What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2022-02-28 compared with 2021-02-25 · 107 added, 99 removed, 195 unchanged (51% of the section changed)

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, and the level of prevailing interest rates and overall market conditions.

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.

3 unchanged sentences

COVID-19 Pandemic Risk

The 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 create extensive disruptions to the global economy and to the lives of individuals throughout the world.

The effectiveness of Farmer Mac’s efforts to manage and mitigate the following risk factors during the COVID-19 pandemic and 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 and the widespread distribution, public acceptance, availability, and use of vaccines;

• the existence and scope of government intervention to mitigate the negative economic effects of the COVID-19 pandemic, including imposing any moratoria on agricultural mortgage foreclosures;

• the ability of Farmer Mac’s borrowers to withstand economic pressures caused by the COVID-19 pandemic, how quickly and to what extent affected borrowers can recover from the negative economic effects of the pandemic, and the nature and extent to which affected borrowers require loan payment deferments;

• the extent to which disruptions in the capital markets or volatility in interest rates stemming from the effects of the COVID-19 pandemic impair customer demand for Farmer Mac’s loan products, Farmer Mac’s ability to offer those loan products at competitive prices, or Farmer Mac’s ability to access the capital markets to fund and capitalize its operations;

• the continued ability of Farmer Mac, its vendors, and the organizations on which they rely, such as government offices and courthouses, to operate effectively during the COVID-19 pandemic, including their ability to implement effective cyber-security protocols in remote-working environments as needed;

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;

• whether the COVID-19 pandemic causes any residual negative effects once the pandemic has subsided.

• 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.

1 unchanged sentence

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 (including recent severely cold weather in Texas);

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;

protracted regional, domestic, or global economic stress (whether due to the continued COVID-19 pandemic or otherwise);

supply-chain disruptions that negatively impact borrowers' production or distribution capabilities, protracted regional, domestic, or global

economic stress (whether due to the continued COVID-19 pandemic or otherwise);

legislative or regulatory actions affecting rural borrowers;

2 unchanged sentences

and adverse changes in interest rates and land values.

Any of these factors could put downward pressure on the profitability of a farming 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.

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.

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.

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 to a particular commodity type, geographic region, or collateral type.

Widespread weakening in the financial condition of borrowers within a particular geographic region, commodity type, or collateral type (which could be exacerbated by a prolonged period of economic stress due to the effects of the COVID-19 pandemic) could negatively affect Farmer Mac’s financial condition if the geographic and commodity diversity within Farmer Mac's portfolio 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, particularly if the collateral is single-use or highly improved, such as storage and processing facilities or permanent plantings.

Single-use or highly improved collateral increases the risk of ultimate losses on a given loan because producers requiring single-use or highly improved collateral are less able to adapt their operations or switch functional production when faced with adverse conditions and are more likely to be undercollateralized in a default scenario.

For example, Farmer Mac's cumulative net credit losses for

loans to borrowers in the Agricultural Storage and Processing category are 54.5% of its cumulative net credit losses for all categories.

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.

12 unchanged sentences

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 have a higher concentration of exposure relative to the rest of Farmer Mac's investment portfolio.

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.

5 unchanged sentences

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.

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.

7 unchanged sentences

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 results, and financial condition.

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).

10 unchanged sentences

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 capacity to remain adequately capitalized through the issuance of equity and debt securities at favorable rates and terms in the U.S.

financial markets.

Farmer Mac's potential for growth and future net income depends in part on Farmer Mac's ability to access equity markets to raise efficient capital.

The issuance of debt securities is Farmer Mac's primary source for repaying or refinancing existing debt, and one of the primary sources of Farmer Mac's revenue is the net interest income earned from the difference, or "spread," between the return received on assets held and the related borrowing costs.

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, or financial condition could be adversely affected.

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.

1 unchanged sentence

Farmer Mac conducts a significant portion of its business with a few business counterparties.

This could result in vulnerability as existing assets pay down or mature and the status and needs of Farmer Mac's business partners evolve.

In 2020, ten institutions generated approximately 57% of loan purchase volume in the Farm & Ranch line of business.

As of December 31, 2020, approximately 90% of the $7.7 billion outstanding principal amount of AgVantage securities under Farmer Mac's Institutional Credit line of business were issued by three institutions (of which $1.7 billion and $1.4 billion will be maturing in 2021 and 2022, respectively).

As of December 31, 2020, transactions with two institutions represented nearly all of the business volume under Farmer Mac's Rural Utilities line of business.

This concentration of business could potentially result in increased variability in Farmer

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.

13 unchanged sentences

The ownership of Farmer Mac's two classes of voting common stock is concentrated in a few institutions.

Three financial institutions hold approximately 44% of Farmer Mac's Class A voting common stock, with 31% held by one institution.

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 Mac's board of directors.

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

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.

Changes in Farmer Mac's board could adversely affect its business, operations, and strategy.

Farmer Mac's charter prescribes that its board of directors consist of fifteen members.

The holders of Farmer Mac's Class A voting common stock and the holders of Farmer Mac's Class B voting common stock separately elect five board members for each class annually.

The President of the United States, with the advice and consent of the United States Senate, appoints five board members (one of whom is designated as the chair of the board of directors).

Farmer Mac's Presidentially appointed board members serve at the pleasure of the President of the United States and therefore could be replaced at any time.

as a result of annual elections or new Presidential appointments to the board, Farmer Mac were to experience a significant turnover in board membership within a short time and the new directors were not able to become proficient quickly in Farmer Mac's business, operations, and strategies, the effectiveness of Farmer Mac's board of directors in overseeing the business, affairs, strategies, and operations of Farmer Mac could be adversely affected.

In 2020, three new individuals joined Farmer Mac's board of directors, two of whom were elected by holders of voting common stock in May 2020 (one of whom died later that year) and one of whom was appointed by the President of the United States after confirmation by the U.S.

Senate in December 2020.

Operational Risk

The inadequacy or failure of Farmer Mac's operational systems, cybersecurity plan, 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.

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 refers to the risk of loss to Farmer Mac resulting from:

• inadequate or failed internal processes, systems, cybersecurity plan, or infrastructure;

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;

• inadequate or failed internal controls or processes to detect or prevent fraud or other violations of law or regulations;

• 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 plan, 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.

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 all of its employees working remotely from their homes.

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 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.

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.

2 unchanged sentences

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.

The risk of disruption to third-party systems or infrastructure may be heightened due to COVID-19-related illnesses or government or third-party actions taken to mitigate the public health effects of the COVID-19 pandemic, including stay-at-home orders.

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.

Any significant deficiency, failure, interruption, or breach in Farmer Mac's information systems, including the occurrence of successful cyber-attacks or a significant deficiency in Farmer Mac's cybersecurity plan, 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 information systems, including from third parties, to conduct and manage its business operations.

These information systems encompass an integrated set of hardware, software, infrastructure, and trained personnel organized to facilitate the planning, control, coordination, and decision-making processes within Farmer Mac.

As Farmer Mac's reliance on information systems has increased, so have the risks posed to its systems, including the effect of events that would threaten the confidentiality, integrity, or availability of Farmer Mac's information resources, known as cyber incidents.

Like many other financial institutions, Farmer Mac faces regular attempts by third parties to gain unauthorized access to its information systems.

Despite the increased cybersecurity risks presented by a workforce that is operating entirely remotely, Farmer Mac is not aware of any cyber-attacks or other privacy or data security incidents through the date of this report that negatively affected the confidentiality, integrity, or availability of Farmer Mac’s information resources or that have had a material effect on its business, operating results, or financial condition, but it is not possible to predict the effect on Farmer Mac of any future cyber incidents.

Farmer Mac has undertaken preventive measures and devotes what Farmer Mac believes to be adequate resources to design, manage, monitor, deploy, and assess its information systems and cybersecurity program consistent with industry best practices.

Farmer Mac's cybersecurity program assesses Farmer Mac's cybersecurity risk profile and seeks to ensure there are sufficient measures and safeguards in place to mitigate the risks identified.

However, Farmer Mac may be unable to prevent, address on a timely and adequate basis, or fully mitigate the negative effects associated with a successful cyber-attack on Farmer Mac's or its third-party information systems, which could adversely affect Farmer Mac's business, operating results, reputation, or financial condition.

Because the methods used to launch cyber-attacks change often or, in some cases, are not recognized until launched, Farmer Mac also may be unable to implement effective preventive measures or proactively address these methods until discovered.

A failure or interruption in any of Farmer Mac's information systems could cause a disruption or malfunction of its operations, which could adversely affect Farmer Mac's ability to conduct business with its customers, loan

servicers, service providers, or other counterparties, result in financial loss, or damage Farmer Mac's reputation.

The secure transmission, processing, and storage of Farmer Mac's confidential, proprietary, and other information assets through Farmer Mac's or its third-party information systems is instrumental to Farmer Mac's operations.

Any action that results in unauthorized access to Farmer Mac's information systems by third parties, including through viruses, malware, cyber-attacks, or other information system breaches, could disrupt Farmer Mac's operations, corrupt its data, or cause the misappropriation, unauthorized release, loss, or destruction of the confidential, proprietary, or other information assets of its customers, loan servicers, service providers, or other counterparties.

Unauthorized access to Farmer Mac's information systems or sensitive information could cause Farmer Mac to experience prolonged operational interruption, damage to its reputation, material loss of business, legal liability, or increased costs from private data exposure, which could adversely affect Farmer Mac's business, operating results, reputation, 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

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 for Farmer Mac.

During these activities, these third parties collect and have access to a variety of confidential or proprietary information, including, among others, sensitive financial information, information presented to Farmer Mac's board of directors, information provided to Farmer Mac's regulators, information about the lenders that participate in Farmer Mac's lines of business, and personal financial information about the borrowers with loans in one of Farmer Mac's lines of business.

Any unauthorized access to or cyber incidents affecting the information systems of one of these third parties, including through viruses, malware, cyber-attacks, or other information system breaches, could result in the misappropriation and inappropriate release of the confidential or proprietary information entrusted to Farmer Mac.

Prior instances of unauthorized access to Farmer Mac's third parties' information systems have not resulted in the misappropriation or inappropriate release of the confidential or proprietary information entrusted to Farmer Mac, although it is not possible to predict the consequences of any future instances.

Any employees or agents of Farmer Mac's third parties that have authorized access to confidential or proprietary information could also inadvertently or erroneously disseminate the information to unauthorized third parties.

The risk of unauthorized access to confidential or proprietary information through information system breaches or inadvertent dissemination may be heightened in a remote-working environment, which may be more prevalent due to the COVID-19 pandemic.

Any unauthorized access to or dissemination of confidential or proprietary information could result in liability for Farmer Mac or damage Farmer Mac's reputation, either of which could have a negative effect on Farmer Mac's business, operating results, or financial condition.

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

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.

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 risk 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.

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.

6 unchanged sentences

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 liabilities that have similar duration and convexity characteristics so that they will perform similarly as interest rates change.

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.

1 unchanged sentence

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.

Volatility in market conditions during the past year 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 an extremely low interest rate environment.

A resumption of market volatility from uncertainties surrounding a prolonged pandemic 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") will increase from the time the initial funding was issued and the time the liabilities are re-funded.

This risk arises from maturity mismatches between assets and liabilities where assets with longer maturities must be re-funded.

A significant increase in the difference between Farmer Mac's funding cost relative to the benchmark

index, including LIBOR, could compress spread income on the assets Farmer Mac holds and seeks to re-fund with the higher cost funding.

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.

5 unchanged sentences

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 2020 and 2019, Farmer Mac recorded a loss of $3.7 million and a gain of $10.1 million, respectively, from changes in the fair values of its financial derivatives as a result of movements in interest rates during those years.

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.

2 unchanged sentences

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 environment, it could have a material adverse effect on Farmer Mac's liquidity position or operating results.

The reform, replacement, or discontinuation of the LIBOR benchmark interest rate could adversely affect Farmer Mac's business, operating results, or financial condition.

If Farmer Mac is required to fully collateralize a significant portion of its derivatives in an adverse interest rate

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.

2 unchanged sentences

These announcements indicate that the continuation of LIBOR in its current form will be discontinued after June 2023.

Farmer Mac is evaluating the potential effect on its business of the replacement of the LIBOR benchmark interest rate, including the possibility of replacement benchmark interest rates.

As of December 31, 2020, Farmer Mac held $5.1 billion of floating rate assets in its lines of business and its investment portfolio, had issued $4.7 billion of floating rate debt, and had

entered into $14.6 billion notional amount of interest rate swaps, each of which resets based on LIBOR.

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.

1 unchanged sentence

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 LIBOR is discontinued and 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.

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.

6 unchanged sentences

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 Policies—Fair Value Measurement" for more 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.

See "Management's Discussion and Analysis—Critical Accounting Estimates—Fair Value Measurement" for more

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.

3 unchanged sentences

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.

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(p) 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, 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.

5 unchanged sentences

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, or capital levels.

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.

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.

6 unchanged sentences

Regulatory and Compliance Risk

Farmer Mac and many of its business partners 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 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.

27 unchanged sentences

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, Farmer Mac's business performance, operations, financial condition, or reputation could be materially adversely affected.

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,

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.

6 unchanged sentences

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

What changed 10-K

Item 1A. Risk Factors