FEDERAL AGRICULTURAL MORTGAGE CORP 10-K

agm-20211231 As filed with the Securities and Exchange Commission on February 28, 2022 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Form 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31 , 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____. Commission File Number 001-14951 FEDERAL AGRICULTURAL MORTGAGE CORPORATION (Exact name of registrant as specified in its charter) Federally chartered instrumentality of the United States 52-1578738 (State or other jurisdiction of incorporation or organization) (I.R.S. employer identification number) 1999 K Street, N.W. , 4th Floor, Washington, DC 20006 (Address of principal executive offices) (Zip code) (202) 872-7700 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading symbol Exchange on which registered Class A voting common stock AGM.A New York Stock Exchange Class C non-voting common stock AGM New York Stock Exchange 6.000% Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series C AGM.PRC New York Stock Exchange 5.700% Non-Cumulative Preferred Stock, Series D AGM.PRD New York Stock Exchange 5.750% Non-Cumulative Preferred Stock, Series E AGM.PRE New York Stock Exchange 5.250% Non-Cumulative Preferred Stock, Series F AGM.PRF New York Stock Exchange 4.875% Non-Cumulative Preferred Stock, Series G AGM.PRG New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: Class B voting common stock Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ The aggregate market value of the Class A voting common stock and Class C non-voting common stock held by non-affiliates of the registrant was $ 966,366,719 as of June 30, 2021, the last business day of the registrant's most recently completed second fiscal quarter, based upon the closing prices for the respective classes on June 30, 2021 reported by the New York Stock Exchange. For purposes of this information, the outstanding shares of Class A voting common stock and Class C non-voting common stock held by directors, executive officers, and significant stockholders of the registrant, as applicable, as of June 30, 2021 were deemed to be held by affiliates. The aggregate market value of the Class B voting common stock is not ascertainable due to the absence of publicly available quotations or prices for the Class B voting common stock as a result of the limited market for, and infrequency of trades in, Class B voting common stock and the fact that any such trades are privately negotiated transactions. As of February 7, 2022, the registrant had outstanding 1,030,780 shares of Class A voting common stock, 500,301 shares of Class B voting common stock, and 9,235,578 shares of Class C non-voting common stock. DOCUMENTS INCORPORATED BY REFERENCE Certain information contained in the registrant's Proxy Statement for the 2021 Annual Meeting of Stockholders is incorporated herein by reference in Part III of this Annual Report on Form 10-K. The Proxy Statement will be filed with the Securities and Exchange Commission within 120 days after the end of the registrant's fiscal year to which this report relates. Auditor Firm ID: 238 Auditor Name: PricewaterhouseCoopers LLP Auditor Location: Washington DC, DC, USA 1 Table of Contents Forward-Looking Statements 3 Summary of Risk Factors 4 PART I 7 Item 1. Business 7 General 7 Farmer Mac's Lines of Business 9 Competition 18 Capital and Corporate Governance 19 Human Capital 21 Available Information 23 Funding of Guarantee and LTSPC Obligations 23 Financing 24 Debt Issuance 24 Equity Issuance 25 Farmer Mac's Authority to Borrow from the U.S. Treasury 28 Government Regulation of Farmer Mac 29 General 29 Office of Secondary Market Oversight 29 Capital Standards 30 Liquidity Requirements 32 Item 1A. Risk Factors 34 Item 1B. Unresolved Staff Comments 49 Item 2. Properties 49 Item 3. Legal Proceedings 49 Item 4. Mine Safety Disclosures 49 PART II 50 Item 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases for Equity Securities 50 Item 6 . [Reserved] 52 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 53 Overview 53 Critical Accounting Estimates 57 Use of Non-GAAP Measures 58 Results of Operations 60 Outlook 79 Balance Sheet Review 86 Risk Management 86 Liquidity and Capital Resources 104 Other Matters 107 Supplemental Information 108 Item 7A . Quantitative and Qualitative Disclosures About Market Risk 112 Item 8 . Financial Statements 113 Management's Report on Internal Controls Over Financial Reporting 113 2 Report of Independent Registered Public Accounting Firm 114 Consolidated Balance Sheets 117 Consolidated Statements of Operations 118 Consolidated Statements of Comprehensive Income 119 Consolidated Statements of Equity 120 Consolidated Statements of Cash Flows 121 Notes to Consolidated Financial Statements 123 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 188 Item 9A . Controls and Procedures 188 Item 9B. Other Information 189 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 189 PART III 189 Item 10. Directors, Executive Officers, and Corporate Governance 190 Item 11. Executive Compensation 190 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 190 Item 13. Certain Relationships and Related Transactions and Director Independence 190 PART IV 190 Item 14. Principal Accountant Fees and Services 190 Item 15. Exhibits and Financial Statement Schedules 190 Item 16. Form 10-K Summary 193 Signatures 194 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; 3 • 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. 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 I, Item 1A of this 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 public response to the ongoing COVID-19 pandemic, including the possibility of government actions to mitigate the pandemic and its effects, and any social or economic disruption that may be caused by any new COVID-19 variants or any further outbreaks; • 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, climate change, 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. 4 SUMMARY OF RISK FACTORS The following summarizes some of the key risks and uncertainties that could materially adversely affect our business, operating results, financial condition, operations, liquidity and capital levels. The following summary does not contain all of the information that may be important to you, and you should review and consider carefully the risks and uncertainties listed in this summary together with the more complete discussion of each risk factor set forth under the heading "Risk Factors" in Item 1A of this report, along with other information in this report and our other filings with the Securities and Exchange Commission. The forward-looking statements discussed above are qualified by these risk factors. • The continuing effects of the COVID-19 pandemic are uncertain and may heighten the risk factors described in this report. • Factors outside of Farmer Mac's or borrowers' control may impair borrowers' profitability and ability to repay their loans in Farmer Mac's portfolio. • Climate change and the occurrence of weather-related events or other natural or environmental disasters could have a material adverse effect on Farmer Mac’s business, operating results, or financial condition. • Concentrations in Farmer Mac’s loan or investments portfolios, or to one or more borrowers or counterparties, may increase Farmer Mac’s exposure to credit risk. • Farmer Mac guaranteed securities and purchase commitments expose Farmer Mac to significant contingent liabilities, and Farmer Mac's ability to fulfill its obligations under its guarantees and purchase commitments may be limited. • Farmer Mac is exposed to counterparty risk on both its cleared and non-cleared swaps transactions. • External factors may affect the demand for Farmer Mac's secondary market, the price or marketability of Farmer Mac's products, or Farmer Mac's ability to offer its products and services. • An inability to access the equity and debt capital markets could have a material adverse effect on Farmer Mac's business, operating results, financial condition, liquidity, and capital levels. • The loss of business from key business counterparties or customers, including AgVantage counterparties, could weaken Farmer Mac’s business and decrease its revenues and profits. • Farmer Mac's efforts to balance fulfilling its mission with providing a return to its stockholders may result in business transactions that involve lower returns or higher risk. • A few stockholders who own large amounts of Farmer Mac voting common stock may seek to influence Farmer Mac's business, strategy, or board composition, and the interests of these stockholders may differ from the interests of Farmer Mac or other holders of Farmer Mac's common stock. • The inadequacy or failure of Farmer Mac's operational systems, cybersecurity program, internal controls or processes, or infrastructure, or those of third parties, could have a material adverse effect on Farmer Mac's business, operating results, or financial condition. • Farmer Mac’s business depends, in part, on effective and reliable loan servicing, and Farmer Mac’s internal loan servicing function and reliance on third-party servicers could expose Farmer Mac to operational risks. • Any significant deficiency, failure, interruption, or breach in Farmer Mac's or our service providers’ technology and information systems, infrastructure, or cybersecurity program, including the occurrence of successful cyber-attacks, could result in a loss of business, damage to Farmer Mac's reputation, the disclosure or misuse of confidential or proprietary information, or increased costs or liability to Farmer Mac. 5 • Failure by Farmer Mac's third-party loan servicers, information systems providers, and other service providers to protect confidential information from unauthorized access and dissemination could result in liability for Farmer Mac or damage Farmer Mac's reputation. • If Farmer Mac's management of risk associated with its loan assets and investment securities based on model assumptions and output is not effective, its business, operating results, financial condition, or capital levels could be materially adversely affected. • Farmer Mac's efforts to expand product offerings and services to its customers exposes Farmer Mac to operational risk. • Farmer Mac is exposed to interest rate risk. • Changes in interest rates relative to Farmer Mac's management of interest rate risk through derivatives may cause volatility in financial results and capital levels. • The reform, replacement, or discontinuation of the LIBOR benchmark interest rate could adversely affect Farmer Mac's business, operating results, or financial condition. • Incorrect estimates and assumptions by management in preparing financial statements, and changes in accounting standards or in applying accounting policies or in the value or composition of Farmer Mac’s investment securities could adversely affect Farmer Mac's business, operating results, reported assets and liabilities, financial condition, reputation, or capital levels. • The trading price for Farmer Mac's Class C non-voting common stock may be volatile due to market influences, trading volume, the effects of equity awards for Farmer Mac's officers, directors, and employees, or sales of significant amounts of the stock by large holders. • Farmer Mac and many of its business partners are subject to comprehensive government regulation, and changes to the laws and regulations to which Farmer Mac or its business partners are subject could adversely affect Farmer Mac's business, operating results, reputation, or financial condition. • Farmer Mac’s capital requirements may change, and failure to meet those requirements could result in supervisory measures or the inability of Farmer Mac to declare dividends. • Farmer Mac is a government-sponsored enterprise (GSE) that may be materially and adversely affected by legislative or political developments. • Farmer Mac's ability to attract and retain motivated and qualified employees is critical to the success of its business. 6 PART I Item 1. Business GENERAL Farmer Mac is a stockholder-owned, federally chartered corporation that combines private capital and public sponsorship to serve a public purpose. Congress has charged Farmer Mac with the mission of providing a secondary market for a variety of loans made to borrowers in rural America. A secondary market is an economic arrangement in which the owners of financial assets, such as the originators of loans, may sell all or part of those assets or pay a fee to offset some or all of the inherent risks of holding the assets. Farmer Mac's secondary market activities include: • purchasing eligible loans directly from lenders (including participation interests, syndicated notes, revolving and non-revolving credit facilities, and unfunded commitments to make advances on loans); • purchasing securities that are issued by lenders and guaranteed by Farmer Mac and that are secured by eligible loans (Farmer Mac refers to these securities as "AgVantage," a registered trademark of Farmer Mac); • issuing and guaranteeing securities that represent interests in, or obligations secured by, pools of eligible loans (together with AgVantage, Farmer Mac refers to these securities as "Farmer Mac Guaranteed Securities"); • servicing (including as master servicer) eligible loans purchased or securitized by Farmer Mac; and • providing long-term standby purchase commitments ("LTSPCs") for eligible loans. Farmer Mac Guaranteed Securities may be retained by the seller of the underlying loans, retained by Farmer Mac, or sold to third-party investors. Farmer Mac was established under federal legislation first enacted in 1988 and amended most recently in 2018 – Title VIII of the Farm Credit Act of 1971 (12 U.S.C. §§ 2279aa et seq.), which is referred to as Farmer Mac's charter. Farmer Mac is a government-sponsored enterprise ("GSE") by virtue of the status conferred by its charter. The charter provides that Farmer Mac has the power to establish, acquire, and maintain affiliates under applicable state law to carry out any activities that Farmer Mac otherwise would perform directly. Farmer Mac established its two existing subsidiaries – Farmer Mac II LLC and Farmer Mac Mortgage Securities Corporation – under that power. Farmer Mac is an institution of the Farm Credit System ("FCS"), which is composed of the banks, associations, and related entities, including Farmer Mac and its subsidiaries, regulated by the Farm Credit Administration ("FCA"), an independent agency in the executive branch of the United States government. Although Farmer Mac is an institution of the FCS, it is not liable for any debt or obligation of any other institution of the FCS. None of FCA, the FCS, or any other individual institution of the FCS is liable for any debt or obligation of Farmer Mac or its subsidiaries. The debts and obligations of Farmer Mac and its subsidiaries are not guaranteed by the full faith and credit of the United States of America. Farmer Mac's two primary sources of revenue are: • interest income earned on assets held on balance sheet, net of related funding costs and interest payments and receipts on financial derivatives; and • guarantee and commitment fees received for outstanding guaranteed securities and LTSPCs. 7 Farmer Mac funds its purchases of eligible loans and securities primarily by issuing debt obligations of various maturities in the public capital markets. Farmer Mac also uses the proceeds of debt issuance to fund liquidity investments that must comply with policies adopted by Farmer Mac's board of directors and with FCA regulations, which establish limitations on asset class, dollar amount, issuer concentration, and credit quality. Those regulations can be found at 12 C.F.R. §§ 652.1-652.45 ("Liquidity and Investment Regulations"). Farmer Mac's regular debt issuance supports its access to the capital markets, and Farmer Mac's liquidity investments provide an alternative source of funds should market conditions become unfavorable. As of December 31, 2021, Farmer Mac had $2.2 billion of discount notes and $20.6 billion of medium-term notes outstanding. For more information about Farmer Mac's eligible loans, securities, and liquidity investments, as well as its financial performance and sources of capital and liquidity, see "Management's Discussion and Analysis of Financial Condition and Results of Operations." For more information about Farmer Mac's debt issuance, see "Business—Financing—Debt Issuance." Secondary Market Farmer Mac's activities are intended to provide lenders with an efficient and competitive secondary market that enhances these lenders' ability to offer competitively-priced financing solutions to borrowers. This secondary market is designed to increase the availability of credit at competitive interest rates to America's rural communities and agricultural sectors, as well as to provide borrowers with the benefits of capital markets pricing and product innovation. The secondary market provided by Farmer Mac functions as a bridge between the public capital markets and the U.S. agricultural and rural credit markets by attracting additional capital sources for financing rural America and agricultural borrowers. Farmer Mac's purchases of loans and securities and its sale of guaranteed securities to investors increase lenders' liquidity and lending capacity and provide a stable source of funding for lenders that extend credit to the agricultural and rural credit markets. Farmer Mac's issuance of LTSPCs for loans held by lenders and its issuance of guaranteed securities to lenders in exchange for the related securitized loans could result in lower regulatory capital requirements and reduced borrower or commodity concentration exposure for many lenders, thereby expanding their lending capacity. Through providing efficient and competitive financing solutions, Farmer Mac has the potential to increase lending flexibility for rural credit markets, which may result in lower interest rates paid on loans made by lenders to rural and agricultural borrowers. Farmer Mac markets a mix of products to lenders who may be in need of capital, liquidity, portfolio diversification, and/or access to a wide variety of loan products, including those with long-term fixed rates. As part of its outreach strategy, Farmer Mac engages with current and prospective lenders to identify how their use of Farmer Mac's secondary market could further support their origination efforts and drive efficient capital deployment to agriculture communities and rural America. Farmer Mac also provides wholesale funding for institutional investors in agricultural assets that qualify as eligible collateral under Farmer Mac's charter. For these potential issuers, Farmer Mac directs its outreach efforts through its business relationships within the agricultural community and through outreach to institutions whose profile may benefit from wholesale funding. Farmer Mac seeks to maximize the use of technology to support these business development efforts. 8 FARMER MAC'S LINES OF BUSINESS Farmer Mac engages in a variety of secondary market activities across its two lines of business, Agricultural Finance and Rural Infrastructure Finance. Within those two lines of business are four segments: Corporate AgFinance, Farm & Ranch, Rural Utilities, and Renewable Energy, as shown in the table below: Agricultural Finance Rural Infrastructure Finance Farm & Ranch Corporate AgFinance Rural Utilities Renewable Energy Interest-earning assets Loans X X X X Loans held in trusts X AgVantage Securities X X X Farmer Mac Guaranteed Securities X USDA Securities X Products and services that earn fee income LTSPCs X X Farmer Mac Guaranteed Securities X X Unfunded Commitments X X X X Farmer Mac Guaranteed Securities 1 X Securitized loan servicing X 1 Structured securitization transactions The loans (and interests in those loans) eligible for Farmer Mac's secondary market activities in each of Farmer Mac's lines of business include: • For Farmer Mac's Agricultural Finance line of business, mortgage loans secured by first liens on agricultural real estate, including part-time farms and rural housing loans, as well as agricultural and rural development loans guaranteed by the United States Department of Agriculture ("USDA"); and • For Farmer Mac's Rural Infrastructure Finance line of business, loans by lenders organized as cooperatives to finance electrification and telecommunications systems and renewable energy providers or projects in rural areas. As of December 31, 2021, the total outstanding business volume in Farmer Mac's two lines of business (Agricultural Finance and Rural Infrastructure Finance) was $23.6 billion. The following table presents the outstanding balances under Farmer Mac's two lines of business as of December 31, 2021 and December 31, 2020: 9 Lines of Business - Outstanding Business Volume On or Off Balance Sheet As of December 31, 2021 As of December 31, 2020 (in thousands) Agricultural Finance: Farm & Ranch: Loans On-balance sheet $ 4,775,070 $ 3,979,854 Loans held in consolidated trusts: Beneficial interests owned by third-party investors On-balance sheet 948,623 1,287,045 IO-FMGS On-balance sheet 12,297 — USDA Securities On-balance sheet 2,445,806 2,487,420 AgVantage Securities On-balance sheet 4,725,000 4,425,000 LTSPCs and unfunded commitments Off-balance sheet 2,587,154 2,314,965 Farmer Mac Guaranteed Securities Off-balance sheet 578,358 378,610 Loans serviced for others Off-balance sheet 22,331 — Total Farm & Ranch $ 16,094,639 $ 14,872,894 Corporate AgFinance: Loans On-balance sheet $ 1,123,300 $ 909,539 AgVantage Securities On-balance sheet 367,464 744,110 Unfunded Loan Commitments Off-balance sheet 47,070 10,466 Total Corporate AgFinance $ 1,537,834 $ 1,664,115 Total Agricultural Finance $ 17,632,473 $ 16,537,009 Rural Infrastructure Finance: Rural Utilities: Loans On-balance sheet $ 2,302,373 $ 2,187,377 AgVantage Securities On-balance sheet 3,033,262 2,565,837 LTSPCs and Unfunded Loan Commitments Off-balance sheet 556,837 556,425 Farmer Mac Guaranteed Securities Off-balance sheet 2,755 4,412 Total Rural Utilities $ 5,895,227 $ 5,314,051 Renewable Energy: Loans On-balance sheet $ 86,763 $ 73,035 Unfunded Loan Commitments Off-balance sheet — — Total Renewable Energy $ 86,763 $ 73,035 Total Rural Infrastructure Finance $ 5,981,990 $ 5,387,086 Total $ 23,614,463 $ 21,924,095 Agricultural Finance Farmer Mac provides a secondary market for eligible loans in Farmer Mac's Agricultural Finance line of business by (1) purchasing and retaining eligible loans and securities, (2) guaranteeing the payment of principal and interest on securities that represent interests in, or obligations secured by, pools of eligible loans, (3) servicing (including as master servicer) eligible loans purchased or securitized by Farmer Mac, and (4) issuing LTSPCs for designated eligible loans. Farmer Mac is compensated for these activities through net interest income on loans and securities held on balance sheet, guarantee fees earned on securities issued to third parties, servicing fees on securitized loans, and commitment fees earned on loans in LTSPCs and on unfunded loan commitments. 10 Loan Eligibility To be eligible for the Agricultural Finance line of business, a loan must either: • be an agricultural mortgage loan (referred to as "Agricultural Finance mortgage loans") that is ◦ secured by a fee simple mortgage or a leasehold mortgage with status as a first lien on agricultural real estate (including part-time farms and rural housing) located within the United States; and ◦ an obligation of a citizen or national of the United States, an alien lawfully admitted for permanent residence in the United States, or a private corporation or partnership that is majority-owned by U.S. citizens, nationals, or legal resident aliens that, in each case, has training or farming experience that is sufficient to ensure a reasonable likelihood that the loan will be repaid according to its terms; or • be the guaranteed portion of a loan guaranteed by the USDA under the Consolidated Farm and Rural Development Act (7 U.S.C. § 1921 et seq.) (referred to as "USDA Securities"). Farmer Mac's charter authorizes a maximum loan size (adjusted annually for inflation) for an eligible Agricultural Finance mortgage loan secured by more than 2,000 acres of agricultural real estate. That maximum loan size was $14.1 million as of December 31, 2021. The charter does not prescribe a maximum loan size or a total borrower exposure for an eligible Agricultural Finance mortgage loan secured by 2,000 acres or less of agricultural real estate. However, an internal policy approved by Farmer Mac's board of directors limits the cumulative direct credit exposure to any one borrower or group of related borrowers on loans secured by 2,000 acres or less of agricultural real estate to 10% of Farmer Mac's Tier 1 capital ($120.1 million as of December 31, 2021). For Agricultural Finance mortgage loans, eligible agricultural real estate consists of one or more parcels of land, which may be improved by permanently affixed buildings or other structures, that (i) is used for the production of one or more agricultural commodities or products and (ii) either consists of a minimum of five acres or generates minimum annual receipts of $5,000. As required by Farmer Mac's charter, Farmer Mac has established underwriting, security appraisal, and repayment standards for eligible loans that consider the nature, risk profile, and other differences between different categories of eligible loans. The charter prescribes that the following minimum standards must be applied to all Agricultural Finance mortgage loans: • provide that no loan with a loan-to-value ratio ("LTV") more than 80% may be eligible; • require each borrower to demonstrate sufficient cash flow to adequately service the loan; • require sufficient documentation standards; • protect the integrity of the appraisal process for any loan; and • confirm that the borrower is or will be actively engaged in agricultural production. Underwriting and Collateral Standards - Farm & Ranch Farmer Mac experiences direct credit exposure to borrowers on Agricultural Finance mortgage loans in its Farm & Ranch reportable operating segment (referred to as "Farm & Ranch loans") through its loan purchases, unfunded commitments, LTSPCs, and Farmer Mac Guaranteed Securities that represent interests in, or obligations secured by, pools of eligible Farm & Ranch loans but that are not AgVantage securities ("Farm & Ranch Guaranteed Securities"). Farmer Mac applies credit underwriting standards and 11 methodologies to help assess exposures to Farm & Ranch loans, which may include collateral valuation, financial metrics, and other appropriate borrower financial and credit information. Farm & Ranch loans typically are required to meet specific underwriting criteria established by Farmer Mac or demonstrate compensating strengths in one or more other underwriting criteria. Farmer Mac relies on the combined expertise of experienced internal agricultural credit underwriters and loan servicers, along with external agricultural loan servicing and collateral valuation contractors, to perform the necessary underwriting, servicing, and collateral valuation functions on Farm & Ranch loans. USDA Securities are exempted from the credit underwriting, collateral valuation, documentation, and other standards that other loans must meet to be eligible for the secondary market provided by Farmer Mac and are exempted from any diversification and internal credit enhancement that may be required of pools of other eligible loans. Farmer Mac purchases nearly all of its USDA Securities through Farmer Mac II LLC, a subsidiary of Farmer Mac that operates substantially all of the business related to Farmer Mac's USDA Securities. Underwriting and Collateral Standards - Corporate AgFinance Farmer Mac experiences direct credit exposure to borrowers on Agricultural Finance mortgage loans in Farmer Mac’s Corporate AgFinance reportable operating segment (referred to as “Corporate AgFinance loans”) through its loan purchases and unfunded commitments. Farmer Mac applies credit underwriting standards and methodologies to help assess exposures to Corporate AgFinance loans, which may include cash flow, leverage, and liquidity assessment, financial metrics analysis, collateral valuation, and other appropriate borrower financial and credit information. Corporate AgFinance loans tend to be larger and more complex farming operations than Farm & Ranch loans (generally more than $10 million) and typically are loans made to agribusinesses focused on agriculture production, food and fiber processing, and other supply chain production. Thus, Corporate AgFinance loans often have a different credit risk profile than Farm & Ranch loans. Farmer Mac has implemented methodologies and parameters to help assess credit risk and has established specific underwriting criteria for Corporate AgFinance loans based on the sector, borrower construct, and transaction complexity. Due to the larger loan sizes and different credit risk profiles, Farmer Mac thoroughly analyzes each prospective Corporate AgFinance loan, including assessing the borrower's leverage, cash flows, liquidity, and revenue and margin trends, as well as evaluating the borrower's suppliers, customers, market share, and competition. Any underlying weaknesses are assessed and analyzed in conjunction with any compensating strengths. Corporate AgFinance loans also typically require ongoing monitoring of reporting requirements and financial and non-financial covenants. Farmer Mac relies on the experience of internal underwriters with the expertise to analyze large, complex farming operations and agribusiness loans, along with collateral valuation contractors, and legal counsel to perform the necessary diligence to assess the overall credit risk and loan structures of these transactions. Lenders Farmer Mac approves lenders into its network of Farm & Ranch loan sellers based on an assessment of the lender's credit profile, which may include factors such as the institution's credit rating, origination history, or financial profile. Most lenders that participate in Farmer Mac's secondary market for Farm & Ranch loans meet prescribed criteria that Farmer Mac establishes for loan-selling counterparties, which typically include the requirement to: 12 • own a requisite amount of Farmer Mac common stock according to a schedule prescribed for the size and type of institution; • have, in the judgment of Farmer Mac, the ability and experience to make or purchase and sell Farm & Ranch loans and service those loans in accordance with Farmer Mac's requirements either through the lender's own staff or through contractors and originators, as well as have appropriate internal controls, policies, and procedures; • maintain a minimum amount of net liquidity or appropriate credit enhancements; and • enter into a Seller/Servicer Agreement, which requires compliance with the terms of Farmer Mac's Seller/Servicer Guide, including providing representations and warranties about the eligibility of the loans and accuracy of loan data provided to Farmer Mac. Any lender authorized by the USDA to obtain a USDA guarantee on a loan may participate in Farmer Mac's secondary market for USDA Securities. Farmer Mac purchases Corporate AgFinance loans and unfunded commitments from a diverse set of lenders that support financing of the agriculture sector. Lenders may be existing Farm & Ranch lenders that have larger, more complex borrowers in their territories, as well as larger financial and non-bank institutions, such as national and regional banks, insurance companies, Farm Credit System institutions, and other non-traditional lending organizations, that structure and originate transactions for larger, more complex farming operations and agribusinesses. Farmer Mac evaluates each lender who originates Corporate AgFinance loans to assess the experience and capabilities of the lender’s ability to originate, structure, distribute, and monitor Corporate AgFinance transactions. In many instances, Farmer Mac will purchase loans and unfunded commitments from lenders that structure and arrange large, syndicated transactions involving numerous lenders that are necessary to support the larger transaction loan size. In these cases, Farmer Mac typically assesses each arranger’s capabilities and experience in arranging syndicated loans. Because Corporate AgFinance loans are typically offered to Farmer Mac without or with few representations and warranties, Farmer Mac places a greater emphasis on underwriting and legal documentation due diligence in connection with its purchase of these loans to mitigate risks associated with the transaction, including loan documentation, borrower eligibility, and loan data. Loan Servicing During 2021, Farmer Mac began servicing a sizeable portion of the Agricultural Finance mortgage loan and USDA Securities portfolios through a strategic acquisition of loan servicing rights along with experienced servicing personnel and an operational servicing platform. Farmer Mac also continues to contract with other institutions to undertake most of the servicing responsibilities for the remaining portion of its Agricultural Finance mortgage loans in accordance with Farmer Mac's specified servicing requirements or in accordance with the servicing standards established by the servicing institution if the institution's standards are acceptable to Farmer Mac. For these loans, the servicer may or may not be the same entity as the lender that sold the loans to Farmer Mac. For Farm & Ranch loans for which the servicer is not the originating lender, the originating lender often retains some servicing responsibility, particularly with direct borrower contact, which is referred to as "field servicing." Field servicers may enter into contracts with Farmer Mac's servicers that specify their field servicing responsibilities. 13 For Farmer Mac's USDA Securities, the lender on each USDA-guaranteed loan is required by regulation to retain the unguaranteed portion of the guaranteed loan, to service the entire underlying guaranteed loan (including the USDA-guaranteed portion of that loan), and to remain mortgagee and/or secured party of record, if applicable. The USDA-guaranteed portion and the unguaranteed portion of the loan are to be secured by the same collateral with equal lien priority. The USDA-guaranteed portion of a loan cannot be paid later than, or in any way be subordinated to, the related unguaranteed portion. Other Products - Agricultural Finance AgVantage Securities Under the AgVantage securities product line, Farmer Mac guarantees and purchases securities issued by lenders and other financial institutions (including financial funds and real estate investment funds) that are secured by pools of eligible loans. Typically, Farmer Mac retains AgVantage securities in its portfolio. Most of the AgVantage securities in Farmer Mac's Agricultural Finance line of business are securities issued by agricultural lenders that are secured by pools of Farm & Ranch loans. The AgVantage securities in the Agricultural Finance line of business also include securities issued by other financial institutions (including financial funds and institutional real estate investors) secured by mortgage loans that generally have different credit profiles, structural characteristics, and loan terms than typical Farm & Ranch loans. The loans serving as collateral for these AgVantage securities require a more comprehensive underwriting that more closely approximates Farmer Mac's underwriting for Corporate AgFinance loans. Farmer Mac has direct credit exposure to the general credit of the issuers of AgVantage securities and assumes the ultimate credit risk of an issuer default on the AgVantage securities. Before approving an institution as an issuer in an AgVantage transaction, Farmer Mac assesses the issuer's creditworthiness as well as the credit quality and performance of the issuer's loan portfolio and loan underwriting standards. Farmer Mac continues to monitor the counterparty risk assessment on an ongoing basis after the AgVantage security is issued. In addition to being a general obligation of the issuer, all AgVantage securities must be secured by eligible loans or eligible securities guaranteed by Farmer Mac in an amount at least equal to the outstanding principal amount of the issuer's AgVantage securities. As a result, Farmer Mac has indirect credit exposure to the loans or guaranteed securities that are pledged to secure the AgVantage securities, which comprise collateral for Farmer Mac in the event of a default by the issuer. Loans pledged under AgVantage securities are serviced by the issuers of the securities (or their affiliated servicing institutions) in accordance with these institutions' servicing procedures. Farmer Mac reviews these servicing procedures before purchasing AgVantage securities from the issuer. In AgVantage transactions, the issuer is generally required to remove from the pool of pledged collateral any loan that becomes and remains delinquent in the payment of principal or interest and to replace the delinquent loan with another eligible loan that is current in payment or to pay down the AgVantage securities to maintain the minimum required collateralization level. For AgVantage securities secured by loans eligible for Farmer Mac's Agricultural Finance line of business, Farmer Mac currently requires the general obligation to be over-collateralized, either by more eligible loans or any of the following types of assets: • cash; • securities issued by the U.S. Treasury or guaranteed by an agency or instrumentality of the United States; 14 • other highly-rated securities; or • other instruments approved by Farmer Mac. The required collateralization level for the AgVantage securities secured by Agricultural Finance mortgage loans currently ranges from 103% to 125%. The required collateralization level is determined based on credit factors related to the issuer and the credit profile of the loans serving as collateral, 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 unless mutually agreed by Farmer Mac and the counterparty. For AgVantage securities that are secured by eligible Agricultural Finance mortgage loans, Farmer Mac requires that the loans meet the minimum standards set forth in the charter for those types of loans with a maximum limit of $75.0 million in cumulative exposure to any one borrower or related borrowers from a single AgVantage issuer. Guarantees and LTSPCs Farmer Mac offers two credit enhancement alternatives to direct loan purchases for Farm & Ranch loans that allow approved lenders the ability to retain the cash flow benefits of their loans and increase their liquidity and lending capacity: (1) LTSPCs and (2) Farm & Ranch Guaranteed Securities. In LTSPCs and Farm & Ranch Guaranteed Securities, the lender effectively transfers the credit risk on their eligible loans because, through Farmer Mac's commitment to purchase the loan (in the case of LTSPCs) or Farmer Mac's guarantee (in the case of Farm & Ranch Guaranteed Securities), Farmer Mac assumes the ultimate credit risk of borrower defaults on the related loans. An LTSPC permits the lender to retain loans in its portfolio until such time, if ever, as the lender elects to deliver some or all of the loans covered by the LTSPC to Farmer Mac for purchase. Loans subject to an LTSPC must meet Farmer Mac's standards for eligible loans at the commencement of the LTSPC when Farmer Mac assumes the credit risk on the loans and are serviced by the holders of those loans in accordance with those lenders' servicing procedures, which Farmer Mac reviews before entering into those transactions. As consideration for its assumption of the credit risk on loans covered by an LTSPC, Farmer Mac receives commitment fees payable monthly in arrears. Some LTSPCs contain risk sharing arrangements for pools of loans that provide for the counterparty to absorb up to a specified amount (typically between one and five percent of the original principal balance of the loan pool) of any losses incurred on the loans in the pool. At a lender's request, Farmer Mac purchases loans subject to an LTSPC at: • par if the loans become delinquent for either 90 days or 120 days (depending on the agreement) or are in material non-monetary default, with accrued and unpaid interest on the defaulted loans payable out of any future loan payments or liquidation proceeds; or • fair value or in exchange for cash or Farm & Ranch Guaranteed Securities (if the loans are not delinquent), in accordance with the applicable agreement. In Farm & Ranch Guaranteed Securities transactions, Farmer Mac guarantees securities representing interests in eligible Farm & Ranch loans held by a trust or other entity. Farmer Mac guarantees the timely payment of principal and interest on the securities in the event of a payment shortfall due to default and either retains these securities or arranges for their sale to third parties. As consideration for its assumption of credit risk on the assets underlying the Farm & Ranch Guaranteed Securities, Farmer Mac receives 15 guarantee fees based on the outstanding principal balance of the securities it guarantees. Some Farm & Ranch Guaranteed Securities transactions include a smaller, subordinate tranche of securities issued to third parties that are not guaranteed by Farmer Mac, which helps to offset Farmer Mac's credit risk on these transactions. Farmer Mac is obligated under its guarantee on the securities to make timely payments to investors of interest and principal (including balloon payments), regardless of whether Farmer Mac or the related trust has actually received those scheduled payments. Farmer Mac's guarantee fees typically are collected out of installment payments made on the underlying loans until those loans have been repaid, purchased out of the trust, or otherwise liquidated (generally as a result of default). The aggregate amount of guarantee fees received on Farm & Ranch Guaranteed Securities depends on the amount of those securities outstanding and on the applicable guarantee fee rate, which Farmer Mac's charter caps at 50 basis points (0.50%) per year. From time to time, Farmer Mac issues and guarantees securities backed by USDA Securities that it has purchased and also guarantees securities issued by Farmer Mac II LLC backed by USDA Securities that it has purchased. Farmer Mac II LLC does not guarantee any USDA Securities it holds or any Farmer Mac Guaranteed USDA Securities issued by Farmer Mac or Farmer Mac II LLC. Rural Infrastructure Finance Farmer Mac's charter authorizes the purchase of, and guarantee of securities backed by, loans for electric (including renewable electric energy) or telecommunications facilities by lenders organized as cooperatives to borrowers that have received or are eligible to receive loans under the Rural Electrification Act of 1936 ("REA"). The REA is administered by the Rural Utilities Service ("RUS"), an agency of the USDA. Farmer Mac refers to eligible loans made to an electric distribution facility, an electric generation and transmission facility, or a telecommunications facility as "Rural Utilities loans" and refers to eligible loans made to renewable electric energy facilities as "Renewable Energy loans." Farmer Mac's Rural Infrastructure Finance line of business encompasses purchases of Rural Utilities loans and Renewable Energy loans and guarantees of securities backed by those loans, as well as LTSPCs for pools of eligible Rural Utilities loans. The vast majority of Farmer Mac's business to date under the Rural Infrastructure Finance line of business has involved Rural Utilities loans made to electric facilities (primarily electric distribution cooperatives and electric generation and transmission cooperatives). During 2021, Farmer Mac purchased $132.2 million of loans and loan commitments to telecommunications companies that provide wireless, cable, fiber transport, and broadband services to rural America as part of its strategic initiative to provide further support for the telecommunications industry. Also during 2021, Farmer Mac purchased $31.2 million of Renewable Energy loans as part of its strategic initiative to support rural renewable energy projects. Underwriting and Collateral Standards Farmer Mac's charter does not specify minimum underwriting criteria for eligible Rural Utilities or Renewable Energy loans. To manage Farmer Mac's credit risk, to mitigate the risk of loss from borrower defaults, and to provide guidance for the management, administration, and conduct of underwriting to participants in the Rural Infrastructure Finance line of business, Farmer Mac has adopted credit underwriting standards that vary by loan product and by loan type. These standards are based on industry 16 practices for similar Rural Utilities and Renewable Energy loans and are designed to assess the creditworthiness of the borrower, as well as the risk to Farmer Mac. For Rural Utilities loans, Farmer Mac reviews lenders' credit submissions and analyzes borrowers' audited financial statements and financial and operating reports to confirm that loans meet Farmer Mac's underwriting standards for Rural Utilities loans. It is customary in loans to electric distribution cooperatives and electric generation and transmission cooperatives for the lender or lender group to take a security interest in substantially all of the borrower's assets. When Farmer Mac purchases a Rural Utilities loan with a pledge of all assets and a lender also has a lien on all assets, Farmer Mac verifies that a lien accommodation will result in either a shared first lien or a first lien in favor of Farmer Mac. When debt indentures are used, Farmer Mac determines if available collateral is adequate to support the loan program and Farmer Mac's investment. Farmer Mac also purchases unsecured Rural Utilities loans (primarily electric generation and transmission loans) that meet Farmer Mac's underwriting standards for unsecured Rural Utilities loans. For a Renewable Energy loan, Farmer Mac has direct credit exposure to the related standalone renewable energy project. These projects are typically financed on a non-recourse or limited recourse basis and underwritten on a projection basis with significant reliance placed on assumptions used in each project’s analysis. Farmer Mac has implemented methodologies and parameters to assess credit risk and has established specific underwriting criteria based on the project and transaction construct and complexity. Farmer Mac thoroughly analyzes each prospective Renewable Energy loan. Farmer Mac performs quantitative assessments typically focused on projected debt service requirements, term and amortization review, interest rate sensitivity, and collateral analysis. Farmer Mac also performs qualitative assessments typically focused on the project sponsor's credentials and experience, off-take (cash flow) considerations, and concentration and other market considerations. Farmer Mac also typically undertakes a review of the project contracts and agreements for each Renewable Energy loan. Renewable Energy loans are typically secured by a first lien on the borrower's project assets, an assignment of the project contracts and agreements, a land or leasehold interest, and in certain cases, a pledge of the equity interests in the borrower entity. Farmer Mac's enforcement rights in any collateral securing a Renewable Energy loan may be subject to tax equity interests in the borrower's renewable energy project. Lenders and Loan Servicing Farmer Mac's charter requires loans in Farmer Mac's Rural Infrastructure Finance line of business to have been originated by a lender organized as a cooperative. Farmer Mac does not directly service the Rural Utilities or Renewable Energy loans held in its portfolio. Typically, these loans are serviced by the lender or other organization designated by Farmer Mac that has experience in servicing loans to utilities and renewable energy providers and in the context of project finance, as applicable. Other Products - Rural Infrastructure Finance AgVantage Securities Farmer Mac's portfolio of AgVantage securities in its Rural Infrastructure Finance line of business includes securities issued by cooperative lenders that are secured by pools of Rural Utilities loans. For these AgVantage securities, Farmer Mac requires: 17 • the counterparty issuing the general obligation to have a credit rating from a nationally-recognized statistical rating organization ("NRSRO") that is at least investment grade, or be of comparable creditworthiness as determined through Farmer Mac's analysis; and • the collateralization (consisting of current, performing loans) to be maintained at the contractually prescribed level, in an amount at least equal to the outstanding principal amount of the security. Although Farmer Mac has only indirect credit exposure on the Rural Utilities loans pledged to secure AgVantage securities, the same underwriting standards that apply to loans made to Rural Utilities borrowers on which Farmer Mac assumes direct credit exposure also apply to loans made to Rural Utilities borrowers that secure the AgVantage securities. Farmer Mac's charter does not prescribe a maximum loan size or a total borrower exposure for an eligible Rural Utilities loan, but Farmer Mac's current limit for AgVantage transactions is $75.0 million for cumulative loan exposure to any one borrower or related borrowers (with the amount of any direct exposure to a borrower not counting towards the $75.0 million limit). COMPETITION Farmer Mac is the only federally-chartered corporation established to provide a secondary market for agricultural mortgage loans, rural infrastructure loans, and USDA Securities, but faces competition from other entities that purchase, retain, securitize, or provide financing for the types of assets eligible for Farmer Mac's secondary market activities. These entities include commercial and investment banks, insurance companies, other FCS institutions, financial funds, and certain government programs. Farmer Mac also competes indirectly with originators of eligible loans that would prefer to retain the loans they originate rather than sell them into the secondary market. Farmer Mac is able to compete to acquire eligible loans due to the variety of products it offers and its ability to offer competitive funding structures and pricing to its customers. This enables Farmer Mac to provide flexible financing options and products designed to meet the varied needs of lending institutions related to capital requirements, liquidity, credit risk, and management of sector and geographic concentrations and borrower exposure limits. The relative competitiveness of Farmer Mac's loan rates and Farmer Mac's ability to develop business with lending institutions are affected by many factors, including: • the overall supply of capital available to agricultural and rural infrastructure borrowers; • the types and variety of products offered by Farmer Mac's competitors to meet the needs of Farmer Mac's customer base; • changes in the levels of available capital and liquidity of lending institutions; • the existence of alternative sources of funding and credit enhancement for lending institutions; • the rate of growth in the market for eligible loans; and • demand for Farmer Mac's products. Because Farmer Mac's charter limits Farmer Mac's business to secondary-market activities, Farmer Mac's competitive position is affected by the willingness of originators to offer eligible loans for sale in the secondary market or to utilize Farmer Mac for funding syndicated or participated loans. The charter's limits on loan size for some Agricultural Finance mortgage loans, as well as the types of loans that are eligible for Farmer Mac's lines of business, also affect Farmer Mac's competitive position. For more information on government regulation of Farmer Mac, see "Business—Government Regulation of Farmer Mac." 18 Farmer Mac's ability to obtain competitive funding in the debt markets is essential to its ability to maintain its relative position with its customers. As a result, competition for debt investors with other debt-issuing institutions, such as the FCS, Federal Home Loan Banks, Fannie Mae, Freddie Mac, and highly-rated financial institutions, can affect the price and volume at which Farmer Mac issues debt and therefore its ability to offer savings to customers in the form of competitive products. CAPITAL AND CORPORATE GOVERNANCE Farmer Mac's charter prescribes the company's basic capital and corporate governance structure, as described below. The charter authorizes Farmer Mac to issue two classes of voting common stock, each of which elects one-third of Farmer Mac's 15-person board of directors. The charter also authorizes Farmer Mac to issue non-voting common stock. • Presidential appointments . Five members of Farmer Mac's 15-member board of directors are individuals who meet the qualifications specified in the charter and are appointed by the President of the United States with the advice and consent of the United States Senate (one of whom is designated as the chair of the board of directors). These appointed directors serve at the pleasure of the President of the United States with no set term. • Class A voting common stock . The charter restricts ownership of Farmer Mac's Class A voting common stock to banks, insurance companies, and other financial institutions or similar entities that are not institutions of the FCS. The charter also provides that five members of Farmer Mac's 15-member board of directors are elected by a plurality of the votes of the Class A stockholders each year. The charter limits the amount of Class A voting common stock that any one holder may own to no more than 33% of the outstanding shares of Class A voting common stock. Farmer Mac is not aware of any regulation applicable to non-FCS financial institutions that requires a minimum investment in Farmer Mac's Class A voting common stock or that prescribes a maximum investment amount lower than the 33% limit set forth in the charter. Farmer Mac's Class A voting common stock is listed on the New York Stock Exchange under the symbol AGM.A. • Class B voting common stock . The charter restricts ownership of Farmer Mac's Class B voting common stock to FCS institutions and also provides that five members of Farmer Mac's 15-member board of directors are elected by a plurality of the votes of the Class B stockholders each year. The charter contains no restrictions on the maximum number or percentage of outstanding shares of Class B voting common stock that any one holder may own, and Farmer Mac is not aware of any regulation applicable to FCS institutions that requires a minimum investment in its Class B voting common stock or that prescribes a maximum amount. Farmer Mac's Class B voting common stock, which has a limited market and trades infrequently, is not listed or quoted on any exchange or other quotation system, and Farmer Mac is not aware of any publicly available quotations or prices for this class of common stock. • Class C non-voting common stock . The charter does not impose any ownership restrictions on Farmer Mac's Class C non-voting common stock, and shares of this class are freely transferable. Farmer Mac uses Class C non-voting common stock for awards of equity-based compensation to officers, directors, and selected employees as part of the company's compensation programs. Holders of the Class C non-voting common stock do not vote on the election of directors or any other matter. Farmer Mac's Class C non-voting common stock is listed on the New York Stock Exchange under the symbol AGM. 19 The dividend and liquidation rights of all three classes of Farmer Mac's common stock are the same. Dividends may be paid on Farmer Mac's common stock only when, as, and if declared by Farmer Mac's board of directors in its sole discretion, subject to compliance with applicable capital requirements and the payment of dividends on any outstanding preferred stock issued by Farmer Mac. Upon liquidation, dissolution, or winding up of the business of Farmer Mac, after payment and provision for payment of outstanding debt of Farmer Mac, the holders of shares of Farmer Mac's currently outstanding 6.000% Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series C ("Series C Preferred Stock"), 5.700% Non-Cumulative Preferred Stock, Series D ("Series D Preferred Stock"), 5.750% Non-Cumulative Preferred Stock, Series E ("Series E Preferred Stock"), 5.250% Non-Cumulative Preferred Stock, Series F ("Series F Preferred Stock"), 4.875% Non-Cumulative Preferred Stock, Series G ("Series G Preferred Stock"), and any other preferred stock then outstanding, would be paid at par value out of assets available for distribution, plus all declared and unpaid dividends, before the holders of shares of common stock received any payment. See also "Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities" for more information about Farmer Mac's common stock, and "Business—Financing—Equity Issuance" for more information about Farmer Mac's common stock and preferred stock. Unlike some other GSEs such as other FCS institutions and the Federal Home Loan Banks, Farmer Mac is not structured as a cooperative owned exclusively by member institutions and established to provide services exclusively to its members. Rather, Farmer Mac, as a publicly-traded corporation, has a broader base of stockholders, including those who do not directly participate in the secondary market provided by Farmer Mac. Farmer Mac therefore seeks to fulfill its mission of serving the financing needs of rural America in a way that is consistent with providing a return on the investment of its stockholders. Farmer Mac generally requires financial institutions to own a requisite amount of Farmer Mac common stock, based on the size and type of institution, to sell Agricultural Finance mortgage loans to Farmer Mac. As a result of this requirement, coupled with the ability of holders of Class A and Class B voting common stock to elect two-thirds of Farmer Mac's board of directors, Farmer Mac regularly conducts business with "related parties," including institutions affiliated with members of Farmer Mac's board of directors and institutions that own large amounts of Farmer Mac's voting common stock. Farmer Mac has adopted a Code of Business Conduct and Ethics and related corporate policies that govern any conflicts of interest that may arise in these transactions. Farmer Mac also requires that any transactions with related parties be conducted in the ordinary course of business, with terms and conditions comparable to those available to any other counterparty not related to Farmer Mac. For more information about related party transactions, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Related Party Transactions" and Note 3 to the consolidated financial statements. 20 Capital Farmer Mac's charter establishes three capital standards for Farmer Mac – minimum capital, critical capital, and risk-based capital. Farmer Mac must comply with the higher of the minimum capital requirement and the risk-based capital requirement. Also, in accordance with the applicable FCA regulation on capital planning, Farmer Mac's board of directors oversees a policy that requires Farmer Mac to maintain a sufficient level of Tier 1 capital and restricts dividends and bonus payments if Farmer Mac's Tier 1 capital falls below specified thresholds. For a discussion of Farmer Mac's capital requirements and its actual capital levels, as well as FCA's role in the establishment and monitoring of those requirements and levels, see "Business—Government Regulation of Farmer Mac—Capital Standards," "Management's Discussion and Analysis of Financial Condition and Results of Operations—Balance Sheet Review—Equity," and "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Capital Requirements." Regulatory Oversight Farmer Mac's charter assigns to FCA, acting through the separate Office of Secondary Market Oversight ("OSMO") within FCA, the responsibility for the examination of Farmer Mac and the general supervision of the safe and sound performance of the powers, functions, and duties vested in Farmer Mac by the charter. The charter also authorizes FCA, acting through OSMO, to apply its general enforcement powers to Farmer Mac. Farmer Mac's charter requires an annual examination of the financial transactions of Farmer Mac and authorizes FCA to assess Farmer Mac for the cost of FCA's regulatory activities, including the cost of any examination. Farmer Mac is also required to file quarterly reports of condition with OSMO. As a publicly-traded corporation, Farmer Mac also must comply with the periodic reporting requirements of the SEC. For a more detailed discussion of Farmer Mac's regulatory and governmental relationships, see "Business—Government Regulation of Farmer Mac." HUMAN CAPITAL As of December 31, 2021, Farmer Mac employed 153 people, with 42 new employees hired during the year resulting in a net increase of 32 employees (26%) compared to year-end 2020. Farmer Mac primarily employs full-time employees to meet its business needs as it grows and evolves while supplementing human capital needs with part-time employees (including interns) and independent contractors and consultants as needed. Farmer Mac's employees are located throughout the United States, often near many of its primary customers. As of December 31, 2021, 94 full-time employees were located in the Washington, D.C. area, 27 full-time employees were located in the Johnston, Iowa area, and 32 full-time employees worked on a fully remote basis (without regard to the COVID-19 pandemic) in other parts of the United States. As a financial services organization, Farmer Mac must attract and retain a highly skilled workforce in an often competitive employment environment. We use traditional methods to attract and retain talent, such as competitive salaries and benefits, including: a generous group health plan with all premiums paid by Farmer Mac; an employer-funded 401(k) plan; group term life insurance and long-term disability insurance; and other voluntary benefits of interest to employees, such as pre-tax dependent care reimbursement, partially-funded health savings accounts, and access to group rates for legal services insurance, additional life insurance, and pet insurance. We also believe that our mission to serve agricultural and rural communities, as well as philanthropic activities we undertake in support of our mission, provide Farmer Mac an advantage in our efforts to attract and retain talent. During 2021, Farmer 21 Mac contributed to Feeding America, Foodbank of Iowa, Common Good City Farm, DC and the Tribal Agriculture Fellowship (TAF) established by the Native American Agriculture Fund’s (NAAF). We also recognize that employee engagement is a key component in Farmer Mac's human capital retention strategy. Therefore, we seek to create an inclusive work culture that is diverse and collaborative, with a focus on long-term succession planning and professional development. Farmer Mac approaches learning through three primary pillars: compliance, cybersecurity, and professional development. We have largely relied on eLearning platforms, self-paced study, and some externally facilitated training to support all three pillars. Farmer Mac also offers an education assistance plan for employees with at least one year of full-time employment in an amount up to $50,000.00. We also use flexible work structures and technology to create incentives to join and remain with Farmer Mac. Farmer Mac experienced a 7.3% turnover rate in 2021, which was down from 9.6% in 2020. COVID-19 Pandemic We continued to execute our business in a mostly remote capacity during 2021 as a result of the COVID-19 pandemic. The pandemic has compelled many companies, including Farmer Mac, to focus on how people work, as evidenced by our regular engagement with two “Future of Work” committees – one targeted at the employee level and the second including executive leaders. The committees are grounded in three fundamental principles: community, collaboration, and communication. In 2021, these committees contemplated the company’s vaccine policy, phased approach to resuming in-person work interactions, employee surveys, and general sentiments about the future of work. To ensure continuity in regular communications, we have continued to reinforce our employees' access to secure digital meeting platforms, and our senior executive team has continued to lead regular meetings of all employees to share pertinent information on Farmer Mac's business and operations, and to provide a forum for discussing current events. We also used this engagement opportunity to gauge the health and well-being of employees and to solicit their feedback, to which we responded with initiatives to address work/life balance, including added flexibility in working hours and paid time off. We do not currently have an established timeline for a full-scale return of our employees to Farmer Mac's offices. We have adopted a phased approach to resuming in-person work interactions, with the current phase involving the ability for employees to work in one of Farmer Mac’s office locations on a voluntary basis in accordance with published health safety protocols. In the meantime, we remain confident in our employees' capacity to remain engaged and productive on a remote basis and are impressed with the resilience of our teams as we enter the third year of the COVID-19 pandemic. Code of Business Conduct and Ethics Farmer Mac's onboarding program includes a mandatory compliance session for every new hire and contract consultant within their first week. All employees also take annual training on and recertification of our Code of Business Conduct and Ethics, which encompasses the following four core principles: (1) promoting a safe workplace and a respectful and inclusive culture, (2) conducting business lawfully, fairly, and objectively, (3) communicating responsibly and protecting information, and (4) conducting business diligently and being a good corporate citizen. Farmer Mac's Code of Business Conduct and Ethics was refreshed in May 2021 while maintaining this principles-based approach. Our Code of Business Conduct and Ethics is available at www.farmermac.com and is not incorporated by reference into this report. 22 Diversity, Equity, and Inclusion During 2021, we continued to strengthen our focus on diversity, equity, and inclusion ("DEI") efforts within Farmer Mac's workforce. Farmer Mac's DEI council was formed in late 2020 at the direction of Farmer Mac's board of directors and senior executives. The DEI council consists of 12 rotating Farmer Mac employees with the assistance of outside DEI consultants. During 2021, the DEI council established a three-year DEI strategic plan and identified five key strategic priorities for Farmer Mac during the plan period: (1) establish a strong DEI foundation across the organization; (2) strengthen talent acquisition, selection, and retention processes; (3) enhance a culture of inclusion; (4) provide services to Farmer Mac's rural customers in a fair and equitable manner; and (5) ensure accountability by tracking, monitoring, and communicating progress with transparency. The council also identified several specific action items for execution under the strategic plan, including: development of a comprehensive DEI communication and education program for employees; identification of data and development of metrics to enhance diverse and inclusive hiring, retention, and promotion practices at Farmer Mac; analysis of diversity within Farmer Mac's loan portfolio and vendors; and establishment of key performance indicators to align Farmer Mac's DEI priorities with Farmer Mac's business plan objectives. The DEI council continues to work closely with members of Farmer Mac’s senior management to execute the DEI strategic plan and reports its progress regularly to Farmer Mac's board of directors. AVAILABLE INFORMATION Farmer Mac makes available free of charge, through the "Investors" section of its internet website at www.farmermac.com, copies of materials it files with, or furnishes to, the SEC, including its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements, and any amendments to those filings, as soon as reasonably practicable after electronically filing those materials with, or furnishing those materials to, the SEC. All references to www.farmermac.com in this report are inactive textual references only. The information contained on Farmer Mac's website is not incorporated by reference into this report. FUNDING OF GUARANTEE AND LTSPC OBLIGATIONS The main sources of funding for the payment of Farmer Mac's obligations under its guarantees and LTSPCs are the fees Farmer Mac receives for its guarantees and commitments, net effective spread, proceeds of debt issuances, loan repayments, and maturities of AgVantage securities. Farmer Mac has traditionally satisfied its obligations under LTSPCs and its guarantees by purchasing defaulted loans out of the LTSPCs or from related securitization trusts under the terms of the respective agreements governing the LTSPC or guaranteed securities. Farmer Mac typically recovers a significant portion of the value of defaulted loans purchased either through borrower payments, loan payoffs, payments by third parties, or foreclosure and sale of the property securing the loans. Net credit losses/(gains) arising from Farmer Mac's guarantees and commitments include charge-offs/(recoveries) against its allowance for losses, gains and losses on the sale of real estate acquired through foreclosure (known as "real estate owned" or "REO"), and fair value adjustments of REOs held. Farmer Mac's charter requires Farmer Mac to maintain in its accounts a portion of the guarantee fees it receives from its guarantee activities as a reserve against losses. As of December 31, 2021, this reserve against losses arising from Farmer Mac's guarantee activities was $110.5 million. Farmer Mac calculates the amount of this statutorily required reserve against losses arising from its guarantee activities based on the credit risk component of guarantee fees received on all securities it guarantees, including AgVantage 23 securities. This amount does not represent expected credit losses and does not directly relate to either the allowance for loan losses or the reserve for losses in Farmer Mac's consolidated balance sheets. Rather, this is the amount of capital that must be exhausted before Farmer Mac may issue obligations to the U.S. Treasury against the $1.5 billion that Farmer Mac is statutorily authorized to borrow from the U.S. Treasury to fulfill its guarantee obligations. That borrowing authority is not intended to be a routine funding source and has never been used. For a more detailed discussion of Farmer Mac's borrowing authority from the U.S. Treasury, see "Business—Farmer Mac's Authority to Borrow from the U.S. Treasury." Farmer Mac's total outstanding guarantees and LTSPCs exceed the total of: (1) the amount held as an allowance for losses, (2) the amount maintained as a reserve against losses arising from guarantee activities, and (3) the amount Farmer Mac may borrow from the U.S. Treasury. However, Farmer Mac does not expect its future payment obligations under its guarantees and LTSPCs to exceed amounts available to satisfy those obligations, which includes access to the underlying collateral in the event of default. For information about Farmer Mac's allowance for losses, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk – Loans and Guarantees" and Note 2(h), Note 8, and Note 12 to the consolidated financial statements. FINANCING Debt Issuance Farmer Mac's charter authorizes Farmer Mac to issue debt obligations to purchase eligible loans and securities, USDA Securities, and to maintain reasonable amounts of liquid investments to maintain an adequate supply of liquidity. Farmer Mac funds its purchases of eligible program assets and liquidity investment assets primarily by issuing debt obligations of various maturities in the public capital markets. Farmer Mac also issues debt obligations to obtain funds to finance its obligations under guarantees and LTSPCs. Farmer Mac's debt obligations include discount notes and medium-term notes, including callable medium-term notes, all of which are unsecured general obligations of Farmer Mac. Discount notes have original maturities of 1 year or less. Medium-term notes generally have maturities of 0.5 years to 25.0 years. The interest and principal on Farmer Mac's debt obligations are not guaranteed by, and do not constitute debts or obligations of, FCA, the United States, or any agency or instrumentality of the United States other than Farmer Mac. Farmer Mac is an institution of the FCS but is not liable for any debt or obligation of any other institution of the FCS. Likewise, neither the FCS nor any other individual institution of the FCS is liable for any debt or obligation of Farmer Mac. Income to the purchaser of a Farmer Mac discount note or medium-term note is not exempt under federal law from federal, state, or local taxation. Farmer Mac's discount notes and medium-term notes are not currently rated by an NRSRO. Farmer Mac invests the proceeds of its debt issuances in eligible program asset purchases, Farmer Mac Guaranteed Securities, and liquidity investment assets in accordance with policies established by its board of directors that comply with FCA's Liquidity and Investment Regulations, which establish limitations on asset class, dollar amount, issuer concentration, and credit quality. Farmer Mac's regular debt issuance supports its access to the capital markets, and Farmer Mac's liquidity investment assets provide an alternative source of funds should market conditions be unfavorable. 24 For more information about the Liquidity and Investment Regulations, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources." For more information about Farmer Mac's outstanding investments and indebtedness, see Note 4 and Note 7 to the consolidated financial statements. Equity Issuance Farmer Mac's charter authorizes Farmer Mac to issue voting common stock, non-voting common stock, and non-voting preferred stock. Farmer Mac may obtain additional capital from future issuances of common stock and preferred stock. Common Stock Only banks, other financial entities, insurance companies, and institutions of the FCS may hold voting common stock. No holder of Class A voting common stock may directly or indirectly be a beneficial owner of more than 33% of the outstanding shares of Class A voting common stock. There are no restrictions on the maximum number or percentage of outstanding shares of Class B voting common stock that may be held by an eligible stockholder. No ownership restrictions apply to Class C non-voting common stock, and those securities are freely transferable. The dividend rights of all three classes of Farmer Mac's common stock are the same, and dividends may be paid on common stock only when, as, and if declared by Farmer Mac's board of directors in its sole discretion, subject to compliance with applicable capital requirements and the payment of dividends on outstanding preferred stock. Upon liquidation, dissolution, or winding up of the business of Farmer Mac, after payment and provision for payment of outstanding debt of Farmer Mac, the holders of shares of preferred stock would be paid at par value out of assets available for distribution, plus all declared and unpaid dividends, before the holders of shares of common stock received any payment. As of December 31, 2021, the following shares of Farmer Mac common stock were outstanding: • 1,030,780 shares of Class A voting common stock; • 500,301 shares of Class B voting common stock; and • 9,235,205 shares of Class C non-voting common stock. During first quarter 2020, Farmer Mac repurchased approximately 4,000 shares of Class C non-voting common stock at a cost of approximately $0.2 million under a share repurchase program that Farmer Mac's board of directors approved in 2015 and modified in 2019. Shortly after these repurchases were completed, Farmer Mac indefinitely suspended its share repurchase program in an effort to preserve capital and liquidity in view of market volatility and uncertainty caused by the COVID-19 pandemic. In March 2021, Farmer Mac's board of directors reinstated the share repurchase program on its previous terms (with a remaining authorization of up to $9.8 million in stock repurchases) and extended the expiration date of the program to March 2023. As of December 31, 2021, Farmer Mac had repurchased approximately 673,000 shares of Class C non-voting common stock at a cost of approximately $19.8 million under the share repurchase program since 2015. 25 The following table presents the dividends declared on Farmer Mac's common stock during and after 2021: Date Dividend Declared Per Share Amount For Holders Of Record As Of Date Paid February 23, 2021 $0.88 March 16, 2021 March 31, 2021 June 1, 2021 $0.88 June 15, 2021 June 30, 2021 August 11, 2021 $0.88 September 15, 2021 September 30, 2021 November 10, 2021 $0.88 December 15, 2021 December 31, 2021 February 24, 2022 $0.95 March 16, 2022 * * The dividend declared on February 24, 2022 is scheduled to be paid on March 31, 2022. Farmer Mac's ability to declare and pay common stock dividends could be restricted if it were to fail to comply with applicable capital requirements. See Note 9 to the consolidated financial statements and "Business—Government Regulation of Farmer Mac—Capital Standards." Preferred Stock No ownership restrictions apply to any preferred stock issued by Farmer Mac, and those securities are freely transferable. As of December 31, 2021, the following shares of Farmer Mac preferred stock were outstanding: • 3,000,000 shares of Series C Preferred Stock, all of which were issued in June 2014; • 4,000,000 shares of Series D Preferred Stock, all of which were issued in May 2019; • 3,180,000 shares of Series E Preferred Stock, all of which were issued in May 2020; • 4,800,000 shares of Series F Preferred Stock, all of which were issued in August 2020; and • 5,000,000 shares of Series G Preferred Stock, all of which were issued in May 2021. The Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock, Series F Preferred Stock, and Series G Preferred Stock, (collectively, "Outstanding Preferred Stock") each has a par value of $25.00 per share and an initial liquidation preference of $25.00 per share. Since each of their respective issuances, Farmer Mac has not issued any more shares of any series of Outstanding Preferred Stock. Each series of Outstanding Preferred Stock ranks senior to Farmer Mac's outstanding Class A voting common stock, Class B voting common stock, Class C non-voting common stock, and any other common stock of Farmer Mac issues in the future. The Series D Preferred Stock, Series E Preferred Stock, Series F Preferred Stock, and Series G Preferred Stock pay an annual dividend rate fixed at 5.700%, 5.750%, 5.250%, and 4.875%, respectively, for the life of the securities. The Series C Preferred Stock pays an annual dividend rate of 6.000% from the date of issuance to and including the quarterly payment date on July 17, 2024 and thereafter at a floating rate equal to three-month LIBOR plus 3.260%. Dividends on all series of Outstanding Preferred Stock are non-cumulative, so if the board of directors has not declared a dividend before the applicable dividend payment date for any dividend period, the dividend will not be paid or accumulate, and Farmer Mac will not be obligated to pay dividends for that dividend period, whether or not dividends on any series of Outstanding Preferred Stock are declared for any future dividend period. Farmer Mac may pay dividends on the Outstanding Preferred Stock without paying dividends on any class or series of stock Farmer Mac may issue in the future that ranks junior to the Outstanding Preferred Stock. 26 The Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock, Series F Preferred Stock, and Series G Preferred Stock rank equally with each other and will rank equally with any other class or series of stock Farmer Mac may issue in the future of equal priority as to dividends and upon liquidation. Farmer Mac has the right, but not the obligation, to redeem some or all of the issued and outstanding shares of Series C Preferred Stock on and any time after July 18, 2024, the Series D Preferred Stock on and after July 17, 2024, the Series E Preferred Stock on and after July 17, 2025, the Series F Preferred Stock on and after October 17, 2025, and the Series G Preferred Stock on and any time after July 17, 2026, all at a price equal to the then-applicable liquidation preference. Any redemption date for the Series D, Series E, Series F, or Series G Preferred Stock must be a scheduled quarterly dividend payment date. The Outstanding Preferred Stock is considered Tier 1 capital for Farmer Mac. For more information on Farmer Mac's capital requirements, see "Business—Government Regulation of Farmer Mac—Capital Standards." The following table presents the dividends declared and paid on Series C Preferred Stock during and after 2021: Date Dividend Declared Per Share Amount For Period Beginning For Period Ending Date Paid February 23, 2021 $0.3750 January 18, 2021 April 17, 2021 April 17, 2021 June 1, 2021 $0.3750 April 18, 2021 July 17, 2021 July 17, 2021 August 11, 2021 $0.3750 July 18, 2021 October 17, 2021 October 17, 2021 November 10, 2021 $0.3750 October 18, 2021 January 17, 2022 January 17, 2022 February 24, 2022 $0.3750 January 18, 2022 April 17, 2022 * * The dividend declared on February 24, 2022 is scheduled to be paid on April 17, 2022. The following table presents the dividends declared and paid on Series D Preferred Stock during and after 2021: Date Dividend Declared Per Share Amount For Period Beginning For Period Ending Date Paid February 23, 2021 $0.35625 January 18, 2021 April 17, 2021 April 17, 2021 June 1, 2021 $0.35625 April 18, 2021 July 17, 2021 July 17, 2021 August 11, 2021 $0.35625 July 18, 2021 October 17, 2021 October 17, 2021 November 10, 2021 $0.35625 October 18, 2021 January 17, 2022 January 17, 2022 February 24, 2022 $0.35625 January 18, 2022 April 17, 2022 * * The dividend declared on February 24, 2022 is scheduled to be paid on April 17, 2022. The following table presents the dividends declared and paid on Series E Preferred Stock during and after 2021: Date Dividend Declared Per Share Amount For Period Beginning For Period Ending Date Paid February 23, 2021 $0.359375 January 18, 2021 April 17, 2021 April 17, 2021 June 1, 2021 $0.359375 April 18, 2021 July 17, 2021 July 17, 2021 August 11, 2021 $0.359375 July 18, 2021 October 17, 2021 October 17, 2021 November 10, 2021 $0.359375 October 18, 2021 January 17, 2022 January 17, 2022 February 24, 2022 $0.359375 January 18, 2022 April 17, 2022 * * The dividend declared on February 24, 2022 is scheduled to be paid on April 17, 2022. 27 The following table presents the dividends declared and paid on Series F Preferred Stock during and after 2021: Date Dividend Declared Per Share Amount For Period Beginning For Period Ending Date Paid February 23, 2021 $0.3281250 January 18, 2021 April 17, 2021 April 17, 2021 June 1, 2021 $0.3281250 April 18, 2021 July 17, 2021 July 17, 2021 August 11, 2021 $0.3281250 July 18, 2021 October 17, 2021 October 17, 2021 November 10, 2021 $0.3281250 October 18, 2021 January 17, 2022 January 17, 2022 February 24, 2022 $0.3281250 January 18, 2022 April 17, 2022 * * The dividend declared on February 24, 2022 is scheduled to be paid on April 17, 2022. The following table presents the dividends declared and paid on Series G Preferred Stock during and after 2021: Date Dividend Declared Per Share Amount For Period Beginning For Period Ending Date Paid June 1, 2021 $0.1692708 May 28, 2021 July 17, 2021 July 17, 2021 August 11, 2021 $0.3046875 July 18, 2021 October 17, 2021 October 17, 2021 November 10, 2021 $0.3046875 October 18, 2021 January 17, 2022 January 17, 2022 February 24, 2022 $0.3046875 January 18, 2022 April 17, 2022 * * The dividend declared on February 24, 2022 is scheduled to be paid on April 17, 2022. FARMER MAC'S AUTHORITY TO BORROW FROM THE U.S. TREASURY Farmer Mac is authorized to borrow up to $1.5 billion from the U.S. Treasury through the issuance of debt obligations to the U.S. Treasury. Any funds borrowed from the U.S. Treasury may be used solely to fulfill Farmer Mac's guarantee obligations. Farmer Mac's charter provides that the U.S. Treasury is required to purchase Farmer Mac's debt obligations up to the authorized limit if Farmer Mac certifies that: • a portion of the guarantee fees assessed by Farmer Mac has been set aside as a reserve against losses arising out of Farmer Mac's guarantee activities in an amount determined by Farmer Mac's board of directors to be necessary and such reserve has been exhausted (that amount was $110.5 million as of December 31, 2021); and • the proceeds of such obligations are needed to fulfill Farmer Mac's guarantee obligations. Any debt obligations issued by Farmer Mac under this authority would bear interest at a rate determined by the U.S. Treasury, taking into consideration the average rate on outstanding marketable obligations of the United States as of the last day of the last calendar month ending before the date of the purchase of the obligations from Farmer Mac. Farmer Mac would be required to repurchase any of its debt obligations held by the U.S. Treasury within a "reasonable time." As of December 31, 2021, Farmer Mac had not used this borrowing authority and does not expect to use this borrowing authority in the future. The United States government does not guarantee payments due on securities guaranteed by Farmer Mac, funds invested in the equity or debt securities of Farmer Mac, any dividend payments on shares of Farmer Mac stock, or the profitability of Farmer Mac. 28 GOVERNMENT REGULATION OF FARMER MAC General Farmer Mac was created by federal statute in 1988 in the aftermath of the collapse of the agricultural credit delivery system. Farmer Mac's primary committees of jurisdiction in Congress – the Committee on Agriculture of the U.S. House of Representatives and the U.S. Senate Committee on Agriculture, Nutrition and Forestry – added requirements for Farmer Mac that had not been included in any of the other statutes establishing other GSEs. Unlike the other existing GSEs at the time, Farmer Mac was required to be regulated by an independent regulator, FCA, which has the authority to regulate Farmer Mac's safety and soundness. The statute creating Farmer Mac expressly requires that eligible Farm & Ranch loans meet minimum credit and appraisal standards that represent sound loans to profitable businesses. The enabling legislation also did not contain a specific federal securities law exemption, which had the effect of requiring Farmer Mac to comply with the periodic reporting requirements of the SEC, including filing annual and quarterly reports on the financial status of Farmer Mac and current reports when there are significant developments. Farmer Mac's charter also requires offerings of securities backed by eligible loans and guaranteed by Farmer Mac to be registered under the Securities Act of 1933 and related regulations (collectively, "Securities Act"), unless an exemption for an offering is available that is not based on Farmer Mac's status as an instrumentality of the United States. Since Farmer Mac's creation, Congress has amended Farmer Mac's charter five times: • in 1990 to authorize Farmer Mac to purchase, and guarantee securities backed by, USDA Securities; • in 1991 to clarify Farmer Mac's authority to purchase its guaranteed securities, establish OSMO as Farmer Mac's financial regulator, and set minimum regulatory capital requirements for Farmer Mac; • in 1996 to remove certain barriers to and restrictions on Farmer Mac's operations to be more competitive (e.g., allowing Farmer Mac to buy loans directly from lenders and issue guaranteed securities representing 100% of the principal of the purchased loans and modifying capital requirements); • in 2008 to authorize Farmer Mac to purchase, and guarantee securities backed by, loans or interests in loans by lenders organized as cooperatives to borrowers to finance electrification and telecommunications systems in rural areas; and • in 2018 to expand the acreage exception to the Farm & Ranch loan amount limitation from 1,000 acres to 2,000 acres, subject to FCA's feasibility assessment (which was completed in June 2019), and to repeal obsolete provisions and make technical corrections. Farmer Mac's authorities and regulatory structure were not revised by legislation adopted in 2008 to regulate other GSEs. Office of Secondary Market Oversight (OSMO) As an institution of the FCS, Farmer Mac (including its subsidiaries) is subject to the regulatory authority of FCA. Farmer Mac's charter assigns to FCA, acting through OSMO within FCA, the responsibility for the examination of Farmer Mac and the general supervision of the safe and sound performance of the powers, functions, and duties vested in Farmer Mac by its charter. The charter also authorizes FCA, acting through OSMO, to apply its general enforcement powers to Farmer Mac. Farmer Mac (including its 29 subsidiaries) is the only entity regulated by OSMO, which was created as a separate office in recognition of the different role that Farmer Mac plays in providing a secondary market, as compared to the roles of other FCS institutions as primary lenders. The Director of OSMO is selected by and reports to the FCA board. Farmer Mac's charter requires an annual examination of the financial transactions of Farmer Mac and authorizes FCA to assess Farmer Mac for the cost of its regulatory activities, including the cost of any examination. Each year, OSMO conducts an examination of Farmer Mac to evaluate its safety and soundness, compliance with applicable laws and regulations, and mission achievement. The examination includes a review of Farmer Mac's capital adequacy, asset quality, management performance, earnings, liquidity, and sensitivity to interest rate risk. OSMO may also conduct additional oversight and examination activities unrelated to its annual examination of Farmer Mac at any other time it determines necessary. Farmer Mac is also required to file quarterly reports of condition with FCA. Capital Standards General Requirements . Farmer Mac's charter establishes three capital standards for Farmer Mac: • Statutory minimum capital requirement . Farmer Mac's minimum capital level is an amount of core capital (stockholders' equity less accumulated other comprehensive income) equal to the sum of 2.75% of Farmer Mac's aggregate on-balance sheet assets, as calculated for regulatory purposes, plus 0.75% of Farmer Mac's aggregate off-balance sheet obligations, specifically including: ◦ the unpaid principal balance of outstanding loan-backed securities guaranteed by Farmer Mac; ◦ instruments issued or guaranteed by Farmer Mac that are substantially equivalent to securities guaranteed by Farmer Mac, including LTSPCs; and ◦ other off-balance sheet obligations of Farmer Mac. • Statutory critical capital requirement . Farmer Mac's critical capital level is an amount of core capital equal to 50% of the total minimum capital requirement at that time. • Risk-based capital . The charter directs FCA to establish a risk-based capital stress test for Farmer Mac, using specified stress-test parameters. Farmer Mac must comply with the higher of the minimum capital requirement and the risk-based capital requirement. The risk-based capital stress test promulgated by FCA is intended to determine the amount of regulatory capital (core capital plus the allowance for losses) that Farmer Mac would need to maintain positive capital during a ten-year period in which: • annual losses occur at a rate of default and severity "reasonably related" to the rates of the highest sequential two years in a limited U.S. geographic area; and • interest rates are shocked by the lesser of 600 basis points or 50% of the ten-year U.S. Treasury rate, and interest rates remain at such level for the remainder of the period. 30 The risk-based capital stress test then adds an additional 30% to the resulting capital requirement for management and operational risk. Farmer Mac's risk-based capital requirement as of December 31, 2021 was $218.7 million, and Farmer Mac's regulatory capital of $1.2 billion exceeded that amount by approximately $1.0 billion. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Capital Requirements" for a presentation of Farmer Mac's current regulatory capital position. Enforcement Levels . Farmer Mac's charter directs FCA to classify Farmer Mac within one of four enforcement levels to determine compliance with the capital standards established by Farmer Mac's charter. As of December 31, 2021, Farmer Mac was classified as within level I – the highest compliance level. Failure to comply with the applicable required capital level in the charter would result in Farmer Mac being classified as within level II (below the applicable risk-based capital level, but above the minimum capital level), level III (below the minimum capital level, but above the critical capital level) or level IV (below the critical capital level). If Farmer Mac were classified as within level II, III or IV, the charter requires the Director of OSMO to take specified mandatory supervisory measures and provides the Director with discretionary authority to take various optional supervisory measures depending on the level in which Farmer Mac is classified. The mandatory measures applicable to level II and level III include: • requiring Farmer Mac to submit and comply with a capital restoration plan; • prohibiting the payment of dividends if the payment would result in Farmer Mac being reclassified as within a lower level and requiring the pre-approval of any dividend payment even if the payment would not result in reclassification as within level IV; and • reclassifying Farmer Mac as within one level lower if it does not submit a capital restoration plan that is approved by the Director, or the Director determines that Farmer Mac has failed to make, in good faith, reasonable efforts to comply with such a plan and fulfill the schedule for the plan approved by the Director. If Farmer Mac were classified as within level III, then, in addition to the mandatory supervisory measures described above, the Director of OSMO could take any of the following discretionary supervisory measures: • imposing limits on any increase in, or ordering the reduction of, any obligations of Farmer Mac, including off-balance sheet obligations; • limiting or prohibiting asset growth or requiring the reduction of assets; • requiring the acquisition of new capital in an amount sufficient to provide for reclassification as within a higher level; • terminating, reducing, or modifying any activity the Director determines creates excessive risk to Farmer Mac; or • appointing a conservator or a receiver for Farmer Mac. Farmer Mac's charter does not specify any supervisory measures, either mandatory or discretionary, to be taken by the Director if Farmer Mac were classified as within level IV. The Director of OSMO has the discretionary authority to reclassify Farmer Mac to a level that is one level below its then current level (for example, from level I to level II) if the Director determines that Farmer Mac is engaging in any action not approved by the Director that could result in a rapid depletion of core 31 capital or if the value of property subject to mortgages backing securities guaranteed by Farmer Mac has decreased significantly. Capital Adequacy Requirements . Under FCA's rule on capital planning, Farmer Mac must develop and submit to OSMO for approval annually a plan for capital that considers the sources and uses of Farmer Mac's capital, addresses capital projections under stress scenarios, assesses Farmer Mac's overall capital adequacy, and incorporates a Farmer Mac board-approved policy on capital adequacy. In accordance with this regulation, Farmer Mac's board of directors oversees a policy that requires Farmer Mac to maintain an adequate level of "Tier 1" capital, consisting of retained earnings, paid-in-capital, common stock, qualifying preferred stock, and accumulated other comprehensive income allocable to "non-program" investments that are not included in the Agricultural Finance and Rural Infrastructure Finance lines of business. Under this policy, Farmer Mac must maintain at all times a Tier 1 capital ratio of at least 7.0% of risk-weighted assets, calculated using an advanced internal ratings based asset risk weighting regime that is consistent with current Basel-based principles. The policy also requires Farmer Mac to maintain a "capital conservation buffer" of additional Tier 1 capital of more than 2.5% of risk-weighted assets. If the capital conservation buffer drops to various levels at or below 2.5%, as shown in the table below, the policy requires Farmer Mac to restrict distributions of current quarter Tier 1-eligible dividends and any discretionary bonus payments to an amount not to exceed the corresponding payout percentage specified in the table below, which represents the percentage of the cumulative core earnings for the four quarters immediately preceding the distribution date: Capital Conservation Buffer Payout Percentage (percentage of risk-weighted assets) (percentage of four quarters' accumulated core earnings) greater than 2.5% No limitation greater than 1.875% to and including 2.5% 60% greater than 1.25% to and including 1.875% 40% greater than 0.625% to and including 1.25% 20% equal to or less than 0.625% 0% (no payout permitted) These distribution restrictions would remain for so long as the Tier 1 capital conservation buffer remains at or below the minimum level of 2.5%, and Farmer Mac's board of directors may consider other factors, such as earnings presented in accordance with generally accepted accounting principles in the United States ("GAAP") and other regulatory requirements, in determining whether to restrict capital distributions, including dividends and bonus payments. As of December 31, 2021, Farmer Mac's Tier 1 capital ratio was 14.7%. The calculation of Farmer Mac's Tier 1 capital ratio does not include certain interest rate risk components of the risk weighting of assets, which reflects the fact that Farmer Mac pursues an approach to funding its assets with liabilities of similar duration and convexity characteristics and therefore does not bear material interest rate risk in its portfolio. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Capital Requirements" for more information on Farmer Mac's Tier 1 capital ratio. Liquidity Requirements Liquidity Reserve Requirement and Supplemental Liquidity . Farmer Mac's Liquidity and Investment Regulations require that Farmer Mac maintain at all times a liquidity reserve sufficient to fund at least 32 90 days of the principal portion of maturing obligations and other borrowings. Farmer Mac may also maintain supplemental liquidity to fund obligations and borrowings maturing after 90 days. The investments that Farmer Mac holds as its liquidity reserve and as supplemental liquidity must consist of unencumbered and readily marketable assets that are diversified in accordance with categories prescribed by FCA, including limitations on asset class, dollar amount, issuer concentration, and credit quality. Farmer Mac must report, in writing, to OSMO no later than the next business day following the discovery of any breach of Farmer Mac's minimum liquidity reserve requirement. Liquidity Management . Under the Liquidity and Investment Regulations, Farmer Mac must develop and approve annually a liquidity policy that outlines Farmer Mac's purpose and objectives for liquidity reserves, diversification requirements for liquidity reserves, target liquidity levels, maximum investment amounts as a percentage of Farmer Mac's program assets, exception parameters (and approval requirements), delegations of investment authority, and reporting requirements to Farmer Mac's board of directors and to OSMO. The regulations also require Farmer Mac to develop a liability maturity management plan and a contingency funding plan, each of which must be reviewed and approved annually by Farmer Mac's board of directors. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources" for more information about Farmer Mac's liquidity and "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk—Other Investments" for more information about Farmer Mac's eligible investments. 33 Item 1A. Risk Factors Farmer Mac's business activities, financial performance, and results of operations are, by their nature, subject to risks and uncertainties, including those related to the agricultural industry, the rural utilities industry, access to the capital markets, the regulatory environment, the level of prevailing interest rates and overall market conditions. The following risk factors should be considered along with "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7 of this report, including the risks and uncertainties described in the "Forward-Looking Statements" section. Because new risk factors likely will emerge from time to time, management can neither predict all potential risk factors nor assess the effects of those factors on Farmer Mac's business, operating results, and financial condition or how much any factor, or combination of factors, may affect Farmer Mac's actual results and financial condition. If any of the following risks materialize, Farmer Mac's business, financial condition, or results of operations could be materially and adversely affected. Farmer Mac undertakes no obligation to update or revise this risk factor discussion, unless required by applicable law. COVID-19 Pandemic Risk The continuing effects of the COVID-19 pandemic are uncertain and may heighten the risk factors described in this report or could otherwise have a material adverse effect on Farmer Mac's business, operations, operating results, financial condition, liquidity, or capital levels. The COVID-19 pandemic continues to impact the global economy and the lives of individuals throughout the world. How much the pandemic affects Farmer Mac’s business, results of operations, and financial condition will depend on many factors beyond Farmer Mac’s control, including: • the duration and severity of the pandemic and the effectiveness of government and public health responses, including to the prevalence of any new strains of the novel coronavirus; • how quickly and to what extent normal economic and operating conditions can resume, including whether any future COVID-19 outbreaks interrupt economic recovery; and • whether the COVID-19 pandemic causes any residual negative effects to Farmer Mac's business once the pandemic has subsided. The full effects of the COVID-19 pandemic on Farmer Mac’s business, results of operations, and financial condition may not be fully known for some time and may heighten the risk factors described below or may otherwise materially and adversely affect Farmer Mac’s business, operations, operating results, financial condition, liquidity, or capital levels. Credit and Counterparty Risk Factors outside of Farmer Mac's or borrowers' control may impair borrowers' profitability and ability to repay their loans in Farmer Mac's portfolio, which could have a material adverse effect on Farmer Mac's financial condition, results of operations, liquidity, or capital levels. External factors beyond Farmer Mac's or borrowers' control could impair borrowers' profitability, such as severe or protracted adverse weather and related effects; volatility in demand for agricultural products or electricity in rural areas; variability in borrowers' input costs; supply-chain disruptions that negatively impact borrowers' production or distribution capabilities, protracted regional, domestic, or global 34 economic stress (whether due to the continued COVID-19 pandemic or otherwise); legislative or regulatory actions affecting rural borrowers; U.S. trade policy affecting the demand for agricultural exports or the price of imports required for borrowers' operations; increased competition among producers due to oversupply or available alternatives; and adverse changes in interest rates and land values. Any of these factors could put downward pressure on the profitability of a farming, agribusiness or rural utilities operation, which could then inhibit the related borrower's repayment capacity on one or more loans that Farmer Mac may have from that borrower in its portfolio. Farmer Mac assumes the ultimate credit risk of borrower defaults on its agricultural mortgage and rural utilities loan assets, and Farmer Mac's earnings, which come from net interest income, guarantee fees, and commitment fees on those assets, depend significantly on their performance. Widespread and sustained repayment shortfalls on loans in Farmer Mac's portfolio could result in losses, particularly if the value of the available collateral does not cover Farmer Mac's exposure, and this could have a material adverse effect on Farmer Mac's financial condition, results of operations, liquidity, or capital levels. Climate change and the occurrence of weather-related events, or other natural or environmental disasters could have a material adverse effect on Farmer Mac’s business, operating results, or financial condition. In addition to the general risks posed by adverse weather conditions, Farmer Mac’s exposure to credit risk and the market value of loan collateral is potentially subject to risks associated with the long-term effects of climate change, as farmers and ranchers may face increasing, as well as increasingly-severe, weather incidents. The U.S. experienced 20 separate billion-dollar weather disasters in 2021, the second-highest level in the 40 years tracked by the National Oceanic and Atmospheric Administration behind 2020. Many of those events affected agriculture, including a midwestern derecho, western wildfires and western drought. Many climatologists predict increases in average temperatures, more extreme temperatures and increases in volatile weather over time. These physical changes may prompt changes in regulations or consumer preferences, which in turn could have negative consequences for the business models of borrowers, such as increasing costs, reducing the value of assets and increasing operating expenses. For example, in 2021, “exceptional drought” conditions, the most severe drought classification, covered significant areas of the western states, and approximately half of the continental United States experienced abnormally dry conditions or worse. Although drought conditions improved in fourth quarter 2021 and early weeks of 2022, 12% of the continental United States remained in exceptional or extreme drought as of February 1, 2022, according to data from the National Drought Mitigation Center. The effects of climate change may be more significant along coastlines, such as in the California coastal areas, due to rising sea levels resulting from the melting of polar ice caps, which could result in an increased risk of coastal erosion, flooding, degradation in the quality of groundwater aquifers and an expansion of agricultural weed and pest populations. As a result, the effects of climate change could make some agricultural properties less suitable for farming or for other alternative uses. For example, 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. These and other effects of climate change could have an adverse impact on farming operations and the value of loan collateral, which could have a material adverse effect on Farmer Mac’s business, operating results, or financial condition. 35 Concentrations in Farmer Mac's loan or investments portfolios, or to one or more borrowers or counterparties, may increase Farmer Mac's exposure to credit risk, which could materially and adversely affect its business, operating results, and financial condition. Farmer Mac's exposure to credit risk may increase due to concentrations in its loan portfolio, which can include concentrated exposure to particular commodities, geographic regions, or collateral types, as well as concentrations in processing and manufacturing segments of agricultural supply chains. Widespread weakening in the financial condition of borrowers within a particular geographic region, that produce particular commodities or rely on particular collateral, or that engage in processes or production that is dependent on a fluid supply chain could negatively affect Farmer Mac’s financial condition if sufficient diversity in these areas does not successfully mitigate concentration risk. Farmer Mac's credit risk may also increase due to decline in the collateral values securing the loans in Farmer Mac's portfolio. Single-use or highly improved collateral, such as storage and processing facilities or permanent plantings, increase the risk of undercollateralization in a default scenario, because producers requiring single-use or highly improved collateral are generally less able to adapt their operations or switch functional production when faced with adverse conditions. Highly improved properties also face higher risk of loss in a default scenario, as the pool of potential purchasers in a sale or foreclosure action may be smaller for a highly improved property than for a property that is adaptable to multiple uses. The farming of permanent plantings generally involves more risk than farming of annual row crops because permanent plantings generally require more time and capital to plant and permanent plantings are more expensive to replace in the event of disease, drought, mismanagement, catastrophic condition (such as wildfire), or adverse weather conditions. Farmer Mac's exposure to credit risk may also increase due to concentrated exposure to a particular borrower or counterparty. Farmer Mac’s Farm & Ranch portfolio consists of loans varying in size and by borrower, including large exposures ($25 million or more) to individual borrowers. The default of any one of these borrowers could negatively affect Farmer Mac's financial condition. Farmer Mac also has concentrated exposures to individual business counterparties on AgVantage securities, which are general obligations of institutional counterparties secured by eligible loans held by the issuing institution. Although AgVantage securities are collateralized by eligible loans in a principal amount equal to or greater than the principal amount of the securities outstanding, Farmer Mac could suffer losses if the market value of the loan collateral declines and the counterparty defaults. Taking possession of the loan collateral upon a default by the AgVantage counterparty could also result in higher current expected credit losses for Farmer Mac's loans held on balance sheet, as well as increased capital requirements. Most of Farmer Mac's AgVantage exposure is concentrated in a few issuers. As of December 31, 2021, $7.6 billion of the $8.1 billion of AgVantage securities outstanding had been issued by three counterparties. A default by any of these counterparties could have a significant adverse effect on Farmer Mac's business, operating results, and financial condition. Farmer Mac's exposure to credit risk may also increase due to concentrated exposure to one or more investment types or counterparties in the investment portfolio Farmer Mac maintains for liquidity. This investment portfolio consists primarily of cash and cash equivalents, U.S. Treasury securities, investment securities guaranteed by U.S. Government agencies and GSEs, and asset-backed securities backed primarily by U.S. Government-guaranteed loans. Farmer Mac regularly reviews concentration limits to ensure that its investments are appropriately diversified and comply with policies approved by Farmer Mac's board of directors and with applicable FCA regulations, but Farmer Mac is still exposed to credit risk from issuers of the investment securities it holds, particularly to issuers to whom Farmer Mac may 36 have a higher concentration of exposure relative to the rest of Farmer Mac's investment portfolio. For example, as of December 31, 2021, Farmer Mac held at fair value $2.3 billion of investment securities guaranteed by GSEs. A default by multiple issuers of investment securities held by Farmer Mac or by a single issuer of investment securities in which Farmer Mac is more heavily concentrated could have an adverse effect on Farmer Mac's business, operating results, and financial condition. Farmer Mac Guaranteed Securities and LTSPCs expose Farmer Mac to significant contingent liabilities, and Farmer Mac's ability to fulfill its obligations under its guarantees and LTSPCs may be limited. Farmer Mac's guarantee and purchase commitment obligations to third parties, including LTSPCs and securities guaranteed by Farmer Mac, are obligations of Farmer Mac only and are not backed by the full faith and credit of the United States, FCA, or any other agency or instrumentality of the United States other than Farmer Mac. As of December 31, 2021, Farmer Mac had $3.8 billion of contingent liabilities related to LTSPCs and securities issued to third parties and guaranteed by Farmer Mac, which represents Farmer Mac's exposure if all loans underlying these LTSPCs and guarantees defaulted and Farmer Mac recovered no value from the related collateral. If this were to occur, the funds available for payment on these guarantees and LTSPCs could be substantially less than the aggregate amount of the corresponding liabilities. As of December 31, 2021, Farmer Mac held cash, cash equivalents, and other investment securities with a fair value of $4.8 billion that could be used as a source of funds for payment on its obligations, including its guarantee and LTSPC obligations. Although Farmer Mac believes that it remains well-collateralized on the assets underlying its guarantee and LTSPC obligations to third parties and that the estimated probable losses for these obligations remain low relative to the amount available for payment of claims on these obligations, Farmer Mac's total contingent liabilities for these obligations could exceed the amount it may have available for payment of Farmer Mac's obligations, including claims on Farmer Mac's contingent obligations. See "Management's Discussion and Analysis—Risk Management—Credit Risk – Loans and Guarantees" for more information on Farmer Mac's management of credit risk. Farmer Mac is exposed to counterparty risk on both its cleared and non-cleared swaps transactions that could materially and adversely affect its business, operating results, and financial condition. Farmer Mac uses interest rate swap contracts and hedging arrangements to manage its interest rate risk. Farmer Mac clears a significant portion of its interest rate swaps through a swap clearinghouse and uses the services of a futures commission merchant to post and receive mark-to-market margin amounts. Farmer Mac also transacts non-cleared (bilateral) derivative contracts directly with swap counterparties and posts and receives collateral to secure the market value of those contracts. A failure of any of these counterparties could cause intra-day disruption for Farmer Mac's swap operations if the failure were to prompt a termination of all or part of Farmer Mac's swap positions or if Farmer Mac were unable to quickly access margin or collateral amounts. These conditions could be exacerbated in volatile market conditions, in which the market could move against Farmer Mac's position before Farmer Mac had time to reposition its swaps. Farmer Mac's derivative contracts executed before March 2017 have market value thresholds ranging from $15 to $25 million that must be exceeded before Farmer Mac must post collateral. Repositioning these swaps under current margin rules if the related counterparty were to fail could require Farmer Mac to post significant collateral within a short time frame. Any of these factors resulting from a failure of the swap clearinghouse, futures commission merchant, or any of Farmer Mac's bilateral swap counterparties could have a negative effect on Farmer Mac's operations and liquidity and could expose Farmer Mac to more interest rate risk, which could materially and adversely affect its business, operating 37 results, and financial condition. As of December 31, 2021, the aggregate notional balance of Farmer Mac's cleared swaps was $14.9 billion, and the aggregate notional balance of Farmer Mac's non-cleared swaps was $2.6 billion (including $0.1 billion notional amount of non-cleared swaps executed before March 2017). Strategic/Business Risk Farmer Mac's business, operating results, financial condition, and capital levels may be materially and adversely affected by external factors that may affect the demand for Farmer Mac's secondary market, the price or marketability of Farmer Mac's products, or Farmer Mac's ability to offer its products and services. Farmer Mac's business, operating results, financial condition, and capital levels may be materially and adversely affected by external factors that may affect the price or marketability of Farmer Mac's products and services or Farmer Mac's ability to offer its products and services, including, but not limited to: • disruptions in the capital markets; • competitive pressures in Farmer Mac's loan purchase and guarantee activities or in the issuance of its debt securities; • changes in interest rates that may increase Farmer Mac's funding costs; • market or customer perception of Farmer Mac's reputation; • legislative or regulatory developments adversely affecting Farmer Mac's ability to offer new products, the ability or motivation of lenders to participate in Farmer Mac's lines of business, or the cost of related corporate activities; • reduced demand for agricultural real estate loans or Rural Utilities loans due to regional, domestic, or global economic conditions; and • expanded funding alternatives available to agricultural and rural utilities borrowers. An inability to access the equity and debt capital markets could have a material adverse effect on Farmer Mac's business, operating results, financial condition, liquidity, and capital levels. Farmer Mac's ability to operate its business, meet its obligations, generate asset volume growth, and fulfill its statutory mission depends on Farmer Mac's continued access to the U.S. financial markets at favorable rates and terms to remain adequately capitalized through the issuance of equity and with adequate access to liquidity through the issuance of debt securities. The issuance of debt securities is Farmer Mac's primary source for repaying or refinancing existing debt and to fund contingent liabilities, as needed. Farmer Mac's ability to access the debt and equity markets to raise capital, fund its assets, repay debt, and earn net interest income depends on market perception of Farmer Mac. If Farmer Mac were unable to access the U.S. financial markets to issue equity or debt securities at favorable rates and terms, Farmer Mac's business, operating results, liquidity, or financial condition could be adversely affected. The loss of business from key business counterparties or customers, including AgVantage counterparties, could weaken Farmer Mac's business and decrease its revenues and profits. Farmer Mac's business and ability to generate revenues and profits largely depends on its ability to purchase eligible loans or place eligible loans under guarantees or LTSPCs and to purchase or guarantee AgVantage securities. Farmer Mac conducts a significant portion of its business with a few business counterparties. This concentration of business could potentially result in increased variability in Farmer 38 Mac's business as existing assets pay down or mature and the status and needs of Farmer Mac's customers evolve. In 2021, ten institutions generated approximately 62% of loan purchase volume in the Agricultural Finance line of business. As of December 31, 2021, approximately 93.9% of the $8.1 billion outstanding principal amount of AgVantage securities (of which $2.6 billion and $0.9 billion will be maturing in 2022 and 2023, respectively) were issued by three institutions. As of December 31, 2021, transactions with two institutions represented nearly all of the business volume under Farmer Mac's Rural Infrastructure Finance line of business. Farmer Mac's ability to maintain the current relationships with its business counterparties or customers and the business generated by those business counterparties or customers is significant to Farmer Mac's business. As a result, the loss of business from any one of Farmer Mac's key business counterparties could decrease Farmer Mac's revenues and profitability. Farmer Mac may be unable to replace the loss of business of a key business counterparty or customer with alternate sources of business due to limitations on the types of assets eligible for Farmer Mac's secondary market, which could adversely affect Farmer Mac's business and decrease its revenues and profits. Farmer Mac's efforts to balance fulfilling its mission with providing a return to its stockholders may result in business transactions that involve lower returns or higher risk, which could adversely affect its business, operating results, or financial condition. Congress created Farmer Mac to provide for a secondary market for agricultural mortgage loans, Rural Utilities loans, and the guaranteed portions of USDA-guaranteed loans. In pursuing this mission, Farmer Mac's secondary market activities are designed to: • increase the availability of credit to rural borrowers at stable interest rates; • provide greater liquidity and lending capacity in extending credit to rural borrowers; and • provide an arrangement for new lending by facilitating capital market investments in funding for rural borrowers, including funds at fixed rates of interest. Farmer Mac's charter provides that its standards for Farm & Ranch loans shall not discriminate against small originators or small agricultural mortgage loans of at least $50,000. The charter also requires Farmer Mac's board of directors to promote and encourage the inclusion of qualified loans for small farms and family farmers in the agricultural mortgage secondary market. Although Farmer Mac strives to undertake its mission-related activities in a manner consistent with providing an accretive return to Farmer Mac's stockholders, these activities could contribute to a lower return to stockholders than if Farmer Mac's sole purpose were to maximize stockholder value. If Farmer Mac were to undertake activities involving greater risk or lower returns to satisfy its mission, Farmer Mac's business, operating results, or financial condition could be adversely affected. A few stockholders who own large amounts of Farmer Mac voting common stock may seek to influence Farmer Mac's business, strategy, or board composition, and the interests of these stockholders may differ from the interests of Farmer Mac or other holders of Farmer Mac's common stock. The ownership of Farmer Mac's two classes of voting common stock is concentrated in a few institutions. Four financial institutions hold approximately 53% of Farmer Mac's Class A voting common stock, with 31% held by one institution. Five FCS institutions hold approximately 97% of Farmer Mac's Class B voting common stock (two of which are related to each other through a parent-subsidiary relationship). The holders of Farmer Mac's Class A voting common stock and the holders of Farmer Mac's Class B voting common stock each have the right to elect one-third of the membership of Farmer 39 Mac's board of directors. Many of these holders are rural lenders that may compete directly with each other. As long as Farmer Mac's Class A and Class B voting common stock is highly concentrated in a few institutions, these institutions could seek to influence (and may succeed in influencing), Farmer Mac's business, strategy, or board composition in a way that may not be in the best interests of either Farmer Mac or other stockholders. Operational Risk The inadequacy or failure of Farmer Mac's operational systems, cybersecurity program, internal controls or processes, or infrastructure, or those of third parties, could have a material adverse effect on Farmer Mac's business, operating results, or financial condition. Farmer Mac is exposed to operational risk due to the complex nature of its business operations and the processes and systems used to undertake its business activities and comply with regulatory requirements. Operational risk includes the risk of loss to Farmer Mac resulting from: • inadequate or failed internal processes, systems, cybersecurity program, or infrastructure; • Farmer Mac's inability to successfully implement enhancements to any of these or migrate to new systems or infrastructure; • failed execution based on human error; • inadequate or failed internal controls or processes to detect or prevent fraud or other violations of law or regulations; or • external events, including a disruption involving physical site access, cyber incidents, catastrophic events, natural disasters, terrorist activities, or disease pandemics. Farmer Mac relies on business processes that largely depend on people, technology, and the use of complex systems and models to manage its business, process a high volume of daily transactions, and generate the records on which Farmer Mac's financial statements are based. Inadequacies or failures in Farmer Mac's internal processes, personnel, systems, cybersecurity program, or infrastructure could lead to a significant disruption in its business operations, financial and economic loss, errors in its financial statements, impairment of its liquidity, liability or service interruptions to its customers, increased regulatory or legislative scrutiny, or reputational damage. In response to the challenges presented by the COVID-19 pandemic, Farmer Mac has modified its business practices to focus on protecting its employees and the public while continuing to fulfill its critical mission and maintaining its regular business operations in support of the farmers, ranchers, and rural utilities of America. On March 12, 2020, Farmer Mac activated its Business Continuity Plan (“BCP”) and has been operating uninterrupted since then with most employees working remotely from their homes. Farmer Mac has provided guidance and support to its employees to ensure that they have the tools and knowledge needed to effectively work from home, and Farmer Mac’s technology platform and BCP have been functioning as designed in support of all functions of the organization. Nonetheless, because the technology in employees’ homes may not be as robust and resilient as in Farmer Mac’s offices and could cause the networks, information systems, applications, and other tools available to employees to be more limited or less reliable than Farmer Mac’s in-office technology, the continuation of these work-from-home measures introduces more operational risk. These risks include but are not limited to greater cybersecurity risk and disruption or failure of local technology networks, which could impair Farmer Mac's ability to perform critical functions. The realization of any of these risks could have a material adverse effect on Farmer Mac’s business, results of operations, or financial condition. 40 The potential for operational risk exposure also exists as a result of Farmer Mac's interactions with, and reliance on, third parties. Farmer Mac's business relies on its ability to process, evaluate, and interpret significant amounts of information, much of which third parties provide. Yet Farmer Mac's ability to implement safeguards preventing disruption to third-party systems or infrastructure is more limited than for its own systems or infrastructure. If the financial, accounting, data processing, backup, information technology, or other operating systems and infrastructure of third parties with whom Farmer Mac interacts or upon whom it relies fail to operate properly or are disrupted, then Farmer Mac's operations and its ability to conduct its business in the ordinary course may be adversely affected, which could have a material adverse effect on Farmer Mac's business, results of operations, or financial condition. Farmer Mac’s business depends, in part, on effective and reliable loan servicing, and Farmer Mac’s internal loan servicing function and reliance on third-party servicers could expose Farmer Mac to operational risks that could adversely affect its business, operating results, or financial condition. Effective and reliable loan servicing is essential for Farmer Mac to successfully operate its business. During third quarter 2021, Farmer Mac expanded its internal loan servicing function through a strategic acquisition that included the loan servicing rights for a sizeable portion of Farmer Mac’s Agricultural Finance mortgage loan and USDA Securities portfolios, as well as experienced servicing personnel and an operational servicing platform. This strategic acquisition has required Farmer Mac to implement processes and controls for a business function that Farmer Mac has previously not operated and has minimal experience executing and managing. Farmer Mac also continues to rely on experienced third-party servicers to service the portion of Farmer Mac’s Agricultural Finance mortgage loan portfolio not serviced directly by Farmer Mac. Although Farmer Mac has established servicing standards and requirements to which these third-party servicers are required by contract to adhere and on which they must report to Farmer Mac, Farmer Mac does not manage the processes and controls of these third-party servicers. The ineffective implementation, operation, or oversight of one or more of the servicing processes or controls employed by Farmer Mac or any of its third-party servicers could expose Farmer Mac to operational risk that could adversely affect Farmer Mac’s business, operating results, or financial condition. Any deficiency, failure, interruption, or breach in Farmer Mac's or our service providers' technology and information systems, infrastructure, or cybersecurity program, including the occurrence of successful cyber-attacks, could result in a loss of business, damage to Farmer Mac's reputation, the disclosure or misuse of confidential or proprietary information, or increased costs or liability to Farmer Mac, which could adversely affect Farmer Mac's business, operating results, or financial condition. Farmer Mac relies heavily on technology and information systems, including from third parties, for the secure collection, processing, transmission, and storage of confidential, proprietary, and personal information in our information systems (and those of third parties) to conduct and manage its business operations. These technology and information systems encompass an integrated set of hardware, software, infrastructure, and personnel organized to facilitate the planning, control, coordination, operations, and decision-making processes within Farmer Mac. As the importance and complexity of Farmer Mac’s technology and information systems has increased, and as new technologies are developed that are used by our customers, Farmer Mac, or our service providers to support our business and operations, so too have the risks posed to Farmer Mac’s information systems and data from cybersecurity attacks that threaten the confidentiality, integrity, or availability of Farmer Mac’s information technology assets and resources and its data. Like many other financial institutions, Farmer Mac and its service providers face regular attempts to gain unauthorized access to, or disrupt, its information systems and access or acquire its data, including 41 from organized criminal groups, hackers, nation states, activists, insiders, and other unauthorized third parties. These threats come from a variety of different sources, including cyber-attacks, computer viruses, malware, exploits of system and network vulnerabilities, human error, phishing, ransomware, and distributed denial of service attacks. The methods used to gain unauthorized access to or disrupt our information systems and data, or those of our service providers, are evolving. We may not be able to prevent or recognize them and may be unable to implement effective preventive measures or proactively address these threats until after a cybersecurity event has been discovered. Moreover, any employees or agents of Farmer Mac’s (or its third-party customers or vendors) who have authorized access to confidential, proprietary, or personal information could also intentionally, inadvertently, or erroneously disseminate the information to unauthorized third parties. Although Farmer Mac has implemented what we believe is an appropriate information security program with cybersecurity procedures, policies, practices, and controls, Farmer Mac may be unable to prevent unauthorized access to its information technology assets or data, resulting in the unauthorized access to or acquisition, destruction, alteration, release, theft, or loss of confidential, proprietary, or personal data of Farmer Mac, our employees, our customers, or our third-party vendors, which could disrupt our operations and ability to conduct business with customers, loan servicers, service providers, or other counterparties, adversely affect Farmer Mac’s business, operating results, reputation, or financial condition, cause financial loss or costs, cause loss of customers or vendors, and result in regulatory inquiries, enforcement proceedings, or litigation. Also, the risk of unauthorized access to confidential, proprietary, or personal information through information system breaches or inadvertent dissemination may be heightened in a remote-working environment, which is currently more prevalent due to the COVID-19 pandemic. Farmer Mac relies on third-party service providers to facilitate our business operations and our cybersecurity program, including for the secure collection, processing, transmission, and storage of confidential, proprietary, and personal information. The control systems, cybersecurity program, infrastructure, and personnel associated with third parties with which we do business or obtain services are beyond our control. Cybersecurity attacks or disruptions of software, hardware, or infrastructure of third parties may adversely affect our business, systems, and controls. Failure by Farmer Mac's third-party loan servicers, information systems providers, and other service providers to protect confidential information from unauthorized access and dissemination could result in liability for Farmer Mac or damage Farmer Mac's reputation, which could have a negative effect on Farmer Mac's business, operating results, or financial condition. Farmer Mac relies on third parties, including loan servicers, information systems providers, software-as-a-service (SaaS) providers, cloud computing service providers, and other service providers, to perform various functions that support Farmer Mac’s business and operations. Farmer Mac depends on these third parties to collect, process, and store a variety of confidential, proprietary, or personal information, including sensitive financial information. Just as Farmer Mac is subject to numerous cyber attacks from a variety of actors, so too are these third parties. Although Farmer Mac requires third parties who collect, process, or store confidential, proprietary, or personal data to adhere to security policies, processes, and controls, if a third party is unable to prevent unauthorized access to its information technology assets or data, it could result in the unauthorized access to or acquisition, destruction, alteration, release, theft, or loss of confidential, proprietary, or personal data of Farmer Mac, our employees, or our customers, which could disrupt our operations and ability to conduct business with customers, loan servicers, service providers, or other counterparties, adversely affect Farmer Mac’s business, operating results, reputation, or 42 financial condition, cause financial loss or costs, cause loss of customers or vendors, or result in regulatory inquiries, enforcement proceedings, or litigation. If Farmer Mac's management of risk associated with its loan assets and investment securities based on model assumptions and output is not effective, its business, operating results, financial condition, or capital levels could be materially adversely affected. Farmer Mac continually develops and adapts profitability and risk management models to adequately address a wide range of possible market developments. Some of Farmer Mac's qualitative tools and metrics for managing risk are based on its use of observed historical market behavior. Farmer Mac applies statistical and other tools to these observations to quantify its risks. These tools and metrics may fail to predict future or unanticipated risks or may not be effective in mitigating its risk exposure in all economic market environments or against all types of risk, which could expose Farmer Mac to material unanticipated losses. The inability of Farmer Mac to effectively identify and manage the risks inherent in its business could have a material adverse effect on its business, operating results, financial condition, or capital levels. Farmer Mac's efforts to expand product offerings and services to its customers exposes Farmer Mac to operational risk that could materially and adversely affect its business, operating results, or financial condition. As the needs of Farmer Mac's customer base and rural America evolve, Farmer Mac seeks to respond by offering new products and services to meet these needs. As Farmer Mac expands its product offerings and services, it is exposed to operational risk in implementing these new products and services. New products and services may require new operational processes, which often require new internal controls to manage new risks that these new processes present. If these controls are insufficient or ineffective to manage the risks inherent in these new processes, or if there is human error in executing these new controls either due to their novelty or otherwise, Farmer Mac could face financial loss, reputational damage, or regulatory enforcement, which could materially and adversely affect Farmer Mac's business, operating results, or financial condition. Market Risk Farmer Mac is exposed to interest rate risk that could materially and adversely affect its operating results or financial condition. Farmer Mac is subject to interest rate risk due to the timing differences in the cash flows of the assets it holds and the liabilities issued to fund those assets. Farmer Mac's primary strategy for managing interest rate risk is to fund asset purchases with debt together with financial derivatives that have similar duration and convexity characteristics to help mitigate impacts from interest rate changes across the yield curve. However, the ability of borrowers to prepay their loans before the scheduled maturities increases the likelihood of asset and liability cash flow mismatches. In a changing interest rate environment, these cash flow mismatches affect Farmer Mac's earnings if assets repay sooner than expected and the resulting cash flows must be reinvested in lower-yielding investments, particularly if Farmer Mac's related funding costs cannot be correspondingly repaid. Conversely, if assets repay more slowly than anticipated and the associated debt issued to fund the assets must be reissued at a higher interest rate, Farmer Mac's earnings could be adversely affected. 43 Volatility in market conditions during 2020 stemming from the effects of the COVID-19 pandemic prompted the Federal Reserve to significantly lower the target range for the federal funds rate, resulting in a low interest rate environment during 2020 and 2021. The Federal Reserve has signaled that it intends to increase the target range for the federal funds rate and is tapering its purchases of U.S. Treasury and GSE mortgage-backed securities. The resulting potential for higher interest rates may create periods of market volatility that could adversely affect Farmer Mac's ability to manage interest rate risk, which could have a material adverse effect on Farmer Mac's operating results or financial condition. Farmer Mac is also subject to repricing risk, which is the risk that Farmer Mac's funding cost relative to a benchmark index (for example, the London Interbank Offered Rate known as "LIBOR" or the Secured Overnight Financing Rate known as "SOFR") will increase from the time the initial funding was issued and the time the liabilities are re-funded. This repricing risk arises from a funding strategy whereby Farmer Mac issues floating rate debt across a variety of maturities to fund floating or synthetically floating rate assets that on average may have longer maturities. A significant increase in the difference between Farmer Mac's funding cost relative to the benchmark index, including LIBOR and SOFR, could compress spread income on the assets Farmer Mac holds and seeks to re-fund with the higher cost funding. Widespread compression within a short timeframe could adversely affect Farmer Mac's operating results or financial condition. Changes in interest rates relative to Farmer Mac's management of interest rate risk through derivatives may cause volatility in financial results and capital levels and may adversely affect Farmer Mac's net income, liquidity position, or operating results. Farmer Mac enters into financial derivatives transactions to hedge interest rate risks inherent in its business and carries its financial derivatives at fair value in its consolidated financial statements. Although Farmer Mac's financial derivatives provide economic hedges of interest rate risk, changes in the fair values of financial derivatives can cause volatility in net income and in capital, particularly if those financial derivatives are not designated in hedge accounting relationships or if there is any ineffectiveness in a hedge accounting relationship. As interest rates increase or decrease, the fair values of Farmer Mac's derivatives change based on the position Farmer Mac holds relative to the specific characteristics of the derivative. Farmer Mac's core capital available to meet its statutory minimum capital requirement can be affected by changes in the fair values of financial derivatives, as noted above. Adverse changes in the fair values of Farmer Mac's financial derivatives that are not designated in hedge accounting relationships and any hedge ineffectiveness that results in a loss would reduce the amount of core capital available to meet this requirement. In 2021 and 2020, Farmer Mac recorded a loss of $5.1 million and a loss of $3.7 million, respectively, from changes in the fair values of its financial derivatives as a result of movements in interest rates during those years. In addition, Farmer Mac recorded losses of $1.5 million and $9.2 million in 2021 and 2020, respectively, related to ineffectiveness in hedge accounting relationships. Changes in interest rates have required, and in the future may require, Farmer Mac to post cash or investment securities to collateralize its derivative exposures due to corresponding changes in the fair market values of these derivatives. If changes in interest rates were to result in a significant decrease in the fair value of Farmer Mac's derivatives, Farmer Mac would be required to post cash, cash equivalents, or investment securities, possibly within a short period of time, to satisfy its obligations under its derivatives contracts. As of December 31, 2021, Farmer Mac posted $16.6 million of cash and $177.9 million of investment securities as collateral for its derivatives in net liability positions. If Farmer Mac is required to fully collateralize a significant portion of its derivatives in an adverse interest rate 44 environment, it could have a material adverse effect on Farmer Mac's liquidity position or operating results. Discontinuation of the LIBOR benchmark interest rate could adversely affect Farmer Mac's business, operating results, or financial condition. In July 2017, the United Kingdom's Financial Conduct Authority ("UKFCA"), which regulates U.S. Dollar LIBOR ("LIBOR"), announced that it would no longer persuade or compel banks to submit rates for the calculation of LIBOR after 2021 and would support the LIBOR indexes through 2021 to allow for a transition to any alternative reference rates. In November 2020, the UKFCA and the ICE Benchmark Administration, which administers LIBOR, announced that most tenors of LIBOR would continue to be published through June 2023. These announcements indicate that the continuation of LIBOR in its current form will be discontinued after June 2023. Farmer Mac continues to evaluate the potential effect on its business of the replacement of the LIBOR benchmark interest rate, including using replacement benchmark interest rates such as SOFR. As of December 31, 2021, Farmer Mac held $3.6 billion of floating rate assets in its lines of business and its investment portfolio, had issued $1.1 billion of floating rate debt, and had entered into $13.7 billion notional amount of interest rate swaps, each of which resets based on LIBOR. In addition, Farmer Mac's Series C Preferred Stock will be indexed to LIBOR after July 17, 2024. The market transition away from LIBOR and towards an alternative benchmark interest rate 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 rates. The introduction of an alternative reference rate may also introduce additional re-funding and repricing risk for Farmer Mac if an alternative benchmark interest rate index is used along with LIBOR during a transition period. If an alternative benchmark interest rate does not become widely used or accepted in place of LIBOR, then there may be uncertainty or differences in the calculation of the applicable interest rate or payment amounts depending on the terms of the governing instruments for Farmer Mac's assets and liabilities. This could result in different financial performance for previously booked transactions, require different hedging strategies, or require renegotiation of previously booked transactions, and may affect Farmer Mac's existing transaction data, products, systems, operations and pricing processes, which could adversely affect Farmer Mac's business, operating results, or financial condition. Financial Risk Incorrect estimates and assumptions by management in preparing financial statements could adversely affect Farmer Mac's business, operating results, reported assets and liabilities, financial condition, reputation, or capital levels. Farmer Mac's accounting policies and methods are fundamental to how it records and reports its financial condition and results of operations. Some of these policies and methods require management to make estimates and assumptions in preparing Farmer Mac's consolidated financial statements. Incorrect estimates and assumptions by management in connection with preparing Farmer Mac's consolidated financial statements could adversely affect the reported amounts of assets and liabilities and the reported amounts of income and expenses. For example, as of December 31, 2021, Farmer Mac's assets and liabilities recorded at fair value included financial instruments valued at $6.4 billion whose fair values management estimated in the absence of readily observable fair values (in other words, level 3). These financial instruments measured with significant unobservable inputs represented 25.3% of total assets and 62.2% of financial instruments measured at fair value as of December 31, 2021. See "Management's Discussion and Analysis—Critical Accounting Estimates—Fair Value Measurement" for more 45 information about fair value measurement. If management makes incorrect assumptions or estimates that result in understating or overstating reported financial results, it could materially and adversely affect Farmer Mac's business, operating results, reported assets and liabilities, financial condition, reputation, or capital levels. Changes in accounting standards or in applying accounting policies could adversely affect Farmer Mac's business, operating results, financial condition, or capital levels. Farmer Mac is subject to the requirements of entities that set and interpret the accounting standards governing the preparation of Farmer Mac's consolidated financial statements. These entities, which include the Financial Accounting Standards Board ("FASB"), the SEC, and Farmer Mac's independent registered public accounting firm, may add new accounting standards or change their interpretations of how those standards should be applied. These changes may be difficult to predict and could affect how Farmer Mac records and reports its financial condition and results of operations. In some cases, Farmer Mac could be required to apply a new or revised standard retrospectively, potentially resulting in changes to previously reported financial results. For example, the FASB issued a new accounting standard in 2016, which was effective for Farmer Mac on January 1, 2020, that required entities to measure credit losses based on an "expected credit loss" approach rather than an "incurred loss" approach previously required under GAAP. The new approach requires entities to measure all expected credit losses for financial assets carried at amortized cost and debt securities classified as available-for-sale, based on historical experience, current conditions, and reasonable forecasts of collectability. This new accounting standard could cause increases and more volatility in Farmer Mac's provision for credit losses and could adversely affect Farmer Mac's business, operating results, financial condition, or capital levels. See Note 2(r) to the consolidated financial statements for more information about this new accounting standard. Changes in the value or composition of Farmer Mac's investment securities could adversely affect Farmer Mac's business, operating results, financial condition, liquidity or capital levels. Deterioration in financial or credit market conditions could reduce the fair value of Farmer Mac's investment securities, particularly those securities that are less liquid and more subject to market variability. Some securities owned by Farmer Mac, including auction-rate certificates, do not have well-established secondary trading markets, making it more difficult to estimate current fair values for those securities. This requires Farmer Mac to rely on market observations and internal models to estimate the fair values of its investment securities and to determine whether credit losses exist. However, available market data may not reflect the actual sale conditions Farmer Mac may face when selling its investment securities, particularly in adverse financial market conditions. Internal models require Farmer Mac to exercise judgment about estimates and assumptions used in the models. If Farmer Mac uses unreliable market data or incorrect estimates or assumptions in its internal models to estimate the fair value of its investment securities, those estimates could adversely affect results of operations during the reporting period. And if Farmer Mac decides to sell securities in its investment portfolio, the price ultimately realized will depend on the demand and liquidity in the market at the time of sale, which could be significantly less than Farmer Mac's estimates for fair value. Failure to accurately estimate the fair value of Farmer Mac's investment securities could adversely affect Farmer Mac's business, operating results, financial condition, liquidity or capital levels. 46 The trading price for Farmer Mac's Class C non-voting common stock may be volatile due to market influences, trading volume, the effects of equity awards for Farmer Mac's officers, directors, and employees, or sales of significant amounts of the stock by large holders. The trading price of Farmer Mac's Class C non-voting common stock ("Class C stock") has at times experienced substantial price volatility and may remain volatile. For example, the closing price of the Class C stock ranged from $74.76 per share to $136.81 per share during 2021. The trading price may fluctuate in response to various factors, including short sales, hedging, the presence or absence of a share repurchase program, stock market influences in general that are unrelated to Farmer Mac's operating performance (including COVID-19), or sales of significant amounts of the stock by large holders. Farmer Mac typically grants equity awards each year that are based on the Class C stock, including grants that vest over time or upon the achievement of specified performance goals. Sales of stock acquired upon vesting or the exercise of equity awards by Farmer Mac's officers, directors, or employees, whether under an established trading plan or otherwise, could adversely affect the trading price of the Class C stock. All of these factors may be exacerbated during periods of low trading volume for Farmer Mac's Class C stock, which averaged 39,800 shares daily during 2021, and may have a prolonged negative effect on its trading price or increase price volatility. Regulatory and Compliance Risk Farmer Mac and many of its business counterparties are subject to comprehensive government regulation, and changes to applicable laws and regulations could adversely affect Farmer Mac's business, operating results, reputation, or financial condition. Farmer Mac was established under a statutory charter that the U.S. Congress may amend at any time and is regulated by various government agencies, including the FCA and the SEC. Farmer Mac is therefore exposed to the risk of legal or regulatory penalties; material financial loss including fines, judgments, damages, or settlements; or loss of reputation if it violates applicable laws, regulations, rules, regulatory requests, self-regulatory organization standards, or codes of conduct applicable to its business activities. Future legislative or regulatory actions affecting Farmer Mac's statutory charter or its business activities, including increased regulatory supervision, and any required changes to Farmer Mac's business or operations resulting from such actions, could result in a financial loss for Farmer Mac or otherwise reduce its profitability, impose more compliance and other costs on Farmer Mac, limit the products offered by Farmer Mac or its ability to pursue business opportunities in which it might otherwise consider engaging, curtail business activities in which it is currently engaged, affect the value of assets that Farmer Mac holds, or otherwise adversely affect Farmer Mac's business, results of operations, reputation, or financial condition. The financial services industry, in which most of Farmer Mac's business counterparties and customers operate, is subject to significant legislation and regulations. To the extent that current or future legislation, regulations, or supervisory activities affect the activities of banks, insurance companies, other rural lenders, derivatives counterparties, clearinghouses, securities dealers, or other regulated entities that constitute a large portion of Farmer Mac's business counterparties or customers, Farmer Mac could experience loss of business or business opportunities, increased compliance costs, disadvantageous business terms in its dealings with counterparties, and unfavorable changes to its business practices or activities. As a result, Farmer Mac's business, operating results, reputation, or financial condition could be adversely affected. 47 Farmer Mac's capital requirements may change, and failure to meet those requirements could result in supervisory measures or the inability of Farmer Mac to declare dividends, or otherwise materially and adversely affect Farmer Mac's business, operating results, or financial condition. Farmer Mac is required by statute and regulation to maintain certain capital levels. Any inability by Farmer Mac to meet these capital requirements could result in supervisory measures by FCA, adversely affect Farmer Mac's ability to declare dividends on its common and preferred stock, or otherwise materially and adversely affect Farmer Mac's business, operating results, or financial condition. As required by an FCA regulation on capital planning, Farmer Mac has adopted a policy to maintain a sufficient level of Tier 1 capital and to restrict paying Tier 1-eligible dividends if Tier 1 capital falls below specified thresholds. For more information about Farmer Mac's capital requirements, including the Tier 1 capital requirement, see "Business—Government Regulation of Farmer Mac—Regulation—Capital Standards." Factors that could adversely affect the adequacy of Farmer Mac's capital levels in the future, and which may be beyond Farmer Mac's control, include: • credit losses; • adverse changes in interest rates or credit spreads; • the need to increase the level of the allowance for losses on loans; • legislative or regulatory actions that increase Farmer Mac's capital requirements; and • changes in GAAP. Political Risk Farmer Mac is a GSE that may be materially and adversely affected by legislative or political developments. Farmer Mac is a GSE with a statutory charter that may be amended by Congress at any time, and is also regulated by government agencies, including the FCA and the SEC. Although Farmer Mac is not aware of any pending legislative or regulatory proposals that would materially impact its business or operations, Farmer Mac's ability to effectively conduct its business is subject to risks and uncertainties related to political developments that could affect Farmer Mac or GSEs generally. These political risks and uncertainties may be heightened under a new Congress or Presidential administration. Farmer Mac cannot predict whether or when legislative or regulatory initiatives may commence that, if successful, could negatively affect the status of Farmer Mac as a GSE or how Farmer Mac operates, and which could have a material and adverse effect on Farmer Mac's business, operating results, financial condition, or capital levels. See "Business—Government Regulation of Farmer Mac" for more information about the rules and regulations governing Farmer Mac's activities. Human Capital Risk Farmer Mac's ability to attract and retain motivated and qualified employees is critical to the success of its business, and significant or sustained disruption in the continuity of Farmer Mac's employees or executive leaders may materially adversely affect Farmer Mac's business performance, operations, financial condition, or reputation. Farmer Mac relies on its employees' breadth and depth of knowledge of Farmer Mac and related industries to run its business operations successfully. If Farmer Mac cannot continue to retain and attract motivated and qualified employees or does not have adequate human capital to achieve its business objectives, 48 Farmer Mac's business performance, operations, financial condition, or reputation could be materially adversely affected. A significant disruption in the continuity of Farmer Mac's employees or any significant executive leadership change could also result in a loss of productivity and affect Farmer Mac's ability to successfully execute business strategies by creating uncertainty or instability or requiring Farmer Mac to divert or expend more resources to replace personnel. For example, after the termination of employment of Farmer Mac's former Chief Financial Officer in July 2019 and resignation of Farmer Mac's former Chief Credit Officer in February 2020, Farmer Mac expended significant resources and attention to identify their successors. Loss of key leadership personnel could also damage the public or market perception of Farmer Mac or result in the departure of other executives or key employees. Any of these factors could materially adversely affect Farmer Mac's business performance, operations, financial condition, or reputation. Any of the risks described in this section could materially and adversely affect Farmer Mac's business, operating results, financial condition, reputation, capital levels, and future earnings. For more information about Farmer Mac's risk management, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management" in Item 7 of this Annual Report on Form 10-K. Item 1B. Unresolved Staff Comments None. Item 2. Properties Farmer Mac maintains its principal office at 1999 K Street, N.W., 4th Floor, Washington, D.C. 20006, under a sublease that began on October 1, 2011 and ends on August 30, 2024. Farmer Mac also maintains two other office locations: (1) 9169 Northpark Drive, Johnston, Iowa 50322, under a lease that began on October 1, 2017 and ends on June 30, 2023; and (2) 9249 Northpark Drive, Johnston, IA 50322, under a lease that began on August 1, 2021 and ends on June 30, 2023. Farmer Mac believes that its offices are suitable and adequate for its current and anticipated needs for the near future. Farmer Mac's activities at each property encompass its Agricultural Finance line of business. Farmer Mac's activities at its Washington, D.C. office encompass all of its segments. Item 3. Legal Proceedings None. Item 4. Mine Safety Disclosures Not applicable. 49 PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases for Equity Securities (a) Farmer Mac has three classes of common stock outstanding – Class A voting common stock, Class B voting common stock, and Class C non-voting common stock. Ownership of Class A voting common stock is restricted to banks, insurance companies, and other financial institutions or similar entities that are not institutions of the FCS. Ownership of Class B voting common stock is restricted to institutions of the FCS. There are no ownership restrictions on the Class C non-voting common stock. In the original public offering of the Class A and Class B voting common stock, Farmer Mac reserved the right to redeem at book value any shares of either class held by an ineligible holder. Farmer Mac's Class A voting common stock and Class C non-voting common stock are listed on the New York Stock Exchange under the symbols AGM.A and AGM, respectively. The Class B voting common stock, which has a limited market and trades infrequently, is not listed or quoted on any exchange or other quotation system, and Farmer Mac is not aware of any publicly available quotations or prices for that class of common stock. As of February 7, 2022, Farmer Mac had 873 registered owners of the Class A voting common stock, 75 registered owners of the Class B voting common stock, and 823 registered owners of the Class C non-voting common stock. The dividend rights of all three classes of Farmer Mac's common stock are the same, and dividends may be paid on common stock only when, as, and if declared by Farmer Mac's board of directors in its sole discretion, subject to compliance with applicable capital requirements and payment of dividends on any outstanding preferred stock. On February 24, 2020, Farmer Mac's board of directors declared a dividend of $0.80 per share on Farmer Mac's common stock payable for first quarter 2020. That dividend was paid quarterly through fourth quarter 2020. On February 23, 2021, Farmer Mac's board of directors declared a dividend of $0.88 per share on Farmer Mac's common stock payable for first quarter 2021. That dividend was paid quarterly through fourth quarter 2021. On February 24, 2022, Farmer Mac's board of directors declared a dividend of $0.95 per share on Farmer Mac's common stock payable for first quarter 2022. See "Business—Financing—Equity Issuance" for more information on Farmer Mac's common stock. The quarterly dividend of $0.95 per share on all three classes of common stock for first quarter 2022 represents an increase of $0.07 per common share, or 8%, over the quarterly dividend payout in 2021 and reflects the board's goal to maintain Farmer Mac's common stock dividend payout target as a percentage of annual core earnings at 35%. In deciding to maintain Farmer Mac's common stock dividend payout target, the board of directors considered Farmer Mac's strong capital position and the consistency of and outlook for earnings, balanced against the need for capital to fund the significant growth objectives identified in the company's strategic plan and to meet regulatory requirements and metrics established by the board of directors. These actions are also consistent with Farmer Mac's goal of providing a competitive return on its common stockholders' investments through the payment of cash dividends. The declaration and payment of future dividends to holders of Farmer Mac's common stock are, however, at the discretion of Farmer Mac's board of directors and depend on many factors, including Farmer Mac's financial condition, actual results of operations and earnings, the capital needs of Farmer Mac's business, regulatory requirements, and other factors that Farmer Mac's board deems relevant. Farmer Mac's ability to pay dividends on its common stock is also subject to the payment of dividends on its outstanding 50 preferred stock. Applicable FCA regulations also require Farmer Mac to provide FCA with 15 days' advance notice of certain capital distributions. Farmer Mac's ability to declare and pay dividends could be restricted if it were to fail to comply with applicable capital requirements. See Note 9 to the consolidated financial statements for more information about Farmer Mac's capital position and see "Business—Government Regulation of Farmer Mac—Regulation—Capital Standards" and "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Capital Requirements" for more information on the capital requirements applicable to Farmer Mac. Information about securities authorized for issuance under Farmer Mac's equity compensation plans appears under "Equity Compensation Plans" in Farmer Mac's definitive proxy statement to be filed on or about April 14, 2022. That portion of the definitive proxy statement is incorporated by reference into this Annual Report on Form 10-K. Farmer Mac is a federally chartered instrumentality of the United States, and its common stock is exempt from registration under Section 3(a)(2) of the Securities Act. One type of transaction related to Farmer Mac's common stock occurred during fourth quarter 2021 that was not registered under the Securities Act and not otherwise reported on a Current Report on Form 8-K: • In October 2021, consistent with Farmer Mac's policy that permits directors of Farmer Mac to elect to receive shares of Class C non-voting common stock in lieu of their cash retainers, Farmer Mac issued an aggregate of 427 shares of Class C non-voting common stock to the five directors who elected to receive such stock in lieu of a portion of their cash retainers. The number of shares issued to the directors was calculated based on a price of $108.52 per share, which was the closing price of the Class C non-voting common stock on September 30, 2021, the last business day of the third quarter, as reported by the New York Stock Exchange. Performance Graph . The following graph compares the performance of Farmer Mac's Class A voting common stock and Class C non-voting common stock with the performance of the New York Stock Exchange Composite Index ("NYSE Comp") and the Standard & Poor's 500 Diversified Financials Index ("S&P 500 Div Fin") over the period from December 31, 2016 to December 31, 2021. The graph assumes that $100 was invested on December 31, 2016 in each of: Farmer Mac's Class A voting common stock; Farmer Mac's Class C non-voting common stock; the NYSE Composite Index; and the S&P 500 Diversified Financials Index. The graph also assumes that all dividends were reinvested into the same securities throughout the past five years. Farmer Mac obtained the information in the performance graph from S&P Global Market Intelligence. 51 This performance graph shall not be deemed to be "soliciting material" or to be "filed" with the SEC, and this performance graph shall not be incorporated by reference into any of Farmer Mac's filings under the Securities Act or the Securities Exchange Act of 1934 and related regulations, or any other document, whether made before or after the date of this report and despite any general incorporation language contained in a filing or document (except to the extent Farmer Mac specifically incorporates this section by reference into a filing or document). (b) Not applicable. (c) None. Item 6. [Reserved]. 52 Item 7. 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 year ended December 31, 2021, including an evaluation of the amounts and certainty of cash flows from operations and from outside sources. 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 Farmer Mac's consolidated financial statements and the related notes to the consolidated financial statements for the fiscal years ended December 31, 2021, 2020, and 2019. 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 the opportunity to earn a competitive return on their investment dollars. During 2021: • we provided $8.6 billion in liquidity and lending capacity to lenders serving rural America; • we closed on a newly-designed structured securitization transaction involving approximately $300 million of agricultural mortgage loans; • 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 added 32 net new employees to our workforce (a 26% increase compared to year-end 2020) to enable continued growth of our business and to fulfill our mission to 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 2021, described in more detail below, 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." 53 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 Years Ended December 31, 2021 2020 2019 (in thousands) Net income attributable to common stockholders $ 107,583 $ 89,176 $ 93,650 Core earnings 113,570 100,612 93,742 The $18.4 million year-over-year increase in net income attributable to common stockholders was due to a $23.8 million after-tax increase in net interest income, a net change in our (release)/provision for credit losses of $8.1 million after tax, and a $5.2 million after-tax gain on sale of mortgage loans. These factors were partially offset by a $9.5 million after-tax increase in operating expenses, a $6.9 million increase in preferred stock dividends, and a $2.5 million after-tax decrease in the fair value of undesignated financial derivatives. The $4.5 million decrease in net income attributable to common stockholders for 2020 compared to 2019 was primarily due to a $7.5 million after-tax increase in operating expenses, a $4.4 million after-tax decrease in the fair value of undesignated financial derivatives due to fluctuations in long-term interest rates, a $3.9 million increase in preferred stock dividends, and a $3.6 million after-tax increase in the total provision for credit losses. These decreases were partially offset by a $13.8 million after-tax increase in net interest income and a $1.3 million after-tax increase in other income. The $13.0 million year-over-year increase in core earnings was due to a $18.7 million after-tax increase in net effective spread, a net change in our (release)/provision for credit losses of $8.1 million after tax, and a $5.2 million after-tax gain on sale of mortgage loans. These factors were partially offset by a $9.5 million after-tax increase in operating expenses, a $6.9 million increase in preferred stock dividends, a $1.3 million after-tax decrease in guarantee fees, and a $0.8 million after-tax decrease in other income. The $6.9 million increase in core earnings for 2020 compared to 2019 was primarily due to a $22.4 million after-tax increase in net effective spread. This increase was partially offset by a $7.5 million after-tax increase in operating expenses, a $3.9 million increase in preferred stock dividends, and a $3.6 million after-tax increase in the total provision for credit losses. 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." 54 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 Years Ended December 31, 2021 2020 2019 (in thousands) Net interest income $ 220,775 $ 190,588 $ 173,135 Net interest yield % 0.94 % 0.85 % 0.87 % Net effective spread $ 220,668 $ 196,956 $ 168,608 Net effective spread % 0.98 % 0.93 % 0.91 % The $30.2 million year-over-year increase in net interest income was primarily due to a $16.7 million increase related to net new business volume, a $6.9 million decrease in funding costs, and a $7.7 million increase in the fair value of derivatives designated in fair value hedge accounting relationships (designated financial derivatives). In percentage terms, the year-over-year 0.09% increase was primarily attributable to an increase of 0.04% in net new business volume, an increase of 0.03% in net fair value changes from designated financial derivatives, and a decrease of 0.01% in funding costs. The $17.5 million increase in net interest income for 2020 compared to 2019 was primarily due to a $23.2 million increase related to net new business volume. This was partially offset by a $4.1 million increase in funding and liquidity costs and a $1.3 million decrease in the fair value of derivatives designated in fair value hedge accounting relationships (designated financial derivatives). In percentage terms, the decrease of 0.02% in net interest income yield was primarily attributable to an increase of 0.05% in funding and liquidity costs and 0.01% in net fair value changes from designated financial derivatives, partially offset by an increase of 0.04% related to net new business volume. The $23.7 million year-over-year increase in net effective spread in dollars was primarily due to an increase of $16.7 million from net new business volume and a $6.3 million decrease in non-GAAP funding costs. In percentage terms, the year-over-year increase of 0.05% was primarily attributable to an increase of 0.04% in net new business volume and a decrease of 0.01% in funding costs. The $28.3 million increase in net effective spread in dollars for 2020 compared to 2019 was primarily due to net new business volume, which increased net effective spread by approximately $23.2 million, and a $4.6 million decrease in non-GAAP funding costs. In percentage terms, the increase of 0.02% was primarily attributable to net 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." 55 Business Volume Our outstanding business volume was $23.6 billion as of December 31, 2021, a net increase of $1.7 billion from December 31, 2020 after taking into account all new business, maturities, sales, and paydowns on existing assets. The net increase was primarily attributable to net increases of $1.1 billion in the Agricultural Finance line of business and $0.6 billion in the Rural Infrastructure Finance 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 December 31, 2021 December 31, 2020 (in thousands) Core capital $ 1,200,560 $ 1,006,400 Capital in excess of minimum capital level required 486,810 325,455 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. Credit Quality The following table presents Agricultural Finance on-balance sheet loan purchase and off-balance sheet LTSPCs and Farmer Mac Guaranteed Securities substandard assets, in dollars and as a percentage of the respective portfolio as of December 31, 2021 and December 31, 2020: Table 4 On-Balance Sheet Off-Balance Sheet Substandard Assets % of Portfolio Substandard Assets % of Portfolio (dollars in thousands) December 31, 2021 $ 185,758 2.7 % $ 60,922 2.1 % December 31, 2020 180,823 2.9 % 110,671 4.6 % Increase/(decrease) from prior year-ending $ 4,935 (0.2) % $ (49,749) (2.5) % The increase of $4.9 million in on-balance sheet substandard assets during 2021 was primarily driven by credit downgrades during the year in permanent plantings, partially offset by credit upgrades in livestock and crops as well as the payoff of one substandard storage and processing loan. The on-balance sheet Agricultural Finance mortgage loan portfolio grew by $670.6 million, which, when coupled with credit upgrades, caused the percentage of substandard assets to decrease. The $49.7 million decrease in substandard assets in our off-balance sheet LTSPC and Farmer Mac Guaranteed Securities portfolios during 2021 was primarily due to credit upgrades across the portfolios during the year, particularly crops and livestock. There was one substandard asset in the Rural Infrastructure Finance loan purchase portfolio (a Rural Utilities loan) as of December 31, 2021 and none as of December 31, 2020. 56 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." The following table presents 90-day delinquencies for on-balance sheet Agricultural Finance mortgage loan purchases and off-balance sheet LTSPCs and Farmer Mac Guaranteed Securities, in dollars and as a percentage of the respective balance sheet category as of December 31, 2021 and December 31, 2020: Table 5 On-Balance Sheet Off-Balance Sheet 90-Day Delinquencies % of Portfolio 90-Day Delinquencies % of Portfolio (dollars in thousands) December 31, 2021 $ 43,710 0.64 % $ 3,597 0.12 % December 31, 2020 34,799 0.56 % 11,433 0.48 % Increase/(decrease) from prior year-ending $ 8,911 0.08 % $ (7,836) (0.36) % On-balance sheet Farm & Ranch loans 90 or more days delinquent increased in all commodity groups, except storage and processing where one loan paid off. Off-balance sheet Farm & Ranch loans 90 days or more delinquent decreased in crops and part-time farms and was partially offset by increases in permanent plantings and livestock. The top ten borrower exposures over 90 days delinquent in either the on- or off-balance sheet Agricultural Finance portfolio represented over half of the aggregate 90-day delinquencies as of December 31, 2021. As of both December 31, 2021 and 2020, there were no 90-day delinquencies in Farmer Mac's portfolio of Rural Infrastructure Finance loan purchases and loans underlying LTSPCs. 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." COVID-19 Update Farmer Mac has operated successfully throughout the COVID-19 pandemic with most employees still working remotely. Farmer Mac has maintained uninterrupted access to the debt capital markets during that time and remains a source of capital and liquidity to rural borrowers facing economic or market volatility stemming from the ongoing pandemic. For more information on the effects of the COVID-19 pandemic on Farmer Mac's business, see "Business—Human Capital" and "Management's Discussion and Analysis of Financial Condition and Results of Operations—Outlook." Critical Accounting Estimates The preparation of Farmer Mac's consolidated financial statements in conformity with GAAP requires the use of estimates and assumptions that affect the amounts reported in the consolidated financial statements and related notes for the periods presented. Farmer Mac considers an accounting estimate made in accordance with GAAP to be critical when it involves a significant level of estimation uncertainty and it has had or is likely to have a material impact on our financial condition or results of operations. 57 The accounting estimate that Farmer Mac considers to be critical in the preparation of its consolidated financial statements is the estimation of the fair value of AgVantage Securities that are classified as available for sale (AgVantage AFS). Farmer Mac considers the fair value of AgVantage AFS to be a critical estimate due to the significance of the periodic measurement of mark-to-market adjustments relative to the company's total assets, comprehensive income, and equity. Farmer Mac also considers the fair value of AgVantage AFS to be a critical accounting estimate because Farmer Mac applies a discount rate in calculating the net present value of future expected cash flows that is both significant to the estimate of their fair value and unobservable in the market. Farmer Mac relies upon this significant unobservable input to estimate the fair value of AgVantage AFS because there are no observable transactions in these securities in the market. The fair value of AgVantage AFS had accumulated unrealized gains in the amount of $212.9 million and $368.3 million as of December 31, 2021 and 2020, respectively. See Note 5 to the consolidated financial statements – Farmer Mac Guaranteed Securities and USDA Securities for more information. Farmer Mac applies discount rates that are commensurate with the risks involved to estimate the fair value measurement of AgVantage AFS. As of December 31, 2021, Farmer Mac applied discount rates that ranged from 0.9% to 2.1% (with a weighted average of 1.7%), As of December 31 2020, Farmer Mac applied discount rates that ranged from 0.8% to 2.3% (with a weighted average of 1.3%). Use of different discount rates than those selected by Farmer Mac may result in materially different estimates of fair value for AgVantage AFS. Farmer Mac selects the discount rate for each AgVantage AFS security by analyzing credit default swap levels and the long-term credit outlook of Farmer Mac's major counterparties and estimating an appropriate credit spread relative to U.S. Treasury yields. The periodic measurement of fair value and underlying discount rate methodology is subject to Farmer Mac’s internal controls and review by management. As of December 31, 2021, a 0.50% increase in the discount rates used to determine the fair value of AgVantage AFS would decrease the overall GAAP carrying value by approximately 2.5%. See Note 13 to the consolidated financial statements – Fair Value Disclosures for more information. For a description of Farmer Mac’s accounting policy for fair value measurements, see Note 2(n) to the consolidated financial statements – Significant Accounting Policies, Fair Value Measurements. 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. 58 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)/gains on financial derivatives" on the consolidated statements of operations. However, 59 the accrual of the contractual amounts due for undesignated financial derivatives are included in Farmer Mac's calculation of net effective spread. 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: 60 Table 6 Reconciliation of Net Income Attributable to Common Stockholders to Core Earnings For the Years Ended December 31, 2021 2020 2019 (in thousands, except per share amounts) Net income attributable to common stockholders $ 107,583 $ 89,176 $ 93,650 Less reconciling items: (Losses)/gains on undesignated financial derivatives due to fair value changes (see Table 14) (5,103) (3,691) 10,077 Losses on hedging activities due to fair value changes (2,985) (10,019) (9,010) Unrealized (losses)/gains on trading securities (115) 51 326 Net effects of amortization of premiums/discounts and deferred gains on assets consolidated at fair value 130 58 (122) Net effects of terminations or net settlements on financial derivatives 494 1,236 1,089 Issuance costs on the retirement of preferred stock — (1,667) (1,956) Income tax effect related to reconciling items 1,592 2,596 (496) Sub-total (5,987) (11,436) (92) Core earnings $ 113,570 $ 100,612 $ 93,742 Composition of Core Earnings: Revenues: Net effective spread (1) $ 220,668 $ 196,956 $ 168,608 Guarantee and commitment fees (2) 17,533 19,150 21,335 Gain on sale of mortgage loans 6,539 — — Other (3) 1,680 2,687 1,775 Total revenues 246,420 218,793 191,718 Credit related expense (GAAP): (Release of)/provision for losses (2,187) 8,055 3,501 REO operating expenses — — 64 Gains on sale of REO — (463) — Total credit related expense (2,187) 7,592 3,565 Operating expenses (GAAP): Compensation and employee benefits 42,847 36,502 28,762 General and administrative 27,507 21,976 20,311 Regulatory fees 3,062 2,925 2,788 Total operating expenses 73,416 61,403 51,861 Net earnings 175,191 149,798 136,292 Income tax expense (4) 36,944 31,381 28,610 Preferred stock dividends (GAAP) 24,677 17,805 13,940 Core earnings $ 113,570 $ 100,612 $ 93,742 Core earnings per share: Basic $ 10.56 $ 9.38 $ 8.76 Diluted 10.47 9.33 8.70 Weighted-average shares: Basic 10,758 10,728 10,696 Diluted 10,846 10,786 10,778 (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. 61 (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. (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 Years Ended December 31, 2021 2020 2019 (in thousands, except per share amounts) GAAP - Basic EPS $ 10.00 $ 8.31 $ 8.76 Less reconciling items: (Losses)/gains on undesignated financial derivatives due to fair value changes (see Table 14) (0.47) (0.34) 0.94 Losses on hedging activities due to fair value changes (0.28) (0.94) (0.83) Unrealized (losses)/gains on trading securities (0.01) — 0.03 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 0.04 0.12 0.10 Issuance costs on the retirement of preferred stock — (0.16) (0.18) Income tax effect related to reconciling items 0.15 0.24 (0.05) Sub-total (0.56) (1.07) — Core Earnings - Basic EPS $ 10.56 $ 9.38 $ 8.76 Shares used in per share calculation (GAAP and Core Earnings) 10,758 10,728 10,696 Reconciliation of GAAP Diluted Earnings Per Share to Core Earnings - Diluted Earnings Per Share For the Years Ended December 31, 2021 2020 2019 (in thousands, except per share amounts) GAAP - Diluted EPS $ 9.92 $ 8.27 $ 8.69 Less reconciling items: (Losses)/gains on undesignated financial derivatives due to fair value changes (see Table 14) (0.47) (0.34) 0.93 Losses on hedging activities due to fair value changes (0.28) (0.93) (0.83) Unrealized (losses)/gains on trading securities (0.01) — 0.03 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 0.05 0.11 0.10 Issuance costs on the retirement of preferred stock — (0.15) (0.18) Income tax effect related to reconciling items 0.15 0.24 (0.05) Sub-total (0.55) (1.06) (0.01) Core Earnings - Diluted EPS $ 10.47 $ 9.33 $ 8.70 Shares used in per share calculation (GAAP and Core Earnings) 10,846 10,786 10,778 62 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 Years Ended December 31, 2021 2020 2019 (in thousands) Losses due to fair value changes (see Table 6.2) $ (1,515) $ (9,184) $ (7,907) Initial cash payment (received) at inception of swap (1,470) (835) (1,103) Losses on hedging activities due to fair value changes $ (2,985) $ (10,019) $ (9,010) 2. Unrealized (losses)/gains on trading securities. The unrealized (losses)/gains 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. 5. The recognition of deferred issuance costs on the retirements of the Series A Preferred Stock in 2020 and Series B Preferred Stock in 2019 has been excluded from core earnings because they are not 63 frequently occurring transactions, nor are they indicative of future operating results. This is consistent with Farmer Mac's previous treatment of deferred issuance costs associated with the retirement of preferred stock. The next eligible preferred stock redemption date is in 2024. 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 years ended December 31, 2021, 2020, and 2019. 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 Year Ended December 31, 2021 December 31, 2020 December 31, 2019 Average Balance Income/ Expense Average Rate Average Balance Income/ Expense Average Rate Average Balance Income/ Expense Average Rate (dollars in thousands) Interest-earning assets: Cash and investments $ 4,726,552 $ 18,660 0.39 % $ 4,180,158 $ 42,144 1.01 % $ 3,218,286 $ 81,522 2.53 % Loans, Farmer Mac Guaranteed Securities and USDA Securities (1) 17,838,238 367,154 2.06 % 16,950,819 407,296 2.40 % 15,214,248 502,694 3.30 % Total interest-earning assets 22,564,790 385,814 1.71 % 21,130,977 449,440 2.13 % 18,432,534 584,216 3.17 % Funding: Notes payable due within one year 3,779,689 3,820 0.10 % 3,937,104 24,242 0.62 % 3,758,256 86,031 2.29 % Notes payable due after one year (2) 18,004,757 166,083 0.92 % 16,869,918 241,211 1.43 % 14,116,085 332,719 2.36 % Total interest-bearing liabilities (3) 21,784,446 169,903 0.78 % 20,807,022 265,453 1.28 % 17,874,341 418,750 2.34 % Net non-interest-bearing funding 780,344 — 323,955 — 558,193 — Total funding 22,564,790 169,903 0.75 % 21,130,977 265,453 1.26 % 18,432,534 418,750 2.27 % Net interest income/yield prior to consolidation of certain trusts 22,564,790 215,911 0.96 % 21,130,977 183,987 0.87 % 18,432,534 165,466 0.90 % Net effect of consolidated trusts (4) 1,049,521 4,864 0.46 % 1,396,850 6,601 0.47 % 1,544,052 7,669 0.50 % Net interest income/yield $ 23,614,311 $ 220,775 0.94 % $ 22,527,827 $ 190,588 0.85 % $ 19,976,586 $ 173,135 0.87 % (1) Excludes interest income of $39.0 million, $54.1 million, and $60.9 million in 2021, 2020, and 2019, 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 $34.1 million, $47.5 million, and $53.2 million in 2021, 2020, and 2019, 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 $30.2 million year-over-year increase in net interest income was primarily due to a $16.7 million increase related to net new business volume, a $6.9 million decrease in funding costs, and a $7.7 million increase in the fair value of derivatives designated in fair value hedge accounting relationships (designated financial derivatives). In percentage terms, the year-over-year 0.09% increase was primarily attributable to an increase of 0.04% in net new business volume, an increase of 0.03% in net fair value changes from designated financial derivatives, and a decrease of 0.01% in funding costs. For 2020 compared to 2019, the $17.5 million increase in net interest income was primarily due to net 64 business volume growth across most lines of business, which contributed $23.2 million to net interest income. This was partially offset by a $4.1 million increase in funding and liquidity costs and a decrease of $1.3 million in net fair value changes from designated financial derivatives as a result of fluctuations in interest rates. In percentage terms, the decrease of 0.02% in net interest income yield was primarily attributable to an increase of 0.05% in funding and liquidity costs and 0.01% in net fair value changes from designated financial derivatives, partially offset by an increase of 0.04% related to new business volume. 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 2021 vs. 2020 2020 vs. 2019 Increase/(Decrease) Due to Increase/(Decrease) Due to Rate Volume Total Rate Volume Total (in thousands) Income from interest-earning assets: Cash and investments $ (28,400) $ 4,916 $ (23,484) $ (58,877) $ 19,499 $ (39,378) Loans, Farmer Mac Guaranteed Securities and USDA Securities (60,647) 20,505 (40,142) (148,159) 52,761 (95,398) Total (89,047) 25,421 (63,626) (207,036) 72,260 (134,776) Expense from other interest-bearing liabilities (107,497) 11,947 (95,550) (213,715) 60,418 (153,297) Change in net interest income prior to consolidation of certain trusts (1) $ 18,450 $ 13,474 $ 31,924 $ 6,679 $ 11,842 $ 18,521 (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. 65 Table 11 For the Years Ended December 31, 2021 2020 2019 Dollars Yield Dollars Yield Dollars Yield (dollars in thousands) Net interest income/yield $ 220,775 0.94 % $ 190,588 0.85 % $ 173,135 0.87 % Net effects of consolidated trusts (4,864) 0.02 % (6,601) 0.02 % (7,669) 0.03 % Expense related to undesignated financial derivatives 2,841 0.01 % 3,468 0.02 % (5,095) (0.03) % Amortization of premiums/discounts on assets consolidated at fair value (45) — % 197 — % 398 — % Amortization of losses due to terminations or net settlements on financial derivatives 446 — % 120 — % (68) — % Fair value changes on fair value hedge relationships 1,515 0.01 % 9,184 0.04 % 7,907 0.04 % Net effective spread $ 220,668 0.98 % $ 196,956 0.93 % $ 168,608 0.91 % The $23.7 million year-over-year increase in net effective spread in dollars was primarily due to an increase of $16.7 million from net new business volume and a $6.3 million decrease in non-GAAP funding costs. In percentage terms, the year-over-year increase of 0.05% was primarily attributable to an increase of 0.04% in net new business volume and a decrease of 0.01% in funding costs. For 2020 compared to 2019, the $28.3 million increase in net effective spread in dollars was primarily due to net business volume growth across most lines of business, which contributed $23.2 million to net effective spread, and a $4.6 million decrease in non-GAAP funding costs. In percentage terms, the increase of 0.02% was primarily attributable to new business volume. See Note 14 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. 66 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 each year in the three-year period ended December 31, 2021: Table 12 Allowance for Losses Reserve for Losses Total Allowance for Losses (in thousands) Balance as of January 1, 2019 $ 7,017 $ 2,167 $ 9,184 Provision for/(release of) losses 3,504 (3) 3,501 Charge-offs (67) — (67) Balance as of December 31, 2019 $ 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 $ 12,247 $ 3,027 $ 15,274 Provision for losses 7,810 250 8,060 Charge-offs (5,759) — (5,759) Balance as of December 31, 2020 $ 14,298 $ 3,277 $ 17,575 Release of losses (860) (1,327) (2,187) Recovery 1,054 — 1,054 Charge-offs — — — Balance as of December 31, 2021 $ 14,492 $ 1,950 $ 16,442 See Notes 8 and 12 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 years ended December 31, 2021, 2020, and 2019: Table 13 For the Years Ended December 31, 2021 2020 2019 (in thousands) Guarantee and commitment fees $ 12,669 $ 12,549 $ 13,666 Guarantee and commitment fees were relatively flat for the year ended December 31, 2021 compared to 2020, which was due to stability 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 $17.5 million for the year ended December 31, 2021, respectively, compared to $19.2 million and $21.3 million for the 2020 and 2019, 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 those 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 67 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)/gains on financial derivatives . The components of gains and losses on financial derivatives for the years ended December 31, 2021, 2020, and 2019 are summarized in the following table: Table 14 For the Years Ended December 31, 2021 2020 2019 (in thousands) (Losses)/gains due to fair value changes $ (5,103) $ (3,691) $ 10,077 Accrual of contractual payments 2,841 3,468 (5,095) (Losses)/gains due to terminations or net settlements (1,086) (23) 300 (Losses)/gains on financial derivatives $ (3,348) $ (246) $ 5,282 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)/gains due to terminations or net 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)/gains 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. 68 Gains on Sale of Mortgage Loans Table 15 For the Years Ended December 31, 2021 2020 2019 (in thousands) Gain on sale of mortgage loans $ 6,539 $ — $ — In fourth quarter 2021, Farmer Mac executed a newly-designed structured securitization of a $299.4 million pool of Farm & Ranch loans. The transaction was structured into two pass-through tranches, Class A and Class B, each of which were sold to third-party investors in the capital markets, as well as an interest-only Farmer Mac Guaranteed Security ("IO-FMGS") that Farmer Mac retained. The Class A tranche makes up 92.5% of the pool and is guaranteed as to principal and interest by Farmer Mac. The IO-FMGS is guaranteed as to interest by Farmer Mac. The Class B tranche makes up the remaining 7.5% of the pool and is subordinated in right of interest and principal payments in the event of a shortfall to the Class A tranche and the IO-FMGS. As a result of this transaction, Farmer Mac recognized the following: 1. A guarantee obligation and corresponding guarantee fee related to the Farmer Mac-guaranteed Class A tranche; 2. A servicing asset and corresponding servicing fee related to Farmer Mac’s role as master servicer for the entire pool and as central servicer for the portion of the pool for which it serves as central servicer; and 3. A security representing the IO-FMGS. These assets and liabilities were initially recorded on the balance sheet at fair value. Other Income . The following table presents other income for the years ended December 31, 2021, 2020, and 2019: Table 16 For the Years Ended December 31, 2021 2020 2019 (in thousands) Late fees $ 951 $ 1,292 $ 1,135 Servicing fees 291 — — Mortgage servicing rights amortization (128) — — Other 955 2,195 769 Total other income $ 2,069 $ 3,487 $ 1,904 The decrease in other income for the year ended December 31, 2021 compared to 2020 is primarily due to a decrease in rate modification fees on Farm & Ranch loans. 69 Operating Expenses . The components of operating expenses for the years ended December 31, 2021, 2020, and 2019 are summarized in the following table: Table 17 For the Years Ended December 31, 2021 2020 2019 (in thousands) Compensation and employee benefits $ 42,847 $ 36,502 $ 28,762 General and administrative 27,507 21,976 20,311 Regulatory fees 3,062 2,925 2,788 Total Operating Expenses $ 73,416 $ 61,403 $ 51,861 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 32 net new employees this year, including ten new employees in connection with the strategic acquisition of loan servicing rights in third quarter 2021. The increase in compensation and employee benefits expenses for 2020 compared to 2019 was primarily due to increased headcount in the current period, higher bonus expense, and severance payments made to an executive who resigned in first quarter 2020. 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, information technology and other 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 third quarter 2021. 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. The increase in G&A expenses for 2020 compared to 2019 was primarily due to increased spending on software licenses and information technology consultants to support growth and strategic initiatives Income Tax Expense . The following table presents income tax expense and the effective income tax rate for the years ended December 31, 2021, 2020, and 2019: Table 18 For the Years Ended December 31, 2021 2020 2019 (dollars in thousands) Income tax expense $ 35,353 $ 28,785 $ 29,105 Effective tax rate 21.1 % 20.9 % 20.9 % 70 Business Volume . The following table sets forth the net growth or decrease in Farmer Mac's lines of business for the years ended December 31, 2021 and 2020: Table 19 Net New Business Volume For the Years Ended December 31, 2021 2020 On or Off Balance Sheet Net Growth/(Decrease) Net Growth/(Decrease) (in thousands) Agricultural Finance: Farm & Ranch: Loans On-balance sheet $ 795,216 $ 917,071 Loans held in consolidated trusts: Beneficial interests owned by third-party investors On-balance sheet (338,422) (313,872) IO-FMGS On-balance sheet 12,297 — USDA Securities On-balance sheet (41,614) 256,461 AgVantage Securities On-balance sheet 300,000 (350,000) LTSPCs and unfunded commitments Off-balance sheet 272,189 (78,106) Farmer Mac Guaranteed Securities Off-balance sheet 199,748 (117,927) Loans serviced for others Off-balance sheet 22,331 — Total Farm & Ranch $ 1,221,745 $ 313,627 Corporate AgFinance: Loans On-balance sheet $ 213,761 $ 296,682 AgVantage Securities On-balance sheet (376,646) 28,364 Unfunded Loan Commitments Off-balance sheet 36,604 10,466 Total Corporate AgFinance $ (126,281) $ 335,512 Total Agricultural Finance $ 1,095,464 $ 649,139 Rural Infrastructure Finance: Rural Utilities: Loans On-balance sheet $ 114,996 $ 525,886 AgVantage Securities On-balance sheet 467,425 (376,096) LTSPCs and Unfunded Loan Commitments Off-balance sheet 412 (52,854) Farmer Mac Guaranteed Securities Off-balance sheet (1,657) (3,155) Total Rural Utilities $ 581,176 $ 93,781 Renewable Energy: Loans On-balance sheet $ 13,728 $ 63,233 Unfunded Loan Commitments Off-balance sheet — — Total Renewable Energy $ 13,728 $ 63,233 Total Rural Infrastructure Finance $ 594,904 $ 157,014 Total $ 1,690,368 $ 806,153 Farmer Mac's outstanding business volume was $23.6 billion as of December 31, 2021, a net increase of $1.7 billion from December 31, 2020 after taking into account all new business, maturities, sales, and paydowns on existing assets. 71 The $1.2 billion net increase in Farm & Ranch was comprised of $5.9 billion of new purchases and guarantees, partially offset by $4.7 billion of scheduled maturities, repayments, and sales. Farmer Mac purchased a total of $2.1 billion in loans, which was primarily driven by farm real estate acquisitions due to improved borrower economics as well as a continued competitive interest rate environment resulting in demand for long-term financing solutions. The $2.1 billion in gross Farm & Ranch loan purchases was partially offset by $1.3 billion in scheduled maturities, repayments, and sales, including the sale of $299.4 million of agricultural mortgage loans through Farmer Mac's newly-designed structured securitization executed in the fourth quarter. The securitization resulted in $289.5 million in Farmer Mac Guaranteed Securities backed by the sold loans. Farmer Mac also purchased a total of $2.2 billion in AgVantage Securities, which primarily reflected the refinancing of maturing securities as well as financial counterparties seeking additional short-term, low-cost securities to manage their asset-liability maturity profile. The $2.2 billion in gross purchases was partially offset by $1.9 billion in scheduled maturities. While the short-term nature of the AgVantage securities added during 2021 may create volatility in AgVantage volumes, Farmer Mac does not anticipate a material impact to its net effective spread given the low-cost nature of these securities due to the short maturity profile. Farmer Mac entered into $788.3 million of new LTSPCs, which was offset by $516.1 million of maturities on existing LTSPCs. The new volume in LTSPCs during 2021 was driven primarily by Farm Credit System institutions seeking credit risk management solutions to address increasing commodity and borrower hold limits resulting from strong loan growth in in their regional portfolios. The $126.3 million net decrease in Corporate AgFinance was comprised of $880.2 million of new loan and AgVantage security purchases, which was offset by $1.0 billion of scheduled maturities, repayments, and sales. Farmer Mac purchased a total of $314.9 million in AgVantage Securities, which was offset by $691.6 million in scheduled maturities and repayments. This net decrease in AgVantage Securities was primarily due to improved borrower economics that reduced the demand for higher priced institutional financing, counterparties diversifying wholesale funding sources, and competitive funding availability for institutional counterparties. Farmer Mac purchased a total of $509.1 million in Corporate AgFinance loans in furtherance of Farmer Mac's strategic initiative to support larger and more complex farming operations, agribusinesses focused on agriculture production, food and fiber processing, and other supply chain production. The $509.1 million in gross purchases was partially offset by $295.4 million in scheduled maturities and repayments. The $581.2 million net increase in Rural Utilities was comprised of $1.8 billion of new purchases and guarantees, which was partially offset by $1.2 billion of scheduled maturities and repayments. Farmer Mac purchased a total of $1.5 billion in AgVantage Securities which was partially offset by $982.6 million in scheduled maturities. The net increase in AgVantage Securities of $467.4 million was a result of a key counterparty proactively managing its capital structure as well as Farmer Mac's ability to offer competitively priced financing structures. Farmer Mac purchased a total of $313.4 million in Rural Utilities loans, which was fueled by a competitive interest rate environment resulting in demand for long-term financing solutions for planned maintenance, capital expenditures, and refinancing higher cost debt. The $313.4 million in loan purchases was partially offset by $198.4 million in scheduled maturities and repayments. 72 The $13.7 million net increase in Renewable Energy was comprised of $43.6 million of new loan purchases, which was partially offset by $29.9 million of repayments. Farmer Mac's outstanding business volume was $21.9 billion as of December 31, 2020, a net increase of $806.2 million from December 31, 2019 after taking into account all new business, scheduled maturities, sales, and paydowns on existing assets. The $313.6 million net increase in Farm & Ranch was comprised of $3.8 billion of new purchases and guarantees, partially offset by $3.5 billion of scheduled maturities and repayments. The $335.5 million net increase in Corporate AgFinance was comprised of $899.4 million of new purchases, which was partially offset by $563.9 million of scheduled maturities and repayments. The $93.8 million net increase in Rural Utilities was comprised of $949.3 million of new purchases and guarantees, which was partially offset by $855.5 million of scheduled maturities and repayments. The $63.2 million net increase in Renewable Energy was comprised of $64.3 million of new purchases, which was partially offset by $1.1 million of repayments. The level and composition of Farmer Mac’s outstanding business volume is based on the relationship between new business, scheduled maturities, and repayments on existing assets from year to year. 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. The following table sets forth information about the Farmer Mac Guaranteed Securities issued during the periods indicated: Table 20 For the Years Ended December 31, 2021 2020 2019 (in thousands) AgVantage securities $ 3,919,907 $ 1,298,751 $ 2,258,550 Structured securitization transactions 289,519 — — Loans securitized and held in consolidated trusts with beneficial interests owned by third parties 113,175 165,054 263,561 Farmer Mac Guaranteed USDA Securities — — 57,853 Total Farmer Mac Guaranteed Securities Issuances $ 4,322,601 $ 4,322,601 $ 1,463,805 $ 2,579,964 Farmer Mac either retains the loans it purchases or securitizes them and retains or sells Farmer Mac Guaranteed Securities backed by those loans. During 2021, Farmer Mac executed a structured securitization transaction, whereby it sold and securitized agricultural mortgage loans resulting in $289.5 million of additional Farmer Mac Guaranteed Securities from this transaction. 73 During 2021, Farmer Mac realized $5.2 million gain after tax from the sale of Farmer Mac Guaranteed Securities in its structured securitization transaction. During 2021 and 2020, Farmer Mac realized no gains or losses from the securitization of loans that it holds in consolidated trusts. Farmer Mac consolidates these loans and presents them as "Loans held for investment in consolidated trusts, at amortized cost" on the consolidated balance sheets. During 2021 and 2020, Farmer Mac realized no gains or losses from the issuance of Farmer Mac Guaranteed USDA Securities, or AgVantage Securities. The following table sets forth information about outstanding volume in each of Farmer Mac's lines of business as of the dates indicated: 74 Table 21 Outstanding Business Volume As of December 31, On or Off Balance Sheet 2021 2020 2019 (in thousands) Agricultural Finance: Farm & Ranch: Loans On-balance sheet $ 4,775,070 $ 3,979,854 $ 3,062,783 Loans held in consolidated trusts: Beneficial interests owned by third-party investors On-balance sheet 948,623 1,287,045 1,600,917 IO-FMGS On-balance sheet 12,297 — — USDA Securities On-balance sheet 2,445,806 2,487,420 2,230,959 AgVantage Securities On-balance sheet 4,725,000 4,425,000 4,775,000 LTSPCs and unfunded commitments Off-balance sheet 2,587,154 2,314,965 2,393,071 Farmer Mac Guaranteed Securities Off-balance sheet 578,358 378,610 496,537 Loans serviced for others Off-balance sheet 22,331 — — Total Farm & Ranch $ 16,094,639 $ 14,872,894 $ 14,559,267 Corporate AgFinance: Loans On-balance sheet $ 1,123,300 $ 909,539 $ 612,857 AgVantage Securities On-balance sheet 367,464 744,110 715,746 Unfunded Loan Commitments Off-balance sheet 47,070 10,466 — Total Corporate AgFinance $ 1,537,834 $ 1,664,115 $ 1,328,603 Total Agricultural Finance $ 17,632,473 $ 16,537,009 $ 15,887,870 Rural Infrastructure Finance: Rural Utilities: Loans On-balance sheet $ 2,302,373 $ 2,187,377 $ 1,661,491 AgVantage Securities On-balance sheet 3,033,262 2,565,837 2,941,933 LTSPCs and Unfunded Loan Commitments Off-balance sheet 556,837 556,425 609,279 Farmer Mac Guaranteed Securities Off-balance sheet 2,755 4,412 7,567 Total Rural Utilities $ 5,895,227 $ 5,314,051 $ 5,220,270 Renewable Energy: Loans On-balance sheet $ 86,763 $ 73,035 $ 9,802 Unfunded Loan Commitments Off-balance sheet — — — Total Renewable Energy $ 86,763 $ 73,035 $ 9,802 Total Rural Infrastructure Finance $ 5,981,990 $ 5,387,086 $ 5,230,072 Total $ 23,614,463 $ 21,924,095 $ 21,117,942 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 December 31, 2021: 75 Table 22 Schedule of Principal Amortization as of December 31, 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) 2022 $ 380,999 $ 248,877 $ 115,980 $ 745,856 2023 368,059 236,628 118,486 723,173 2024 380,945 210,773 117,940 709,658 2025 406,447 211,653 120,298 738,398 2026 460,738 231,084 126,211 818,033 Thereafter 7,238,941 2,382,578 2,094,717 11,716,236 Total $ 9,236,129 $ 3,521,593 $ 2,693,632 $ 15,451,354 Of Farmer Mac's $23.6 billion outstanding principal balance of business volume as of December 31, 2021, $8.1 billion were AgVantage securities included in the Agricultural Finance and Rural Infrastructure Finance lines 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 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 December 31, 2021: Table 23 AgVantage Balances by Year of Maturity As of December 31, 2021 (in thousands) 2022 $ 2,638,903 2023 1,090,564 2024 796,416 2025 361,025 2026 975,660 Thereafter (1) 2,265,913 Total $ 8,128,481 (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 4.7 years as of December 31, 2021. Related Party Transactions . As provided by Farmer Mac's statutory charter, only banks, insurance companies, and other financial institutions or similar entities may hold Farmer Mac's Class A voting common stock, and only institutions of the FCS may hold Farmer Mac's Class B voting common stock. Farmer Mac's charter also provides that holders of Class A voting common stock elect five members of Farmer Mac's 15-member board of directors and that holders of Class B voting common stock 76 elect five members of the board of directors. The ownership of Farmer Mac's two classes of voting common stock is currently concentrated in a small number of institutions. Approximately 53% of the Class A voting common stock is held by four financial institutions, with 31% held by one institution. Approximately 97% of the Class B voting common stock is held by five FCS institutions (two of which are related to each other through a parent-subsidiary relationship). Unlike some other GSEs, specifically other FCS institutions and the Federal Home Loan Banks, Farmer Mac is not structured as a cooperative owned exclusively by member institutions and established to provide services exclusively to its members. Farmer Mac, as a stockholder-owned, publicly-traded corporation, seeks to fulfill its mission of serving the financing needs of rural America in a way that is consistent with providing a return on the investment of its stockholders, including those who do not directly participate in the secondary market provided by Farmer Mac. Farmer Mac's generally requires most financial institutions that participate in Farmer Mac's Agricultural Finance line of business to own a requisite amount of common stock, based on the size and type of institution. As a result of this requirement, coupled with the ability of holders of Class A and Class B voting common stock to elect two-thirds of Farmer Mac's board of directors, Farmer Mac regularly conducts business with "related parties," including institutions affiliated with members of Farmer Mac's board of directors and institutions that own large amounts of Farmer Mac's voting common stock. Farmer Mac has adopted a Code of Business Conduct and Ethics and other related corporate policies that govern any conflicts of interest that may arise in these transactions, and Farmer Mac's policy is to require that any transactions with related parties be conducted in the ordinary course of business, with terms and conditions comparable to those available to any other counterparty not related to Farmer Mac. The following table summarizes the material relationships between Farmer Mac and certain related parties. The related parties listed in the table below consist of (1) all holders of at least five percent of a class of Farmer Mac voting common stock as of December 31, 2021 and (2) other institutions that are considered "related parties" through an affiliation with a Farmer Mac director and that have conducted business with Farmer Mac during the two years ended December 31, 2021. The table below does not specify any relationships based on the ownership of Farmer Mac's non-voting common stock or any series of preferred stock. Table 24 Name of Institution Ownership of Farmer Mac Voting Common Stock Affiliation with Any Farmer Mac Directors Primary Aspects of Institution's Business Relationship with Farmer Mac AgFirst Farm Credit Bank 84,024 shares of Class B voting common stock (16.79% of outstanding Class B stock and 5.49% of total voting common stock outstanding) None In both 2021 and 2020, Farmer Mac earned approximately $1.2 million in fees attributable to transactions with AgFirst, primarily commitment fees for LTSPCs. AgriBank, FCB 201,621 shares of Class B voting common stock (40.30% of outstanding Class B stock and 13.17% of total voting common stock outstanding) Farmer Mac director Richard H. Davidson served as director of AgriBank until March 2021 and former Farmer Mac director (through May 2021) Daniel L. Shaw serves as director of AgriBank. Farmer Mac did not conduct any business with AgriBank during 2021 or 2020. 77 Name of Institution Ownership of Farmer Mac Voting Common Stock Affiliation with Any Farmer Mac Directors Primary Aspects of Institution's Business Relationship with Farmer Mac Bath State Bank Less than 5% ownership Farmer Mac director Dennis L. Brack serves as a director of Bath State Bank and Bath State Bancorp, the holding company of Bath State Bank. Farmer Mac purchased $2.3 million and $9.2 million in USDA Securities from Bath State Bank in 2021 and 2020, respectively. Additionally, Farmer Mac purchased $5.0 million in Agricultural Finance mortgage loans from Bath State Bank in 2021. Farmer Mac did not purchase any Agricultural Finance mortgage loans from Bath State Bank in 2020. CoBank, ACB 163,253 shares of Class B voting common stock (32.63% of outstanding Class B stock and 10.66% of total voting common stock outstanding) Farmer Mac director Everett M. Dobrinski served as a director of CoBank through December 2019. Although no longer a director of CoBank, Mr. Dobrinski currently serves on CoBank's independent nominating committee that screens and interviews director candidates and recommends a slate of candidates for consideration by CoBank's membership. Farmer Mac purchased $207.5 million and $416.8 million in participation interests in loans from CoBank in 2021 and 2020, respectively. This represented 60.2% and 56.0% of loan purchases under the Rural Infrastructure Finance line of business for 2021 and 2020, respectively. Farmer Mac entered into $72.0 million in unfunded commitments from CoBank in 2021. Farmer Mac did not purchase any of these from CoBank in 2020. In 2021 and 2020, CoBank retained $3.2 million and $2.3 million of servicing fees related to the loan participations sold to Farmer Mac, respectively. Farm Credit Bank of Texas (FCBT) 38,503 shares of Class B voting common stock (7.70% of outstanding Class B stock and 2.51% of total voting common stock outstanding) None In 2021 and 2020, Farmer Mac earned approximately $1.9 million and $1.2 million, respectively, in fees attributable to transactions with FCBT, primarily commitment fees for LTSPCs. In both 2021 and 2020, FCBT retained approximately $0.1 million in servicing fees for its work as a Farmer Mac servicer. Matthew 25 Management Corp. 77,412 shares of Class A voting common stock (7.51% of outstanding Class A stock and 5.06% of total voting common stock outstanding) None Farmer Mac did not conduct any business with Matthew 25 Management Corp. during 2021 or 2020. National Rural Utilities Cooperative Finance Corporation (CFC) 81,500 shares of Class A voting common stock (7.91% of outstanding Class A stock and 5.32% of total voting common stock outstanding) Farmer Mac director Todd P. Ware served as a director of CFC from June 2015 through June 2021. Transactions with CFC represented 36.9% and 36.7% of loan purchases under the Rural Infrastructure Finance line of business during 2021 and 2020, respectively. In 2021 and 2020, Farmer Mac earned commitment fees of approximately $1.2 million and $1.3 million, respectively, attributable to transactions with CFC. In 2021 and 2020, Farmer Mac earned interest income of $50.0 million and $63.1 million, respectively, attributable to AgVantage transactions with CFC. In both 2021 and 2020, CFC retained approximately $3.3 million in servicing fees for its work as a Farmer Mac servicer. 78 Name of Institution Ownership of Farmer Mac Voting Common Stock Affiliation with Any Farmer Mac Directors Primary Aspects of Institution's Business Relationship with Farmer Mac The Vanguard Group, Inc. 66,056 shares of Class A voting common stock (6.41% of outstanding Class A stock and 4.31% of total voting common stock outstanding) None Farmer Mac did not conduct any business with The Vanguard Group during 2021 or 2020. Zions Bancorporation, National Association (Zions) 322,100 shares of Class A voting common stock (31.25% of outstanding Class A stock and 21.04% of total voting common stock outstanding) None In 2021 and 2020, Farmer Mac's purchases of on-balance sheet Agricultural Finance mortgage loans from Zions represented approximately 8.0% and 7.1%, respectively, of Agricultural Finance mortgage loan purchase volume for those years. Those purchases represented 5.6% and 6.2%, respectively, of total Agricultural Finance mortgage loan business volume (excluding AgVantage and USDA Securities) for those years. The purchases of USDA Securities from Zions represented approximately 2.1% and 1.4%, respectively, of the USDA Guarantees purchases for the years ended December 31, 2021 and 2020. Transactions with Zions represented 3.4% and 4.1%, respectively, of Farmer Mac's total outstanding business volume as of December 31, 2021 and 2020. In 2021 and 2020, Zions retained approximately $11.0 million and $11.8 million, respectively, in servicing fees for its work as a Farmer Mac servicer. As discussed in more detail in Note 2(o) to the consolidated financial statements, Farmer Mac’s consolidated financial statements include the accounts of variable interest entities ("VIEs") in which Farmer Mac determines itself to be the primary beneficiary, including securitization trusts where Farmer Mac shares the power to make decisions about default mitigation with a related party. If that related party status changes, consolidation or deconsolidation of securitization trusts may occur. For more information about related party transactions, see Note 3 to the consolidated financial statements. Outlook Farmer Mac continues to provide a stable source of liquidity, capital, and risk management tools as a secondary market that helps meet the financing needs of rural America. The pace and trajectory of Farmer Mac's growth will depend on the capital and liquidity needs of the lending institutions in the agriculture and rural utilities business and the overall financial 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 infrastructure lenders seek to manage equity capital and return on equity capital requirements or 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. • As a result of business and product development efforts and continued interest in the agricultural asset class from institutional investors and nontraditional agricultural real estate lenders, Farmer 79 Mac's customer base and product set continue to expand and diversify, which may generate more demand for Farmer Mac's products from new sources. • Farmer Mac's growing relationships with larger regional and national lenders, as well as consolidation within the agricultural lending industry, 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. • Future growth opportunities in Farmer Mac's Rural Infrastructure Finance 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. • Expansion and refinancing opportunities for agricultural producers resulting from continued-low interest rates have increased financing requirements for mergers and acquisitions, consolidation, and vertical integration across many sectors of the agricultural industry, which may also generate demand for Farmer Mac's loan products. • Lower market interest rates have driven a cyclical increase in agricultural loan refinancings over the last two years. Future changes to monetary policy and the overall level of interest rates could impact the pace and timing of Agricultural Finance mortgage loan purchase demand. As we grow outstanding business volume through the products described above, we are also developing new ways to obtain funding and manage our overall credit risk. In October 2021, we completed a structured agricultural mortgage-backed securitization (AMBS) that included a $277.0 million senior tranche guaranteed by Farmer Mac and a $22.5 million unguaranteed subordinate tranche sold to investors, resulting in the sale of Farm & Ranch loans formerly held on Farmer Mac's balance sheet. During fourth quarter 2021, Farmer Mac recorded a gain on this transaction of $5.2 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 were significantly moderated during 2021. However, the recent and rapid increase in cases of COVID-19 resulting from variants of coronavirus demonstrates the volatility and uncertainty stemming from the pandemic. Future variants and outbreaks may result in increased market volatility and supply chain disruptions similar to the market dislocations experienced in 2020 and 2021. 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 this 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. 80 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 Securities portfolios. This acquisition will increase our interest income on our Farm & Ranch loans and USDA 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. Operations . On March 12, 2020, Farmer Mac activated its business continuity plan and has been operating uninterruptedly since then, with most of its employees working remotely throughout 2020 and 2021. Farmer Mac has provided guidance and support to all of its employees to ensure that they have the tools and knowledge needed to effectively work remotely, and Farmer Mac's technology platform and business continuity plan have been functioning as designed in support of all functions of the organization with no material disruption of business. As a secondary market participant in the agricultural and rural utilities lending space, Farmer Mac's business model is already based on a remote interface with its customers and vendors. Agricultural Industry . Economic conditions throughout the agricultural, food, fuel, and fiber sectors were generally positive throughout 2021. According to USDA estimates, gross farm income increased by 10% in 2021 to a record high of $487.9 billion. Improved commodity prices for grains and animal proteins drove the increase in gross cash receipts, and the increase in gross income was more than enough to offset a 40% decline in direct government payments. The general price rally is largely a function of dwindling global supplies for most major crop commodities. Farm expenses also rose in 2021 for most producers, driven by rising feed, energy, and labor costs. However, growth in income outpaced growth in expense, and net cash farm income increased nearly 15% in 2021 to $134.2 billion, the highest level since 2013. Consumers returned to restaurants and food service establishments in 2021, with a 41% annual increase in retail spending at food service and drinking places according to advance retail sales data from the U.S. Census Bureau. Combined with an annual 8.4% increase in retail spending at food and drinking stores (e.g., grocery), consumers have demonstrated the ability to absorb higher commodity prices in their food budgets in 2021. The increase in farm profitability combined with low overall interest rates drove a rapid rise in land values and a decrease in farm delinquencies and bankruptcies. 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 an 18% gain in farmland values in the Seventh District (primarily Iowa, Indiana, Illinois, and Wisconsin) between October 2020 and October 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. 81 In its first look at the 2022 farm economy, the USDA projects a tightening profitability outlook. The rapid rise of input costs and interest expense is likely to increase the cost of production in 2022, putting downward pressure on overall net farm income. However, the USDA projects a modest increase in net cash farm income by 1.4% in 2022 to $136.1 billion due to cash revenue rising slightly faster than cash expenses. Fertilizer prices spiked in 2021, with December prices paid by farmers 62% higher than 2020 levels. While fertilizer prices abated somewhat in early 2022, the elevated costs may have already been incurred as prepaid input expense. Interest expense is also seen rising in 2022 due to a combination of higher debt levels and rising short-term borrowing costs. The decline in net cash farm income is modest historically, and most of the USDA's projected financial ratios show a robust food and farm economy in 2022. Farm equity is expected to rise for the third straight year, as forecasts for land values outpace the expected increase in debt utilization. The farm sector's overall working capital and interest expense coverage ratios are expected to reach their highest levels in eight years during 2022. Economic conditions are likely to bring mixed effects to credit demand in 2022. Strong asset appreciation and rising interest rates could signal a credit cycle expansion as financial decision-makers look to lock in long-term economics for their appreciating farm and agribusiness assets. Farm profitability generally increases asset values and demand for the asset class, which also contributes to increasing credit demand. The low interest rate environment in 2021 increased farmland mortgage refinancing and loan prepayment speeds throughout the year. A reduction in loan refinancing is possible in 2022, as fewer borrowers will economically benefit from refinancing or restructuring their farm debt. This could have mixed effects on mortgage portfolios, potentially lowering new sales and originations but also slowing portfolio prepayments and exits. Finally, a rising yield curve coupled with widening market credit spreads could increase opportunities for corporate and institutional lending, as Farmer Mac's programs become more attractive at higher costs of capital. Combined, these factors are generally supportive of continued net portfolio growth in 2022. Positive economic conditions improved portfolio performance in 2021, and they could continue to positively impact loan delinquencies and losses into 2022. Farmer Mac's 90-day delinquencies and substandard assets levels improved in fourth quarter 2021 relative to fourth quarter 2020. One-third of the loan volume past due 90-days or more in third quarter 2021 cured or paid off by December 31, 2021. The overall delinquency rate fell from 0.58% of the Farm & Ranch operating segment as of September 30, 2021, to 0.48% of the Farm & Ranch portfolio by December 31, 2021, a significant improvement that follows the seasonal pattern historically observed during the fourth quarter of each year. Year-over-year, the delinquency rate fell by 6 basis points from 0.54% in fourth 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. Another virus resurgence, 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 Agricultural Finance mortgage loans in Farmer Mac's portfolio as of December 31, 2021, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk—Loans and Guarantees." 82 Exogenous factors facing farm and food producers can create uncertainty and market instability within the sector. External market conditions that could adversely impact the farm and food sectors in 2022 include supply chain disruptions, foreign trade and trade policy, and environmental conditions. The logistics of growing, harvesting, processing, packaging, shipping, storing, and retailing food are complex and intertwined. Labor shortages and transportation disruptions created supply chain stoppages in 2020 and 2021, and they could again challenge producers in 2022. The U.S. agricultural sector has become increasingly dependent on foreign markets as a source of demand, making trade policy increasingly important to farms and food. The USDA reports U.S. agricultural exports in the fiscal year 2021 at $173.5 billion, 35% of the total estimated gross farm income in 2021. The USDA's initial forecast for 2022 is a modest increase in export value, but this outcome could be influenced by foreign relations or foreign economic conditions should they worsen in markets important to exports or imported inputs. For example, U.S. sanctions against Belarus in 2021 create upward pressure on fertilizer prices, and tensions between Ukraine and Russia create uncertainty and volatility in global grain prices. Severe weather conditions and long-term environmental change continue to shape agricultural sectors. The U.S. experienced 20 separate billion-dollar weather disasters in 2021, the second-highest level in the 40 years tracked by the National Oceanic and Atmospheric Administration behind 2020. 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. Long and persistent drought conditions impacted western agriculture during much of 2021. Although drought conditions improved in fourth quarter 2021 and early weeks of 2022, 12% of the continental U.S. remained in exceptional or extreme drought as of February 1, 2022, according to data from the National Drought Mitigation Center. 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. For more information about Farmer Mac's environmental risk mitigation requirements, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk—Loans and Guarantees—Environmental Considerations." Rural Infrastructure Industry . Economic conditions affecting the rural infrastructure 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 increased by 2.5% and 8.2%, respectively, in 2021 through November 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 throughout 2021, with improved employment, credit, and retail sales activity, but COVID-19 variants and higher inflation continue to impact economic activity. Through December 31, 2021, Farmer Mac had not observed material degradation in the financial performance of its rural infrastructure portfolio. Prospects for loan growth within the rural infrastructure industry overall appear to be moderate in the near term, as ongoing normal-course capital expenditures related to maintaining and upgrading utility 83 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 compared to historical rates, 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. As RDOF auction winners submit plans to the FCC and begin development, Farmer Mac could see increased lending activity for rural utilities providers. In addition to RDOF broadband, Farmer Mac could see an increase in financing opportunities to other telecommunications providers to rural areas with wireless broadband increasingly important to economic opportunity and precision agriculture. 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. According to data from the U.S. Energy Information Administration, renewable electricity capacity will grow by 48% in the next five years, compared to total electric capacity growth of only 10%. 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 was $86.8 million as of December 31, 2021. 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 December 31, 2021, nor has damage from Hurricane Ida. Farmer Mac continues to monitor the ongoing effects of the arctic freeze weather event that occurred during mid-February 2021 in the mid-south region, particularly in Texas, on our rural infrastructure portfolio. As of December 31, 2021, our rural infrastructure portfolio exposure in Texas was approximately $428.0 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. In January 2022, the first Texas electric cooperative announced plans to use securitization financing to recover these extraordinary costs. We believe that the current risk ratings applied to our rural infrastructure portfolio reflect any remaining financial stress resulting from the 2021 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 2021, a federal judge issued a preliminary injunction 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. If enacted, this 84 provision could lead to a short-term acceleration in the prepayment of the FSA guaranteed loans in Farmer Mac's USDA Securities portfolio. • Farmer Mac continues to monitor legislative developments that could lead to changes in the tax code that could affect Farmer Mac’s business. For example, an increase in the U.S. corporate tax rate (currently at 21%) has been proposed in recent years as a possible offset to increased spending on social programs. A proposed 1% excise tax on the fair market value of a corporation's stock repurchased in a taxable year has been considered as well. Farmer Mac has an existing stock buyback program that authorizes up to $9.8 million in repurchases of common stock that expires in March 2023 . • The current farm bill is set to expire in 2023. The farm bill is an omnibus piece of legislation that may impact several programs impacting farm profitability, the vitality of rural communities, and Farmer Mac’s charter. The House and Senate Agriculture Committees are expected to begin consideration of a new farm bill during 2022. Farmer Mac will continue to monitor this legislation for any impact it may have to Farmer Mac and farm profitability. • Agricultural exports from the United States were valued at more than $177 billion in the fiscal year 2021. 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. In 2021, Congress passed a $550 billion bipartisan infrastructure bill that provides for key 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 prudential regulator of Farmer Mac is expected to undergo significant changes to its board this calendar year. The three-member board of the Farm Credit Administration (FCA) currently has one vacant seat, a member whose term expired in 2018, and a third member whose term expires in May 2022. The two current board members continue to serve until their replacement has been confirmed the U.S. Senate. 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. 85 Balance Sheet Review The following table summarizes the balance sheet as of the periods indicated: Table 25 As of Change December 31, 2021 December 31, 2020 $ % (in thousands) Assets Cash and cash equivalents $ 908,785 $ 1,033,941 $ (125,156) (12) % Investment securities, net of allowance 3,882,590 3,898,724 (16,134) — % Farmer Mac Guaranteed Securities, net of allowance 8,361,798 8,123,493 238,305 3 % USDA Securities 2,440,732 2,480,321 (39,589) (2) % Loans, net of allowance 8,300,619 7,248,990 1,051,629 15 % Loans held in trusts, net of allowance 948,059 1,286,156 (338,097) (26) % Other 302,908 283,876 19,032 7 % Total assets $ 25,145,491 25,145,491 $ 24,355,501 $ 789,990 3 % Liabilities Notes Payable 22,716,156 21,848,917 867,239 4 % Debt securities of consolidated trusts held by third parties 981,379 1,323,786 (342,407) (26) % Other 243,543 190,321 53,222 28 % Total liabilities $ 23,941,078 $ 23,363,024 $ 578,054 2 % Total equity 1,204,413 992,477 211,936 21 % Total liabilities and equity $ 25,145,491 $ 24,355,501 $ 789,990 3 % 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 retained earnings, and an increase in accumulated other comprehensive income. Risk Management Credit Risk – Loans and Guarantees . Agricultural Finance - Direct Credit Exposure Farmer Mac's direct credit exposure to Agricultural Finance mortgage loans as of December 31, 2021 was $9.8 billion across 48 states. Farmer Mac applies credit underwriting standards and methodologies to help assess exposures to loan purchases, which may include collateral valuation, financial metrics, and other appropriate borrower financial and credit information. For Corporate AgFinance loans, which are often larger loan exposures to agriculture production and agribusinesses that support agriculture production, food and fiber processing, and other supply chain production, and which may have risk profiles that differ from smaller agricultural mortgage loans, 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 Agricultural Finance mortgage loans, see "Business—Farmer Mac's Lines of Business—Agricultural 86 Finance—Underwriting and Collateral Standards—Farm & Ranch" and "Business—Farmer Mac's Lines of Business—Agricultural Finance—Underwriting and Collateral Standards—Corporate AgFinance." 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. For Agricultural Finance mortgage loans to which Farmer Mac has direct credit exposure, Farmer Mac's 90-day delinquencies as of December 31, 2021, were $47.3 million (0.48% of the Agricultural Finance mortgage loan portfolio to which Farmer Mac has direct credit exposure), compared to $46.2 million (0.54% of the Agricultural Finance mortgage loan portfolio) as of December 31, 2020. Those 90-day delinquencies were comprised of 32 and 38 delinquent loans as of December 31, 2021 and December 31, 2020, respectively. The increase in 90-day delinquencies was primarily driven by increased delinquencies in crops, permanent plantings, and livestock, partially offset by the payoff of a single delinquent loan in storage and processing. The top ten borrower exposures over 90 days delinquent represented over half of the 90-day delinquencies as of December 31, 2021. Farmer Mac believes that it remains adequately collateralized on its delinquent loans. Farmer Mac's 90-day delinquency rate as of December 31, 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 Agricultural Finance mortgage loan 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 Agricultural Finance mortgage loan portfolio compared to the unpaid principal balance of all Agricultural Finance mortgage loans to which Farmer Mac has direct credit exposure: Table 26 Agricultural Finance Mortgage Loans 90-Day Delinquencies Percentage (dollars in thousands) As of: December 31, 2021 $ 9,811,749 $ 47,307 0.48 % 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 % Across all of Farmer Mac's lines of business, 90-day delinquencies represented 0.20% of total outstanding business volume as of December 31, 2021, compared to 0.21% as of December 31, 2020 and 0.29% as of December 31, 2019. 87 The following table presents outstanding Agricultural Finance mortgage loans and 90-day delinquencies as of December 31, 2021 by year of origination, geographic region, commodity/collateral type, original loan-to-value ratio, and range in the size of borrower exposure: 88 Table 27 Agricultural Finance Mortgage Loans 90-Day Delinquencies as of December 31, 2021 Distribution of Agricultural Loans Agricultural Loans 90-Day Delinquencies (1) Percentage (dollars in thousands) By year of origination: 2011 and prior 6 % $ 532,267 $ 2,906 0.55 % 2012 2 % 236,822 231 0.10 % 2013 3 % 331,265 1,107 0.33 % 2014 3 % 274,519 3,641 1.33 % 2015 4 % 427,958 10,110 2.36 % 2016 7 % 666,632 11,075 1.66 % 2017 7 % 685,753 5,074 0.74 % 2018 7 % 672,594 2,987 0.44 % 2019 10 % 954,909 8,713 0.91 % 2020 23 % 2,288,796 1,463 0.06 % 2021 28 % 2,740,234 — 0.06 % Total 100 % $ 9,811,749 $ 47,307 0.48 % By geographic region (2) : Northwest 13 % $ 1,271,158 $ 7,169 0.56 % Southwest 32 % 3,127,283 10,279 0.33 % Mid-North 27 % 2,650,690 3,979 0.15 % Mid-South 15 % 1,511,250 9,872 0.65 % Northeast 4 % 408,053 7,296 1.79 % Southeast 9 % 843,315 8,712 1.03 % Total 100 % $ 9,811,749 $ 47,307 0.48 % By commodity/collateral type: Crops 50 % $ 4,916,170 $ 32,427 0.66 % Permanent plantings 22 % 2,180,623 3,567 0.16 % Livestock 19 % 1,838,097 10,797 0.59 % Part-time farm 5 % 485,342 516 0.11 % Ag. Storage and Processing 4 % 377,220 — — % Other — 14,297 — — % Total 100 % $ 9,811,749 $ 47,307 0.48 % By original loan-to-value ratio: 0.00% to 40.00% 17 % $ 1,694,247 $ 2,775 0.16 % 40.01% to 50.00% 24 % 2,342,658 16,428 0.70 % 50.01% to 60.00% 35 % 3,412,859 23,706 0.69 % 60.01% to 70.00% 21 % 2,058,146 4,398 0.21 % 70.01% to 80.00% (3) 3 % 265,592 — — % 80.01% to 90.00% (3) — % 38,247 — — % Total 100 % $ 9,811,749 $ 47,307 0.48 % By size of borrower exposure (4) : Less than $1,000,000 34 % $ 3,326,506 $ 6,632 0.20 % $1,000,000 to $4,999,999 40 % 3,897,862 26,068 0.67 % $5,000,000 to $9,999,999 15 % 1,501,123 14,607 0.97 % $10,000,000 to $24,999,999 10 % 999,255 — — % $25,000,000 and greater 1 % 87,003 — — % Total 100 % $ 9,811,749 $ 47,307 0.48 % (1) Includes loans held and loans underlying off-balance sheet Agricultural Finance 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. 89 Another indicator that Farmer Mac considers in analyzing the credit quality of its Agricultural Finance mortgage loans is the level of internally-rated "substandard" assets, both in dollars and as a percentage of the outstanding 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 December 31, 2021, Farmer Mac's Agricultural Finance mortgage loans (to which it has direct credit exposure) comprising substandard assets were $246.7 million (2.5% of the portfolio), compared to $291.5 million (3.4% of the portfolio) as of December 31, 2020. Those substandard assets comprised 274 loans as of December 31, 2021 and 343 loans as of December 31, 2020. The decrease of $44.8 million in substandard assets during 2021 was primarily driven by credit upgrades in our off-balance sheet portfolio, partially offset by credit downgrades in our on-balance sheet portfolio. Substandard assets decreased as a percentage of the total on-balance sheet and off-balance sheet portfolios due to a combination of credit upgrades in the off-balance sheet portfolio and growth in both portfolios. The percentage of substandard assets within the portfolio as of December 31, 2021 was below the historical average. Farmer Mac's average substandard assets as a percentage of its Agricultural Finance mortgage loans 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. 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 December 31, 2021 and December 31, 2020, the average unpaid principal balances for Agricultural Finance mortgage loans outstanding and to which Farmer Mac has direct credit exposure was $790,000 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 Agricultural Finance mortgage loans purchased during 2021 was 49%, compared to 54% for loans purchased during 2020. The weighted-average original loan-to-value ratio for Agricultural Finance mortgage loans and loans underlying off-balance sheet Agricultural Finance Guaranteed Securities and LTSPCs was 52% as of both December 31, 2021 and December 31, 2020. The weighted-average original loan-to-value ratio for all 90-day delinquencies was 51% and 50% as of December 31, 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 Agricultural Finance mortgage loans and loans underlying off-balance sheet Agricultural Finance Guaranteed Securities and LTSPCs was 47% and 46% as of December 31, 2021 and December 31, 2020, respectively. 90 The following table presents the current loan-to-value ratios for the Agricultural Finance mortgage loans to which Farmer Mac has direct credit exposure, as disaggregated by internally assigned risk ratings: Table 28 Agricultural Finance Mortgage Loans current loan-to-value ratio by internally assigned risk rating as of December 31, 2021 Acceptable Special Mention Substandard Total (in thousands) Current loan-to-value ratio (1) : 0.00% to 40.00% $ 2,761,962 $ 52,503 $ 89,018 $ 2,903,483 40.01% to 50.00% 2,378,511 97,733 58,177 2,534,421 50.01% to 60.00% 2,484,515 90,934 57,317 2,632,766 60.01% to 70.00% 1,427,135 54,072 22,594 1,503,801 70.01% to 80.00% 188,280 22,260 17,123 227,663 80.01% and greater 6,359 805 2,451 9,615 Total $ 9,246,762 $ 318,307 $ 246,680 $ 9,811,749 (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. 91 The following table presents Farmer Mac's cumulative net credit losses relative to the cumulative original balance for all Agricultural Finance mortgage loans as of December 31, 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 29 Agricultural Finance Mortgage Loans Credit Losses Relative to Cumulative Original Loans, Guarantees, and LTSPCs as of December 31, 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 $ 16,099,619 $ 33,785 0.21 % 2012 1,161,476 — — % 2013 1,470,293 — — % 2014 1,059,486 — — % 2015 1,227,120 (516) (0.04) % 2016 1,542,996 — — % 2017 1,641,538 4,311 0.26 % 2018 1,326,813 — — % 2019 1,533,503 — — % 2020 2,832,102 — — % 2021 3,048,399 — — % Total $ 32,943,345 $ 37,580 0.11 % By geographic region (1) : Northwest $ 4,323,709 $ 11,191 0.26 % Southwest 11,248,086 8,542 0.08 % Mid-North 8,263,325 17,165 0.21 % Mid-South 4,450,935 (613) (0.01) % Northeast 1,753,860 323 0.02 % Southeast 2,903,430 972 0.03 % Total $ 32,943,345 $ 37,580 0.11 % By commodity/collateral type: Crops $ 15,250,131 $ 2,887 0.02 % Permanent plantings 7,171,387 9,783 0.14 % Livestock 7,322,393 3,836 0.05 % Part-time farm 1,829,054 1,090 0.06 % Ag. Storage and Processing 1,206,989 19,984 1.66 % Other 163,391 — — % Total $ 32,943,345 $ 37,580 0.11 % (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). 92 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 Agricultural Finance mortgage loans by commodity type within geographic region and cumulative credit losses by origination year and commodity type: Table 30 As of December 31, 2021 Agricultural Finance Mortgage Loans 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 $ 634,469 $ 190,687 $ 291,914 $ 105,312 $ 48,695 $ 81 $ 1,271,158 6.5 % 1.9 % 3.0 % 1.1 % 0.5 % — % 13.0 % Southwest 673,514 1,639,929 570,639 96,212 134,629 12,360 3,127,283 6.9 % 16.7 % 5.8 % 1.0 % 1.4 % 0.1 % 31.9 % Mid-North 2,257,009 11,761 208,460 99,043 72,781 1,636 2,650,690 23.0 % 0.1 % 2.1 % 1.0 % 0.7 % — % 26.9 % Mid-South 835,252 72,925 495,756 64,200 43,086 31 1,511,250 8.5 % 0.7 % 5.1 % 0.7 % 0.4 % — % 15.4 % Northeast 197,876 43,229 79,836 54,097 33,015 — 408,053 2.0 % 0.4 % 0.8 % 0.6 % 0.3 % — % 4.1 % Southeast 318,050 222,092 191,492 66,478 45,014 189 843,315 3.2 % 2.3 % 2.0 % 0.7 % 0.5 % — % 8.7 % Total $4,916,170 $2,180,623 $1,838,097 $485,342 $377,220 $14,297 $9,811,749 50.1 % 22.1 % 18.8 % 5.1 % 3.8 % 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). 93 Table 31 As of December 31, 2021 Agricultural Loans 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 — — — — 4,311 4,311 2018 — — — — — — 2019 — — — — — — 2020 — — — — — — 2021 — — — — — — Total $ 2,887 $ 9,783 $ 3,836 $ 1,090 $ 19,984 $ 37,580 For more information about the credit quality of Farmer Mac's Agricultural Finance mortgage loans and the associated allowance for losses please refer to Note 8 and Note 12 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." Rural Infrastructure Finance - Direct Credit Exposure Farmer Mac's direct credit exposure to Rural Utilities loans held and loans underlying LTSPCs as of December 31, 2021 was $2.9 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 Infrastructure Finance—Underwriting and Collateral Standards." As of December 31, 2021, there were no delinquencies in Farmer Mac's portfolio of Rural Utilities loans. 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. 94 Table 32 Rural Infrastructure Finance portfolio by internally assigned risk rating as of December 31, 2021 Acceptable Special Mention Substandard Total (in thousands) Distribution Cooperative $ 2,166,068 $ — $ — $ 2,166,068 G&T Cooperative 670,342 — 22,800 693,142 Renewable Energy 86,763 — — 86,763 Rural Utilities Total $ 2,923,173 $ — $ 22,800 $ 2,945,973 For more information about the credit quality of Farmer Mac's Rural Infrastructure Finance portfolio and the associated allowance for losses please refer to Notes 8 and 12 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 to the USDA Securities in the Agricultural Finance line of business because of the USDA guarantee. As of December 31, 2021, Farmer Mac had not experienced any credit losses on any USDA Securities or Farmer Mac Guaranteed USDA Securities 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 many lenders to make representations and warranties about the conformity of Agricultural Finance mortgage loans and Rural Infrastructure Finance 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 December 31, 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 Finance mortgage loans (other than rural housing and part-time farm mortgage loans) and Rural Infrastructure Finance 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—Agricultural Finance—Loan Eligibility," "Business—Farmer Mac's Lines of Business—Agricultural Finance—Underwriting and Collateral Standards—Farm & Ranch," "Business—Farmer Mac's Lines of Business—Agricultural Finance—Underwriting and Collateral Standards—Corporate AgFinance," and "Business—Farmer Mac's Lines of Business—Rural Infrastructure Finance—Underwriting and Collateral Standards." 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 95 Farmer Mac's consent, or experiences insolvency or bankruptcy, the servicer is responsible for any 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 December 31, 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—Agricultural Finance—Loan Servicing" and "Business—Farmer Mac's Lines of Business—Rural Infrastructure Finance—Lenders and Loan Servicing." Environmental Considerations For loans purchased by Farmer Mac in its Agricultural Finance line of business, Farmer Mac has outlined specific requirements for environmental compliance. Sellers seeking to sell Agricultural Finance mortgage loans to Farmer Mac must complete an environmental disclosure form and ensure that properties securing these loans are in full compliance with applicable permitting requirements and have necessary access to proper waste disposal. Farmer Mac requires sellers to make representations and warranties that it has physically inspected the property prior to sale to ensure that the borrower has handled any hazardous materials on the property (including the waters adjacent) only as necessary to operate the property and in compliance with applicable environmental laws. Farmer Mac also requires sellers to monitor each borrower's continuing compliance with environmental laws and regulations by performing annual inspections throughout the life of the loan. Farmer Mac also requires that each mortgage note prohibit the use, disposal, storage, or release of hazardous substances on the property except for small amounts appropriate for the maintenance of the property. For Agricultural Finance mortgage loans secured by irrigated property, Farmer Mac requires the seller to prepare an analysis for water rights and water sustainability for the borrower's operation for the life of the loan. This analysis must include pump and well tests for groundwater sources and legally-documented easements or agreements for off-site water sources. For loans secured by properties where water availability may be a concern (primarily 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. As part of this process, Farmer Mac may conduct, or require the seller to conduct, an in-depth groundwater availability analysis. Credit Risk – Counterparty Risk . 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 96 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. As a result, Farmer Mac has indirect credit exposure to the Agricultural Finance mortgage loans and Rural Utilities loans that secure AgVantage securities. For AgVantage counterparties that are institutional real estate investors or financial funds and other similar entities, Farmer Mac also typically requires that the counterparty (1) maintain a higher collateralization level, through either a higher overcollateralization percentage or lower loan-to-value ratio thresholds and (2) comply with specified financial covenants for the life of the related AgVantage security to avoid default. As of December 31, 2021, Farmer Mac had not experienced any credit losses on any AgVantage securities. For a more detailed description of AgVantage securities, see "Business—Farmer Mac's Lines of Business—Agricultural Finance—Other Products – Agricultural Finance—AgVantage Securities" and "Business—Farmer Mac's Lines of Business—Rural Infrastructure Finance—Other Products – Rural Infrastructure Finance—AgVantage Securities." The unpaid principal balance of outstanding on-balance sheet AgVantage securities secured by loans eligible for the Agricultural Finance line of business totaled $5.1 billion as of December 31, 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 Infrastructure Finance line of business totaled $3.0 billion as of December 31, 2021 and $2.6 billion as of December 31, 2020. The unpaid principal balance of outstanding off-balance sheet AgVantage securities totaled $2.8 million as of December 31, 2021 and $4.4 million as of December 31, 2020. The following table provides information about the issuers of AgVantage securities and the required collateralization levels for those transactions as of December 31, 2021 and December 31, 2020: Table 33 As of December 31, 2021 As of December 31, 2020 Counterparty Balance Required Collateralization Balance Required Collateralization (dollars in thousands) AgVantage: CFC $ 3,036,017 100% $ 2,570,249 100% MetLife 2,050,000 103% 2,375,000 103% Rabo AgriFinance 2,550,000 110% 2,050,000 110% Other (1) 492,464 106% to 125% 744,110 106% to 125% Total outstanding $ 8,128,481 $ 7,739,359 (1) Consists of AgVantage securities issued by 13 and 10 different issuers as of December 31, 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—Agricultural Finance—Lenders" and "Business—Farmer Mac's Lines of Business—Rural Infrastructure Finance—Lenders and Loan Servicing." 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 97 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 6 to the consolidated financial statements. Credit Risk – Other Investments . As of December 31, 2021, Farmer Mac had $0.9 billion of cash and cash equivalents and $3.9 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's 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 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 ($121.7 million as of December 31, 2021). However, Farmer Mac's current policy limits this total credit exposure to 5% of its regulatory capital ($60.8 million as of December 31, 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 interest-earning 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 98 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 interest-earning 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 mitigate impacts from interest rate changes across the yield curve. As part of this debt issuance strategy, Farmer 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 interest-earning 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 interest-earning 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 99 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 December 31, 2021, $2.9 billion of the $3.9 billion of investment securities (74%) 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. 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 a 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 interest-earning assets, debt, and financial derivatives. Duration gap quantifies the extent to which estimated fair value sensitivities are matched for interest-earning 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 interest-earning 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 interest-earning 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 100 interest-earning 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 interest-earning 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. The following schedule summarizes the results of Farmer Mac's MVE and NES sensitivity analysis as of December 31, 2021 and December 31, 2020 to an immediate and instantaneous uniform or "parallel" shift in the yield curve: Table 34 Percentage Change in MVE from Base Case Interest Rate Scenario (1) As of December 31, 2021 As of December 31, 2020 (1) +100 basis points 3.7 % 4.9 % -100 basis points (0.1) % (0.2) % Percentage Change in NES from Base Case Interest Rate Scenario As of December 31, 2021 As of December 31, 2020 (1) +100 basis points 6.6 % 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 December 31, 2021 and negative 4 basis points as of December 31, 2020. As of December 31, 2021, Farmer Mac's duration gap was negative 1.5 months, compared to negative 1.6 months as of December 31, 2020. Farmer Mac updated its duration gap measure to interest-earning assets, debt, and financial derivatives as of December 31, 2020. Interest rates within the yield curve increased significantly during 2021 with the 2-year and 10-year U.S. Treasury Note yield-to-maturity increasing by approximately 61 basis points and 59 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 interest-earning 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; 101 • "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 December 31, 2021, Farmer Mac had $17.5 billion combined notional amount of interest rate swaps, with terms ranging from less than one year to just over thirty years, of which $7.0 billion were pay-fixed interest rate swaps, $8.8 billion were receive-fixed interest rate swaps, and $1.6 billion were basis swaps. Farmer Mac enters into interest rate swaps to more closely match the cash flow and duration characteristics of its interest-earning 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 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 6 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)/gains 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 December 31, 2021 and December 31, 2020, Farmer Mac had no uncollateralized net exposures based on the mark-to-market value of the portfolio of interest rate swaps 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 resulting from a funding strategy whereby Farmer Mac issues floating rate debt across a variety of maturities to fund floating rate or synthetically floating rate assets that on average may have longer 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. 102 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; • 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 December 31, 2021, Farmer Mac held $5.3 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 $7.0 billion of interest rate swaps outstanding where Farmer Mac pays a fixed rate of interest and receives a floating rate of interest, primarily LIBOR or SOFR. Discontinuation of LIBOR As described in "Risk Factors—Market Risk" in Part I, Item 1A, 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 103 replacement of the LIBOR benchmark interest rate, including the possibility of replacement benchmark interest rates. As of December 31, 2021, Farmer Mac held $3.6 billion of floating rate assets in its lines of business and its investment portfolio, had issued $1.1 billion of floating rate debt, and had entered into $13.7 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 may also result in different financial performance for existing transactions, require different hedging strategies, or require renegotiation of existing transactions. As of December 31, 2021, we had $0.6 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 and investment securities. Farmer Mac regularly accesses the debt capital markets for funding, and Farmer Mac has maintained access to the debt capital markets at favorable interest rates throughout 2021 and 2020. 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 debt capital markets. As of December 31, 2021, Farmer Mac had outstanding discount notes of $2.2 billion, medium-term notes that mature within one year of $4.8 billion, and medium-term notes that mature after one year of $15.8 billion. Assuming continued access to the debt 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 debt 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 280 days of liquidity throughout 2021 and had 367 days of liquidity as of December 31, 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; 104 • corporate debt securities; and • mortgage-backed securities. The following table presents these assets as of December 31, 2021 and December 31, 2020: Table 35 As of December 31, 2021 As of December 31, 2020 (in thousands) Cash and cash equivalents $ 908,785 $ 1,033,941 Investment securities: Guaranteed by U.S. Government and its agencies 1,579,452 1,935,056 Guaranteed by GSEs 2,282,655 1,944,497 Asset-backed securities 19,254 19,171 Total $ 4,790,146 $ 4,932,665 The objective of the investment portfolio as of December 31, 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 December 31, 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 December 31, 2021 and December 31, 2020, Farmer Mac's Tier 1 capital ratio was 14.7% 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 2021. As of December 31, 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 Standards." See Note 9 to the consolidated financial statements for more information about Farmer Mac's capital position. Discount and Medium-term Notes . The following table presents the amount and timing of Farmer Mac's known, fixed, and determinable discount and medium-term note obligations by payment date as of December 31, 2021. The payment amounts represent those amounts due to the investor (including return of discount and interest on debt) and do not include unamortized premiums or discounts or other similar carrying value adjustments. 105 Table 36 One Year or Less One to Three Years Three to Five Years Over Five Years Total (in thousands) Discount notes (1) $ 2,168,288 $ — $ — $ — $ 2,168,288 Medium-term notes (1) 4,819,159 6,738,000 4,935,827 4,114,997 20,607,983 Interest payments on fixed rate medium-term notes (2) 180,554 275,464 188,425 323,262 967,705 Interest payments on floating rate medium-term notes (3) 7,008 10,547 7,767 5,676 30,998 (1) Future events, including additional issuance of discount notes and medium-term notes and refinancing of those notes, could cause actual payments to differ significantly from these amounts. For more information regarding discount notes and medium-term notes, see Note 7 to the consolidated financial statements. (2) Interest payments on callable medium-term notes are calculated based on maturity. Future calls of these notes could cause actual interest payments to differ significantly from the amounts presented. (3) Calculated using the effective interest rates as of December 31, 2021. As a result, these amounts do not reflect the effects of changes in the interest rates effective on future interest rate reset dates. Farmer Mac enters into financial derivatives contracts under which it either receives cash from counterparties, or is required to pay cash to them, depending on changes in interest rates. Financial derivatives are carried on the consolidated balance sheets at fair value, representing the net present value of expected future cash payments or receipts based on market interest rates as of the balance sheet date adjusted for the consideration of credit risk of Farmer Mac and its counterparties. The fair values of the contracts change daily as market interest rates change. Because the financial derivative liabilities recorded on the consolidated balance sheet as of December 31, 2021 do not represent the amounts that may ultimately be paid under the financial derivative contracts, those liabilities are not included in the table presented above. More information about financial derivatives is included in Note 2(f) and Note 6 to the consolidated financial statements. Contingent Liabilities . In conducting its loan purchase activities, Farmer Mac enters into mandatory delivery commitments to purchase agricultural mortgage loans and USDA Securities. In conducting its LTSPC activities, Farmer Mac commits, subject to the applicable LTSPC agreement, to a future purchase of one or more loans from identified pools of eligible loans that met Farmer Mac's standards when the applicable transaction was entered into and Farmer Mac assumed the credit risk on the loans. The following table presents these significant commitments: Table 37 As of December 31, 2021 2020 (in thousands) LTSPCs $ 3,191,061 $ 2,881,856 Mandatory commitments to purchase loans and USDA Securities 78,449 125,811 For more information about Farmer Mac's commitments to purchase loans, see Note 12 to the consolidated financial statements. Off-Balance Sheet Arrangements Farmer Mac offers approved lenders two credit enhancement alternatives to increase their liquidity or lending capacity while retaining the cash flow benefits of their loans: (1) Farmer Mac Guaranteed Securities; and (2) LTSPCs. Both products are available through each of the Agricultural Finance and Rural Infrastructure Finance lines of business. For securitization trusts where Farmer Mac is the primary beneficiary, the trust assets and liabilities are included on Farmer Mac's consolidated balance sheet. For 106 securitization trusts where Farmer Mac is not the primary beneficiary and in the event of de-consolidation, both of these alternatives create off-balance sheet obligations for Farmer Mac. See Note 12 to the consolidated financial statements for more information about consolidation and Farmer Mac's off-balance sheet business activities. As of December 31, 2021 and 2020, outstanding off-balance sheet LTSPCs and Farmer Mac Guaranteed Securities totaled $3.8 billion and $3.3 billion, respectively. The following table presents the balance of outstanding LTSPCs and off-balance sheet Farmer Mac Guaranteed Securities as of December 31, 2021 and 2020: Table 38 Outstanding Balance of LTSPCs and Off-Balance Sheet Farmer Mac Guaranteed Securities As of December 31, 2021 2020 (in thousands) Agricultural Finance: Corporate AgFinance: Unfunded Loan Commitments $ 47,070 $ 10,466 Farm & Ranch: LTSPCs and unfunded commitments 2,587,154 2,314,965 Farmer Mac Guaranteed Securities 578,358 378,610 Total Agricultural Finance obligations 3,212,582 2,704,041 Rural Infrastructure: Rural Utilities: LTSPCs and Unfunded Loan Commitments 556,837 556,425 Farmer Mac Guaranteed Securities 2,755 4,412 Renewable Energy: Unfunded Loan Commitments — — Total Rural Infrastructure obligations 559,592 560,837 Total off-balance sheet $ 3,772,174 $ 3,264,878 See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk – Loans and Guarantees" and Notes 2(c), 2(d), 5 and 12 to the consolidated financial statements for more information about Farmer Mac Guaranteed Securities and Notes 2(m) and 12 to the consolidated financial statements for more information about LTSPCs. Other Matters None. 107 Supplemental Information The following tables present quarterly and annual information about new business volume, repayments, and outstanding business volume: Table 39 New Business Volume Agricultural Finance Rural Infrastructure Finance Farm & Ranch Corporate AgFinance Rural Utilities Renewable Energy Total (in thousands) For the quarter ended: December 31, 2021 $ 2,075,540 $ 411,838 $ 631,338 $ 12,594 $ 3,131,310 September 30, 2021 1,791,662 122,043 609,745 4,152 2,527,602 June 30, 2021 925,950 159,958 410,666 3,441 1,500,015 March 31, 2021 1,087,897 186,393 171,546 23,484 1,469,320 December 31, 2020 907,316 242,394 145,416 44,313 1,339,439 September 30, 2020 1,059,891 212,829 52,300 10,000 1,335,020 June 30, 2020 1,069,693 279,021 358,866 — 1,707,580 March 31, 2020 768,700 165,128 392,668 10,000 1,336,496 December 31, 2019 721,248 311,756 242,900 10,000 1,285,904 For the year ended: December 31, 2021 $ 5,881,049 $ 880,232 $ 1,823,295 $ 43,671 $ 8,628,247 December 31, 2020 3,805,600 899,372 949,250 64,313 5,718,535 108 Table 40 Repayments of Assets Agricultural Finance Rural Infrastructure Finance Farm & Ranch Corporate AgFinance Rural Utilities Renewable Energy Total (in thousands) For the quarter ended: Scheduled $ 928,663 $ 205,778 $ 816,802 $ 18,526 $ 1,969,769 Unscheduled 318,024 48,042 — — 366,066 December 31, 2021 $ 1,246,687 $ 253,820 $ 816,802 $ 18,526 $ 2,335,835 Scheduled $ 725,713 $ 406,285 $ 95,443 $ 4,043 $ 1,231,484 Unscheduled 374,287 — 201 — 374,488 September 30, 2021 $ 1,100,000 $ 406,285 $ 95,644 $ 4,043 $ 1,605,972 Scheduled $ 380,684 $ 139,774 $ 225,257 $ 4,704 $ 750,419 Unscheduled 409,393 3,921 1,652 — 414,966 June 30, 2021 $ 790,077 $ 143,695 $ 226,909 $ 4,704 $ 1,165,385 Scheduled $ 721,090 $ 120,621 $ 100,482 $ 2,671 $ 944,864 Unscheduled 501,651 82,090 2,279 — 586,020 March 31, 2021 $ 1,222,741 $ 202,711 $ 102,761 $ 2,671 $ 1,530,884 Scheduled $ 365,732 $ 197,108 $ 405,597 $ 561 $ 968,998 Unscheduled 400,809 27,850 1,610 — 430,269 December 31, 2020 $ 766,541 $ 224,958 $ 407,207 $ 561 $ 1,399,267 Scheduled $ 569,820 $ 74,038 $ 211,152 $ 279 $ 855,289 Unscheduled 531,062 1,489 — — 532,551 September 30, 2020 $ 1,100,882 $ 75,527 $ 211,152 $ 279 $ 1,387,840 Scheduled $ 523,721 $ 109,543 $ 67,708 $ 240 $ 701,212 Unscheduled 448,900 50,737 3,935 — 503,572 June 30, 2020 $ 972,621 $ 160,280 $ 71,643 $ 240 $ 1,204,784 Scheduled $ 320,488 $ 94,775 $ 165,467 $ — $ 580,730 Unscheduled 326,078 8,318 — — 334,396 March 31, 2020 $ 646,566 $ 103,093 $ 165,467 $ — $ 915,126 Scheduled $ 220,004 $ 94,130 $ 489,876 $ 198 $ 804,208 Unscheduled 244,303 17,747 34,063 — 296,113 December 31, 2019 $ 464,307 $ 111,877 $ 523,939 $ 198 $ 1,100,321 For the year ended: Scheduled $ 2,756,150 $ 872,458 $ 1,237,984 $ 29,944 $ 4,896,536 Unscheduled 1,603,355 134,053 4,132 — 1,741,540 December 31, 2021 $ 4,359,505 $ 1,006,511 $ 1,242,116 $ 29,944 $ 6,638,076 Scheduled $ 1,779,761 $ 475,464 $ 849,924 $ 1,080 $ 3,106,229 Unscheduled 1,706,849 88,394 5,545 — 1,800,788 December 31, 2020 $ 3,486,610 $ 563,858 $ 855,469 $ 1,080 $ 4,907,017 109 Table 41 Outstanding Business Volume Agricultural Finance Rural Infrastructure Finance Farm & Ranch Corporate AgFinance Rural Utilities Renewable Energy Total (in thousands) As of: December 31, 2021 $ 16,094,639 $ 1,537,834 $ 5,895,227 $ 86,763 $ 23,614,463 September 30, 2021 15,565,589 1,379,816 6,080,691 92,695 23,118,791 June 30, 2021 14,873,926 1,664,059 5,566,591 92,585 22,197,161 March 31, 2021 14,738,052 1,647,796 5,382,835 93,848 21,862,531 December 31, 2020 14,872,894 1,664,115 5,314,051 73,035 21,924,095 September 30, 2020 14,737,485 1,646,679 5,575,841 29,283 21,989,288 June 30, 2020 14,778,474 1,509,378 5,734,694 19,562 22,042,108 March 31, 2020 14,681,403 1,390,637 5,447,470 19,802 21,539,312 December 31, 2019 14,559,268 1,328,602 5,220,270 9,802 21,117,942 Table 42 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: December 31, 2021 $ 13,228,675 $ 2,896,014 $ 3,695,269 $ 19,819,958 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 17,611,488 110 The following table presents the quarterly net effective spread (a non-GAAP measure) by segment: Table 43 Net Effective Spread (1) Agricultural Finance Rural Infrastructure Finance Treasury Farm & Ranch Corporate AgFinance Rural Utilities Renewable Energy Funding Investments Net Effective Spread Dollars Yield Dollars Yield Dollars Yield Dollars Yield Dollars Yield Dollars Yield Dollars Yield (dollars in thousands) For the quarter ended: December 31, 2021 (2) $ 28,998 0.99 % $ 6,321 1.84 % $ 2,521 0.19 % $ 356 1.53 % $ 15,979 0.28 % $ 158 0.01 % $ 54,333 0.94 % September 30, 2021 28,914 1.06 % 7,163 1.80 % 2,067 0.16 % 236 1.09 % 17,386 0.31 % 159 0.01 % 55,925 0.99 % June 30, 2021 29,163 1.06 % 6,676 1.65 % 1,759 0.14 % 378 1.80 % 18,449 0.33 % 126 0.01 % 56,551 1.01 % March 31, 2021 26,461 0.98 % 6,921 1.67 % 1,720 0.14 % 249 1.28 % 18,394 0.33 % 114 0.01 % 53,859 0.97 % December 31, 2020 (1) 25,596 0.95 % 6,237 1.53 % 1,838 0.15 % 123 1.20 % 20,585 0.37 % 143 0.01 % 54,522 0.98 % September 30, 2020 23,735 0.89 % 5,786 1.45 % 2,022 0.16 % 75 1.19 % 20,034 0.37 % 150 0.01 % 51,802 0.96 % June 30, 2020 21,597 0.83 % 4,997 1.36 % 1,701 0.14 % 47 0.93 % 19,449 0.37 % (1,322) (0.13) % 46,469 0.89 % March 31, 2020 19,230 0.76 % 4,421 1.32 % 1,315 0.11 % 58 1.51 % 19,150 0.39 % (11) — % 44,163 0.89 % December 31, 2019 20,677 0.83 % 4,049 1.33 % 1,411 0.12 % 22 1.07 % 19,868 0.41 % (36) — % 45,991 0.95 % (1) Farmer Mac excludes the Corporate segment in the presentation above because the segment does not have any interest-earning assets. (2) See Note 14 to the consolidated financial statements for a reconciliation of GAAP net interest income by segment to net effective spread by segment for the years ended December 31, 2021 and 2020. 111 The following table presents quarterly core earnings (a non-GAAP measure) reconciled to net income attributable to common stockholders: Table 44 Core Earnings by Quarter End December 2021 September 2021 June 2021 March 2021 December 2020 September 2020 June 2020 March 2020 December 2019 (in thousands) Revenues: Net effective spread $ 54,333 $ 55,925 $ 56,551 $ 53,859 $ 54,522 $ 51,802 $ 46,469 $ 44,163 $ 45,991 Guarantee and commitment fees 4,637 4,322 4,334 4,240 4,652 4,659 4,943 4,896 5,432 Gain on sale of mortgage loans 6,539 — — — — — — — — Other 241 687 301 451 512 453 1,048 674 100 Total revenues 65,750 60,934 61,186 58,550 59,686 56,914 52,460 49,733 51,523 Credit related expense/(income): (Release of)/provision for losses (1,428) 255 (983) (31) 2,973 1,200 51 3,831 2,851 REO operating expenses — — — — — — — — — Losses/(gains) on sale of REO — — — — 22 — — (485) — Total credit related expense/(income) (1,428) 255 (983) (31) 2,995 1,200 51 3,346 2,851 Operating expenses: Compensation and employee benefits 11,246 10,027 9,779 11,795 9,497 8,791 8,087 10,127 6,732 General and administrative 8,492 6,330 6,349 6,336 6,274 5,044 5,295 5,363 5,773 Regulatory fees 812 750 750 750 750 725 725 725 725 Total operating expenses 20,550 17,107 16,878 18,881 16,521 14,560 14,107 16,215 13,230 Net earnings 46,628 43,572 45,291 39,700 40,170 41,154 38,302 30,172 35,442 Income tax expense 9,809 9,152 9,463 8,520 8,470 8,297 8,016 6,598 7,526 Preferred stock dividends 6,792 6,774 5,842 5,269 5,269 5,166 3,939 3,431 3,432 Core earnings $ 30,027 $ 27,646 $ 29,986 $ 25,911 $ 26,431 $ 27,691 $ 26,347 $ 20,143 $ 24,484 Reconciling items: (Losses)/gains on undesignated financial derivatives due to fair value changes $ (1,213) $ (1,864) $ (3,721) $ 1,695 $ (1,758) $ (4,149) $ 8,700 $ (6,484) $ 4,469 Gains/(losses) on hedging activities due to fair value changes 1,476 (2,093) (2,097) (271) 3,827 (5,245) (2,676) (5,925) (220) Unrealized (losses)/gains on trading assets (76) 36 (61) (14) 223 (258) (20) 106 172 Net effects of amortization of premiums/discounts and deferred gains on assets consolidated at fair value 71 23 20 16 (77) 97 35 3 40 Net effects of terminations or net settlements on financial derivatives (429) (351) 109 1,165 1,583 233 720 (1,300) 1,339 Issuance costs on the retirement of preferred stock — — — — — (1,667) — — — Income tax effect related to reconciling items 36 892 1,208 (544) (798) 1,957 (1,419) 2,856 (1,218) Net income attributable to common stockholders $ 29,892 $ 24,289 $ 25,444 $ 27,958 $ 29,431 $ 18,659 $ 31,687 $ 9,399 $ 29,066 Item 7A. Quantitative and Qualitative Disclosures About Market Risk Farmer Mac is exposed to market risk from changes in interest rates. Farmer Mac manages this market risk by entering into various financial transactions, including financial derivatives, and by monitoring and 112 measuring its exposure to changes in interest rates. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Interest Rate Risk" for more information about Farmer Mac's exposure to interest rate risk and its strategies to manage that risk. For information about Farmer Mac's use of financial derivatives and related accounting policies, see Note 6 to the consolidated financial statements. Item 8. Financial Statements Management's Report on Internal Control over Financial Reporting The management of Farmer Mac is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f). Internal control over financial reporting is a process designed under the supervision of Farmer Mac's Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of Farmer Mac's financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Farmer Mac's internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of Farmer Mac; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of Farmer Mac are being made only in accordance with authorizations of management and directors of Farmer Mac; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of Farmer Mac's assets that could have a material effect on the consolidated financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Under the supervision and with the participation of Farmer Mac's Chief Executive Officer and Chief Financial Officer, Farmer Mac's management assessed the effectiveness of Farmer Mac's internal control over financial reporting as of December 31, 2021. In making this assessment, Farmer Mac's management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework (2013) . Based on its evaluation under the COSO criteria, management concluded that Farmer Mac's internal control over financial reporting as of December 31, 2021 was effective. Farmer Mac's independent registered public accounting firm, PricewaterhouseCoopers LLP, has audited the effectiveness of Farmer Mac's internal control over financial reporting as of December 31, 2021, as stated in their report appearing below. 113 Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of the Federal Agricultural Mortgage Corporation Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of the Federal Agricultural Mortgage Corporation and its subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations, comprehensive income, equity and cash flows for each of the three years in the period ended December 31, 2021, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020 , and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. Change in Accounting Principle As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for credit losses in 2020. Basis for Opinions The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and 114 performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matter s The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Valuation of Available-for-sale AgVantage Farmer Mac Guaranteed Securities As disclosed by management, the Company guarantees and purchases general obligations of lenders and other financial institutions that are secured by pools of the types of loans eligible for purchase under Farmer Mac's Agricultural Finance or Rural Infrastructure Finance lines of business, which are referred to as AgVantage securities. As described in Notes 5 and 13 to the consolidated financial statements, the total unpaid principal balance of available-for-sale AgVantage securities as of December 31, 2021 was $6.1 billion, and the fair value of the available-for-sale AgVantage securities of December 31, 2021 was $6.3 115 billion. The fair value of AgVantage securities is estimated using a discounted cash flow model. The significant unobservable input used is the discount rate commensurate with the risks involved. The principal considerations for our determination that performing procedures relating to the valuation of available-for-sale AgVantage securities is a critical audit matter are (i) the high degree of audit effort in performing procedures and evaluating audit evidence related to the discount rate assumption used by management in the valuation of the available-for-sale AgVantage securities, and (ii) the audit effort involved the use of professionals with specialized skill and knowledge. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the valuation of available-for-sale AgVantage securities, including controls over the model, data and assumption. These procedures also included, among others, (i) the involvement of professionals with specialized skill and knowledge to assist in developing an independent range of prices for a sample of available-for-sale AgVantage securities, and (ii) comparing management’s estimate to the independently developed range to evaluate the reasonableness of management’s estimate. Developing the independent range of prices involved testing the completeness and accuracy of data provided by management and independently developing the discount rate assumption. /s/ PricewaterhouseCoopers LLP Washington, District of Columbia February 28, 2022 We have served as the Company’s auditor since 2010. 116 FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS As of December 31, 2021 December 31, 2020 (in thousands) Assets: Cash and cash equivalents $ 908,785 $ 1,033,941 Investment securities: Available-for-sale, at fair value (amortized cost of $ 3,834,714 and $ 3,843,666 , respectively) 3,836,391 3,853,692 Held-to-maturity, at amortized cost 44,970 45,032 Other investments 1,229 — Total Investment Securities 3,882,590 3,898,724 Farmer Mac Guaranteed Securities: Available-for-sale, at fair value (amortized cost of $ 6,135,807 and $ 6,594,992 , respectively) 6,328,559 6,947,701 Held-to-maturity, at amortized cost 2,033,239 1,175,792 Total Farmer Mac Guaranteed Securities 8,361,798 8,123,493 USDA Securities: Trading, at fair value 4,401 6,695 Held-to-maturity, at amortized cost 2,436,331 2,473,626 Total USDA Securities 2,440,732 2,480,321 Loans: Loans held for investment, at amortized cost 8,314,096 7,261,933 Loans held for investment in consolidated trusts, at amortized cost 948,623 1,287,045 Allowance for losses ( 14,041 ) ( 13,832 ) Total loans, net of allowance 9,248,678 8,535,146 Financial derivatives, at fair value 19,139 17,468 Interest receivable (includes $ 10,418 and $ 16,401 , respectively, related to consolidated trusts) 177,355 186,429 Guarantee and commitment fees receivable 45,538 37,113 Deferred tax asset, net 15,558 18,321 Prepaid expenses and other assets 45,318 24,545 Total Assets $ 25,145,491 $ 24,355,501 Liabilities and Equity: Liabilities: Notes payable $ 22,716,156 $ 21,848,917 Debt securities of consolidated trusts held by third parties 981,379 1,323,786 Financial derivatives, at fair value 34,248 29,892 Accrued interest payable (includes $ 9,619 and $ 14,370 , respectively, related to consolidated trusts) 83,992 92,738 Guarantee and commitment obligation 43,926 35,535 Accounts payable and accrued expenses 79,427 28,879 Reserve for losses 1,950 3,277 Total Liabilities 23,941,078 23,363,024 Commitments and Contingencies (Note 12) Equity: Preferred stock: Series C, par value $ 25 per share, 3,000,000 shares authorized, issued and outstanding 73,382 73,382 Series D, par value $ 25 per share, 4,000,000 shares authorized, issued and outstanding 96,659 96,659 Series E, par value $ 25 per share, 3,180,000 shares authorized, issued and outstanding 77,003 77,003 Series F, par value $ 25 per share, 4,800,000 shares authorized, issued and outstanding 116,160 116,160 Series G, par value $ 25 per share, 5,000,000 shares authorized, issued and outstanding 121,327 — Common stock: Class A Voting, $ 1 par value, no maximum authorization, 1,030,780 shares outstanding 1,031 1,031 Class B Voting, $ 1 par value, no maximum authorization, 500,301 shares outstanding 500 500 Class C Non-Voting, $ 1 par value, no maximum authorization, 9,235,205 shares and 9,205,897 shares outstanding, respectively 9,235 9,206 Additional paid-in capital 125,993 122,899 Accumulated other comprehensive income/(loss), net of tax 3,853 ( 13,923 ) Retained earnings 579,270 509,560 Total Equity 1,204,413 992,477 Total Liabilities and Equity $ 25,145,491 $ 24,355,501 The accompanying notes are an integral part of these consolidated financial statements. 117 FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS For the Years Ended December 31, 2021 2020 2019 (in thousands, except per share amounts) Interest income: Investments and cash equivalents $ 18,660 $ 42,144 $ 81,522 Farmer Mac Guaranteed Securities and USDA Securities 163,547 227,691 333,896 Loans 242,582 233,699 229,675 Total interest income 424,789 503,534 645,093 Total interest expense 204,014 312,946 471,958 Net interest income 220,775 190,588 173,135 Release of/(provision for) losses 860 ( 7,805 ) ( 3,504 ) Net interest income after release of/(provision for) losses 221,635 182,783 169,631 Non-interest income/(expense): Guarantee and commitment fees 12,669 12,549 13,666 (Losses)/gains on financial derivatives ( 3,348 ) ( 246 ) 5,282 Gain on sale of mortgage loans 6,539 — — (Losses)/gains on trading securities ( 115 ) 50 326 Gains/(losses) on sale of available-for-sale investment securities 253 — ( 236 ) Gains on sale of real estate owned — 463 — Release of/(provision for) reserve for losses 1,327 ( 250 ) 3 Other income 2,069 3,487 1,904 Non-interest income 19,394 16,053 20,945 Operating expenses: Compensation and employee benefits 42,847 36,502 28,762 General and administrative 27,507 21,976 20,311 Regulatory fees 3,062 2,925 2,788 Real estate owned operating costs, net — — 64 Operating expenses 73,416 61,403 51,925 Income before income taxes 167,613 137,433 138,651 Income tax expense 35,353 28,785 29,105 Net income 132,260 108,648 109,546 Preferred stock dividends ( 24,677 ) ( 17,805 ) ( 13,940 ) Loss on retirement of preferred stock — ( 1,667 ) ( 1,956 ) Net income attributable to common stockholders $ 107,583 $ 89,176 $ 93,650 Earnings per common share: Basic earnings per common share $ 10.00 $ 8.31 $ 8.76 Diluted earnings per common share $ 9.92 $ 8.27 $ 8.69 The accompanying notes are an integral part of these consolidated financial statements. 118 FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME For the Years Ended December 31, 2021 2020 2019 (in thousands Net income $ 132,260 $ 108,648 $ 109,546 Other comprehensive income/(loss) before taxes: Net unrealized gains/(losses) on available-for-sale securities 8,867 37,291 ( 22,831 ) Net changes in held-to-maturity securities ( 8,451 ) ( 12,677 ) ( 13,415 ) Net unrealized gains/(losses) on cash flow hedges 22,084 ( 21,780 ) ( 15,801 ) Other comprehensive income/(loss) before tax 22,500 2,834 ( 52,047 ) Income tax (expense)/benefit related to other comprehensive income/(loss) ( 4,724 ) ( 596 ) 10,930 Other comprehensive income/(loss) net of tax 17,776 2,238 ( 41,117 ) Comprehensive income $ 150,036 $ 110,886 $ 68,429 The accompanying notes are an integral part of these consolidated financial statements. 119 FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EQUITY Accumulated Additional Other Preferred Stock Common Stock Paid-In Comprehensive Retained Total Shares Amount Shares Amount Capital Income/(Loss) Earnings Equity (in thousands) Balance as of January 1, 2019 8,400 $ 204,759 10,669 $ 10,669 $ 118,822 $ 24,956 $ 393,351 $ 752,557 Net Income — — — — — — 109,546 109,546 Other comprehensive loss, net of tax — — — — — ( 41,117 ) — ( 41,117 ) Cash dividends: Preferred stock — — — — — — ( 13,940 ) ( 13,940 ) Common stock (cash dividend of $ 0.70 per share) — — — — — — ( 29,954 ) ( 29,954 ) Issuance of Series D Preferred Stock 4,000 96,659 — — — — — 96,659 Redemption of Series B Preferred Stock ( 3,000 ) ( 73,044 ) — — — — — ( 73,044 ) Loss on retirement of preferred stock — — — — — — ( 1,956 ) ( 1,956 ) Issuance of Class C Common Stock — — 43 43 44 — — 87 Stock-based compensation cost — — — — 2,258 — — 2,258 Other stock-based award activity — — — — ( 1,820 ) — — ( 1,820 ) Balance as of December 31, 2019 9,400 $ 228,374 10,712 $ 10,712 $ 119,304 $ ( 16,161 ) $ 457,047 $ 799,276 Cumulative effect adjustment from adoption of current expected credit loss standard — — — — — — ( 2,099 ) ( 2,099 ) Balance as of January 1, 2020 9,400 $ 228,374 10,712 $ 10,712 $ 119,304 $ ( 16,161 ) $ 454,948 $ 797,177 Net Income — — — — — — 108,648 108,648 Other comprehensive income, net of tax — — — — — 2,238 — 2,238 Cash dividends: Preferred stock — — — — — — ( 17,805 ) ( 17,805 ) Common stock (cash dividend of $ 0.80 per share) — — — — — — ( 34,333 ) ( 34,333 ) Issuance of Series E Preferred Stock 3,180 77,003 — — — — — 77,003 Issuance of Series F Preferred Stock 4,800 116,160 — — — — — 116,160 Redemption of Series A preferred stock ( 2,400 ) ( 58,333 ) — — — — — ( 58,333 ) Loss on retirement of preferred stock — — — — — — ( 1,667 ) ( 1,667 ) Issuance of Class C Common Stock — — 29 29 56 — — 85 Repurchase of Class C Common Stock — — ( 4 ) ( 4 ) — — ( 231 ) ( 235 ) Stock-based compensation cost — — — — 4,128 — — 4,128 Other stock-based award activity — — — — ( 589 ) — — ( 589 ) Balance as of December 31, 2020 14,980 $ 363,204 10,737 $ 10,737 $ 122,899 $ ( 13,923 ) $ 509,560 $ 992,477 Net Income — — — — — — 132,260 132,260 Other comprehensive income, net of tax — — — — — 17,776 — 17,776 Cash dividends: Preferred stock — — — — — — ( 24,677 ) ( 24,677 ) Common stock (cash dividend of $ 0.88 per share) — — — — — — ( 37,873 ) ( 37,873 ) Issuance of Series G Preferred Stock 5,000 121,327 — — — — — 121,327 Issuance of Class C Common Stock — — 29 29 116 — — 145 Stock-based compensation cost — — — — 4,310 — — 4,310 Other stock-based award activity — — — — ( 1,332 ) — — ( 1,332 ) Balance as of December 31, 2021 19,980 $ 484,531 10,766 $ 10,766 $ 125,993 $ 3,853 $ 579,270 $ 1,204,413 The accompanying notes are an integral part of these consolidated financial statements. 120 FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOW For the Years Ended December 31, 2021 2020 2019 (in thousands) Cash flows from operating activities: Net income $ 132,260 $ 108,648 $ 109,546 Adjustments to reconcile net income to net cash provided by operating activities: Net amortization of deferred gains, premiums, and discounts on loans, investments, Farmer Mac Guaranteed Securities, and USDA Securities 17,314 8,343 ( 10,399 ) Amortization of debt premiums, discounts, and issuance costs 6,780 21,319 50,052 Net change in fair value of trading securities, hedged assets, and financial derivatives 203,758 ( 256,466 ) ( 220,080 ) Gain on sale of real estate owned — ( 463 ) — Gain on the sale of available-for-sale investment securities ( 253 ) — — Gain on the sale of mortgage loans ( 6,539 ) — — Total (release)/provision for allowance for losses ( 2,187 ) 8,055 3,501 Excess tax benefits related to stock-based awards 292 ( 440 ) 449 Deferred income taxes ( 1,960 ) ( 2,406 ) 789 Other — — 236 Stock-based compensation expense 4,311 4,128 2,258 Purchases of loans held for sale — ( 59,150 ) — Proceeds from the sale of loans held for sale — 15,000 — Proceeds from repayment of loans purchased as held for sale 46,968 59,370 54,195 Net change in: Interest receivable 6,945 11,054 ( 19,080 ) Guarantee and commitment fees receivable ( 34 ) 164 ( 59 ) Other assets ( 9,830 ) ( 3,348 ) ( 2,744 ) Accrued interest payable ( 8,746 ) ( 14,221 ) 10,216 Custodial deposit liability 44,955 — — Other liabilities 2,378 5,866 1,421 Net cash provided by/(used in) operating activities 436,412 ( 94,547 ) ( 19,699 ) Cash flows from investing activities: Purchases of available-for-sale investment securities ( 2,004,911 ) ( 2,852,658 ) ( 2,166,376 ) Purchases of other investment securities ( 1,229 ) — — Purchases of Farmer Mac Guaranteed Securities and USDA Securities ( 4,380,901 ) ( 2,074,701 ) ( 2,691,104 ) Purchases of loans held for investment ( 3,029,668 ) ( 3,167,198 ) ( 2,234,715 ) Purchases of defaulted loans ( 8,713 ) ( 6,272 ) ( 469 ) Proceeds from repayment of available-for-sale investment securities 1,740,000 1,961,895 1,425,402 Proceeds from repayment of Farmer Mac Guaranteed Securities and USDA Securities 4,027,726 2,517,957 2,190,702 Proceeds from repayment of loans purchased as held for investment 1,889,408 1,715,663 758,192 Proceeds from sale of loans previously classified as held for investment 301,393 — — Proceeds from sale of available-for-sale investment securities 257,524 — 12,367 Proceeds from sale of Farmer Mac Guaranteed Securities 113,175 165,054 321,414 Proceeds from sale of real estate owned — 4,169 — Net cash used in investing activities ( 1,096,196 ) ( 1,736,091 ) ( 2,384,587 ) Cash flows from financing activities: Proceeds from issuance of discount notes 61,112,365 68,548,733 64,642,545 Proceeds from issuance of medium-term notes 11,173,147 13,509,754 10,195,775 Payments to redeem discount notes ( 60,743,066 ) ( 68,960,492 ) ( 64,079,322 ) Payments to redeem medium-term notes ( 10,586,370 ) ( 10,414,765 ) ( 7,970,126 ) Payments to third parties on debt securities of consolidated trusts ( 480,272 ) ( 504,807 ) ( 181,493 ) Proceeds from common stock issuance 117 56 44 Retirement of preferred stock — ( 60,000 ) ( 75,000 ) Proceeds from preferred stock issuance, net of stock issuance costs 121,327 193,163 96,659 Tax payments related to share-based awards ( 1,305 ) ( 560 ) ( 1,777 ) Purchases of common stock — ( 235 ) — Dividends paid on common and preferred stock ( 61,315 ) ( 50,649 ) ( 43,894 ) Net cash provided by financing activities 534,628 2,260,198 2,583,411 Net change in cash and cash equivalents ( 125,156 ) 429,560 179,125 Cash and cash equivalents at beginning of period 1,033,941 604,381 425,256 Cash and cash equivalents at end of period $ 908,785 $ 1,033,941 $ 604,381 121 Cash paid during the period for: Interest 198,593 283,335 365,526 Income taxes 36,300 30,000 23,100 Non-cash activity: Loans acquired and securitized as Farmer Mac Guaranteed Securities 113,175 165,054 321,414 Consolidation of Farmer Mac Guaranteed Securities from off-balance sheet to loans held for investment in consolidated trusts and to debt securities of consolidated trusts held by third parties 113,175 165,054 263,561 Reclassification of defaulted loans from loans held for investment in consolidated trusts to loans held for investment 24,690 47,036 5,479 Reclassification of loans held for sale to loans held for investment — 44,150 — Reclassification of loans held for investment to loans held for sale 301,551 — — Net assets obtained in securitization 15,369 — — Capitalized interest 1,259 1,348 — (Recovery)/charge-off from the allowance for losses ( 1,054 ) 5,759 — Loan payoff not yet received ( 7,500 ) — — Purchases of securities - traded, not yet settled 1,980 — — The accompanying notes are an integral part of these consolidated financial statements. 122 FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION The Federal Agricultural Mortgage Corporation ("Farmer Mac") is a stockholder-owned, federally chartered instrumentality of the United States established under Title VIII of the Farm Credit Act of 1971, as amended (12 U.S.C. §§ 2279aa et seq.), which is sometimes referred to as Farmer Mac's charter. Farmer Mac was originally created by the United States Congress to provide a secondary market for a variety of loans made to borrowers in rural America. This secondary market is designed to increase the availability of long-term credit at stable interest rates to America's rural communities and to provide rural borrowers with the benefits of capital markets pricing and product innovation. Farmer Mac's secondary market activities include: • purchasing eligible loans directly from lenders; • providing advances against eligible loans by purchasing obligations secured by those loans; • securitizing assets and guaranteeing the payment of principal and interest on the resulting securities that represent interests in, or obligations secured by, pools of eligible loans; and • issuing long-term standby purchase commitments ("LTSPCs") for eligible loans. Farmer Mac conducts its secondary market activities through two lines of business — Agricultural Finance and Rural Infrastructure Finance. For more information about those lines of business and the segments within them, see Note 14 - Business Segments. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting and reporting policies of Farmer Mac conform with accounting principles generally accepted in the United States of America ("generally accepted accounting principles" or "GAAP"). The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. The following are the significant accounting policies that Farmer Mac follows in preparing and presenting its consolidated financial statements: (a) Principles of Consolidation The consolidated financial statements include the accounts of Farmer Mac and its two subsidiaries during the year: (1) Farmer Mac Mortgage Securities Corporation, whose principal activities are to facilitate the purchase and issuance of Farmer Mac Guaranteed Securities; and (2) Farmer Mac II LLC, whose principal activity is the operation of substantially all of the business related to the USDA Securities included in the Agricultural Finance line of business. The consolidated financial statements also include the accounts of VIEs in which Farmer Mac determined itself to be the primary beneficiary. 123 (b) Cash and Cash Equivalents Farmer Mac considers highly liquid investment securities with maturities at the time of purchase of three months or less to be cash equivalents. (c) Investment Securities, Farmer Mac Guaranteed Securities, and USDA Securities Securities for which Farmer Mac has the intent and ability to hold to maturity are classified as held-to-maturity and are carried at amortized cost. Securities for which Farmer Mac does not have the positive intent and ability to hold to maturity are classified as available-for-sale or trading and are carried at estimated fair value. Unrealized gains and losses on available-for-sale securities are reported as a component of accumulated other comprehensive income in stockholders' equity. For securities classified as trading, unrealized gains and losses are included in earnings. Gains and losses on the sale of available-for-sale and trading securities are determined using the specific identification cost method. Farmer Mac determines the fair value of investment securities using quoted market prices, when available. Farmer Mac determines the fair values of certain investment securities for which quoted market prices are not available, Farmer Mac Guaranteed Securities, and USDA Securities based on the present value of the associated expected future cash flows. In estimating the present value of the expected future cash flows, management is required to make estimates and assumptions. The key estimates and assumptions include discount rates and collateral repayment rates. Premiums, discounts, and other deferred costs are amortized to interest income using the effective interest method. Farmer Mac generally receives compensation when loans with yield maintenance provisions underlying Farmer Mac Guaranteed Securities prepay. These yield maintenance payments mitigate Farmer Mac's exposure to reinvestment risk and are calculated such that, when reinvested with the prepaid principal, they should generate substantially the same cash flows that would have been generated had the loans not prepaid. Yield maintenance payments are recognized as interest income in the consolidated statements of operations upon receipt. Interest Income Recognition on IO-FMGS Farmer Mac recognizes interest income for its IO-FMGS by applying the effective yield methodology required by GAAP for financial assets that are either not of high credit quality at the time of acquisition or can be contractually prepaid or otherwise settled in such a way that Farmer Mac would not recover substantially all of its recorded investment. The amount of periodic interest income recognized is determined by applying the IO-FMGS effective interest rate to its amortized cost basis (or “reference amount”). At the time of acquisition, the effective interest rate is calculated by solving for the single discount rate that equates the present value of Farmer Mac's best estimate of the amount and timing of the cash flows expected to be collected from the IO-FMGS to its purchase cost. To prepare its best estimate of cash flows expected to be collected, Farmer Mac develops a number of assumptions about the future performance of the pool of mortgage loans that serve as collateral, including assumptions about the timing and amount of prepayments and credit losses. In each subsequent quarterly reporting period, the amount and timing of cash flows expected to be collected from the IO-FMGS are re-estimated based upon current information and events. 124 (d) Loans Loans for which Farmer Mac has the positive intent and ability to hold for the foreseeable future are classified as held for investment and reported at their unpaid principal balance, net of unamortized purchase discounts or premiums. Loans for which Farmer Mac does not have the positive intent and ability to hold for the foreseeable future are classified as held for sale and reported at the lower of cost or fair value determined on a pooled basis. Farmer Mac de-recognizes sold loans, and recognizes any associated gain or loss, when they have been legally isolated from Farmer Mac, the buyer has the right to pledge or exchange them, and Farmer Mac does not maintain effective control over them. When Farmer Mac consolidates a trust, it recognizes the loans underlying the trust in the consolidated balance sheets as "Loans held for investment in consolidated trusts, at amortized cost." See Note 2(o) for more information on the accounting policy related to consolidation. Non-accrual Loans Non-accrual loans are loans for which it is probable that Farmer Mac will be unable to collect all amounts due according to the contractual terms of the loan agreement and include all loans 90 days or more past due. When a loan becomes 90 days past due, interest accrual on the loan is discontinued and interest previously accrued is reversed against interest income in the current period. The interest on such loans is accounted for on the cash basis until a loan qualifies for return to accrual status. Loans are returned to accrual status when all the principal and interest payments contractually due are collected and certain performance criteria are met. Troubled Debt Restructuring ("TDR") A modification to the contractual terms of a loan that results in granting a concession to a borrower experiencing financial difficulties is considered a TDR. Farmer Mac has granted a concession when, as a result of the restructuring, it does not expect to collect all amounts due in a timely manner, including interest accrued at the original contract rate. In making its determination of whether a borrower is experiencing financial difficulties, Farmer Mac considers several factors, including whether (1) the borrower has declared or is in the process of declaring bankruptcy, (2) there is substantial doubt as to whether the borrower will continue to be a going concern, and (3) the borrower can obtain funds from other sources at an effective interest rate at or near a current market interest rate for debt with similar risk characteristics. (e) Securitization Securitization involves the transfer of financial assets to another entity in exchange for cash and/or beneficial interests in the assets transferred. Farmer Mac or third parties transfer agricultural mortgage loans, Rural Utilities loans, or USDA securities into trusts that are used as vehicles for the securitization of the transferred financial assets. The trusts issue Farmer Mac Guaranteed Securities that are beneficial interests in the assets of the trusts, to either Farmer Mac or third-party investors. Farmer Mac guarantees the timely payment of principal and interest on the securities issued by the trusts and receives guarantee fees as compensation for its guarantee. Farmer Mac recognizes guarantee fees on the accrual basis over the terms of the Farmer Mac Guaranteed Securities, which generally coincide with the terms of the underlying loans. As such, no guarantee fees are unearned at the end of any reporting period. 125 Farmer Mac is required to perform under its guarantee obligation when the underlying loans for the off-balance sheet Farmer Mac Guaranteed Securities do not make their scheduled installment payments. When a loan underlying an Agricultural Finance Guaranteed Security becomes 90 days or more past due, Farmer Mac may, in its sole discretion, repurchase the loan from the trust and generally does repurchase such loans, thereby reducing the principal balance of the outstanding Farm & Ranch Guaranteed Security. When Farmer Mac purchases a delinquent loan underlying a Farmer Mac Guaranteed Security, Farmer Mac stops accruing the guarantee fee upon loan purchase. If Farmer Mac repurchases a loan that is collateral for a Farmer Mac Guaranteed Security, Farmer Mac would have the right to enforce the terms of the loan, and in the event of a default, would have access to the underlying collateral. Farmer Mac typically recovers its investment in the defaulted loans purchased either through borrower payments, loan payoffs, payments by third parties, or foreclosure and sale of the collateral securing the loans. Farmer Mac has recourse to the USDA for any amounts advanced for the timely payment of principal and interest on Farmer Mac Guaranteed USDA Securities. That recourse is the USDA guarantee, a full-faith-and-credit obligation of the United States that becomes enforceable if a lender fails to repurchase the USDA-guaranteed portion from its owner within 30 days after written demand from the owner when (a) the borrower under the guaranteed loan is in default not less than 60 days in the payment of any principal or interest due on the USDA-guaranteed portion, or (b) the lender has failed to remit to the owner the payment made by the borrower on the USDA-guaranteed portion or any related loan subsidy within 30 days after the lender's receipt of the payment. Transfers of Financial Assets Farmer Mac accounts for transfers of financial assets as sales when it has surrendered control over the related assets. Whether control has been relinquished requires, among other things, an evaluation of relevant legal considerations and an assessment of the nature and extent of Farmer Mac's continuing involvement with the assets transferred. Gains and losses stemming from transfers reported as sales are included in “Gain on sale of mortgage loans” in the accompanying consolidated statements of operations. Assets obtained and liabilities incurred in connection with transfers reported as sales are initially recognized in the consolidated balance sheets at fair value. In the fourth quarter of 2021, Farmer Mac executed a structured securitization of a $ 299.4 million pool of Farm & Ranch loans. The securitization consisted of two classes of securities, Class A and Class B. The Class A securities are backed by 92.5 % of the