fourth quarter 2021. The $37.4 million net increase in the Rural Utilities line of business was due to $113.9 million in gross new volume, partially offset by $76.5 million in paydowns in loans and LTSPCs. Within the $113.9 million in gross volume is $50.0 million of unfunded telecommunications loan commitments. The $4.2 million net decrease in the USDA Guarantees line of business reflected $118.3 million in paydowns, partially offset by $114.1 million in gross new volume. The net volume decrease is reflective of the low interest rate environment that has increased the competition and lowered the spreads in this line of business. The level and composition of Farmer Mac’s outstanding business volume is based on the relationship between new business, maturities, and repayments on existing assets from quarter to quarter. This relationship in turn depends on a variety of factors both internal and external to Farmer Mac. The external factors include general market forces, competition, and our counterparties’ liquidity needs, access to alternative funding, desired products, and assessment of strategic factors. The internal factors include our assessment of profitability, mission fulfillment, credit risk, and customer relationships. For more information about potential growth opportunities in Farmer Mac's lines of business, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Outlook" in this report. 79 The following table sets forth information about the Farmer Mac Guaranteed Securities issued during the periods indicated: Table 19 For the Three Months Ended For the Nine Months Ended September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020 (in thousands) Loans securitized and sold as Farm & Ranch Guaranteed Securities $ 34,998 $ 36,562 $ 84,131 $ 64,612 AgVantage securities 1,368,912 211,908 2,280,440 1,202,327 Total Farmer Mac Guaranteed Securities Issuances $ 1,403,910 $ 248,470 $ 2,364,571 $ 1,266,939 Farmer Mac either retains the loans it purchases or securitizes them and retains or sells Farmer Mac Guaranteed Securities backed by those loans. The weighted-average age of the Farm & Ranch non-delinquent eligible loans purchased and retained (excluding the purchases of defaulted loans) during both third quarter 2021 and 2020 was less than one year. Of those loans, 70% and 68% had principal amortization periods longer than the maturity date, resulting in balloon payments at maturity, with a weighted-average remaining term to maturity of 22.9 years and 23.2 years for each period, respectively. During the three and nine months ended September 30, 2021 and 2020, Farmer Mac realized no gains or losses from the sale of Farmer Mac Guaranteed Securities or USDA Securities. Farmer Mac consolidates these loans and presents them as "Loans held for investment in consolidated trusts, at amortized cost" on the consolidated balance sheets. For the first nine months of 2021 and 2020, no Farmer Mac Guaranteed Securities were sold to a related party. 80 The following table sets forth information about outstanding volume in each of Farmer Mac's four lines of business as of the dates indicated: Table 20 Lines of Business - Outstanding Business Volume As of September 30, 2021 As of December 31, 2020 (in thousands) Farm & Ranch: Loans $ 5,800,376 $ 4,889,393 Loans held in trusts: Beneficial interests owned by third party investors 977,373 1,287,045 LTSPCs 2,607,261 2,325,431 Guaranteed Securities 60,349 79,312 USDA Guarantees: USDA Securities 2,434,582 2,452,964 Farmer Mac Guaranteed USDA Securities 288,120 333,754 Rural Utilities: Loans 2,243,172 2,260,412 LTSPCs 574,255 556,425 Institutional Credit AgVantage Securities 8,133,303 7,739,359 Total $ 23,118,791 $ 21,924,095 The following table summarizes by maturity date the scheduled principal amortization of loans held, loans underlying off-balance sheet Farmer Mac Guaranteed Securities (excluding AgVantage securities) and LTSPCs, USDA Securities, and Farmer Mac Guaranteed USDA Securities as of September 30, 2021: Table 21 Schedule of Principal Amortization as of September 30, 2021 Loans Held Loans Underlying Off-Balance Sheet Farmer Mac Guaranteed Securities and LTSPCs USDA Securities and Farmer Mac Guaranteed USDA Securities Total (in thousands) 2021 $ 47,300 $ 52,257 $ 28,426 $ 127,983 2022 381,000 273,294 116,991 771,285 2023 361,950 234,303 120,284 716,537 2024 368,914 202,772 120,577 692,263 2025 391,288 205,601 122,636 719,525 Thereafter 7,470,469 2,273,638 2,213,788 11,957,895 Total $ 9,020,921 $ 3,241,865 $ 2,722,702 $ 14,985,488 Of the $23.1 billion outstanding principal balance of volume included in Farmer Mac's four lines of business as of September 30, 2021, $8.1 billion were AgVantage securities included in the Institutional Credit line of business. Unlike business volume in the form of purchased loans, USDA Securities, and loans underlying LTSPCs and non-AgVantage Farmer Mac Guaranteed Securities, most AgVantage 81 securities do not require periodic payments of principal based on amortization schedules and instead have fixed maturity dates when the secured general obligation is due. The following table summarizes by maturity date the outstanding principal amount of both on- and off-balance sheet AgVantage securities as of September 30, 2021: Table 22 AgVantage Balances by Year of Maturity As of September 30, 2021 (in thousands) 2021 $ 1,563,373 2022 1,711,474 2023 1,006,807 2024 802,321 2025 361,025 Thereafter (1) 2,688,303 Total $ 8,133,303 (1) Includes various maturities ranging from 2026 to 2044. The weighted-average remaining maturity of the outstanding AgVantage securities shown in the table above was 4.4 years as of September 30, 2021. Outlook Farmer Mac continues to provide a stable source of liquidity, capital, and risk management tools as the secondary market that helps meet the financing needs of rural America. The pace of Farmer Mac’s growth will depend on the capital and liquidity needs of the lending institutions in the agricultural and rural utilities business as well as the overall health of borrowers in the sectors we serve. Farmer Mac foresees opportunities for profitable growth across our lines of business driven by several key factors: • As agricultural and rural utilities lenders seek to manage equity capital and return on equity capital requirements or seek to reduce exposure due to lending or concentration limits, Farmer Mac can provide relief for those institutions through loan and portfolio purchases, participations, guarantees, LTSPCs, or wholesale funding. • Future growth opportunities in Farmer Mac’s Rural Utilities line of business may evolve by deepening business relationships with eligible counterparties, financing broadband-related capital expenditures and rural telecommunications facilities, growing opportunities for renewable energy project finance, and exploring new types of loan products. These opportunities may be limited by sector growth, credit quality, and the competitiveness of Farmer Mac’s products. • As a result of business and product development efforts and continued interest of institutional investors in agricultural assets, Farmer Mac’s customer base and product set continue to expand, which may generate more demand for Farmer Mac’s products from new sources. • Farmer Mac’s growing relationships with larger regional and national lenders continue to provide opportunities that could influence Farmer Mac’s loan demand and increase the average transaction size within Farmer Mac’s lines of business. 82 • Expansion and refinancing opportunities for agricultural producers and agribusinesses resulting from competitive interest rates have increased financing needs to support mergers and acquisitions, and vertical integration across many sectors of the agricultural industry, which may also generate demand for Farmer Mac’s loan products. • As we grow our outstanding business volume through the purchases and commitments described above, we are also developing new ways to obtain funding and manage our overall credit risk. In October 2021, we completed a structured and syndicated agricultural mortgage-backed securitization (AMBS) that included a $280.0 million senior tranche guaranteed by Farmer Mac and a $22.7 million unguaranteed subordinate tranche sold to investors, resulting in off-balance sheet treatment for Farm & Ranch loans formerly held on Farmer Mac's balance sheet. During fourth quarter 2021, Farmer Mac expects to record a gain on this transaction of approximately $4 million after-tax. Farmer Mac will serve as the master servicer of the securitization and as central servicer for a portion of the underlying loan pool. This new source of funding provides us with another tool to help manage capital and credit risk and also provides an investment opportunity for leading institutional investors. The disruptions from the COVID-19 pandemic experienced during 2020 continued to be significantly moderated during the first three quarters of 2021. However, the potential increase of COVID-19 resulting from certain variants of coronavirus and the utilization of vaccines both domestically and globally continue to evolve and create uncertainty, which may result in increased market volatility such as the supply chain disruptions currently impacting global trade. Farmer Mac’s mission is to support rural America, and the disruptions caused by COVID-19 may continue to present new and expanded opportunities for Farmer Mac to help meet the financing needs of rural America while also presenting uncertainties and risks. See "Risk Factors" in Part I, Item 1A of the 2020 Annual Report for more information about the uncertainties and risks associated with the COVID-19 pandemic on Farmer Mac and its business. Operating Expense . Farmer Mac continues to expand its investments in human capital, technology, and business infrastructure to increase capacity and efficiency as it seeks to accommodate its growth opportunities and achieve its long-term strategic objectives. Farmer Mac expects continued increases in its operating expenses over the next several years corresponding to business and revenue growth. We expect these efforts to continue and increase over the next 12 - 18 months as we innovate and grow our business while monitoring the growth in operating expenses commensurate with the growth in our revenue. During the third quarter, we closed on a strategic acquisition that enhanced our operations by expanding our internal loan servicing function and acquiring the loan servicing rights for a sizeable portion of our Farm & Ranch loan and USDA Guaranteed Securities portfolios. This acquisition will increase our interest income on our Farm & Ranch loans and USDA Guaranteed Securities that we service because there will not be any third-party central servicer retaining a central servicer fee on those assets. That increased interest income is expected to be partially offset by the increase in our operating expenses relating to our enhanced internal loan servicing operations. In the short-term, we do not expect the effect on core earnings to be significant. In the medium to long-term, the effect will depend on the size of our portfolio that we service and the long-run costs of our servicing operations. Agricultural Industry . Economic conditions throughout the agricultural, food, fuel, and fiber sectors remained largely positive throughout the first three quarters of 2021. Although grain commodity prices abated during the third quarter, corn, soybean, and wheat prices held between 20% and 40% above their 10-year averages. Consumer mobility and demand held up during the third quarter, helping to restore fuel 83 demand and bring ethanol production back to 2019 levels by July 2021, according to U.S. Energy Information Administration data. Cattle and dairy prices remain the only major agricultural commodities with continued pressure on prices, but both sectors held at-or-above pre-pandemic price levels during third quarter 2021. The U.S. agricultural sector has become increasingly dependent on foreign markets as a source of demand. Agriculture exports were strong in 2020, aided by a weaker U.S. dollar, a recovery in Chinese demand for grains and oilseeds, and better overall trade relations. These conditions continued to be favorable in the first three quarters of 2021, but sales to China slowed in the third quarter due to higher prices, rising grain supplies, and supply chain disruptions that challenged shipping lanes. Exports have been boosted in 2021 by increases in sales of beef, dairy, pork, and tree nuts, according to data from the USDA's Foreign Agricultural Service (FAS), but global supply chain disruptions and high shipping costs are currently providing a major headwind for agricultural exports. Through August 2021, USDA FAS trade data shows modest slowing of U.S. agricultural export volumes to Asia, which could continue into 2022. Farm incomes have been boosted in recent years by additional sources of liquidity and cash flow. During 2020, Congress provided a significant amount of emergency assistance through direct payments to producers, food support funding, and other measures to support the food supply chain. The USDA estimates that $9.3 billion of that funding has been disbursed to farmers and ranchers in 2021 through the Coronavirus Food Assistance Program (CFAP), with another $8.7 billion in forgivable loans distributed during the year through the Paycheck Protection Program (PPP) by the Small Business Administration. The rebound in commodity prices combined with extensive government support payments led to a large increase in sector-wide profitability at the end of 2020 and into 2021. USDA estimates for net farm income and net cash farm income in 2021 are the highest levels since 2013 at $113.0 billion and $134.7 billion, respectively. An average year generates approximately $100 billion in net farm income, so both 2021 metrics are well above historical averages. Higher commodity prices are estimated to offset lower projected government payments in 2021. Animal protein and specialty crop producers did not fully participate in the increased profitability, as higher labor, feed, and other input costs partially offset any gains in cash receipts. Although farm incomes and profitability remain strong in 2021, a potential challenge for producers heading into 2022 will be rising input prices, including the cost of fertilizer, transportation and shipping, and the cost and availability of labor. Farmland values increased steadily on average in 2021 after rising at approximately the rate of inflation for the last two years. Though the COVID-19 pandemic slowed public auctions and sales during 2020, transactions picked up and values began to trend higher in fourth quarter 2020. An improved profitability outlook combined with low market interest rates provided support for land values throughout 2021. Land value survey data from the USDA show a 7.0% increase in average farm real estate values from June 2020 to June 2021. Annual farm real estate value gains were highest in the Northern Plains (9.4%) and the Southern Plains (9.0%), but also strong in Pacific states (8.6%) and the Corn Belt (7.7%). The Federal Reserve Bank of Chicago AgLetter reported a 14% gain in farmland values in the Seventh District (primarily Iowa, Indiana, Illinois, and Wisconsin) between June 2020 and June 2021. Data from the Federal Reserve Bank of Kansas City show a similar rise in land values in the Tenth District (primarily Kansas, Missouri, Nebraska, and Oklahoma). Historically, rising farm real estate values have paired with an increase in real estate-secured debt. While regional averages for farmland values provide a good barometer for the overall movement in U.S. farmland values, economic forces affecting land markets are highly localized, and some markets may experience greater volatility than state or national averages indicate. 84 The U.S. experienced $22 billion in severe weather disasters in 2020, the highest level in the 40 years tracked by the National Oceanic and Atmospheric Administration. Many of those events affected agriculture, including a midwestern derecho, western wildfires, and western drought. Federal crop insurance provides a strong mitigator against this risk, but farmers and ranchers face increasingly-severe weather incidents. Weather conditions have also presented a challenge to many producers in 2021. Long and persistent drought conditions have impacted western agriculture in the first three quarters of 2021. As of October 19, 2021, 98% of the National Weather Service Western Region was designated as experiencing some level of drought or dryness, and 20% of the region was designated as experiencing exceptional drought, according to data from the National Drought Mitigation Center. Due to drought conditions along the Colorado River Basin, the U.S. Bureau of Reclamation mandated limits on water use along the river in August 2021 that will be effective for the 2022 water year. Farmer Mac estimates that less than 2.5% of our Farm & Ranch portfolio is exposed to this water source. Extended periods of drought and dryness can reduce agricultural productivity, cause lasting damage to permanent crops like fruit and tree nuts, and result in producers leaving some fields fallow due to lack of water. States also regulate water use, and state laws like California's Sustainable Groundwater Management Act (SGMA) will continue to shape state-led efforts to manage water infrastructure and use. Agricultural production in California, Oregon, Washington, Arizona, and Utah is likely to experience the greatest impact from the 2021 drought and future water management efforts. For loans in areas that commonly experience exceptional drought (primarily in California), Farmer Mac’s underwriting process includes an assessment of anticipated long-term water availability for the related property and how that impacts the collateral value and borrower’s cash flow position to mitigate that risk. Due to improvements in sector profitability and despite weather challenges in the west, Farmer Mac's 90-day delinquencies and substandard assets levels improved in third quarter 2021 relative to third quarter 2020. Forty percent of the loans past due 90-days or more in second quarter 2021 cured or paid off by September 30, 2021. The overall delinquency rate fell from 0.70% of the Farm & Ranch portfolio as of June 30, 2021 to 0.58% of the Farm & Ranch portfolio by September 30, 2021, a significant improvement that defies the seasonal pattern historically observed during the third quarter of each year. Year-over-year, the delinquency rate fell by 48 basis points from 1.07% in third quarter 2020. However, the ongoing COVID-19 pandemic and the potential for continued economic and weather-related stress increase the level of uncertainty inherent in the agricultural credit sector and could alter the trajectory of the current agricultural cycle. A virus resurgence, another economic disruption, continued or worsening supply chain disruptions, or long-term damage to secured collateral from drought or wildfires could result in elevated loan delinquencies and a higher percentage of loans rated substandard. Farmer Mac believes that its portfolio continues to be highly diversified, both geographically and by commodity, and that its portfolio has been underwritten to high credit quality standards. Therefore, Farmer Mac believes that its portfolio is well-positioned to endure reasonably foreseeable volatility from cyclical and external factors. For more information about the loan balances, loan-to-value ratios, 90-day delinquencies, and substandard asset rate for the Farm & Ranch loans in Farmer Mac’s portfolio as of September 30, 2021, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk—Loans and Guarantees." Rural Utilities Industry . Economic conditions affecting the rural utilities industry tend to follow those in the general economy. According to data from the U.S. Energy Information Administration, sales and the revenue from the sale of electricity to customers is up by 3.7% and 8.2%, respectively, in 2021 through July compared to 2020. This increase was driven by higher sales to residential markets, a rebound in sales to the industrial sector, and an increase in the retail price of electricity. Overall economic conditions continued to improve during the first three quarters of 2021, with improved employment, credit, and retail sales activity, but COVID-19 variants and higher inflation continue to threaten the depth and speed of the 85 economic recovery. Through September 30, 2021, Farmer Mac had not observed material degradation in the financial performance of its Rural Utilities portfolio. Prospects for loan growth within the rural utilities industry overall appear to be moderate in the near term, as ongoing normal-course capital expenditures related to maintaining and upgrading utility infrastructure continue at typical levels. Farmer Mac's future growth opportunities for financing the electric cooperative industry may be affected by the demand for electric power in rural areas, capital expenditures by electric cooperatives driven by regulatory or technological changes, the continuation of a low interest rate environment, and competitive dynamics within the rural utilities cooperative finance industry. In December 2020, the Federal Communications Commission’s Rural Digital Opportunity Fund (RDOF) auction awarded $9.2 billion in broadband-related operating cost subsidies to winning bidders. This may provide a catalyst for capital demands from rural electric cooperatives and other telecommunications companies providing communication services to rural America who seek to develop and deploy broadband services. Over $1.5 billion in subsidies were awarded to various rural electric cooperatives, and a significant number of final allocations were made to other carriers investing in rural broadband and other communications services. The cooperatives and other companies that were unsuccessful RDOF bidders also gained knowledge about the processes and technologies involved in broadband projects, which may enable them to develop broadband infrastructure. In particular, these capital needs may provide Farmer Mac with new financing opportunities with existing and new customers. The growth in renewable energy generation and deployment of energy storage technologies may help deepen Farmer Mac's relationships with existing customers through new business opportunities. This growth may also broaden Farmer Mac's customer base with cooperative lenders focused on lending to renewable energy customers. In response to this growth, Farmer Mac has deployed new financing products tailored to the renewable energy sector, which represents a new market opportunity for Farmer Mac. Under this new initiative, Farmer Mac's total outstanding loan purchase balance of renewable energy financing transactions including undisbursed commitments as of September 30, 2021 was $92.7 million. Weather is an ongoing source of uncertainty for the utilities sector. Drought, fires, and extreme storms can drive demand, outages, and damage to power and telecommunications facilities. The recent drought and wildfires in California have not materially impacted Farmer Mac’s portfolio as of September 30, 2021, nor has damage from Hurricane Ida. Farmer Mac continues to monitor the ongoing effects of the extremely cold weather event that occurred during mid-February 2021 in the mid-south region, particularly in Texas, on our rural infrastructure portfolio. As of September 30, 2021, our rural infrastructure portfolio exposure in Texas was approximately $405 million and split between distribution and generation and transmission cooperatives. Many of these cooperatives were affected in some way by the arctic freeze, including obstacles in receiving fuel for power plants or the inability to obtain contracted electricity, which resulted in rolling blackouts across the state. In June 2021, the governor of Texas signed Texas Senate Bill 1580 into law allowing electric cooperatives impacted by the severe weather event to use securitization financing to recover the extraordinary costs and expenses incurred during the event. We believe that the current internal risk ratings applied to our rural infrastructure portfolio reflect the elevated financial stress resulting from the Texas freeze and elevated energy costs. Legislative and Regulatory Outlook . Farmer Mac continues to monitor potential legislative and regulatory changes that could affect Farmer Mac or its stakeholders, including: • Section 1005 of the American Rescue Plan Act of 2021 authorized the USDA to provide debt relief to socially disadvantaged producers who had outstanding principal balances on Farm Service Agency (FSA) loans as of January 1, 2021. In July, a federal judge issued a preliminary injunction 86 that ordered USDA to halt all payments under that debt relief program pending resolution of the constitutional objections raised against the program in ongoing litigation . Congress has proposed replacing Section 1005 of the American Rescue Plan with a new program that provides debt relief to “economically distressed” and “at-risk” farmers in the Build Back Better reconciliation package pending in Congress. If enacted, t his provision could lead to a short-term acceleration in the prepayment of the FSA guaranteed loans in Farmer Mac’s USDA Securities portfolio. • The Build Back Better reconciliation package pending in Congress contains several proposed changes to the U.S. tax code. As negotiations on the package move forward, Farmer Mac will continue to monitor the effect of any change to the tax code that may affect its business. The proposed corporate alternative minimum tax in the package is not expected to change Farmer Mac’s tax liability in the near future. The package does not include any proposed increases to the current U.S. corporate tax rate of 21%. The package includes a proposed 1% excise tax on the fair market value of a corporation’s stock repurchased in a taxable year. That excise tax would apply to future repurchases of common stock under Farmer Mac’s existing stock buyback program that authorizes up to $9.8 million in repurchases of common stock and expires in March 2023. Under that program, Farmer Mac has repurchased approximately $200,000 of common stock since January 1, 2017. • Agricultural exports from the United States were valued at $145.7 billion in 2020. The ability to produce food and fiber and transport it efficiently across the globe is critical for the U.S. food and agricultural sectors’ competitiveness internationally. Congress recently passed a bipartisan infrastructure bill that contains several important investments to improve roads, bridges, freight rail, electric, broadband, ports, and waterways that are expected to support farmers and ranchers’ profitability, competitiveness, and access to global markets. • The three-member board of the Farm Credit Administration (FCA) currently has a vacancy as well as a sitting member whose term expired in 2018. The Biden Administration is expected to nominate individuals to fill these seats in the future. Changes to the composition of the FCA board may affect Farmer Mac’s regulatory environment. 87 Balance Sheet Review The following table summarizes the balance sheet as of the periods indicated: Table 23 As of Change September 30, 2021 December 31, 2020 $ % (in thousands) Assets Cash and cash equivalents $ 899,052 $ 1,033,941 $ (134,889) (13) % Investment securities, net of allowance 3,741,639 3,898,724 (157,085) (4) % Farmer Mac Guaranteed Securities, net of allowance 8,387,062 8,123,493 263,569 3 % USDA Securities 2,462,010 2,480,321 (18,311) (1) % Loans, net of allowance 8,046,215 7,248,990 797,225 11 % Loans held in trusts, net of allowance 976,700 1,286,156 (309,456) (24) % Other 231,690 283,876 (52,186) (18) % Total assets $ 24,744,368 24,744,368 $ 24,355,501 $ 388,867 2 % Liabilities Notes Payable 22,365,121 21,848,917 516,204 2 % Debt securities of consolidated trusts held by third parties 990,961 1,323,786 (332,825) (25) % Other 190,988 190,321 667 — % Total liabilities $ 23,547,070 $ 23,363,024 $ 184,046 1 % Total equity 1,197,298 992,477 204,821 21 % Total liabilities and equity $ 24,744,368 $ 24,355,501 $ 388,867 2 % Assets . The increase in total assets was primarily attributable to new loan volume. Liabilities . The increase in total liabilities was primarily due to an increase in total notes payable, to fund the acquisition of loan volume. Equity . The increase in total equity was primarily due to the issuance of the Series G Preferred Stock, an increase in accumulated other comprehensive income, and an increase in retained earnings. Risk Management Credit Risk – Loans and Guarantees . Farm & Ranch Farmer Mac's direct credit exposure to Farm & Ranch loans held and loans underlying Farm & Ranch Guaranteed Securities and LTSPCs as of September 30, 2021 was $9.4 billion across 48 states. Farmer Mac applies credit underwriting standards and methodologies to help assess exposures to Farm & Ranch loans, which may include collateral valuation, financial metrics, and other appropriate borrower financial and credit information. For larger loan exposures to agriculture production and agribusinesses that support agriculture production, food and fiber processing, and other supply chain production, which may have different risk profiles, Farmer Mac has implemented methodologies and parameters that help assess credit risk based on the appropriate sector, borrower construct, and transaction complexity. For more information about Farmer Mac's underwriting and collateral valuation standards for Farm & Ranch loans, see 88 "Business—Farmer Mac's Lines of Business—Farm & Ranch—Underwriting and Collateral Standards" in Farmer Mac’s 2020 Annual Report. Farmer Mac has indirect credit exposure to the Farm & Ranch loans that secure AgVantage securities included in the Institutional Credit line of business. As of September 30, 2021, Farmer Mac had not experienced any credit losses on any AgVantage securities. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk—Institutional" for more information about Farmer Mac's credit risk on AgVantage securities. Farmer Mac considers a loan's original loan-to-value ratio as one of many factors in evaluating loss severity. Loan-to-value ratios depend on the market value of a property, as determined in accordance with Farmer Mac's collateral valuation standards. As of September 30, 2021 and December 31, 2020, the average unpaid principal balances for loans outstanding in the Farm & Ranch line of business was $780,000 and $742,000, respectively. Farmer Mac calculates the "original loan-to-value" ratio of a loan by dividing the original loan principal balance by the original appraised property value. This calculation does not reflect any amortization of the original loan balance or any adjustment to the original appraised value to provide a current market value. The original loan-to-value ratio of any cross-collateralized loans is calculated on a combined basis rather than on a loan-by-loan basis. The weighted-average original loan-to-value ratio for Farm & Ranch loans purchased during third quarter 2021 was 51%, compared to 55% for loans purchased during third quarter 2020. The weighted-average original loan-to-value ratio for all Farm & Ranch loans held and all loans underlying off-balance sheet Farm & Ranch Guaranteed Securities and LTSPCs was 53% and 52% as of September 30, 2021 and December 31, 2020. The weighted-average original loan-to-value ratio for all 90-day delinquencies was 49% and 50% as of September 30, 2021 and December 31, 2020, respectively. The weighted-average current loan-to-value ratio (the loan to-value ratio based on original appraised value and current outstanding loan amount adjusted to reflect amortization) for Farm & Ranch loans held and loans underlying off-balance sheet Farm & Ranch Guaranteed Securities and LTSPCs was 48% and 46% as of September 30, 2021 and December 31, 2020, respectively. For more information about the credit quality of Farmer Mac's Farm & Ranch portfolio and the associated allowance for losses please refer to Note 5 to the consolidated financial statements. Activity affecting the allowance for loan losses and reserve for losses is discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Provision for and Release of Allowance for Loan Losses and Reserve for Losses." Farmer Mac's 90-day delinquency measure includes loans 90 days or more past due, as well as loans in foreclosure and non-performing loans where the borrower is in bankruptcy. As of September 30, 2021, Farmer Mac's 90-day delinquencies were $54.8 million (0.58% of the Farm & Ranch portfolio), compared to $63.1 million (0.70% of the Farm & Ranch portfolio) as of June 30, 2021 and $46.2 million (0.54% of the Farm & Ranch portfolio) as of December 31, 2020. Those 90-day delinquencies were comprised of 38 delinquent loans as of September 30, 2021, compared to 42 delinquent loans as of June 30, 2021 and 38 delinquent loans as of December 31, 2020. The decrease in 90-day delinquencies from second quarter was primarily driven by two commodity groups – crops and livestock. The top ten borrower exposures over 90 days delinquent represented over half of the 90-day delinquencies as of September 30, 2021. Farmer Mac believes that it remains adequately collateralized on its delinquent loans. 89 Our 90-day delinquency rate as of September 30, 2021 was below Farmer Mac's historical average. In the near-term, our delinquency rate may exceed our historical average due to the impact of adverse weather events and/or supply chain disruptions on the agricultural economy. Farmer Mac's average 90-day delinquency rate as a percentage of its Farm & Ranch portfolio over the last 15 years is approximately 1%. The highest 90-day delinquency rate observed during that period occurred in 2009 at approximately 2%, which coincided with increased delinquencies in loans within Farmer Mac's ethanol loan portfolio. The following table presents historical information about Farmer Mac's 90-day delinquencies in the Farm & Ranch line of business compared to the unpaid principal balance of all Farm & Ranch loans held and loans underlying off-balance sheet Farm & Ranch Guaranteed Securities and LTSPCs: Table 24 Farm & Ranch Line of Business 90-Day Delinquencies Percentage (dollars in thousands) As of: September 30, 2021 $ 9,445,359 $ 54,792 0.58 % June 30, 2021 9,056,152 63,076 0.70 % March 31, 2021 8,629,352 72,346 0.84 % December 31, 2020 8,581,181 46,232 0.54 % September 30, 2020 8,249,349 88,041 1.07 % June 30, 2020 8,017,850 68,682 0.86 % March 31, 2020 7,811,594 79,722 1.02 % December 31, 2019 7,776,950 60,954 0.78 % September 30, 2019 7,393,728 59,691 0.81 % Across all of Farmer Mac's lines of business, 90-day delinquencies represented 0.24% of total outstanding business volume as of September 30, 2021, compared to 0.21% as of December 31, 2020 and 0.40% as of September 30, 2020. The following table presents outstanding Farm & Ranch loans held and loans underlying LTSPCs and off-balance sheet Farm & Ranch Guaranteed Securities and 90-day delinquencies as of September 30, 2021 by year of origination, geographic region, commodity/collateral type, original loan-to-value ratio, and range in the size of borrower exposure: 90 Table 25 Farm & Ranch 90-Day Delinquencies as of September 30, 2021 Distribution of Farm & Ranch Line of Business Farm & Ranch Line of Business 90-Day Delinquencies (1) Percentage (dollars in thousands) By year of origination: 2011 and prior 6 % $ 567,596 $ 3,181 0.56 % 2012 3 % 250,167 — — % 2013 4 % 343,964 724 0.21 % 2014 3 % 294,207 3,641 1.24 % 2015 5 % 439,266 4,607 1.05 % 2016 7 % 695,379 17,706 2.55 % 2017 7 % 695,045 12,821 1.84 % 2018 7 % 696,031 610 0.09 % 2019 11 % 1,037,240 10,858 1.05 % 2020 25 % 2,358,286 644 0.03 % 2021 22 % 2,068,178 — 0.03 % Total 100 % $ 9,445,359 $ 54,792 0.58 % By geographic region (2) : Northwest 12 % $ 1,171,940 $ 7,169 0.61 % Southwest 33 % 3,109,426 15,305 0.49 % Mid-North 27 % 2,537,817 9,900 0.39 % Mid-South 16 % 1,459,683 3,820 0.26 % Northeast 4 % 376,707 9,060 2.41 % Southeast 8 % 789,786 9,538 1.21 % Total 100 % $ 9,445,359 $ 54,792 0.58 % By commodity/collateral type: Crops 50 % $ 4,697,771 $ 28,534 0.61 % Permanent plantings 23 % 2,111,933 10,069 0.48 % Livestock 19 % 1,812,493 8,096 0.45 % Part-time farm 5 % 486,965 593 0.12 % Ag. Storage and Processing 3 % 322,654 7,500 2.32 % Other — 13,543 — — % Total 100 % $ 9,445,359 $ 54,792 0.58 % By original loan-to-value ratio: 0.00% to 40.00% 16 % $ 1,538,800 $ 3,444 0.22 % 40.01% to 50.00% 24 % 2,247,209 27,520 1.22 % 50.01% to 60.00% 35 % 3,343,152 21,048 0.63 % 60.01% to 70.00% 21 % 2,008,487 2,780 0.14 % 70.01% to 80.00% (3) 3 % 268,458 — — % 80.01% to 90.00% (3) 1 % 39,253 — — % Total 100 % $ 9,445,359 $ 54,792 0.58 % By size of borrower exposure (4) : Less than $1,000,000 27 % $ 2,523,934 $ 7,172 0.28 % $1,000,000 to $4,999,999 35 % 3,334,715 27,661 0.83 % $5,000,000 to $9,999,999 16 % 1,506,924 16,213 1.08 % $10,000,000 to $24,999,999 13 % 1,270,026 3,746 0.29 % $25,000,000 and greater 9 % 809,760 — — % Total 100 % $ 9,445,359 $ 54,792 0.58 % (1) Includes loans held and 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. (2) Geographic regions: Northwest (AK, ID, MT, OR, WA, WY); Southwest (AZ, CA, CO, HI, NM, NV, UT); Mid-North (IA, IL, IN, MI, MN, NE, ND, SD, WI); Mid-South (AR, KS, LA, MO, OK, TX); Northeast (CT, DE, KY, MA, MD, ME, NH, NJ, NY, OH, PA, RI, VA, VT, WV); Southeast (AL, FL, GA, MS, NC, SC, TN). (3) Primarily part-time farm loans. Loans with an original loan-to-value ratio of greater than 80% are required to have private mortgage insurance. (4) Includes aggregated loans to single borrowers or borrower-related entities. 91 Another indicator that Farmer Mac considers in analyzing the credit quality of its Farm & Ranch portfolio is the level of internally-rated "substandard" assets, both in dollars and as a percentage of the outstanding Farm & Ranch portfolio. Assets categorized as "substandard" 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, 2021, Farmer Mac's substandard assets were $278.3 million (2.9% of the Farm & Ranch portfolio), compared to $299.1 (3.3% of the Farm & Ranch portfolio) as of June 30, 2021 and $291.5 million (3.4% of the Farm & Ranch portfolio) as of December 31, 2020. Those substandard assets were comprised of 291 loans as of September 30, 2021, 323 loans as of June 30, 2021, and 343 loans as of December 31, 2020. The decrease of $20.8 million in substandard assets during third quarter 2021 was primarily driven by credit upgrades in both our on- and off-balance sheet portfolios during the quarter. Substandard assets decreased as a percentage of the total on-balance sheet and off-balance sheet portfolios primarily due to these credit upgrades. The percentage of substandard assets within the portfolio as of September 30, 2021 was below the historical average. Farmer Mac's average substandard assets as a percentage of its Farm & Ranch portfolio over the last 15 years is approximately 4%. The highest substandard asset rate observed during the last 15 years occurred in 2010 at approximately 8%, which coincided with an increase in substandard loans within Farmer Mac's ethanol portfolio. If Farmer Mac's substandard asset rate increases from current levels, it is likely that Farmer Mac's provision to the allowance for loan losses and the reserve for losses will also increase. Although some credit losses are inherent to the business of agricultural lending, Farmer Mac believes that losses associated with the current agricultural credit cycle will be moderated by the strength and diversity of its portfolio, which Farmer Mac believes is adequately collateralized. The following table presents the current loan-to-value ratios for the Farm & Ranch portfolio, as disaggregated by internally assigned risk ratings: Table 26 Farm & Ranch current loan-to-value ratio by internally assigned risk rating as of September 30, 2021 Acceptable Special Mention Substandard Total (in thousands) Current loan-to-value ratio (1) : 0.00% to 40.00% $ 2,626,070 $ 60,117 $ 98,922 $ 2,785,109 40.01% to 50.00% 2,201,583 88,954 66,735 2,357,272 50.01% to 60.00% 2,335,126 91,361 60,910 2,487,397 60.01% to 70.00% 1,457,866 53,785 22,008 1,533,659 70.01% to 80.00% 171,374 35,780 8,213 215,367 80.01% and greater 43,968 1,101 21,486 66,555 Total $ 8,835,987 $ 331,098 $ 278,274 $ 9,445,359 (1) The current loan-to-value ratio is based on original appraised value (or most recently obtained appraisal, if available) and current outstanding loan amount adjusted to reflect loan amortization. 92 The following table presents Farmer Mac's cumulative net credit losses relative to the cumulative original balance for all Farm & Ranch loans purchased and loans underlying LTSPCs and off-balance sheet Farm & Ranch Guaranteed Securities as of September 30, 2021 by year of origination, geographic region, and commodity/collateral type. The purpose of this information is to present information about realized losses relative to original Farm & Ranch purchases, guarantees, and commitments. Table 27 Farm & Ranch Credit Losses Relative to Cumulative Original Loans, Guarantees, and LTSPCs as of September 30, 2021 Cumulative Original Loans, Guarantees and LTSPCs Cumulative Net Credit Losses/(Recoveries) Cumulative Loss Rate (dollars in thousands) By year of origination: 2011 and prior $ 16,099,523 $ 33,785 0.21 % 2012 1,159,170 — — % 2013 1,463,970 — — % 2014 1,047,800 — — % 2015 1,223,646 (516) (0.04) % 2016 1,540,809 — — % 2017 1,622,277 5,365 0.33 % 2018 1,323,055 — — % 2019 1,518,736 — — % 2020 2,823,275 — — % 2021 2,279,534 — — % Total $ 32,101,795 $ 38,634 0.12 % By geographic region (1) : Northwest $ 4,173,255 $ 11,191 0.27 % Southwest 11,038,665 8,542 0.08 % Mid-North 8,060,301 18,219 0.23 % Mid-South 4,312,637 (613) (0.01) % Northeast 1,708,199 323 0.02 % Southeast 2,808,738 972 0.03 % Total $ 32,101,795 $ 38,634 0.12 % By commodity/collateral type: Crops $ 14,829,309 $ 2,887 0.02 % Permanent plantings 6,997,733 9,783 0.14 % Livestock 7,211,088 3,836 0.05 % Part-time farm 1,802,009 1,090 0.06 % Ag. Storage and Processing 1,099,159 21,038 1.91 % Other 162,497 — — % Total $ 32,101,795 $ 38,634 0.12 % (1) Geographic regions: Northwest (AK, ID, MT, OR, WA, WY); Southwest (AZ, CA, CO, HI, NM, NV, UT); Mid-North (IA, IL, IN, MI, MN, NE, ND, SD, WI); Mid-South (AR, KS, LA, MO, OK, TX); Northeast (CT, DE, KY, MA, MD, ME, NH, NJ, NY, OH, PA, RI, VA, VT, WV); Southeast (AL, FL, GA, MS, NC, SC, TN). 93 Analysis of portfolio performance indicates that commodity type is the primary determinant of Farmer Mac's exposure to loss on a given loan. The following tables present concentrations of Farm & Ranch loans held and loans underlying LTSPCs and off-balance sheet Farm & Ranch Guaranteed Securities by commodity type within geographic region and cumulative credit losses by origination year and commodity type: Table 28 As of September 30, 2021 Farm & Ranch Concentrations by Commodity Type within Geographic Region Crops Permanent Plantings Livestock Part-time Farm Ag. Storage and Processing Other Total (dollars in thousands) By geographic region (1) : Northwest $ 569,356 $ 185,593 $ 292,232 $ 98,517 $ 26,161 $ 81 $ 1,171,940 6.0 % 2.0 % 3.1 % 1.0 % 0.3 % — % 12.4 % Southwest 678,984 1,586,428 554,846 95,456 182,225 11,487 3,109,426 7.2 % 16.8 % 5.9 % 1.0 % 1.9 % 0.1 % 32.9 % Mid-North 2,168,698 10,608 208,413 101,204 47,182 1,712 2,537,817 23.0 % 0.1 % 2.2 % 1.1 % 0.5 % — % 26.9 % Mid-South 822,385 66,990 485,122 65,683 19,469 34 1,459,683 8.7 % 0.7 % 5.1 % 0.8 % 0.2 % — % 15.5 % Northeast 189,889 45,354 79,398 58,891 3,175 — 376,707 2.0 % 0.5 % 0.9 % 0.6 % — % — % 4.0 % Southeast 268,459 216,960 192,482 67,214 44,442 229 789,786 2.8 % 2.3 % 2.0 % 0.7 % 0.5 % — % 8.3 % Total $4,697,771 $2,111,933 $1,812,493 $486,965 $322,654 $13,543 $9,445,359 49.7 % 22.4 % 19.2 % 5.2 % 3.4 % 0.1 % 100.0 % (1) Geographic regions: Northwest (AK, ID, MT, OR, WA, WY); Southwest (AZ, CA, CO, HI, NM, NV, UT); Mid-North (IA, IL, IN, MI, MN, NE, ND, SD, WI); Mid-South (AR, KS, LA, MO, OK, TX); Northeast (CT, DE, KY, MA, MD, ME, NH, NJ, NY, OH, PA, RI, VA, VT, WV); Southeast (AL, FL, GA, MS, NC, SC, TN). 94 Table 29 As of September 30, 2021 Farm & Ranch Cumulative Credit Losses by Origination Year and Commodity Type Crops Permanent Plantings Livestock Part-time Farm Ag. Storage and Processing Total (in thousands) By year of origination: 2011 and prior $ 3,427 $ 9,783 $ 3,836 $ 1,066 $ 15,673 $ 33,785 2012 — — — — — — 2013 — — — — — — 2014 — — — — — — 2015 (540) — — 24 — (516) 2016 — — — — — — 2017 — — — — 5,365 5,365 2018 — — — — — — 2019 — — — — — — 2020 — — — — — — 2021 — — — — — — Total $ 2,887 $ 9,783 $ 3,836 $ 1,090 $ 21,038 $ 38,634 Rural Utilities Farmer Mac's direct credit exposure to Rural Utilities loans held and loans underlying LTSPCs as of September 30, 2021 was $2.8 billion across 45 states. For more information about Farmer Mac's underwriting and collateral valuation standards for Rural Utilities loans, see "Business—Farmer Mac's Lines of Business—Rural Utilities—Underwriting" in Farmer Mac’s 2020 Annual Report. As of September 30, 2021, there were no delinquencies in Farmer Mac's portfolio of Rural Utilities loans. Farmer Mac has indirect credit exposure to Rural Utilities loans that secure AgVantage securities included in the Institutional Credit line of business. As of September 30, 2021, Farmer Mac had not experienced any credit losses on any AgVantage securities. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk—Institutional" for more information about Farmer Mac's credit risk on AgVantage securities. Farmer Mac evaluates credit risk for these assets by reviewing a variety of borrower credit risk characteristics. These characteristics can include (but is not limited to) financial metrics, internal risk ratings, ratings assigned by ratings agencies, types of customers served, sources of power supply, and the regulatory environment. The following table presents Farmer Mac’s portfolio of generation and transmission ("G&T") and distribution cooperative borrowers, as well as renewable energy loans, disaggregated by internally assigned risk ratings. 95 Table 30 Rural Utilities portfolio by internally assigned risk rating as of September 30, 2021 Acceptable Special Mention Substandard Total (in thousands) Distribution Cooperative $ 2,112,176 $ — $ — $ 2,112,176 G&T Cooperative 589,357 — 23,200 612,557 Renewable Energy 92,694 — — 92,694 Rural Utilities Total $ 2,794,227 $ — $ 23,200 $ 2,817,427 For more information about the credit quality of Farmer Mac's Rural Utilities portfolio and the associated allowance for losses please refer to Notes 5 and 6 of the consolidated financial statements. Other Considerations Regarding Credit Risk Related to Loans and Guarantees The credit exposure on USDA Securities, including those underlying Farmer Mac Guaranteed USDA Securities, is guaranteed by the full faith and credit of the United States. Therefore, Farmer Mac believes that we have little or no credit risk exposure in the USDA Guarantees line of business because of the USDA guarantee. As of September 30, 2021, Farmer Mac had not experienced any credit losses on any securities under the USDA Guarantees line of business and does not expect to incur any such losses in the future. Because we do not expect credit losses on this portfolio, Farmer Mac does not provide an allowance for losses on its portfolio of USDA Securities. Farmer Mac requires most approved lenders to make representations and warranties about the conformity of eligible agricultural mortgage and Rural Utilities loans to Farmer Mac's standards, the accuracy of loan data provided to Farmer Mac, and other requirements related to the loans. Sellers who make these representations and warranties are responsible to Farmer Mac for breaches of those representations and warranties. Farmer Mac has the ability to require a seller to cure, replace, or repurchase a loan sold or transferred to Farmer Mac if any breach of a representation or warranty is discovered that was material to Farmer Mac's decision to purchase the loan or that directly or indirectly causes a default or potential loss on a loan sold or transferred by the seller to Farmer Mac. During the previous three years ended September 30, 2021, there have been no breaches of representations and warranties by sellers that resulted in Farmer Mac requiring a seller to cure, replace, or repurchase a loan. In addition to relying on the representations and warranties of sellers, Farmer Mac also underwrites the agricultural real estate mortgage loans (other than rural housing and part-time farm mortgage loans) and Rural Utilities loans on which it has direct credit exposure. For rural housing and part-time farm mortgage loans, Farmer Mac relies on representations and warranties from the seller that those loans conform to Farmer Mac's specified underwriting criteria. For more information about Farmer Mac's loan eligibility requirements and underwriting standards, see "Business—Farmer Mac's Lines of Business—Farm & Ranch—Loan Eligibility," "Business—Farmer Mac's Lines of Business—Farm & Ranch—Underwriting and Collateral Standards," "Business—Farmer Mac's Lines of Business—Rural Utilities—Loan Eligibility," and "Business—Farmer Mac's Lines of Business—Rural Utilities—Underwriting and Collateral Standards" in Farmer Mac’s 2020 Annual Report. Under contracts with Farmer Mac and in consideration for servicing fees, Farmer Mac-approved servicers service loans in accordance with Farmer Mac's requirements. Servicers are responsible to Farmer Mac for serious errors in the servicing of those loans. If a servicer materially breaches the terms of its servicing agreement with Farmer Mac, such as failing to forward payments received or releasing collateral without Farmer Mac's consent, or experiences insolvency or bankruptcy, the servicer is responsible for any 96 corresponding damages to Farmer Mac and, in most cases, Farmer Mac has the right to terminate the servicing relationship for a particular loan or the entire portfolio serviced by the servicer. Farmer Mac also can proceed against the servicer in arbitration or exercise any remedies available to it under law. During the previous three years ended September 30, 2021, Farmer Mac had not exercised any remedies or taken any formal action against any servicers. For more information about Farmer Mac's servicing requirements, see "Business—Farmer Mac's Lines of Business—Farm & Ranch—Servicing" and "Business—Farmer Mac's Lines of Business—Rural Utilities—Servicing" in Farmer Mac’s 2020 Annual Report. Credit Risk – Institutional . Farmer Mac is exposed to credit risk arising from its business relationships with other institutions, which include: • issuers of AgVantage securities; • approved lenders and servicers; and • interest rate swap counterparties. Farmer Mac approves AgVantage counterparties and manages institutional credit risk related to those AgVantage counterparties by requiring them to meet Farmer Mac's standards for creditworthiness for the particular counterparty type and transaction. The required collateralization level is established when the AgVantage facility is entered into with the counterparty and does not change during the life of the AgVantage securities issued under the facility without Farmer Mac's consent. In AgVantage transactions, the corporate obligor is typically required to remove from the pool of pledged collateral loans that become and remain (within specified parameters) delinquent in the payment of principal or interest and to substitute eligible loans that are current in payment or pay down the AgVantage securities to maintain the minimum required collateralization level. In the event of a default on an AgVantage security, Farmer Mac would have recourse to the pledged collateral and have rights to the ongoing borrower payments of principal and interest. For Farm Equity AgVantage counterparties and smaller financial funds or entities, Farmer Mac also requires that the counterparty generally (1) maintain a higher collateralization level either through a higher overcollateralization percentage or through lower loan-to-value ratio thresholds and (2) comply with specified financial covenants for the life of the related AgVantage security to avoid default. For a more detailed description of AgVantage securities, see "Business—Farmer Mac's Lines of Business—Institutional Credit" in Farmer Mac's 2020 Annual Report. The unpaid principal balance of outstanding on-balance sheet AgVantage securities secured by loans eligible for the Farm & Ranch line of business totaled $4.8 billion as of September 30, 2021 and $5.2 billion as of December 31, 2020. The unpaid principal balance of on-balance sheet AgVantage securities secured by loans eligible for the Rural Utilities line of business totaled $3.4 billion as of September 30, 2021 and $2.6 billion as of December 31, 2020. The unpaid principal balance of outstanding off-balance sheet AgVantage securities totaled $4.4 million as of both September 30, 2021 and December 31, 2020. 97 The following table provides information about the issuers of AgVantage securities and the required collateralization levels for those transactions as of September 30, 2021 and December 31, 2020: Table 31 As of September 30, 2021 As of December 31, 2020 Counterparty Balance Required Collateralization Balance Required Collateralization (dollars in thousands) AgVantage: CFC $ 3,355,959 100% $ 2,570,249 100% MetLife 2,050,000 103% 2,375,000 103% Rabo AgriFinance 2,330,000 110% 2,050,000 110% Other (1) 210,008 106% to 125% 551,654 106% to 125% Farm Equity AgVantage (2) 187,336 110% 192,456 110% Total outstanding $ 8,133,303 $ 7,739,359 (1) Consists of AgVantage securities issued by 9 and 6 different issuers as of September 30, 2021 and December 31, 2020, respectively. (2) Consists of AgVantage securities issued by 4 and 4 different issuers as of September 30, 2021 and December 31, 2020, respectively. Farmer Mac manages institutional credit risk related to lenders and servicers by requiring those institutions to meet Farmer Mac's standards for creditworthiness. Farmer Mac monitors the financial condition of those institutions by evaluating financial statements and credit rating agency reports. For more information about Farmer Mac's lender eligibility requirements, see "Business—Farmer Mac's Lines of Business—Farm & Ranch—Lenders" and "Business—Farmer Mac's Lines of Business—Rural Utilities—Lenders" in Farmer Mac's 2020 Annual Report. Farmer Mac manages institutional credit risk related to its interest rate swap counterparties through collateralization provisions contained in each of its swap agreements that vary based on the market value of its swap portfolio with each counterparty. Farmer Mac and its interest rate swap counterparties are required to fully collateralize their derivatives positions without any minimum threshold for cleared swap transactions, as well as for non-cleared swap transactions entered into after March 1, 2017. Farmer Mac transacts interest rate swaps with multiple counterparties to reduce counterparty credit exposure concentration. Farmer Mac's usage of cleared derivatives has increased over time as has its exposure to clearinghouses. The usage of cleared swap transactions reduces Farmer Mac's exposure to individual counterparties with the central clearinghouse acting to settle the change in value of contracts on a daily basis. Credit risk related to interest rate swap contracts is discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Interest Rate Risk" and Note 4 to the consolidated financial statements. Credit Risk – Other Investments . As of September 30, 2021, Farmer Mac had $0.9 billion of cash and cash equivalents and $3.7 billion of investment securities. The management of the credit risk inherent in these investments is governed by Farmer Mac's internal policies as well as FCA regulations that establish criteria for investments eligible for Farmer Mac's investment portfolio, including limitations on asset class, dollar amount, issuer concentration, and credit quality (the "Liquidity and Investment Regulations"). In addition to establishing a portfolio of highly liquid investments as an available source of cash, the goals of Farmer Mac's investment policies are designed to minimize Farmer Mac's exposure to financial market volatility, preserve capital, and support Farmer Mac's access to the debt markets. The Liquidity and Investment Regulations and Farmer Mac's internal policies require that investments held in Farmer Mac's investment portfolio meet the following creditworthiness standards: (1) at a 98 minimum, at least one obligor of the investment must have a very strong capacity to meet financial commitments for the life of the investment, even under severely adverse or stressful conditions, and generally present a very low risk of default; (2) if the obligor whose capacity to meet financial commitments is being relied upon to meet the standard set forth in subparagraph (1) is located outside of the United States, the investment must also be fully guaranteed by a U.S. government agency; and (3) the investment must exhibit low credit risk and other risk characteristics consistent with the purpose or purposes for which it is held. The Liquidity and Investment Regulations and Farmer Mac's internal policies also establish concentration limits, which are intended to limit exposure to any single entity, issuer, or obligor. The Liquidity and Investment Regulations limit Farmer Mac's total credit exposure to any single entity, issuer, or obligor of securities to 10% of Farmer Mac's regulatory capital ($119.6 million as of September 30, 2021). However, Farmer Mac's current policy limits this total credit exposure to 5% of its regulatory capital ($59.8 million as of September 30, 2021). These exposure limits do not apply to obligations of U.S. government agencies or GSEs, although Farmer Mac's current policy restricts investing more than 100% of regulatory capital in the senior non-convertible debt securities of any one GSE. Although the Liquidity and Investments Regulations do not establish limits on the maximum amount, expressed as a percentage of Farmer Mac's investment portfolio, that can be invested in each eligible asset class, Farmer Mac's internal policies set forth asset class limits as part of Farmer Mac's overall risk management framework. Interest Rate Risk . Farmer Mac is subject to interest rate risk on all funded financial assets on its balance sheet because of timing differences in the cash flows due to maturity, paydown, or repricing of the assets and debt together with financial derivatives. Cash flow mismatches due to changing interest rates can reduce the earnings of Farmer Mac if assets prepay sooner than expected and the resulting cash flows must be reinvested in lower-yielding investments when Farmer Mac's funding costs cannot be correspondingly reduced. Alternatively, Farmer Mac could realize a decline in income if assets repay more slowly than originally forecasted and the associated maturing debt must be replaced by debt issuances at higher interest rates. Interest Rate Risk Management The goal of interest rate risk management at Farmer Mac is to manage the balance sheet in a manner that generates stable earnings and value across a variety of interest rate environments. Recognizing that interest rate sensitivities may change with the passage of time and as interest rates change, Farmer Mac regularly assesses this exposure and, if necessary, adjusts its portfolio of funded financial assets, debt, and financial derivatives. Farmer Mac's objective is to maintain its exposure to interest rate risk within appropriate limits, as approved by Farmer Mac's board of directors. Farmer Mac's management-level Asset and Liability Committee ("ALCO") provides oversight, establishes guidelines, and approves strategies to maintain interest rate risk within the board-established limits. Farmer Mac's primary strategy for managing interest rate risk is to fund asset purchases with debt that together with financial derivatives have similar duration and convexity characteristics and help to mitigate impacts from interest rate changes across the yield curve. As part of this debt issuance strategy, Farmer 99 Mac seeks to issue debt securities across a variety of maturities that together with financial derivatives closely align the forecasted debt and financial derivative cash flows with forecasted asset cash flows. Farmer Mac issues discount notes and both callable and non-callable medium-term notes across a spectrum of maturities to execute its debt issuance strategy. Callable debt is issued to mitigate prepayment risk associated with certain funded financial assets held on balance sheet. In general, as interest rates decline, prepayments typically increase, and Farmer Mac is able to economically extinguish certain callable debt issuances. In addition, Farmer Mac enters into financial derivatives, primarily interest rate swaps, to better match the durations of Farmer Mac's assets and liabilities, thereby reducing overall sensitivity to changing interest rates. Taking into consideration the prepayment provisions and the default probabilities associated with its portfolio of funded financial assets, Farmer Mac incorporates behavioral prepayment models when projecting and valuing cash flows associated with these assets. In recognition that borrowers' behaviors in various interest rate environments may change over time, Farmer Mac periodically evaluates the effectiveness of these models compared to actual prepayment experience and adjusts and refines the models as necessary to improve the precision of future prepayment forecasts. Changes in interest rates may affect the timing of asset prepayments which may, in turn, impact durations and values of the assets. Declining interest rates generally results in increased prepayments, which shortens the duration of these assets, while rising interest rates generally results in lower prepayments, thereby extending the duration of the assets. Farmer Mac is subject to interest rate risk on loans and securities it has committed to acquire but not yet purchased (other than delinquent loans purchased through LTSPCs or loans designated for securitization under a forward purchase agreement). When Farmer Mac commits to purchase these assets, it is exposed to interest rate risk between the time it commits to purchase the loans and the time it issues debt to fund the purchase of these loans. Farmer Mac manages the interest rate risk exposure related to these loans by entering into exchange-traded futures contracts involving U.S. Treasury securities and other financial derivatives. Similarly, when Farmer Mac commits to sell certain assets, the associated interest rate exposure is primarily managed with exchange-traded futures contracts involving U.S. Treasury securities and other financial derivatives. Farmer Mac's $0.9 billion of cash and cash equivalents mature within three months and are generally funded with debt having similar maturities. As of September 30, 2021, $3.0 billion of the $3.7 billion of investment securities (80%) were floating rate securities with rates that adjust within one year or fixed rate securities with original maturities between three months and one year. Farmer Mac's floating rate investment securities are funded with floating rate debt that closely matches the rate adjustment frequency of the associated investments. The fixed rate investment securities are generally funded in a manner consistent with Farmer Mac's overall funding strategy that approximates a duration and convexity match. 100 Interest Rate Risk Metrics Farmer Mac regularly evaluates and conducts interest rate shock simulations on its portfolio of financial assets, debt, and financial derivatives and examines a variety of metrics to quantify and manage its exposure to interest rate risk. These metrics include sensitivity to interest rate movements on the market value of equity ("MVE") and forecasted net effective spread ("NES") as well as duration gap analysis. MVE represents management's estimate of the present value of all future cash flows from its current portfolio of on- and off-balance sheet assets, liabilities, and financial derivatives, discounted at current interest rates and appropriate spreads. However, MVE is not indicative of the market value of Farmer Mac as a going concern because these market values are theoretical and do not reflect future business activities. The MVE sensitivity analysis measures the degree to which the market values of Farmer Mac's assets, liabilities, and financial derivatives are estimated to change for a given change in interest rates. Farmer Mac's NES simulation represents the difference between projected income over the next twelve months from the current portfolio of interest-earning assets and interest expense produced by the related funding, including associated financial derivatives. Farmer Mac's NES simulation may be impacted by changes in market interest rates resulting from timing differences between maturities and re-pricing characteristics of funded assets and debt together with the associated financial derivatives. The direction and magnitude of any such effect depends on the direction and magnitude of the change in interest rates across the yield curve as well as the composition of Farmer Mac's portfolio. The NES simulation represents an estimate of the net effective spread income that Farmer Mac's current portfolio is expected to produce over a twelve-month horizon. As a result, the NES simulation sensitivity statistics provide a short-term view of Farmer Mac's NES income sensitivity to interest rate shocks. Duration is a measure of a financial instrument's fair value sensitivity to small changes in interest rates. Duration gap is calculated using the net estimated durations of Farmer Mac's funded financial assets, debt, and financial derivatives. Duration gap quantifies the extent to which estimated fair value sensitivities are matched for funded financial assets, debt and financial derivatives.. Duration gap provides a relatively concise measure of the interest rate risk inherent in Farmer Mac's outstanding portfolio. A positive duration gap denotes that the duration of Farmer Mac's funded financial assets is greater than the duration of its debt and financial derivatives. A positive duration gap indicates that with small changes in interest rate movements the fair value change of Farmer Mac's funded financial assets is more sensitive than the fair value change of its debt and financial derivatives. Conversely, a negative duration gap indicates that with small changes in interest rate movements the fair value change of Farmer Mac's funded financial assets are less sensitive than the fair value change of its debt and financial derivatives. A duration gap of zero indicates that with small changes in interest rate movements the fair value change of Farmer Mac's funded financial assets is effectively offset by the fair value change of its debt and financial derivatives. Each of the interest rate risk metrics is quantified using asset/liability models and derived based on management's best estimates of factors such as forward interest rates across the yield curve, interest rate volatility, and timing of asset prepayments and callable debt redemptions. Accordingly, these metrics are estimates rather than precise measurements. Actual results may differ to the extent there are material changes to Farmer Mac's financial asset portfolio or changes in funding or hedging strategies undertaken to mitigate unfavorable sensitivities to interest rate changes. 101 The following schedule summarizes the results of Farmer Mac's MVE and NES sensitivity analysis as of September 30, 2021 and December 31, 2020 to an immediate and instantaneous uniform or "parallel" shift in the yield curve: Table 32 Percentage Change in MVE from Base Case Interest Rate Scenario (1) As of September 30, 2021 As of December 31, 2020 (1) +100 basis points 4.1 % 4.9 % -100 basis points (0.1) % (0.2) % Percentage Change in NES from Base Case Interest Rate Scenario As of September 30, 2021 As of December 31, 2020 (1) +100 basis points 7.5 % 3.9 % -100 basis points (0.1) % — % (1) The down 100 basis points shock scenario was replaced in 2020 with a proportional shock relative to 50% of the 3-month Treasury bill rate, with the approval of the Financial Risk Committee of the Board of Directors. The replacement down shock scenario was negative 2 basis point as of September 30, 2021 and negative 4 basis points as of December 31, 2020. As of September 30, 2021, Farmer Mac's effective duration gap was negative 1.3 months, compared to negative 1.6 months as of December 31, 2020. Farmer Mac updated its duration gap measure to funded assets, debt, and financial derivatives as of December 31, 2020. Interest rates within the yield curve steepened significantly during the first nine months of 2021 with the 2-year and 10-year U.S. Treasury Note yield-to-maturity increasing by approximately 16 basis points and 56 basis points, respectively, versus year-end 2020. This rate movement contributed to extending the duration of Farmer Mac's funded assets compared to its debt and financial derivatives, thereby narrowing Farmer Mac's duration gap. Financial Derivatives Transactions The economic effects of financial derivatives are included in Farmer Mac's MVE, NES, and duration gap analyses. Farmer Mac enters into the following types of financial derivative transactions principally to protect against risk from the effects of market price or interest rate movements on the value of funded financial assets, future cash flows, and debt issuance, and not for trading or speculative purposes: • "pay-fixed" interest rate swaps, in which Farmer Mac pays fixed rates of interest to, and receives floating rates of interest from, counterparties; • "receive-fixed" interest rate swaps, in which Farmer Mac receives fixed rates of interest from, and pays floating rates of interest to, counterparties; • "basis swaps," in which Farmer Mac pays floating rates of interest based on one index to, and receives floating rates of interest based on a different index from, counterparties; and • exchange-traded futures contracts involving U.S. Treasury securities. As of September 30, 2021, Farmer Mac had $15.8 billion combined notional amount of interest rate swaps, with terms ranging from less than one year to thirty years, of which $6.1 billion were pay-fixed interest rate swaps, $7.6 billion were receive-fixed interest rate swaps, and $2.1 billion were basis swaps. Farmer Mac enters into interest rate swaps to more closely match the cash flow and duration characteristics of its funded financial assets with those of its debt. For example, Farmer Mac transacts pay-fixed interest rate swaps and issues floating rate debt to effectively create fixed rate funding that approximately matches the duration of the corresponding fixed rate assets being funded. Farmer Mac 102 evaluates the overall cost of using interest rate swaps in conjunction with debt issuance as a funding alternative to duration-matched debt and enters into interest rate swaps to manage interest rate risks across the balance sheet. Certain financial derivatives are designated as fair value hedges of fixed rate assets classified as available for sale or liabilities to protect against fair value changes in the assets or liabilities related to a benchmark interest rate (e.g., LIBOR or Secured Overnight Financing Rate (“SOFR”)). Also, certain financial derivatives are designated as cash flow hedges to mitigate the volatility of future interest rate payments on floating rate debt. As discussed in Note 4 to the consolidated financial statements, all financial derivatives are recorded on the balance sheet at fair value as derivative assets or as derivative liabilities. Changes in the fair values of undesignated financial derivatives are reported in "Losses on financial derivatives" in the consolidated statements of operations. For financial derivatives designated in fair value hedge accounting relationships, changes in the fair values of the hedged items related to the risk being hedged are reported in "Net interest income" in the consolidated statements of operations. Interest accruals on derivatives designated in fair value hedge accounting relationships are also recorded in "Net interest income" in the consolidated statements of operations. For financial derivatives designated in cash flow hedge accounting relationships, the unrealized gain or loss on the derivative is recorded in other comprehensive income. Because the hedging instrument is an interest rate swap and the hedged forecasted transactions are future interest payments on floating rate debt, amounts recorded in accumulated other comprehensive income are reclassified to "Total interest expense" in conjunction with the recognition of interest expense on the debt. All of Farmer Mac's interest rate swap transactions are conducted under standard collateralized agreements that limit Farmer Mac's potential credit exposure to any counterparty. As of both September 30, 2021 and December 31, 2020, Farmer Mac had no uncollateralized net exposures. Re-funding and repricing risk Farmer Mac is subject to re-funding and repricing risk on any floating rate assets that are not funded to contractual maturity. Re-funding and repricing risk arises from potential changes in funding costs when Farmer Mac funds floating rate, or synthetic floating rate, assets with floating rate debt with shorter maturities. Changes in Farmer Mac's funding costs relative to the benchmark market index rate to which the assets are indexed can cause changes to net interest income when debt matures and is reissued at then current interest rates to continue funding those assets. In addition, many of Farmer Mac's floating rate assets may prepay before the contractual maturity date. Farmer Mac is subject to re-funding and repricing risk on a portion of its fixed rate assets as a result of its use of pay-fixed receive-floating interest rate swaps that effectively convert the required funding needed from fixed rate to floating rate. These fixed rate assets are then effectively synthetically floating rate assets that require floating rate funding. Farmer Mac can meet floating rate funding needs in several ways, including: • issuing short-term fixed rate discount notes with maturities that match the reset period of the assets; • issuing floating rate medium-term notes with maturities and reset frequencies that match the assets being funded; 103 • issuing non-maturity matched, floating rate medium-term notes with reset frequencies that match the assets being funded; or • issuing non-maturity matched, fixed rate discount notes or medium-term notes swapped to floating rate to match the interest rate reset dates of the assets. To meet certain floating rate funding needs, Farmer Mac frequently issues shorter-term floating-rate medium-term notes or fixed rate medium-term notes paired with a received-fixed interest rate swap because these funding alternatives generally provide a lower cost of funding while generating an effective interest rate match. As funding for these floating rate assets matures, Farmer Mac seeks to refinance the debt associated with these assets in a similar fashion to achieve an appropriate interest rate risk sensitivity match in the context of Farmer Mac's overall debt issuance and liquidity management strategies. However, if the funding cost of Farmer Mac’s discount notes or medium-term notes increased relative to the benchmark market index of the associated assets during the time between when these floating rate assets were first funded and when Farmer Mac refinanced the associated debt, Farmer Mac would be exposed to a commensurate reduction of net effective spread. Conversely, if the funding cost on Farmer Mac’s discount notes or medium-term notes decreased relative to the benchmark market index during that time, Farmer Mac would benefit from a commensurate increase to net effective spread. Farmer Mac's debt issuance strategy targets balancing liquidity risk and re-funding and repricing risk while maintaining an appropriate liability management profile that is consistent with Farmer Mac's risk tolerance. Farmer Mac regularly adjusts its funding strategies to mitigate the effects of interest rate variability and seeks to maintain an effective mixture of funding structures in the context of its overall liability management and liquidity management strategies. As of September 30, 2021, Farmer Mac held $5.5 billion of floating rate assets in its lines of business and its investment portfolio that reset based on floating rate market indices, such as LIBOR or SOFR. As of the same date, Farmer Mac also had $6.1 billion of interest rate swaps outstanding where Farmer Mac pays a fixed rate of interest and receives a floating rate of interest, primarily LIBOR. Discontinuation of LIBOR As described in "Risk Factors—Market Risk" in Part I, Item 1A of the 2020 Annual Report, Farmer Mac faces risks associated with the reform, replacement, or discontinuation of the LIBOR benchmark interest rate and the transition to an alternative benchmark interest rate. Farmer Mac is evaluating the potential effect on our business of the replacement of the LIBOR benchmark interest rate, including the possibility of replacement benchmark interest rates. As of September 30, 2021, Farmer Mac held $3.9 billion of floating rate assets in its lines of business and its investment portfolio, had issued $2.2 billion of floating rate debt, and had entered into $14.3 billion notional amount of interest rate swaps, each of which reset based on LIBOR. In addition, our Non-Cumulative Series C Preferred Stock currently pays a fixed rate of interest until July 17, 2024. It becomes redeemable at our option on July 18, 2024 and thereafter pays interest at a floating rate equal to three-month LIBOR plus 3.260%. The market transition away from LIBOR and towards alternative benchmark interest rate indices that may be developed is expected to be complicated and may require the development of term and credit adjustments to accommodate for differences between the benchmark interest rate indices. The transition 104 may also result in different financial performance for existing transactions, require different hedging strategies, or require renegotiation of existing transactions. As of September 30, 2021, we had $0.8 billion outstanding in medium-term notes based on SOFR, a potential alternative benchmark interest rate index. Liquidity and Capital Resources Farmer Mac's primary sources of funds to meet its liquidity and funding needs are the proceeds of its debt issuances, guarantee and commitment fees, net effective spread, loan repayments, and maturities of AgVantage securities. Farmer Mac regularly accesses the capital markets for funding, and Farmer Mac has maintained access to the capital markets at favorable interest rates throughout the first three quarters of 2021. Farmer Mac funds its purchases of eligible loan assets, USDA Securities, Farmer Mac Guaranteed Securities, and investment assets and finances its operations primarily by issuing debt obligations of various maturities in the public capital markets. As of September 30, 2021, Farmer Mac had outstanding discount notes of $2.4 billion, medium-term notes that mature within one year of $5.7 billion, and medium-term notes that mature after one year of $14.3 billion. Assuming continued access to the capital markets, Farmer Mac believes it has sufficient liquidity and capital resources to support its operations for the next 12 months and for the foreseeable future. Farmer Mac has a contingency funding plan to manage unanticipated disruptions in its access to the capital markets. Farmer Mac must maintain a minimum of 90 days of liquidity under the Liquidity and Investment Regulations prescribed for Farmer Mac by FCA. In accordance with the methodology for calculating available days of liquidity under those regulations, Farmer Mac maintained a monthly average of 279 days of liquidity during third quarter 2021 and had 266 days of liquidity as of September 30, 2021. Farmer Mac maintains cash, cash equivalents (including U.S. Treasury securities and other short-term money market instruments), and other investment securities that can be drawn upon for liquidity needs. Farmer Mac's current policies authorize liquidity investments in: • obligations of or fully guaranteed by the United States or a U.S. government agency; • obligations of or fully guaranteed by GSEs; • municipal securities; • international and multilateral development bank obligations; • money market instruments; • diversified investment funds; • asset-backed securities; • corporate debt securities; and • mortgage-backed securities. 105 The following table presents these assets as of September 30, 2021 and December 31, 2020: Table 33 As of September 30, 2021 As of December 31, 2020 (in thousands) Cash and cash equivalents $ 899,052 $ 1,033,941 Investment securities: Guaranteed by U.S. Government and its agencies 1,666,505 1,935,056 Guaranteed by GSEs 2,055,231 1,944,497 Asset-backed securities 19,500 19,171 Total $ 4,640,288 $ 4,932,665 The objective of the investment portfolio as of September 30, 2021 and December 31, 2020 was to provide a level of liquidity that mitigates enterprise risk, provides a reliable source of short-term and long-term liquidity, to prepare for the possibility of future volatility in the debt capital markets, and to support program asset growth. Capital Requirements . Farmer Mac is subject to the following statutory capital requirements – minimum, critical, and risk-based. Farmer Mac must comply with the higher of the minimum capital requirement and the risk-based capital requirement. As of September 30, 2021, Farmer Mac was in compliance with its statutory capital requirements and was classified as within "level 1" (the highest compliance level). In accordance with FCA's rule on capital planning, Farmer Mac's board of directors 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). That policy restricts Tier 1-eligible dividends and any discretionary bonus payments if Tier 1 capital falls below specified thresholds. As of September 30, 2021 and December 31, 2020, Farmer Mac's Tier 1 capital ratio was 15.1% and 14.1%, respectively. The increase in our Tier 1 capital ratio was due to that fact that capital growth, which reflects the issuance of the Series G Preferred Stock, outpaced the growth in risk-weighted assets during the first half of 2021. As of September 30, 2021, Farmer Mac was in compliance with its capital adequacy policy. Farmer Mac does not expect its compliance on an ongoing basis with FCA's rule on capital planning, including Farmer Mac's policy on Tier 1 capital, to materially affect Farmer Mac's operations or financial condition. For more information about the capital requirements applicable to Farmer Mac, its capital adequacy policy, and FCA's rule on capital planning, see "Business—Government Regulation of Farmer Mac—Capital Standard" in Farmer Mac's 2020 Annual Report. See Note 8 to the consolidated financial statements for more information about Farmer Mac's capital position. Other Matters None. 106 Supplemental Information The following tables present quarterly and annual information about new business volume, repayments, and outstanding business volume: Table 34 New Business Volume Farm & Ranch USDA Guarantees Rural Utilities Institutional Credit Loans LTSPCs USDA Securities Loans LTSPCs AgVantage Total (in thousands) For the quarter ended: September 30, 2021 $ 617,557 $ 313,116 $ 114,120 $ 63,897 $ 50,000 $ 1,368,912 $ 2,527,602 June 30, 2021 650,436 241,387 100,469 39,107 — 468,616 1,500,015 March 31, 2021 681,412 117,693 157,273 48,030 22,000 442,912 1,469,320 December 31, 2020 731,434 141,332 180,520 189,729 — 96,424 1,339,439 September 30, 2020 740,823 94,495 225,494 62,300 — 211,908 1,335,020 June 30, 2020 609,284 85,390 224,016 339,366 19,500 430,024 1,707,580 March 31, 2020 401,853 73,674 147,906 152,668 — 560,395 1,336,496 December 31, 2019 602,750 65,614 143,565 102,900 — 371,075 1,285,904 September 30, 2019 309,805 125,022 113,664 117,279 — 402,611 1,068,381 For the year ended: December 31, 2020 $ 2,483,394 $ 394,891 $ 777,936 $ 744,063 $ 19,500 $ 1,298,751 $ 5,718,535 December 31, 2019 1,363,863 339,172 432,787 871,377 — 2,258,550 5,265,749 107 Table 35 Repayments of Assets by Line of Business Farm & Ranch USDA Guarantees Rural Utilities Institutional Credit Loans Guaranteed Securities LTSPCs USDA Securities Loans LTSPCs AgVantage Total (in thousands) For the quarter ended: Scheduled $ 218,352 $ 1,726 $ 32,992 $ 32,436 $ 67,092 $ 9,204 $ 869,682 $ 1,231,484 Unscheduled 222,661 3,933 61,802 85,891 201 — — 374,488 September 30, 2021 $ 441,013 $ 5,659 $ 94,794 $ 118,327 $ 67,293 $ 9,204 $ 869,682 $ 1,605,972 Scheduled $ 128,126 $ 2,778 $ 39,950 $ 41,480 $ 37,991 $ 23,874 $ 476,220 $ 750,419 Unscheduled 224,072 3,417 66,680 119,145 1,652 — — 414,966 June 30, 2021 $ 352,198 $ 6,195 $ 106,630 $ 160,625 $ 39,643 $ 23,874 $ 476,220 $ 1,165,385 Scheduled $ 214,978 $ 4,362 $ 56,642 $ 48,137 $ 59,059 $ 21,092 $ 540,594 $ 944,864 Unscheduled 339,905 2,747 132,300 108,789 2,279 — — 586,020 March 31, 2021 $ 554,883 $ 7,109 $ 188,942 $ 156,926 $ 61,338 $ 21,092 $ 540,594 $ 1,530,884 Scheduled $ 175,613 $ 4,213 $ 26,895 $ 29,120 $ 37,062 $ 19,528 $ 676,567 $ 968,998 Unscheduled 231,342 2,242 95,264 99,811 1,610 — — 430,269 December 31, 2020 $ 406,955 $ 6,455 $ 122,159 $ 128,931 $ 38,672 $ 19,528 $ 676,567 $ 1,399,267 Scheduled $ 174,986 $ 2,524 $ 32,276 $ 29,654 $ 54,513 $ 14,100 $ 547,236 $ 855,289 Unscheduled 326,025 1,934 66,074 138,518 — — — 532,551 September 30, 2020 $ 501,011 $ 4,458 $ 98,350 $ 168,172 $ 54,513 $ 14,100 $ 547,236 $ 1,387,840 Scheduled $ 101,264 $ 3,043 $ 39,010 $ 37,879 $ 23,589 $ 25,132 $ 471,295 $ 701,212 Unscheduled 248,890 4,034 92,177 154,536 3,935 — — 503,572 June 30, 2020 $ 350,154 $ 7,077 $ 131,187 $ 192,415 $ 27,524 $ 25,132 $ 471,295 $ 1,204,784 Scheduled $ 128,768 $ 6,132 $ 50,393 $ 43,069 $ 34,235 $ 13,593 $ 304,540 $ 580,730 Unscheduled 191,260 3,888 60,442 78,806 — — — 334,396 March 31, 2020 $ 320,028 $ 10,020 $ 110,835 $ 121,875 $ 34,235 $ 13,593 $ 304,540 $ 915,126 Scheduled $ 57,488 $ 4,737 $ 39,878 $ 25,142 $ 10,317 $ 10,551 $ 656,095 $ 804,208 Unscheduled 105,671 3,247 74,121 66,011 34,063 — 13,000 296,113 December 31, 2019 $ 163,159 $ 7,984 $ 113,999 $ 91,153 $ 44,380 $ 10,551 $ 669,095 $ 1,100,321 Scheduled $ 97,421 $ 3,095 $ 22,713 $ 27,853 $ 31,656 $ 8,692 $ 441,575 $ 633,005 Unscheduled 129,676 2,663 76,883 39,442 — — 1,088 249,752 September 30, 2019 $ 227,097 $ 5,758 $ 99,596 $ 67,295 $ 31,656 $ 8,692 $ 442,663 $ 882,757 For the year ended: Scheduled $ 580,631 $ 15,912 $ 148,574 $ 139,722 $ 149,399 $ 72,353 $ 1,999,638 $ 3,106,229 Unscheduled 997,517 12,098 313,957 471,671 5,545 — — 1,800,788 December 31, 2020 $ 1,578,148 $ 28,010 $ 462,531 $ 611,393 $ 154,944 $ 72,353 $ 1,999,638 $ 4,907,017 Scheduled $ 307,761 $ 17,433 $ 195,424 $ 132,937 $ 80,416 $ 43,995 $ 2,181,446 $ 2,959,412 Unscheduled 367,867 11,107 260,465 195,295 58,511 — 19,675 912,920 December 31, 2019 $ 675,628 $ 28,540 $ 455,889 $ 328,232 $ 138,927 $ 43,995 $ 2,201,121 $ 3,872,332 108 Table 36 Lines of Business - Outstanding Business Volume Farm & Ranch USDA Guarantees Rural Utilities Institutional Credit Loans Guaranteed Securities LTSPCs USDA Securities Loans LTSPCs AgVantage Total (in thousands) As of: September 30, 2021 $ 6,777,749 $ 60,349 $ 2,607,261 $ 2,722,702 $ 2,243,172 $ 574,255 $ 8,133,303 $ 23,118,791 June 30, 2021 6,601,205 66,008 2,388,939 2,726,909 2,246,568 533,459 7,634,073 22,197,161 March 31, 2021 6,302,967 72,203 2,254,182 2,787,065 2,247,104 557,333 7,641,677 21,862,531 December 31, 2020 6,176,438 79,312 2,325,431 2,786,718 2,260,412 556,425 7,739,359 21,924,095 September 30, 2020 5,857,324 85,767 2,306,258 2,735,129 2,109,355 575,953 8,319,502 21,989,288 June 30, 2020 5,617,512 90,225 2,310,113 2,677,807 2,101,568 590,053 8,654,830 22,042,108 March 31, 2020 5,358,382 97,302 2,355,910 2,646,206 1,789,726 595,685 8,696,101 21,539,312 December 31, 2019 5,276,557 107,322 2,393,071 2,620,175 1,671,293 609,278 8,440,246 21,117,942 September 30, 2019 4,836,966 115,306 2,441,456 2,567,763 1,612,773 619,829 8,738,266 20,932,359 Table 37 On-Balance Sheet Outstanding Business Volume Fixed Rate 5- to 10-Year ARMs & Resets 1-Month to 3-Year ARMs Total Held in Portfolio (in thousands) As of: September 30, 2021 $ 12,921,572 $ 2,872,499 $ 3,818,550 $ 19,612,621 June 30, 2021 11,800,429 2,878,637 4,254,625 18,933,691 March 31, 2021 11,454,321 2,824,551 4,410,661 18,689,533 December 31, 2020 11,330,414 2,816,840 4,511,964 18,659,218 September 30, 2020 10,879,372 2,811,547 5,013,640 18,704,559 June 30, 2020 10,793,629 2,845,266 5,076,445 18,715,340 March 31, 2020 10,296,598 2,818,869 4,996,478 18,111,945 December 31, 2019 10,045,712 2,863,199 4,702,577 17,611,488 September 30, 2019 9,642,802 2,850,000 4,549,689 17,042,491 109 The following table presents the quarterly net effective spread (a non-GAAP measure) by segment: Table 38 Net Effective Spread by Line of Business Farm & Ranch USDA Guarantees Rural Utilities Institutional Credit Corporate Net Effective Spread Dollars Yield Dollars Yield Dollars Yield Dollars Yield Dollars Yield Dollars Yield (dollars in thousands) For the quarter ended: September 30, 2021 (1) $ 24,367 1.74 % $ 6,847 1.11 % $ 6,464 1.15 % $ 15,359 0.81 % $ 2,888 0.25 % $ 55,925 0.99 % June 30, 2021 23,978 1.82 % 6,982 1.12 % 6,615 1.18 % 16,131 0.85 % 2,845 0.24 % 56,551 1.01 % March 31, 2021 21,454 1.74 % 6,367 1.02 % 6,674 1.19 % 16,673 0.87 % 2,691 0.22 % 53,859 0.97 % December 31, 2020 20,313 1.75 % 6,786 1.10 % 7,322 1.35 % 17,401 0.85 % 2,700 0.22 % 54,522 0.98 % September 30, 2020 (1) 18,025 1.67 % 5,865 0.97 % 6,939 1.32 % 18,601 0.87 % 2,372 0.23 % 51,802 0.96 % June 30, 2020 16,733 1.71 % 4,689 0.81 % 5,516 1.15 % 18,782 0.86 % 749 0.08 % 46,469 0.89 % March 31, 2020 14,938 1.64 % 4,625 0.81 % 4,920 1.14 % 17,702 0.84 % 1,978 0.21 % 44,163 0.89 % December 31, 2019 16,374 1.90 % 4,363 0.78 % 4,871 1.17 % 18,008 0.85 % 2,375 0.27 % 45,991 0.95 % September 30, 2019 13,181 1.66 % 4,314 0.79 % 4,502 1.16 % 17,807 0.84 % 2,657 0.30 % 42,461 0.90 % (1) See Note 10 to the consolidated financial statements for a reconciliation of GAAP net interest income by line of business to net effective spread by line of business for the three months ended September 30, 2021 and 2020. 110 The following table presents quarterly core earnings (a non-GAAP measure) reconciled to net income attributable to common stockholders: Table 39 Core Earnings by Quarter End September 2021 June 2021 March 2021 December 2020 September 2020 June 2020 March 2020 December 2019 September 2019 (in thousands) Revenues: Net effective spread $ 55,925 $ 56,551 $ 53,859 $ 54,522 $ 51,802 $ 46,469 $ 44,163 $ 45,991 $ 42,461 Guarantee and commitment fees 4,322 4,334 4,240 4,652 4,659 4,943 4,896 5,432 5,208 Other 687 301 451 512 453 1,048 674 100 389 Total revenues 60,934 61,186 58,550 59,686 56,914 52,460 49,733 51,523 48,058 Credit related expense/(income): Provision for/(release of) losses 255 (983) (31) 2,973 1,200 51 3,831 2,851 623 REO operating expenses — — — — — — — — — Losses/(gains) on sale of REO — — — 22 — — (485) — — Total credit related expense/(income) 255 (983) (31) 2,995 1,200 51 3,346 2,851 623 Operating expenses: Compensation and employee benefits 10,027 9,779 11,795 9,497 8,791 8,087 10,127 6,732 7,654 General and administrative 6,330 6,349 6,336 6,274 5,044 5,295 5,363 5,773 5,253 Regulatory fees 750 750 750 750 725 725 725 725 688 Total operating expenses 17,107 16,878 18,881 16,521 14,560 14,107 16,215 13,230 13,595 Net earnings 43,572 45,291 39,700 40,170 41,154 38,302 30,172 35,442 33,840 Income tax expense 9,152 9,463 8,520 8,470 8,297 8,016 6,598 7,526 7,018 Preferred stock dividends 6,774 5,842 5,269 5,269 5,166 3,939 3,431 3,432 3,427 Core earnings $ 27,646 $ 29,986 $ 25,911 $ 26,431 $ 27,691 $ 26,347 $ 20,143 $ 24,484 $ 23,395 Reconciling items: (Losses)/gains on undesignated financial derivatives due to fair value changes $ (1,864) $ (3,721) $ 1,695 $ (1,758) $ (4,149) $ 8,700 $ (6,484) $ 4,469 $ (7,117) (Losses)/gains on hedging activities due to fair value changes (2,093) (2,097) (271) 3,827 (5,245) (2,676) (5,925) (220) (4,535) Unrealized gains/(losses) on trading assets 36 (61) (14) 223 (258) (20) 106 172 49 Net effects of amortization of premiums/discounts and deferred gains on assets consolidated at fair value 23 20 16 (77) 97 35 3 40 (7) Net effects of terminations or net settlements on financial derivatives (351) 109 1,165 1,583 233 720 (1,300) 1,339 232 Issuance costs on the retirement of preferred stock — — — — (1,667) — — — — Income tax effect related to reconciling items 892 1,208 (544) (798) 1,957 (1,419) 2,856 (1,218) 2,389 Net income attributable to common stockholders $ 24,289 $ 25,444 $ 27,958 $ 29,431 $ 18,659 $ 31,687 $ 9,399 $ 29,066 $ 14,406