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Item 8. Financial Statements and Supplementary Data

2022-02-28 compared with 2021-02-25 · 504 added, 463 removed, 1701 unchanged (36% of the section changed)

48 unchanged sentences

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 Farm & Ranch, USDA Guarantees, or Rural Utilities lines of business, which are referred to as AgVantage 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

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/s/ PricewaterhouseCoopers LLP

McLean, Virginia

Washington, District of Columbia

February 28, 2022

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Held-to-maturity, at amortized cost 44,970 45,032

Other investments 1,229 —

Total Investment Securities 3,882,590 3,898,724

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Preferred stock:

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

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

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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

Common stock:

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Additional paid-in capital 125,993 122,899

Accumulated other comprehensive loss, net of tax ( 13,923 ) ( 16,161 )

Accumulated other comprehensive income/(loss), net of tax 3,853 ( 13,923 )

Retained earnings 579,270 509,560

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Net interest income 220,775 190,588 173,135

Provision for losses ( 7,805 ) ( 3,504 ) ( 238 )

Net interest income after provision for losses 182,783 169,631 174,198

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):

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(Losses)/gains on financial derivatives ( 3,348 ) ( 246 ) 5,282

Gains on trading securities 50 326 81

Losses on sale of available-for-sale investment securities — ( 236 ) —

Gains/(losses) on sale of real estate owned 463 — ( 7 )

(Provision)/release of reserve for losses ( 250 ) 3 ( 97 )

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/(expense) 16,053 20,945 11,643

Non-interest income 19,394 16,053 20,945

Operating expenses:

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Net changes in held-to-maturity securities ( 8,451 ) ( 12,677 ) ( 13,415 )

Net unrealized (losses)/gains on cash flow hedges ( 21,780 ) ( 15,801 ) 2,938

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 )

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— — — — — — ( 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

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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 loss, net of tax — — — — — ( 41,117 ) — ( 41,117 )

Other comprehensive income, net of tax — — — — — 2,238 — 2,238

Cash dividends:

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— — — — — — ( 34,333 ) ( 34,333 )

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

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

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

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

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

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

Net Income — — — — — — 132,260 132,260

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— — — — — — ( 37,873 ) ( 37,873 )

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 Series G Preferred Stock 5,000 121,327 — — — — — 121,327

Issuance of Class C Common Stock — — 29 29 116 — — 145

Repurchase of Class C Common Stock — — ( 4 ) ( 4 ) — — ( 231 ) ( 235 )

Stock-based compensation cost — — — — 4,310 — — 4,310

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FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

CONSOLIDATED STATEMENTS OF CASH FLOW

For the Years Ended December 31,

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Net change in fair value of trading securities, hedged assets, and financial derivatives 203,758 ( 256,466 ) ( 220,080 )

Gain/(loss) on sale of real estate owned ( 463 ) — 7

Total provision for allowance for losses 8,055 3,501 335

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

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Accrued interest payable ( 8,746 ) ( 14,221 ) 10,216

Custodial deposit liability 44,955 — —

Other liabilities 2,378 5,866 1,421

Net cash (used in)/provided by operating activities ( 94,547 ) ( 19,699 ) 200,031

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 )

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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

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Non-cash activity:

Real estate owned acquired through loan liquidation — — 128

Loans acquired and securitized as Farmer Mac Guaranteed Securities 113,175 165,054 321,414

2 unchanged sentences

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 —

Charge-off from the allowance for losses 5,759 — —

(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 — —

11 unchanged sentences

• 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.

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.

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").

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

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:

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

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

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

(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.

(b) Cash and Cash Equivalents

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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, and evaluates the securities for other-than-temporary impairment.

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.

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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.

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 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(p) for more information on the accounting policy related to consolidation.

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

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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 real estate mortgage loans, Rural Utilities loans, or USDA securities into trusts that are used as vehicles for the securitization of the transferred financial assets.

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.

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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 a Farm & Ranch 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 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 property 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 pool and is guaranteed by Farmer Mac.

The Class B Tranche is backed by the remaining 7.5 % of the pool.

Credit losses on the entire pool are first allocated to the Class B securities.

As a result of the transaction, Farmer Mac recognized the following:

A guarantee asset and liability related to the guarantee fees and the obligation to stand ready to perform on the guarantee to the Class A security holders.

A servicing asset related to Farmer Mac’s role as Master and Central Servicer.

Farmer Mac will earn a related servicing fee.

A retained interest-only strip (IO-FMGS) security.

The above assets and liabilities were initially recorded on the consolidated balance sheets at fair value.

For more information on fair value measurement see Footnote 13.

The securitization trust used to effect this transaction was a variable interest entity that Farmer Mac does not consolidate.

See Table 2.4 below for more information about these trusts.

Gains or losses arising from securitization are recorded as the difference between the transferred loans’ carrying values and the sum of (a) the initial fair value of the assets or liabilities received and (b) net cash proceeds.

For the year ended December 31, 2021, Farmer Mac recorded $ 6.5 million in gains attributable to securitization activity.

These gains were reported in “Gain on sale of mortgage loans” in the consolidated statements of operations.

(f) Financial Derivatives

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

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

Upon the adoption of CECL, Farmer Mac measures its expected credit losses for the expected life of all financial instruments, including its Rural Utilities loans.

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

Upon the adoption of CECL, Farmer Mac measures its expected credit losses for the expected life of all financial instruments, including its Rural Infrastructure Finance loans.

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

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Farmer Mac's estimation methodology includes the following key components:

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

• An economic model for each portfolio, including Agricultural Finance loans (Corporate AgFinance and Farm & Ranch), Rural Infrastructure Finance loans (Rural Utilities and Renewable Energy), and AgVantage Securities;

• A migration matrix for each portfolio that reasonably predicts the movement of each financial asset among various risk categories over the course of each asset's expected life (the migration matrix forms the basis for our estimate of the probability of default of each financial asset);

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

COVID-19 Payment Deferments

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

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

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

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

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

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

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

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

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

Probable Incurred Credit Loss (prior to January 1, 2020)

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If the service or performance conditions are not met, Farmer Mac reverses previously recognized compensation expense upon forfeiture.

Farmer Mac recognized $ 4.1 million, $ 2.3 million, and $ 2.5 million of compensation expense related to stock options, SARs, and non-vested restricted stock awards for 2020, 2019, and 2018, respectively.

Farmer Mac recognized $ 4.3 million, $ 4.1 million, and $ 2.3 million of compensation expense related to SARs and non-vested restricted stock awards for 2021, 2020, and 2019, respectively.

(l) Comprehensive Income

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Balance as of January 1, 2019 $ ( 25,360 ) $ 43,443 $ 6,873 $ 24,956

Other comprehensive (loss)/income before reclassifications ( 19,151 ) — 2,571 ( 16,580 )

Amounts reclassified from AOCI ( 4,533 ) ( 4,793 ) ( 250 ) ( 9,576 )

Net comprehensive (loss)/income ( 23,684 ) ( 4,793 ) 2,321 ( 26,156 )

Balance as of December 31, 2018 $ ( 25,360 ) $ 43,443 $ 6,873 $ 24,956

Other comprehensive loss before reclassifications ( 14,976 ) — ( 11,561 ) ( 26,537 )

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Balance as of December 31, 2020 $ ( 13,937 ) $ 22,829 $ ( 22,815 ) $ ( 13,923 )

Other comprehensive income before reclassifications 9,114 — 11,602 20,716

Amounts reclassified from AOCI ( 2,109 ) ( 6,676 ) 5,845 ( 2,940 )

Net comprehensive income/(loss) 7,005 ( 6,676 ) 17,447 17,776

Balance as of December 31, 2021 $ ( 6,932 ) $ 16,153 $ ( 5,368 ) $ 3,853

The following table presents other comprehensive income activity, the impact on net income of amounts reclassified from each component of AOCI, and the related tax impact for the years ended December 31, 2021, 2020, and 2019:

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( 2,333 ) ( 490 ) ( 1,843 ) ( 3,895 ) ( 818 ) ( 3,077 ) ( 3,834 ) ( 805 ) ( 3,029 )

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

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

( 253 ) ( 53 ) ( 200 ) — — — 236 50 186

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Cash flow hedges

Unrealized (losses)/gains on cash flow hedges $ ( 27,350 ) $ ( 5,744 ) $ ( 21,606 ) $ ( 14,635 ) $ ( 3,074 ) $ ( 11,561 ) $ 3,254 $ 683 $ 2,571

Unrealized gains/(losses) on cash flow hedges $ 14,685 $ 3,083 $ 11,602 $ ( 27,350 ) $ ( 5,744 ) $ ( 21,606 ) $ ( 14,635 ) $ ( 3,074 ) $ ( 11,561 )

Less reclassification adjustments included in:

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

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

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

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Because the cash flows of these instruments may be interest rate path dependent, these values and projected discount rates are derived using a Monte Carlo simulation model.

The guarantee obligation and corresponding asset are later amortized into guarantee and commitment fee income in relation to the decrease in the unpaid principal balance on the underlying agricultural real estate mortgage and Rural Utilities loans.

The guarantee obligation and corresponding asset are later amortized into guarantee and commitment fee income in relation to the decrease in the unpaid principal balance on the underlying Agricultural Finance real estate mortgage loans and Rural Infrastructure Finance loans.

See Note 2(h) for Farmer Mac's policy for estimating probable losses for LTSPCs.

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Available-for-Sale and Trading Farmer Mac Guaranteed Securities and USDA Securities

Farmer Mac estimates the fair value of its Farmer Mac Guaranteed Securities and USDA Securities by discounting the projected cash flows of these instruments at projected interest rates.

Farmer Mac estimates the fair value of its Farmer Mac Guaranteed Securities and USDA Securities by discounting the projected cash flows of these instruments at discount rates commensurate with the risks involved.

The fair values are based on the present value of expected cash flows using management's best estimate of certain key assumptions, which include prepayment speeds, forward yield curves, and discount rates commensurate with the risks involved.

Farmer Mac classifies these fair value measurements as Level 3 because there is limited market activity and therefore little or no price transparency.

On a sample basis, Farmer Mac corroborates the fair value of its Farmer Mac Guaranteed Securities and USDA Securities by obtaining a secondary valuation from an independent third-party service.

Financial Derivatives

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Farmer Mac's derivative portfolio consists primarily of interest rate swaps and forward sales contracts on the debt of other GSEs.

Farmer Mac estimates the fair value of these financial instruments primarily based upon the counterparty valuations.

Farmer Mac estimates the fair value of these financial instruments primarily based

upon the counterparty valuations.

Farmer Mac internally values its derivative portfolio using a discounted cash flow valuation technique and obtains a secondary valuation for certain interest rate swaps to corroborate the counterparty valuations.

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Farmer Mac classifies these fair value measurements as Level 2.

Certain basis swaps are non-standard interest rate swap structures and are therefore internally modeled using significant assumptions and unobservable inputs, resulting in Level 3 classification.

Farmer Mac uses a discounted cash flow valuation technique, using management's best estimate of certain key assumptions, which include prepayment speeds, forward yield curves, and discount rates commensurate with the risks involved.

See Note 13 for more information regarding fair value measurement.

(o) Consolidation of Variable Interest Entities

Farmer Mac has interests in various entities that are considered to be VIEs.

Farmer Mac has a variable interest in various entities that are considered to be VIEs.

These interests include investments in securities issued by VIEs, such as Farmer Mac agricultural mortgage-backed securities created pursuant to Farmer Mac's securitization transactions and mortgage and asset-backed trusts that Farmer Mac did not create.

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Generally, the ability to make decisions regarding default mitigation is evidence of that power.

Farmer Mac determined that it is the primary beneficiary for the securitization trusts related to most Farm & Ranch and all Rural Utilities securitization transactions because of its rights as guarantor under both programs to control the default mitigation activities of the trusts.

For certain securitization trusts created when loans subject to LTSPCs were converted to Farm & Ranch Guaranteed Securities, Farmer Mac determined that it was not the primary beneficiary since the power to make decisions regarding default mitigation was shared among unrelated parties.

Farmer Mac determined that it is the primary beneficiary for the securitization trusts related to most Agricultural Finance securitization transactions because of its rights as guarantor under both programs to control the default mitigation activities of the trusts.

For certain securitization trusts created when loans subject to LTSPCs were converted to Agricultural Finance Guaranteed Securities, Farmer Mac determined that it was not the primary beneficiary since the power to make decisions regarding default mitigation was shared among unrelated parties.

For these trusts, the shared power provisions are substantive with respect to decision-making power and relate to the same activity (i.e., default mitigation).

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For those trusts in which Farmer Mac has a variable interest but is not the primary beneficiary, Farmer Mac's interests are presented as either "Farmer Mac Guaranteed Securities," "USDA Securities," or "Investment securities" on the consolidated balance sheets.

Farmer Mac's involvement in VIEs classified as Farmer Mac Guaranteed Securities or USDA Securities include securitization trusts under the USDA Guarantees line of business.

Farmer Mac's involvement in VIEs classified as Farmer Mac Guaranteed Securities or USDA Securities include securitization trusts under the Agricultural Finance line of business.

In the case of USDA guaranteed trusts, Farmer Mac is not determined to be the primary beneficiary because it does not have the decision-making power over default mitigation activities.

Based on the USDA's program authority over the servicing and default mitigation activities of the USDA guaranteed portions of loans, Farmer Mac believes that the USDA has the power to direct the activities that most significantly impact the trust's economic performance.

Based on the USDA's program authority over the servicing and default mitigation

activities of the USDA guaranteed portions of loans, Farmer Mac believes that the USDA has the power to direct the activities that most significantly impact the trust's economic performance.

Farmer Mac does not have exposure to losses that could be significant to the trust and there are no triggers that would result in Farmer Mac superseding the USDA's authority with regard to directing the activities of the trust.

For VIEs classified as investment securities, which include auction-rate certificates, asset-backed securities, and government-sponsored enterprise ("GSE") guaranteed mortgage-backed securities, Farmer Mac is determined not to be the primary beneficiary because of the lack of voting rights or other powers to direct the activities of the trust.

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

In fourth quarter 2021, Farmer Mac executed a structured securitization of a $ 299.4 million pool of Farm & Ranch loans.

For more information about this securitization, see Note 2(e) - Securitization.

The securitization trust used to effect this transaction was a variable interest entity that Farmer Mac has not consolidated.

Farmer Mac determined that it was not the primary beneficiary of the securitization trust because the subordinate class majority holder has the unilateral right to remove Farmer Mac as Master Servicer without cause.

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

Consolidation of Variable Interest Entities

As of December 31, 2021

Farm & Ranch USDA Guarantees Corporate Total

Agricultural Finance Treasury Total

(in thousands)

7 unchanged sentences

Carrying value 42,298 — 42,298

— 34,537 — 34,537

Maximum exposure to loss (2)

12 unchanged sentences

The borrower remittances had not been passed through to third-party investors as of December 31, 2021.

(2) Includes $ 0.1 million of unamortized premiums and discounts and fair value adjustments related to the USDA Guarantees line of business.

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

(4) Includes auction-rate certificates, asset-backed securities, and government-sponsored enterprise ("GSE")-guaranteed mortgage-backed securities.

(5) The amount under the Farm & Ranch line of business relates to unconsolidated trusts where Farmer Mac determined it was not the primary beneficiary due to shared power with an unrelated party.

(3) Includes auction-rate certificates, government-sponsored enterprise ("GSE")-guaranteed mortgage-backed securities, and other mission related investments.

(4) The amount under the Agricultural Finance line of business relates to unconsolidated trusts where it was determined that Farmer Mac was either not the primary beneficiary due to shared power with an unrelated party or a subordinate class majority holder has the unilateral right to remove Farmer Mac as Master Servicer without cause.

Consolidation of Variable Interest Entities

As of December 31, 2020

Farm & Ranch USDA Guarantees Corporate Total

Agricultural Finance Treasury Total

(in thousands)

22 unchanged sentences

The borrower remittances had not been passed through to third-party investors as of December 31, 2020.

(2) Includes $ 0.2 million of unamortized premiums and discounts and fair value adjustments related to the USDA Guarantees line of business.

(2) Includes $ 0.1 million of unamortized premiums and discounts and fair value adjustments related to USDA Securities.

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

(4) Includes auction-rate certificates, asset-backed securities, and government-sponsored enterprise ("GSE")-guaranteed mortgage-backed securities.

(5) The amount under the Farm & Ranch line of business relates to unconsolidated trusts where Farmer Mac determined it was not the primary beneficiary due to shared power with an unrelated party.

(p) New Accounting Standards

(5) The amount under the Agricultural Finance line of business relates to unconsolidated trusts where Farmer Mac determined it was not the primary beneficiary due to shared power with an unrelated party.

(p) Custodial Deposit Liability

During 2021, Farmer Mac acquired the loan servicing rights for a sizeable portion of its Agricultural Finance loan and USDA Guaranteed Securities portfolios.

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

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

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

(q) Business Segments

During fourth quarter 2021, Farmer Mac's Chief Operating Decision Maker ("CODM") – its President and Chief Executive Officer – began reviewing financial information of seven operating segments, which are reportable segments.

Prior to fourth quarter 2021, the CODM reviewed the financial information of five reportable segments.

The CODM reviews the financial information of the seven segments to make decisions about allocating resources and to assess the financial performance of those segments.

Prior to fourth quarter 2021, the five segments were:

Farm & Ranch, USDA Guarantees, Rural Utilities, Institutional Credit, and Corporate.

Beginning in fourth quarter 2021, the seven reportable segments are:

Farm & Ranch, Corporate AgFinance, Rural Utilities, Renewable Energy, Funding, Investments, and Corporate.

The purpose of the new alignment of the company's segments is for the CODM to review and analyze financial performance according to the type of customer and market rather than according to the type of product offerings.

Additionally, the financial information for the Funding and Investments segments allow the CODM to review the results of the company's Treasury activities.

All operating

expenses are managed at the enterprise level and are reported within the Corporate segment rather than allocated to any of the other segments.

The operations and financial results of the Farm & Ranch and Corporate AgFinance segments are within our Agricultural Finance line of business.

Beginning in fourth quarter 2021, the Farm & Ranch segment includes the financial results of the USDA Securities portfolio and Farm & Ranch loans.

Also beginning in the fourth quarter of 2021, the Corporate AgFinance segment includes loans and AgVantage securities to larger and more complex farming operations, agribusinesses focused on food and fiber processing, and other supply chain production.

The Rural Utilities and Renewable Energy segments are within our Rural Infrastructure Finance line of business.

Beginning in fourth quarter 2021, the Rural Utilities segment includes loans to rural electric generation and transmission cooperatives, distribution cooperatives, and telecommunications providers, as well as AgVantage securities secured by those types of loans.

The Renewable Energy segment includes loans to rural electric solar and wind energy projects.

Prior to fourth quarter 2021, the financial results of all of the company's AgVantage Securities portfolio were included within the Institutional Credit segment.

The Funding segment includes the financial results of the company's debt issuance, hedging, asset/liability management, and capital allocation strategies.

The company allocates interest expense to each of the other segments (except Corporate) using a funds transfer pricing process.

That process also allocates the benefits and costs from the company's funding and hedging strategies to the Funding segment.

The Investments segment includes the financial results of the company's investment portfolio, which is held for liquidity purposes.

Interest expense is allocated to the Investments segment using the same funds transfer pricing process that is used to allocate interest expense to the other segments.

The Corporate segment includes all of the company's operating expenses, including compensation, general and administrative expenses, and regulatory fees.

The Corporate segment also includes items of other income and preferred stock dividend expense.

Farmer Mac uses the non-GAAP financial measure "core earnings" to measure corporate economic

performance and develop financial plans because, in management's view, core earnings is a useful

alternative measure in understanding Farmer Mac's economic performance, transaction economics, and

business trends.

The main difference between core earnings and net income attributable to common

stockholders is that core earnings excludes the effects of fair value fluctuations, which are not expected to

have a cumulative net impact on financial condition or results of operations reported in accordance with

generally accepted accounting principles if the related financial instruments are held to maturity, as is

generally expected.

Core earnings also differs from net income attributable to common stockholders by

excluding specified infrequent or unusual transactions that Farmer Mac believes are not indicative of

future operating results and that may not reflect the trends and economic financial performance of Farmer

Mac's core business.

This corporate economic performance measure may not be comparable to similarly

labeled measures disclosed by other companies.

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.

Net effective spread differs from net interest income and net interest yield because it excludes:

(1) the amortization of premiums and discounts

on assets consolidated at fair value that are amortized as adjustments to yield in interest income over the contractual or estimated remaining lives of the underlying assets;

(2) interest income and interest expense related to consolidated trusts with beneficial interests owned by third parties, which are presented on Farmer Mac's consolidated balance sheets as "Loans held for investment in consolidated trusts, at

amortized cost";

and (3) the fair value changes of financial derivatives and the corresponding assets or

liabilities designated in a fair value hedge accounting relationship.

(r) New Accounting Standards

Recently Adopted Accounting Guidance

Standard Description Date of Adoption Effect on Consolidated Financial Statements

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

Measurement of Credit Losses on Financial Instruments

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

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

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

For more information on the transition adjustment see Table 2.5 below.

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

Premium Amortization on Purchased Callable Debt Securities

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

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

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

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

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

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

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

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

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

3 unchanged sentences

January 1, 2020 Farmer Mac adopted optional expedients specific to discounting transition on a retrospective basis, and as a result of this election, the discounting transition did not have a material effect on Farmer Mac's financial position, results of operations, or cash flows.

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

December 31, 2019 Transition Adjustment January 1, 2020

(in thousands)

Farm & Ranch:

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

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

Rural Utilities:

Loans — 5,378 5,378

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

Farmer Mac Guaranteed Securities:

AgVantage — 315 315

Investment Securities — 9 9

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

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

(q) Reclassifications

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

RELATED PARTY TRANSACTIONS

2 unchanged sentences

Farmer Mac's statutory charter also provides that Class A stockholders elect 5 members of Farmer Mac's 15-member board of directors and that Class B stockholders elect 5 members of the board of directors.

Farmer Mac generally requires financial institutions to own a requisite amount of common stock, based on the size and type of institution, to participate in the Farm & Ranch line of business.

Farmer Mac generally requires financial institutions to own a requisite amount of common stock, based on the size and type of institution, to participate in the Agricultural Finance line of business.

As a result of these requirements, Farmer Mac conducts business with related parties in the normal course of Farmer Mac's business.

10 unchanged sentences

Sales of Farmer Mac Guaranteed Securities — 41,247 163,134

The purchases of loans from Zions under the Farm & Ranch line of business represented approximately 7.1 %, 9.5 %, and 11.9 % of Farm & Ranch loan purchases for the years ended December 31, 2020, 2019, and 2018, respectively, and 6.2 %, 7.6 % and 8.2 %, respectively, of total new Farm & Ranch business volume.

The purchases of USDA Securities from Zions under the USDA Guarantees line of business represented approximately 1.4 %, 2.1 %, and 4.2 % of purchases in that line of business for the years ended December 31, 2020, 2019, and 2018, respectively.

Outstanding Farm & Ranch loans, USDA Securities, and AgVantage securities purchased from Zions represented 4.1 % and 4.5 %, respectively, of Farmer Mac's outstanding business volume as of December 31, 2020 and 2019.

The purchases of loans from Zions under the Agricultural Finance line of business represented approximately 8.0 %, 7.1 %, and 9.5 % of Agricultural Finance mortgage loan purchases for the years ended December 31, 2021, 2020, and 2019, respectively, and 5.6 %, 6.2 % and 7.6 %, respectively, of total Agricultural Finance mortgage loan business volume (excluding AgVantage and USDA Securities).

The purchases of USDA Securities from Zions represented approximately 2.1 %, 1.4 %, and 2.1 % of total purchases of USDA Securities for the years ended December 31, 2021, 2020, and 2019, respectively.

Outstanding Agricultural Finance mortgage loans purchased, USDA Securities, and AgVantage securities purchased from Zions represented 3.4 % and 4.1 %, respectively, of Farmer Mac's outstanding business volume as of December 31, 2021 and 2020.

Zions retained servicing fees of $ 11.0 million, $ 11.8 million, and $ 12.2 million in 2021, 2020, and 2019, respectively, for its work as a Farmer Mac servicer.

8 unchanged sentences

Loans $ 127,117 $ 272,943 $ 85,000

Off-balance sheet revolving line of credit 19,500 — —

Unfunded Commitments 321 19,500 —

On-balance sheet AgVantage Securities 1,450,000 250,000 575,000

Off-balance sheet revolving floating rate AgVantage facility — — 300,000

Total purchases and guarantees $ 1,577,438 $ 542,443 $ 660,000

The transactions with CFC represented 36.7 % of Farmer Mac's loan purchase volume under the Rural Utilities line of business for 2020, compared to 9.8% of Farmer Mac's loan purchase volume for 2019 and 100% for 2018.

These transactions represented 19.2 %, 25.5 %, and 29.5 % of AgVantage securities volume under the Institutional Credit line of business for 2020, 2019, and 2018, respectively, and represented 9.5 %, 12.5 %, and 19.1 % of total purchases, guarantees, and LTSPCs for 2020, 2019, and 2018, respectively.

The transactions with CFC represented 36.9 % of Farmer Mac's loan purchase volume under the Rural Infrastructure Finance line of business for 2021, compared to 36.7 % of Rural Infrastructure Finance loan purchase volume for 2020 and 9.8 % for 2019.

These transactions represented 37.0 %, 19.2 %, and 25.5 % of AgVantage securities volume for 2021, 2020, and 2019, respectively, and represented 18.4 %, 9.5 %, and 12.5 % of total purchases, guarantees, LTSPCs, and unfunded commitments for 2021, 2020, and 2019, respectively.

Of Farmer Mac's total outstanding business volume as of December 31, 2021 and 2020, Rural Utilities loans, loans under LTSPCs, and AgVantage securities issued by CFC represented 19.5 % and 19.2 %, respectively.

3 unchanged sentences

Farmer Mac considers CoBank a related party because CoBank owns approximately 32.6 % of Farmer Mac's Class B voting common stock and because a member of Farmer Mac's board of directors had an affiliation with CoBank through the end of 2019.

Farmer Mac purchased $ 416.8 million and $ 776.4 million of loans and participations from CoBank, under the Rural Utilities line of business in 2020 and 2019, respectively.

The transactions with CoBank represented 56.0 % and 89.1 % of Farmer Mac's loan purchase transactions under the Rural Utilities line of business for 2020 and 2019, respectively.

During 2018, Farmer Mac did not do any business with CoBank through any of its lines of business.

CoBank retained servicing fees of $ 2.3 million and $ 1.2 million in 2020 and 2019, respectively, for its work as a Farmer Mac central servicer.

During 2018, CoBank was not a Farmer Mac central servicer.

Farmer Mac purchased $ 207.5 million, $ 416.8 million, and $ 776.4 million of loans and participations from CoBank, under the Rural Infrastructure Finance line of business in 2021, 2020, and 2019, respectively.

The transactions with CoBank represented 60.2 %, 56.0 %, and 89.1 % of Farmer Mac's loan purchase transactions under the Rural Infrastructure Finance line of business for 2021, 2020, and 2019, respectively.

During 2021, Farmer Mac entered into $ 72.0 million of unfunded commitments with CoBank, in which Farmer Mac earns a nominal unused commitment fee.

Of Farmer Mac's total outstanding business volume as of December 31, 2021 and 2020, CoBank's Rural Infrastructure Finance loans and unfunded commitments represented 5.6 % and 5.1 %, respectively, of total outstanding volume.

CoBank retained servicing fees of $ 3.2 million, $ 2.3 million, and $ 1.2 million in 2021, 2020, and 2019, respectively, for its work as a Farmer Mac central servicer.

AgFirst Farm Credit Bank :

Farmer Mac considers AgFirst Farm Credit Bank ("AgFirst") a related party because AgFirst owns approximately 16.8 % of Farmer Mac's Class B voting common stock.

AgFirst entered into $ 32.5 million, $ 26.7 million, and $ 26.6 million of LTSPC transactions in 2020, 2019, and 2018, respectively, and the aggregate balance of LTSPCs outstanding as of December 31, 2020 and 2019 was $ 331.2 million and $ 332.4 million, respectively.

AgFirst entered into $ 11.0 million, $ 32.5 million, and $ 26.7 million of Agricultural Finance LTSPC transactions in 2021, 2020, and 2019, respectively, and the aggregate balance of Agricultural Finance LTSPCs outstanding as of December 31, 2021 and 2020 was $ 363.9 million and $ 331.2 million,

respectively.

In each of 2021, 2020, and 2019, Farmer Mac received $ 1.2 million in commitment fees from AgFirst, and had $ 0.1 million of commitment fees receivable as of both December 31, 2021 and 2020.

AgFirst owns certain securities backed by rural housing loans.

Farmer Mac guarantees the last ten percent of losses (based on the original principal balance at the time of pooling) from each loan in the pool

backing those securities.

Farmer Mac guarantees the last ten percent of losses (based on the original principal balance at the time of pooling) from each loan in the pool backing those securities.

As of December 31, 2021 and 2020, the outstanding balance of those securities owned by AgFirst was $ 4.0 million and $ 5.5 million, respectively.

3 unchanged sentences

Farmer Mac received from Farm Credit Bank of Texas commitment fees of $ 1.9 million, $ 1.2 million, and $ 1.1 million in 2021, 2020, and 2019, respectively.

The aggregate amount of LTSPCs outstanding with Farm Credit Bank of Texas as of December 31, 2020 and 2019 was $ 304.9 million and $ 270.3 million, respectively.

In 2020, 2019, and 2018, Farm Credit Bank of Texas retained $ 0.1 million, $ 0.1 million, and $ 0.2 million, respectively, in servicing fees for its work as a Farmer Mac central servicer.

The aggregate amount of Agricultural Finance LTSPCs outstanding with Farm Credit Bank of Texas as of December 31, 2021 and 2020 was $ 625.6 million and $ 304.9 million, respectively.

In each of 2021, 2020, and 2019, Farm Credit Bank of Texas retained $ 0.1 million in servicing fees for its work as a Farmer Mac central servicer.

Other Related Party Transactions :

1 unchanged sentence

Farmer Mac purchased $ 2.3 million, $ 9.2 million, and $ 4.0 million in USDA Securities from Bath State Bank in 2021, 2020, and 2019, respectively.

Farmer Mac purchased $ 0.2 million of Farm & Ranch loans from Farm Credit of Florida in 2020.

Farmer Mac did no t purchase any loans from Farm Credit of Florida in 2019 or 2018.

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 or 2019.

Farmer Mac purchased $ 1.1 million and $ 0.2 million of Agricultural Finance mortgage loans from Farm Credit of Florida in 2021 and 2020, respectively.

Farmer Mac did no t purchase any loans from Farm Credit of Florida in 2019.

INVESTMENT SECURITIES

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

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

As of December 31, 2021

6 unchanged sentences

Floating rate auction-rate certificates backed by Government guaranteed student loans $ 19,700 $ — $ 19,700 $ ( 52 ) $ — $ ( 394 ) $ 19,254

Floating rate asset-backed securities 6,232 — 6,232 — — ( 1 ) 6,231

Floating rate Government/GSE guaranteed mortgage-backed securities 2,168,016 90 2,168,106 — 11,821 ( 1,096 ) 2,178,831

6 unchanged sentences

44,970 — 44,970 — 1,612 — 46,582

Total investment securities $ 3,871,614 $ 17,084 $ 3,888,698 $ ( 36 ) $ 14,843 $ ( 3,580 ) $ 3,899,925

Total held-to-maturity $ 44,970 $ — $ 44,970 $ — $ 1,612 $ — $ 46,582

(1) Amounts presented exclude $ 4.3 million of accrued interest receivable on investment securities as of December 31, 2021.

4 unchanged sentences

Amount Outstanding Unamortized Premium/(Discount) Amortized

Cost Unrealized

Allowance for losses (2)

Gains Unrealized

12 unchanged sentences

45,032 — 45,032 — 1,201 — 46,233

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

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

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

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

Amount excludes unrealized losses relating to non-credit factors.

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

Farmer Mac did not sell any securities from its available-for-sale investment portfolio during the years ended December 31, 2020 or 2018.

During the year ended December 31, 2019, Farmer Mac received proceeds of $12.4 million from the sale of securities from its available-for-sale investment portfolio, resulting in gross realized losses of $0.2 million.

During the year ended December 31, 2021, Farmer Mac received proceeds of $ 257.5 million, from the sale of securities from its available-for-sale investment portfolio, resulting in gains of $ 0.3 million.

Farmer Mac did no t sell any securities from its available-for-sale investment portfolio during the year ended December 31, 2020.

During the year ended December 31, 2019, Farmer Mac received proceeds of

$ 12.4 million from the sale of securities from its available-for-sale investment portfolio, resulting in gross realized losses of $ 0.2 million.

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

8 unchanged sentences

Floating rate auction-rate certificates backed by Government guaranteed student loans $ — $ — $ 19,254 $ ( 394 )

Floating rate asset-backed securities — — 6,231 ( 1 )

Floating rate Government/GSE guaranteed mortgage-backed securities 459,195 ( 619 ) 37,307 ( 477 )

Fixed rate Government/GSE guaranteed mortgage-backed securities 406,805 ( 5,730 ) — —

Fixed rate U.S.

50 unchanged sentences

AgVantage $ 6,122,240 $ 1,270 $ 6,123,510 $ ( 263 ) $ 212,908 $ ( 20,010 ) $ 6,316,145

Farmer Mac Guaranteed Securities (3)

— 12,297 12,297 — 117 — 12,414

Total available-for-sale $ 6,122,240 $ 13,567 $ 6,135,807 $ ( 263 ) $ 213,025 $ ( 20,010 ) $ 6,328,559

USDA Securities (4)

3 unchanged sentences

Amount excludes unrealized losses relating to non-credit factors.

(3) Fair value includes $ 12.4 million of an interest-only security with a notional amount of $ 275.4 million.

(4) The trading USDA securities had a weighted average yield of 5.05 % as of December 31, 2021.

1 unchanged sentence

Unpaid Principal Balance Unamortized Premium/(Discount) Amortized

Cost Unrealized

Allowance for losses (2)

Gains Unrealized

11 unchanged sentences

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

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

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

Amount excludes unrealized losses relating to non-credit factors.

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

10 unchanged sentences

AgVantage $ 1,387,236 $ ( 12,764 ) $ — $ —

Farmer Mac Guaranteed USDA Securities — — — —

USDA Securities — — — —

18 unchanged sentences

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

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

As of December 31, 2020, Farmer Mac had executed COVID-19 payment deferments on loans with unpaid principal balances of $ 92.9 million underlying USDA Securities.

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

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

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

respectively.

There were 10 and 2 held-to-maturity AgVantage securities with an unrealized loss as of December 31, 2021 and December 31, 2020, respectively.

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

During the years ended December 31, 2020, 2019, and 2018, Farmer Mac had no sales of Farmer Mac Guaranteed Securities or USDA Securities and, therefore, Farmer Mac realized no gains or losses.

During the three years ended December 31, 2021, 2020, and 2019, Farmer Mac had no sales of Farmer Mac Guaranteed Securities or USDA Securities and, therefore, Farmer Mac realized no gains or losses.

The amortized cost, fair value, and weighted-average yield of available-for-sale and held-to-maturity Farmer Mac Guaranteed Securities and USDA Securities by remaining contractual maturity as of December 31, 2021 are set forth below.

22 unchanged sentences

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

Certain financial derivatives are designated as fair value hedges of fixed rate assets, classified as available-for-sale, to protect against fair value changes in the assets related to changes in a benchmark interest rate (e.g., LIBOR).

Certain financial derivatives are designated as fair value hedges of

fixed rate assets, classified as available-for-sale, to protect against fair value changes in the assets related

to changes in a benchmark interest rate (e.g., LIBOR or SOFR).

Certain other financial derivatives are designated as cash flow hedges to mitigate the volatility of future interest rate payments on floating rate debt.

Certain financial derivatives are not designated in hedge accounting relationships.

Farmer Mac manages the interest rate risk related to loans it has committed to acquire, but has not yet permanently funded, primarily through the use of forward sale contracts on the debt of other GSEs and futures contracts involving U.S.

Farmer Mac manages the interest rate risk related to loans it has committed to acquire, but has not yet

permanently funded, primarily through the use of forward sale contracts on the debt of other GSEs and

futures contracts involving U.S.

Treasury securities.

Farmer Mac uses forward sale contracts on GSE securities to reduce its interest rate exposure to changes in both U.S.

Treasury rates and spreads on Farmer Mac debt.

Farmer Mac aims to achieve a duration-matched hedge ratio between the hedged item and the hedge instrument.

Gains or losses generated by these hedge transactions are expected to offset changes in funding costs.

All financial derivatives are recorded on the balance sheet at fair value as a freestanding asset or liability.

Farmer Mac uses forward sale contracts on GSE

securities to reduce its interest rate exposure to changes in both U.S.

Treasury rates and spreads on Farmer

Farmer Mac aims to achieve a duration-matched hedge ratio between the hedged item and the

hedge instrument.

Gains or losses generated by these hedge transactions are expected to offset changes in

funding costs.

All financial derivatives are recorded on the balance sheet at fair value as a freestanding

asset or liability.

The following tables summarize information related to Farmer Mac's financial derivatives on a gross basis without giving consideration to master netting arrangements as of December 31, 2021 and December 31, 2020:

19 unchanged sentences

Receive fixed non-callable 1,377,250 — — 0.13 % 0.43 % 0.97

Receive fixed callable 200,000 1 ( 12 ) 0.13 % 0.15 % 0.72

Basis swaps 1,608,911 489 ( 280 ) 0.17 % 0.20 % 3.31

31 unchanged sentences

Net amount $ 16,123 $ 182,371

As of December 31, 2020, Farmer Mac expects to reclassify $ 5.3 million after tax from accumulated other comprehensive income to earnings over the next twelve months.

As of December 31, 2021, Farmer Mac expects to reclassify $ 4.6 million after-tax from accumulated other comprehensive income to earnings over the next twelve months related to cash flow hedges.

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

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

The following table summarizes the net income/(expense) recognized in the consolidated statements of operations related to derivatives for the years ended December 31, 2020, 2019, and 2018:

The following tables summarize the net income/(expense) recognized in the consolidated statements of operations related to derivatives for the years ended December 31, 2021, 2020, and 2019:

For the Year Ended December 31, 2021

1 unchanged sentence

Net Interest Income Non-Interest Income Total

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

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

(in thousands)

5 unchanged sentences

Income/(expense) related to interest settlements on fair value hedging relationships $ 790 $ 34,594 $ 19,675 $ ( 10,011 ) $ — $ 45,048

(Losses)/gains on fair value hedging relationships:

Gains/(losses) on fair value hedging relationships:

Recognized on derivatives $ 1,688 $ 177,077 $ 97,459 $ ( 98,332 ) $ — $ 177,892

Recognized on hedged items ( 1,218 ) ( 176,304 ) ( 97,502 ) 95,617 — ( 179,407 )

(Losses)/gains on fair value hedging relationships $ ( 3,657 ) $ ( 3,139 ) $ ( 2,388 ) $ — $ ( 9,184 )

Gains/(losses) on fair value hedging relationships $ 470 $ 773 $ ( 43 ) $ ( 2,715 ) $ — $ ( 1,515 )

Expense related to interest settlements on cash flow hedging relationships:

3 unchanged sentences

Expense recognized on cash flow hedges $ — $ — $ — $ ( 10,093 ) $ — $ ( 10,093 )

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

Losses on financial derivatives not designated in hedging relationships:

Losses on interest rate swaps $ — $ — $ — $ — $ ( 5,816 ) $ ( 5,816 )

1 unchanged sentence

Treasury futures — — — — ( 791 ) ( 791 )

(Losses)/gains on financial derivatives not designated in hedge relationships $ — $ — $ — $ ( 246 ) $ ( 246 )

Losses on financial derivatives not designated in hedge relationships $ — $ — $ — $ — $ ( 3,348 ) $ ( 3,348 )

For The Year Ended December 31, 2020

2 unchanged sentences

Interest Income

Farmer Mac Guaranteed Securities and USDA Securities Interest Income Loans Total Interest Expense Gains/(losses) on financial derivatives

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

(in thousands)

15 unchanged sentences

Expense recognized on cash flow hedges $ — $ — $ ( 10,136 ) $ — $ ( 10,136 )

Gains on financial derivatives not designated in hedge relationships:

Gains on interest rate swaps $ — $ — $ — $ 10,321 $ 10,321

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

Losses on interest rate swaps $ — $ — $ — $ ( 4,204 ) $ ( 4,204 )

Interest expense on interest rate swaps — — — 5,808 5,808

Treasury futures — — — ( 1,850 ) ( 1,850 )

Gains on financial derivatives not designated in hedge relationships $ — $ — $ — $ 5,282 $ 5,282

(Losses)/gains on financial derivatives not designated in hedge relationships $ — $ — $ — $ ( 246 ) $ ( 246 )

For The Year Ended December 31, 2019

1 unchanged sentence

Net Interest Income Non-Interest Income Total

Interest Income

Farmer Mac Guaranteed Securities and USDA Securities Interest Income Loans Total Interest Expense (Losses)/gains on financial derivatives

Interest Income Farmer Mac Guaranteed Securities and USDA Securities Interest Income Loans Total Interest Expense Gains/(losses) on financial derivatives

(in thousands)

Total amounts presented in the consolidated statement of operations $ 333,896 $ 229,675 $ ( 471,958 ) $ 5,282 $ 96,895

$ 290,953 $ 198,152 $ ( 369,848 ) $ ( 3,687 ) $ 115,570

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

3 unchanged sentences

Income/(expense) related to interest settlements on fair value hedging relationships $ 116,432 $ 24,299 $ ( 52,167 ) $ — $ 88,564

Gains/(losses) on fair value hedging relationships:

(Losses)/gains on fair value hedging relationships:

Recognized on derivatives $ ( 184,478 ) $ ( 50,141 ) $ 18,401 $ — $ ( 216,218 )

Recognized on hedged items 181,144 43,194 ( 16,027 ) — 208,311

Gains/(losses) on fair value hedging relationships $ 1,181 $ ( 212 ) $ 3,972 $ — $ 4,941

(Losses)/gains on fair value hedging relationships $ ( 3,334 ) $ ( 6,947 ) $ 2,374 $ — $ ( 7,907 )

Expense related to interest settlements on cash flow hedging relationships:

3 unchanged sentences

Expense recognized on cash flow hedges $ — $ — $ ( 9,407 ) $ — $ ( 9,407 )

Losses on financial derivatives not designated in hedge relationships:

Gains on financial derivatives not designated in hedging relationships:

Gains on interest rate swaps $ — $ — $ — $ 10,321 $ 10,321

1 unchanged sentence

Treasury futures — — — ( 826 ) ( 826 )

Losses on financial derivatives not designated in hedge relationships $ — $ — $ — $ ( 3,687 ) $ ( 3,687 )

Gains on financial derivatives not designated in hedge relationships $ — $ — $ — $ 5,282 $ 5,282

The following table shows the carrying amount and associated cumulative basis adjustment related to the application of hedge accounting that is included in the carrying amount of hedged assets and liabilities in fair value hedging relationships as of December 31, 2021 and December 31, 2020:

3 unchanged sentences

(in thousands)

Investment securities, Available-for-Sale, at fair value $ 458,653 $ — $ ( 1,218 ) $ —

Farmer Mac Guaranteed Securities, Available-for-Sale, at fair value (1)

4 unchanged sentences

( 7,083,535 ) ( 3,006,140 ) 42,377 ( 53,240 )

(1) Includes $ 1.6 million of hedging adjustments on discontinued hedging relationships as of December 31, 2020.

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

(1) Includes $ 1.3 million and $ 1.6 million of hedging adjustments on discontinued hedging relationships as of December 31, 2021 and December 31, 2020, respectively.

(2) Includes $ 1.2 million and $ 1.4 million of hedging adjustments on a discontinued hedging relationship as of December 31, 2021 and December 31, 2020, respectively.

(3) Carrying amount represents amortized cost.

14 unchanged sentences

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

As of December 31, 2020, Farmer Mac held $ 1.3 million of cash and no investment securities as collateral for its derivatives in net asset positions, compared to $ 2.7 million of cash and no investment securities as collateral for its derivatives in net asset positions as of December 31, 2019.

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

Farmer Mac posted $ 16.6 million cash and $ 177.9 million of investment securities as of December 31, 2021 and posted $ 11.2 million cash and $ 201.1 million investment securities as of December 31, 2020.

1 unchanged sentence

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

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

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

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

1 unchanged sentence

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

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

During 2021 and throughout 2020, Farmer Mac continued the use of non-cleared basis swaps to prepare for the transition away from the use of LIBOR as a reference rate.

NOTES PAYABLE

67 unchanged sentences

During the years ended December 31, 2021 and 2020, Farmer Mac called $ 2.0 billion and $ 3.1 billion of callable medium-term notes, respectively.

The decrease in market interest rates throughout 2020 led to an increase in called medium-term notes compared to the prior year.

Authority to Borrow from the U.S.

4 unchanged sentences

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.

obligations from Farmer Mac.

The charter requires Farmer Mac to repurchase any of its debt obligations held by the U.S.

2 unchanged sentences

Gains on Repurchase of Outstanding Debt

No outstanding debt repurchases were made in the years ended December 31, 2020, 2019, or 2018.

During the year ended December 31, 2021, Farmer Mac repurchased $ 23.0 million of outstanding debt at a gain of $ 14,000 ;

no outstanding debt repurchases were made in the years ended December 31, 2020 and 2019.

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

1 unchanged sentence

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

During the year ended December 31, 2020, Farmer Mac acquired $ 59.2 million in loans held for sale, of which it sold $ 15.0 million during the year, and reclassified $ 44.2 million as loans held for investment.

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

Farmer Mac did not record any lower of cost or fair value adjustments during the year ended December 31, 2021 related to its loans held for sale.

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

As of December 31, 2020 (1)

As of December 31, 2019 (2)

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

Unsecuritized In Consolidated Trusts Total Unsecuritized In Consolidated Trusts Total

(in thousands)

Farm & Ranch $ 4,889,393 $ 1,287,045 $ 6,176,438 $ 3,675,640 $ 1,600,917 $ 5,276,557

Rural Utilities 2,260,412 — 2,260,412 1,671,293 — 1,671,293

Agricultural Finance mortgage loans $ 5,898,370 $ 948,623 $ 6,846,993 $ 4,889,393 $ 1,287,045 $ 6,176,438

Rural Infrastructure Finance loans 2,389,136 — 2,389,136 2,260,412 — 2,260,412

Total unpaid principal balance (1)

4 unchanged sentences

Total loans, net of allowance $ 8,300,619 $ 948,059 $ 9,248,678 $ 7,248,990 $ 1,286,156 $ 8,535,146

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

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

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

1 unchanged sentence

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

December 31, 2020 (1)

December 31, 2019 (2)

December 31, 2021 December 31, 2020

Allowance for Losses Allowance for Losses

(in thousands)

Farm & Ranch $ 3,745 $ 10,454

Rural Utilities 10,087 —

Agricultural Finance mortgage loans $ 3,442 $ 3,745

Rural Infrastructure Finance loans 10,599 10,087

Total $ 14,041 $ 13,832

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

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

The following is a summary of the changes in the allowance for losses for each year in the three-year period ended December 31, 2021:

Farm & Ranch Rural Utilities

Agricultural Finance mortgage loans Rural Infrastructure Finance loans

Allowance for Losses Allowance for Losses

4 unchanged sentences

Balance as of December 31, 2019 (1)

Cumulative effect adjustment from adoption of current expected credit loss standard ( 3,909 ) 5,378

Adjusted Beginning Balance $ 6,545 $ 5,378

Provision for losses 2,959 4,709

1 unchanged sentence

Balance as of December 31, 2020 (2)(3)(4)

Cumulative effect adjustment from adoption of current expected credit loss standard ( 3,909 ) 5,378

Adjusted Beginning Balance 6,545 5,378

$ 3,745 $ 10,087

(Release of)/provision for losses ( 1,357 ) 512

Recovery 1,054 —

Charge-offs — —

1 unchanged sentence

$ 3,442 $ 10,599

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

(1) Prior to the adoption of ASU 2016-13, "Financial Instruments - Credit Losses," effective January 1, 2020, Farmer Mac maintained an allowance for loan

losses to cover estimated probable incurred losses on loans held.

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

(3) Allowance for losses for Farm & Ranch includes no allowance for collateral dependent assets secured by agricultural real estate.

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

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

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

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

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

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

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

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

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

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

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

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

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

In addition, the highly-specialized nature of power generation and transmission and other rural infrastructure facilities results in significant expected

losses given default even though the probability of default is low.

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

The provision to the allowance for Rural Utilities loan losses of $ 4.7 million recorded during the year ended December 31, 2020 was primarily attributable to the impact of net new loan volume in the Rural Utilities portfolio and the impact of economic factor forecasts on the Rural Utilities portfolio, especially continued expected higher unemployment, as a result of the COVID-19 pandemic and the resulting economic volatility.

The provision to the allowance for Farm & Ranch loan losses of $ 3.0 million recorded during the year ended December 31, 2020 was primarily related to the Farm & Ranch agricultural storage & processing loan secured by a specialized poultry facility that Farmer Mac has deemed to be a CDA.

(3) As of both December 31, 2021 and 2020, allowance for losses for Agricultural Finance mortgage loans includes no allowance, for collateral dependent assets secured by agricultural real estate.

(4) As of both December 31, 2021 and 2020, allowance for losses for Rural Infrastructure Finance loans includes no allowance for collateral dependent assets.

The provision to the allowance for Rural Infrastructure Finance loan losses of $ 0.5 million recorded during the year ended 2021 was primarily attributable to the impact of the Texas Arctic Freeze, partially offset by the impact of improving economic factor forecasts.

The $ 1.4 million release from the allowance for the Agricultural Finance mortgage loan portfolio during the year ended 2021 was primarily attributable to a recovery on the payoff of the agricultural storage and processing loan secured by a specialized poultry facility that had been partially charged off in 2020 and improving economic factor forecasts.

The provision to the allowance for Rural Infrastructure Finance loan losses of $ 4.7 million recorded during the year ended December 31, 2020 was primarily attributable to the impact of net new loan volume in the portfolio and the impact of economic factor forecasts, especially continued expected higher unemployment, as a result of the COVID-19 pandemic and the resulting economic volatility.

The provision to the allowance for Agricultural Finance mortgage loans of $ 3.0 million recorded during the year ended December 31, 2020 was primarily related to an agricultural storage and processing loan secured by a specialized poultry facility that Farmer Mac has deemed to be a CDA.

The provision was more than offset by charge-offs from the allowance of $ 5.8 million, primarily related to the specialized poultry loan because a portion of the loan was deemed to be uncollectible.

The provision to the allowance for loan losses recorded during 2019 was primarily attributable to a specific reserve on a single specialized poultry loan, a decrease in overall credit quality, and net portfolio growth.

The allowance for losses in the Farm & Ranch portfolio, as a percentage of outstanding loan volume, increased slightly from the previous year.

The total provision for losses increased by $ 3.2 million, during 2019 as compared to 2018, primarily due to the specific reserve on the single specialized poultry loan mentioned above and a decrease in overall credit quality combined with net portfolio growth.

During 2018, the total allowance for losses increased because of increased loan volume within Farmer Mac's Farm & Ranch portfolio.

The total allowance for losses in the Farm & Ranch portfolio, as a percentage of outstanding loan volume, remained consistent with recent years.

The total provision for losses decreased by $ 1.4 million during 2018 as compared to 2017 primarily due to decreased loan growth year-over-year and modestly improved credit quality in the Farm & Ranch portfolio.

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

The provision to the allowance for loan losses recorded during 2019 was primarily attributable to a

specific reserve on a single specialized poultry loan, a decrease in overall credit quality, and net portfolio

The allowance for losses in the Agricultural Finance mortgage loan portfolio, as a percentage of outstanding loan volume, increased slightly from the previous year.

The total provision for losses increased by $ 3.2 million, during 2019 as compared to 2018, primarily due to the specific reserve on the agricultural storage and processing loan secured by a specialized poultry facility loan mentioned above and a decrease in overall credit quality combined with net

portfolio growth.

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

As of December 31, 2021

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

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

Total Past Due Nonaccrual loans (3)(4)

(in thousands)

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

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

Agricultural Finance mortgage loans $ 6,715,070 $ 4,548 $ 568 $ — $ 5,116 $ 126,807 $ 6,846,993

Rural Infrastructure Finance loans 2,389,136 — — — — — 2,389,136

Total $ 9,104,206 $ 4,548 $ 568 $ — $ 5,116 $ 126,807 $ 9,236,129

4 unchanged sentences

During the year ended December 31, 2021, Farmer Mac received $ 5.0 million, in interest on nonaccrual loans.

(5) Includes $ 145.5 million of unpaid principal balance related to Farm & Ranch loans that Farmer Mac has executed a COVID-19 payment deferment.

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

As of December 31, 2020

Crops Permanent

Plantings Livestock Part-time

Processing Other Total

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

Total Past Due Nonaccrual loans (3)(4)

(in thousands)

Ending Balance:

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

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

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

Allowance for Losses:

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

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

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

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

Agricultural Finance mortgage loans $ 6,055,154 $ 4,582 $ 632 $ 1,072 $ 6,286 $ 114,998 $ 6,176,438

Rural Infrastructure Finance loans 2,260,412 — — — — — 2,260,412

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

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

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

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

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

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

Credit Quality Indicators

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

As of December 31, 2021

Crops Permanent

Plantings Livestock Part-time

Processing Other Total

Year of Origination:

2021 2020 2019 2018 2017 Prior Revolving Loans - Amortized Cost Basis Total

(in thousands)

Impaired Loans:

With no specific allowance:

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

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

With a specific allowance:

Recorded investment (1)

Agricultural Finance mortgage loans (1) :

Internally Assigned Risk Rating:

Acceptable $ 2,138,060 $ 1,541,509 $ 540,139 $ 324,917 $ 303,852 $ 1,004,709 $ 545,370 $ 6,398,556

Special mention (2)

84,795 50,057 51,200 48,078 9,132 14,646 4,771 262,679

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

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

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

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

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

Recorded investment of loans on nonaccrual status (2)

Substandard (3)

1,654 4,997 26,237 27,109 38,703 75,780 11,278 185,758

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

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

The following table presents by commodity type the average recorded investment and interest income recognized on impaired loans for the year ended December 31, 2019:

December 31, 2019

Crops Permanent

Plantings Livestock Part-time

Processing Other Total

(in thousands)

Total $ 2,224,509 $ 1,596,563 $ 617,576 $ 400,104 $ 351,687 $ 1,095,135 $ 561,419 $ 6,846,993

For the Year Ended:

Average recorded investment in impaired loans $ 101,053 $ 44,986 $ 36,054 $ 7,953 $ — $ 60 $ 190,106

Income recognized on impaired loans 1,157 625 687 284 — — 2,753

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

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

90-Day Delinquencies (1)

Net Credit Losses

As of For the Year Ended

December 31, 2019 December 31, 2019 December 31, 2018

(in thousands)

Farm & Ranch loans $ 57,719 $ 131 $ 40

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

Rural Utilities

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

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

Credit Quality Indicators

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

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

Current period recoveries — — — — ( 1,054 ) — — ( 1,054 )

Current period Agricultural Finance recoveries $ — $ — $ — $ — $ ( 1,054 ) $ — $ — $ ( 1,054 )

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

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

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

As of December 31, 2021

2 unchanged sentences

(in thousands)

Farm & Ranch (1) :

Rural Infrastructure Finance loans (1) :

Internally Assigned Risk Rating:

8 unchanged sentences

Current period recoveries — — — — — — — —

Current period Farm & Ranch net charge-offs $ — $ — $ — $ 5,365 $ — $ 394 $ — $ 5,759

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

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

5 unchanged sentences

(in thousands)

Rural Utilities (1) :

Agricultural Finance mortgage loans (1) :

Internally Assigned Risk Rating:

8 unchanged sentences

Current period recoveries — — — — — — — —

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

Current period Agricultural Finance net charge-offs $ — $ — $ — $ 5,365 $ — $ 394 $ — $ 5,759

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

1 unchanged sentence

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

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

As of December 31, 2020

Crops Permanent

Plantings Livestock Part-time

Processing Other Total

Year of Origination:

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

(in thousands)

Rural Infrastructure Finance loans (1) :

Internally Assigned Risk Rating:

5 unchanged sentences

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

Commodity analysis of past due loans (1)

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

For the Year Ended:

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

Current period recoveries — — — — — — — —

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

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

11 unchanged sentences

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

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

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

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

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

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

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.

The program expires at the end of March 2021.

Preferred Stock

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

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

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

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

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

As a result of the retirement of the Series A

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

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

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

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

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

The following table presents the Series C Preferred Stock, the Series D Preferred Stock, the Series E Preferred Stock, and the Series F Preferred Stock (collectively referred to as the "Outstanding Preferred Stock") as of December 31, 2020:

In May 2021, Farmer Mac issued 5.0 million shares of 4.875 % non-cumulative perpetual Series G

preferred stock, par value $ 25.00 per share.

Farmer Mac incurred direct costs of $ 3.7 million related to

the issuance of the Series G preferred stock.

The dividend rate on the Series G preferred stock will remain

at a non-cumulative, fixed rate of 4.875 % per year, when, as, and if a dividend is declared by the Board of

Directors of Farmer Mac, for so long as the Series G preferred stock remains outstanding.

preferred stock has no maturity date, but Farmer Mac has the option to redeem the preferred stock at any

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

The following table presents the Series C Preferred Stock, the Series D Preferred Stock, the Series E Preferred Stock, the Series F Preferred Stock, and the Series G Preferred Stock (collectively referred to as the "Outstanding Preferred Stock") as of December 31, 2021:

Name Issuance Date Issuance Cost Shares Issued Annual Dividend Rate (3)

4 unchanged sentences

Series F August 20, 2020 $ 3,839,902 4,800,000 5.250 % $ 25.00 October 17, 2025

Series G May 27, 2021 $ 3,661,677 5,000,000 4.875 % $ 25.00 July 17, 2026

(1) The Series C Preferred Stock pays an annual dividend rate of 6.00 % from the date of issuance to and including the quarterly payment date occurring on July 17, 2024, and thereafter, at a floating rate equal to three-month LIBOR plus 3.26 %.

4 unchanged sentences

1st Quarter 2nd Quarter (1)

3rd Quarter 4th Quarter

6.000% Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series C $ 0.3750 $ 0.3750 $ 0.3750 $ 0.3750

5.700% Non-Cumulative Preferred Stock, Series D 0.3563 0.3563 0.3563 0.3563

5.750% Non-Cumulative Preferred Stock, Series E 0.3594 0.3594 0.3594 0.3594

5.250% Non-Cumulative Preferred Stock, Series F 0.3281 0.3281 0.3281 0.3281

4.875% Non-Cumulative Preferred Stock, Series G — 0.1693 0.3047 0.3047

(1) For second quarter 2021, dividend payment includes $ 0.1693 per share on the Series G Preferred Stock for the period from but not including May 27, 2021 (issuance date) to and including July 17, 2021.

1st Quarter 2nd Quarter (1)

3rd Quarter (2)(3)

4 unchanged sentences

5.250% Non-Cumulative Preferred Stock, Series F — — 0.2078 0.3281

(1) For second quarter 2020, dividend payment includes $ 0.2276 per share on the Series E Preferred Stock for the period from but not including May 20, 2020 (issuance date) to and including the July 17, 2020.

(2) For third quarter 2020 dividend payment includes $ 0.2530 per share on the Series A Preferred Stock for the period from but not including July 17, 2020 to and including the September 19, 2020 redemption date.

(3) For third quarter 2020, dividend payment includes $ 0.2078 per share on the Series F Preferred Stock for the period from but not including August 20, 2020 (issuance date) to and including the October 17, 2020.

1st Quarter 2nd Quarter (1)(2)

6 unchanged sentences

(2) For second quarter 2019, dividend payment includes $ 0.2533 per share on the Series D Preferred Stock for the period from but not including May 13, 2019 (issuance date) to and including July 17, 2019.

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

5.875% Non-Cumulative Preferred Stock, Series A $ 0.3672 $ 0.3672 $ 0.3672 $ 0.3672

6.875% Non-Cumulative Preferred Stock, Series B 0.4297 0.4297 0.4297 0.4297

6.000% Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series C 0.3750 0.3750 0.3750 0.3750

Equity-Based Incentive Compensation Plans

4 unchanged sentences

For all SARs granted, the exercise price is equal to the closing price of Farmer Mac's Class C non-voting common stock on the date of grant.

SARs granted during 2020 have an exercise price ranging from $ 72.26 to $ 75.16 per share, SARs granted during 2019 have an exercise price of $ 82.76 per share, and SARs granted during 2018 have an exercise price of $ 86.15 per share.

SARs granted during 2021 have an exercise price of $ 88.68 per share, SARs granted during 2020 have an exercise price ranging from $ 72.26 to $ 75.16 per

share, and SARs granted during 2019 have an exercise price of $ 82.76 per share.

During 2021, 2020, and 2019, restricted stock awards were granted to employees, officers, and directors with vesting periods of one to three years .

26 unchanged sentences

During 2021, 2020, and 2019 the reduction of income taxes payable as a result of the deduction for the exercise of SARs and the vesting or accelerated tax elections of restricted stock was $ 0.9 million, $ 0.5 million, and $ 1.0 million, respectively.

During 2020 and 2019, Farmer Mac recognized $ 8,900 and $ 0.4 million, respectively, of tax benefits recognized in income tax expense associated with stock compensation activity.

During 2021, 2020, and 2019 , Farmer Mac recorded a net decrease to additional paid-in capital of $ 1.3 million, $ 0.6 million, and $ 1.8 million, respectively, related to stock-based compensation awards.

6 unchanged sentences

Average Remaining Contractual Life

$ 10.00 - $ 24.99

3,000 0.2 years 3,000 0.2 years 3,000 0.2 years

25.00 - 39.99

37,037 2.7 years 37,037 2.7 years 37,037 2.7 years

40.00 - 54.99

— 0.0 years — 0.0 years — 0.0 years

55.00 - 69.99

3,381 5.3 years 3,381 5.3 years 3,381 5.3 years

70.00 - 84.99

52,458 7.9 years 22,730 7.7 years 52,458 7.9 years

85.00 - 99.99

34,533 8.7 years 5,958 6.3 years 34,533 8.7 years

4 unchanged sentences

Life Non-vested Restricted Stock Weighted-Average Remaining Contractual

$ 50.00 - $ 64.99

18,580 1.3 years 18,580 1.3 years

65.00 - 79.99

25,314 0.9 years 25,314 0.9 years

80.00 - 94.99

58,872 1.7 years 58,872 1.7 years

95.00 - 109.99

1,125 1.5 years 1,125 1.5 years

26 unchanged sentences

As of December 31, 2021, Farmer Mac's minimum capital requirement was $ 713.8 million and its core capital level was $ 1.2 billion, which was $ 486.8 million above the minimum capital requirement as of that date.

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

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

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

22 unchanged sentences

Basis differences related to financial derivatives $ 63,982 $ 100,099

Unrealized losses on securities — 2,805

Allowance for losses 3,452 3,690

2 unchanged sentences

Stock-based compensation 1,462 1,027

Capital loss carryforwards and other-than-temporary impairment 86 86

Capital loss carryforwards 32 86

Valuation allowance ( 32 ) ( 86 )

Other 394 341

Total deferred tax assets 71,998 112,242

1 unchanged sentence

Basis differences related to hedged items 53,945 91,460

Unrealized gains on securities 2,364 —

Unrealized gains on available-for-sale securities 2,451 2,364

Total deferred tax liability 56,440 93,921

Net deferred tax asset $ 15,558 $ 18,321

After the evaluation of both positive and negative objective evidence regarding the likelihood that its deferred tax assets will be realized, Farmer Mac established a valuation allowance of $ 86,000 as of both December 31, 2020 and 2019, which was attributable to capital loss carryforwards on investment securities.

After the evaluation of both positive and negative objective evidence regarding the likelihood that its deferred tax assets will be realized, Farmer Mac established a valuation allowance of $ 32,000 and $ 86,000 as of December 31, 2021 and 2020, respectively, which was attributable to capital loss carryforwards on investment securities.

Farmer Mac did not establish a valuation allowance for the remainder of its deferred tax assets because it believes it is more likely than not that those deferred tax assets will be realized.

8 unchanged sentences

Farmer Mac contributed 13.2 % of the lesser of an employee's gross salary and the maximum compensation permitted under the Economic Growth and Tax Relief Reconciliation Act of 2001 ("EGTRRA") ($ 290,000 for 2021, $ 285,000 for 2020, and $ 280,000 for 2019), plus 5.7 % of the difference between:

(1) the lesser of the gross salary and the amount established under EGTRRA and (2) the Social

Security Taxable Wage Base.

Employees are fully vested after having been employed for approximately 3 years.

(1) the lesser of the gross salary and the amount established under EGTRRA and (2) the Social Security Taxable Wage Base.

Employees are fully vested after having been employed for approximately 3

Expenses for this plan for the years ended December 31, 2021, 2020, and 2019 were $ 2.7 million, $ 2.2 million, and $ 1.9 million, respectively.

4 unchanged sentences

Expenses for the NQDC Plan were $ 0.2 million, $ 0.2 million, and $ 0.1 million for the years ended December 31, 2021, 2020, and 2019, respectively.

GUARANTEES AND COMMITMENTS

Farmer Mac offers two credit enhancement alternatives to direct loan purchases that allow approved lenders the ability to retain the cash flow benefits of their loans and increase their liquidity and lending capacity:

(1) Farmer Mac Guaranteed Securities, which are available through each of the Farm & Ranch, USDA Guarantees, Rural Utilities, and Institutional Credit lines of business, and (2) LTSPCs, which are available through the Farm & Ranch or the Rural Utilities lines of business.

(1) Farmer Mac Guaranteed Securities and (2) LTSPCs, both of which are available through each of the Agricultural Finance and Rural Infrastructure Finance lines of business.

The contractual terms of Farmer Mac's off-balance sheet guarantees and LTSPCs range from less than 1 year to 30 years.

18 unchanged sentences

Off-Balance Sheet Farmer Mac Guaranteed Securities

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

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

Outstanding Balance of Off-Balance Sheet Farmer Mac Guaranteed Securities

1 unchanged sentence

(in thousands)

Farm & Ranch:

Agricultural Finance

Farmer Mac Guaranteed Securities $ 578,358 $ 378,610

USDA Guarantees:

Farmer Mac Guaranteed USDA Securities 299,298 389,216

Institutional Credit:

AgVantage Securities 4,412 7,567

Rural Infrastructure Finance

Farmer Mac Guaranteed Securities 2,755 4,412

Total off-balance sheet Farmer Mac Guaranteed Securities $ 581,113 $ 383,022

6 unchanged sentences

Guarantee fees received 1,029 1,365 1,413

Servicing fees received 199 — —

Interest-only Farmer Mac Guaranteed Securities income 47 — —

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

7 unchanged sentences

Long-Term Standby Purchase Commitments

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

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

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

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

12 unchanged sentences

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

December 31, 2020 (1)

December 31, 2019 (2)

December 31, 2021 December 31, 2020

Reserve for Losses Reserve for Losses

(in thousands)

Farm & Ranch:

Agricultural Finance:

LTSPCs and Farmer Mac Guaranteed Securities $ 1,068 $ 2,097

Rural Utilities

Rural Infrastructure Finance

LTSPCs 882 1,180

Total $ 1,950 $ 3,277

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

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

The following is a summary of the changes in the reserve for losses for each year in the three-year period ended December 31, 2021:

Farm & Ranch Rural Utilities

Agricultural Finance Rural Infrastructure Finance

Reserve for Losses Reserve for Losses

1 unchanged sentence

Balance as of December 31, 2018 (1)

Provision for losses 97 —

Balance as of December 31, 2018 (1)

(Release of)/provision for losses ( 3 ) —

Release of losses ( 3 ) —

Balance as of December 31, 2019 (1)

4 unchanged sentences

$ 2,097 $ 1,180

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

Release of losses ( 1,029 ) ( 298 )

Balance as of December 31, 2021 (2)

$ 1,068 $ 882

(1) Prior to the adoption of ASU 2016-13, "Financial Instruments - Credit Losses," in first quarter 2020, Farmer Mac maintained a reserve for losses to cover

estimated probable incurred losses on loans underlying LTSPCs and off-balance sheet Agricultural Finance Farmer Mac Guaranteed Securities.

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

The provision to the reserve for losses recorded during the year ended December 31, 2020 was primarily due to credit downgrades in the LTSPC portfolio.

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

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

The release from the reserve for losses in both the Agricultural Finance and Rural Infrastructure Finance LTSPC and Farmer Mac Guaranteed portfolios recorded during the year ended December 31, 2021 was primarily due to improving economic factor forecasts and ratings upgrades.

The provision to the reserve for losses recorded during the year ended December 31, 2020 was primarily

due to credit downgrades in the LTSPC portfolio.

The following table presents the unpaid principal balances by delinquency status of Agricultural Finance and Rural Utilities loans underlying LTSPCs and Farmer Mac Guaranteed Securities as of December 31, 2021 and December 31, 2020:

As of December 31, 2021

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

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

Total Past Due Total Loans

(in thousands)

Farm and Ranch:

Agricultural Finance:

LTSPCs and Farmer Mac Guaranteed Securities $ 2,953,091 $ 8,068 $ — $ 3,597 $ 11,665 $ 2,964,756

Rural Utilities:

Rural Infrastructure:

LTSPCs $ 556,837 $ — $ — $ — $ — $ 556,837

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

(2) Includes $ 193.7 million of unpaid principal balance related to Farm & Ranch LTSPCs for which the lender has notified Farmer Mac of an executed COVID-19 payment deferment.

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

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

As of December 31, 2020

Crops Permanent

Plantings Livestock Part-time

Processing Other Total

(in thousands)

Ending Balance:

Collectively evaluated for impairment:

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

Individually evaluated for impairment:

5,698 2,114 10,207 706 — 56 18,781

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

Allowance for Losses:

Collectively evaluated for impairment:

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

Individually evaluated for impairment:

97 43 189 14 — — 343

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

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

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

90-Day Delinquencies (1)

Net Credit Losses/(Recoveries)

As of For the Years Ended

December 31, 2019 December 31, 2019 December 31, 2018

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

Total Past Due Total Loans

(in thousands)

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

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

Agricultural Finance:

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

Rural Infrastructure:

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

Credit Quality Indicators

The following tables present credit quality indicators related to Farm & Ranch loans underlying LTSPCs, Farm & Ranch Farmer Mac Guaranteed Securities, and Rural Utilities loans underlying LTSPCs as of December 31, 2020, by year of origination:

The following tables present credit quality indicators related to Agricultural Finance and Rural Utilities loans underlying LTSPCs and Farmer Mac Guaranteed Securities as of December 31, 2021 and December 31, 2020, by year of origination:

As of December 31, 2021

2 unchanged sentences

(in thousands)

Farm & Ranch LTSPCs and Farmer Mac Guaranteed Securities:

Agricultural Finance LTSPCs and Farmer Mac Guaranteed Securities:

Internally Assigned Risk Rating:

8 unchanged sentences

Current period recoveries — — — — — — — —

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

Current period Agricultural Finance net charge-offs $ — $ — $ — $ — $ — $ — $ — $ —

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

4 unchanged sentences

(in thousands)

Rural Utilities LTSPCs:

Rural Infrastructure Finance LTSPCs:

Internally Assigned Risk Rating:

8 unchanged sentences

Current period recoveries — — — — — — — —

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

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

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

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

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

As of December 31, 2020

Crops Permanent

Plantings Livestock Part-time

Processing Other Total

Year of Origination:

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

(in thousands)

Agricultural Finance LTSPCs and Farmer Mac Guaranteed Securities:

Internally Assigned Risk Rating:

5 unchanged sentences

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

Commodity analysis of past due loans (1)

For the Year Ended:

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

Current period recoveries — — — — — — — —

Current period Agricultural Finance net charge-offs $ — $ — $ — $ — $ — $ — $ — $ —

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

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

As of December 31, 2020

Year of Origination:

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

(in thousands)

Rural Infrastructure Finance LTSPCs:

Internally Assigned Risk Rating:

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

Special mention (1)

— — — — — — — —

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

Substandard (2)

— — — — — — — —

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

For the Year Ended:

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

Current period recoveries — — — — — — — —

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

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

2 unchanged sentences

Fair Value Classification and Transfers

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

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

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

4 unchanged sentences

Floating rate auction-rate certificates backed by Government guaranteed student loans $ — $ — $ 19,254 $ 19,254

Floating rate asset-backed securities — 6,231 — 6,231

Floating rate Government/GSE guaranteed mortgage-backed securities — 2,178,831 — 2,178,831

2 unchanged sentences

Treasuries 1,179,469 — — 1,179,469

Total Investment Securities 1,467,951 2,366,570 19,171 3,853,692

Total Available-for-sale Investment Securities 1,179,469 2,637,668 19,254 3,836,391

Farmer Mac Guaranteed Securities:

1 unchanged sentence

AgVantage — — 6,316,145 6,316,145

Farmer Mac Guaranteed Securities — — 12,414 12,414

Total Farmer Mac Guaranteed Securities — — 6,328,559 6,328,559

3 unchanged sentences

Financial derivatives 73 19,066 — 19,139

Guarantee Asset — — 6,237 6,237

Total Assets at fair value $ 1,179,542 $ 2,656,734 $ 6,358,451 $ 10,194,727

1 unchanged sentence

Total Liabilities at fair value $ — $ 34,248 $ — $ 34,248

Non-recurring:

Mortgage Servicing Rights $ — $ — $ 2,681 $ 2,681

Total non-recurring assets at fair value $ — $ — $ 2,681 $ 2,681

(1) Level 3 assets represent 25 % of total assets and 62 % of financial instruments measured at fair value.

10 unchanged sentences

Treasuries 1,467,951 — — 1,467,951

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

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

Farmer Mac Guaranteed Securities:

10 unchanged sentences

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

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

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

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

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

During the years ended December 31, 2021 and 2020, there were no transfers within the fair value hierarchy.

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

3 unchanged sentences

Beginning Balance Purchases Sales Settlements Allowance for Losses Realized and

unrealized gains included

unrealized losses included

in Income Unrealized gains

10 unchanged sentences

AgVantage 6,947,701 1,143,115 — ( 1,614,598 ) 47 ( 176,064 ) 15,944 6,316,145

Farmer Mac Guaranteed Securities — 12,560 — ( 263 ) — — 117 12,414

Total available-for-sale 6,947,701 1,155,675 — ( 1,614,861 ) 47 ( 176,064 ) 16,061 6,328,559

2 unchanged sentences

Total USDA Securities 6,695 — — ( 2,178 ) ( 116 ) — 4,401

Guarantee and commitment obligations:

Guarantee Asset — 6,237 — — — — — 6,237

Total Guarantee and commitment obligations — 6,237 — — — — — 6,237

Total Assets at fair value $ 6,973,567 $ 1,161,912 $ — $ ( 1,617,039 ) $ 31 $ ( 176,180 ) $ 16,160 $ 6,358,451

Level 3 Assets and Liabilities Measured at Fair Value for the Year Ended December 31, 2020

Balance Purchases Sales Settlements Realized and

Beginning Balance Purchases Sales Settlements Allowance for Losses Realized and

unrealized gains included

in Income Unrealized gains/(losses)

in Income Unrealized gains

included in Other

Comprehensive

Income Ending

Income Ending Balance

(in thousands)

8 unchanged sentences

USDA Securities:

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

Trading 8,913 — — ( 2,269 ) — 51 — 6,695

2 unchanged sentences

Level 3 Assets and Liabilities Measured at Fair Value for the Year Ended December 31, 2019

Balance Cumulative Effect from Change in Hedge Accounting Purchases Sales Settlements Realized and

unrealized (losses)/gains included

Beginning Balance Purchases Sales Settlements Realized and

unrealized gains included

in Income Unrealized gains/(losses)

1 unchanged sentence

Comprehensive

Income Ending

Income Ending Balance

(in thousands)

2 unchanged sentences

Floating rate auction-rate certificates backed by Government guaranteed student loans $ 18,715 $ — $ — $ — $ — $ 197 $ 18,912

Fixed rate GSE guaranteed mortgage-backed securities 4,333 — — — ( 2,137 ) ( 2,092 ) ( 104 ) —

Total available-for-sale 18,715 — — — — 197 18,912

5 unchanged sentences

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

13,515 — — — ( 3,597 ) 81 — 9,999

Trading 9,999 — — ( 1,412 ) 326 — 8,913

Total USDA Securities 9,999 57,853 ( 57,853 ) ( 1,412 ) 326 — 8,913

Total Assets at fair value $ 6,003,211 $ 2,091,566 $ ( 57,853 ) $ ( 1,021,706 ) $ 181,470 $ ( 25,838 ) $ 7,170,850

(1) Includes unrealized gains of $ 0.1 million attributable to assets still held as of December 31, 2018 that are recorded in "Gains on trading securities."

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

As of December 31, 2021

5 unchanged sentences

AgVantage $ 6,316,145 Discounted cash flow Discount rate 0.9 % - 2.1 % ( 1.7 %)

Farmer Mac Guaranteed Securities $ 12,414 Discounted cash flow Discount rate 2.3 % - 2.8 % ( 2.6 %)

USDA Securities $ 4,401 Discounted cash flow Discount rate 1.4 % - 3.1 % ( 2.8 %)

CPR 25 % - 42 % ( 39 %)

Guarantee Asset $ 6,237 Discounted cash flow Discount rate 5.4 % - 5.8 % ( 5.6 %)

CPR 7 % - 12 % ( 8 %)

As of December 31, 2020

11 unchanged sentences

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

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

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

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

Typically, significant increases (decreases) in any of these inputs in isolation may result in materially lower (higher) fair value measurements.

Generally, in a rising interest rate environment, Farmer Mac would expect average discount rates to increase and would likely expect a corresponding decrease in forecasted prepayment rates.

Generally, in a rising interest rate environment, Farmer Mac would expect average

discount rates to increase and would likely expect a corresponding decrease in forecasted prepayment rates.

Conversely, in a declining interest rate environment, Farmer Mac would expect average discount rates to decrease and would likely expect a corresponding increase in forecasted prepayment rates.

Disclosures on Fair Value of Financial Instruments

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

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

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

26 unchanged sentences

Notes payable are valued by discounting the expected cash flows of these instruments using a yield curve derived from market prices observed for similar agency securities and are also classified as Level 3.

Because the cash flows of Farmer Mac's financial instruments may be interest rate path dependent, estimated fair values and projected discount rates for Level 3 financial instruments are derived using a Monte Carlo simulation model.

Because the cash flows of Farmer Mac's financial instruments may be interest rate path dependent, estimated fair values and

projected discount rates for Level 3 financial instruments are derived using a Monte Carlo simulation model.

Different market assumptions and estimation methodologies could significantly affect estimated fair value amounts.

BUSINESS SEGMENT REPORTING

Farmer Mac's operations consist of four operating segments – Farm & Ranch, USDA Guarantees, Rural Utilities, and Institutional Credit.

The Institutional Credit segment comprises Farmer Mac's purchases and guarantees of AgVantage securities related to general obligations of lenders that are secured by pools of eligible loans.

Each segment is based on distinct products and distinct business activities.

In addition to these four operating segments, a corporate segment is presented.

That segment represents activity in Farmer Mac's investment portfolio and other corporate activities.

Each operating segment's financial results include directly attributable revenues and expenses.

Corporate charges for administrative expenses not directly attributable to an operating segment are allocated to each segment based on headcount.

Farmer Mac uses the non-GAAP financial measure "core earnings" to measure corporate economic performance and develop financial plans because, in management's view, core earnings is a useful alternative measure in understanding Farmer Mac's economic performance, transaction economics, and business trends.

The main difference between core earnings and net income attributable to common stockholders is that core earnings excludes the effects of fair value fluctuations, which are not expected to have a cumulative net impact on financial condition or results of operations reported in accordance with generally accepted accounting principles if the related financial instruments are held to maturity, as is generally expected.

Core earnings also differs from net income attributable to common stockholders by excluding specified infrequent or unusual transactions that Farmer Mac believes are not indicative of future operating results and that may not reflect the trends and economic financial performance of Farmer Mac's core business.

This corporate economic performance measure may not be comparable to similarly labeled measures disclosed by other companies.

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.

Net effective spread differs from net interest income and net interest yield because it excludes:

(1) the amortization of premiums and discounts on assets consolidated at fair value that are amortized as adjustments to yield in interest income over the contractual or estimated remaining lives of the underlying assets;

and (3) the fair value changes of financial derivatives and the corresponding assets or liabilities designated in a fair value hedge accounting relationship.

The financial information presented below reflects the accounts of Farmer Mac and its subsidiaries on a consolidated basis.

Accordingly, the core earnings for Farmer Mac's reportable operating segments will differ from the stand-alone financial statements of Farmer Mac's subsidiaries.

These differences will be due to various factors, including the exclusion of unrealized gains and losses related to fair value changes of trading assets and financial derivatives, as well as the allocation of certain expenses such as dividends and interest expense related to the issuance of capital and the issuance of indebtedness managed at the corporate level.

The allocation of general and administrative expenses that are not directly attributable to an operating segment may also result in differences.

The following tables present core earnings for Farmer Mac's operating segments and a reconciliation to consolidated net income for the years ended December 31, 2020, 2019, and 2018:

The following table presents the alignment of the Farmer Mac's seven segments:

Agricultural Finance Rural Infrastructure Finance Treasury

Farm & Ranch Corporate AgFinance Rural Utilities Renewable Energy Funding Investments Corporate

The financial information presented below reflects the accounts of Farmer Mac and its subsidiaries on a

consolidated basis.

Accordingly, the core earnings for Farmer Mac's segments would differ from any stand-alone financial statements of Farmer Mac's subsidiaries.

These differences would be due to various factors, including the exclusion of unrealized gains and losses related to fair value changes of trading assets and financial derivatives, as well as the allocation of certain expenses such as operating expenses, dividends and interest expense related to the issuance of capital and the issuance of indebtedness managed at the corporate level.

The following tables present core earnings for Farmer Mac's segments and a reconciliation to consolidated net income for the years ended December 31, 2021, 2020 and 2019.

The amounts for the years ended December 31, 2020 and 2019 have been revised to conform to the current year's segment alignment.

Core Earnings by Business Segment

For the Year Ended December 31, 2021

Farm & Ranch USDA Guarantees Rural

Institutional Credit Corporate Reconciling

Agricultural Finance Rural Infrastructure Treasury Corporate

Farm & Ranch Corporate AgFinance Rural

Renewable Energy Funding Investments Reconciling

Adjustments Consolidated Net Income

5 unchanged sentences

Guarantee and commitment fees 16,178 48 1,287 20 — — — ( 4,864 ) 12,669

16,957 850 1,314 29 — ( 6,601 ) 12,549

Gain on sale of mortgage loans 6,539 — — — — — — — 6,539

Other income/(expense) (3)

1,966 — 5 — — — ( 291 ) ( 2,821 ) ( 1,141 )

Non-interest income/(loss) 19,513 1,948 1,346 29 ( 536 ) ( 5,997 ) 16,303

Release of losses ( 2,959 ) — ( 4,709 ) ( 110 ) ( 27 ) — ( 7,805 )

Provision for reserve for losses ( 81 ) — ( 169 ) — — — ( 250 )

Other non-interest expense ( 22,414 ) ( 7,270 ) ( 6,224 ) ( 8,784 ) ( 16,711 ) — ( 61,403 )

Non-interest expense (4)

( 22,495 ) ( 7,270 ) ( 6,393 ) ( 8,784 ) ( 16,711 ) — ( 61,653 )

Total revenues 138,219 27,129 9,359 1,239 70,208 557 ( 291 ) ( 7,578 ) 238,842

Release of/(provision for) losses 1,574 ( 210 ) ( 291 ) ( 198 ) — ( 15 ) — — 860

Release of reserve for losses 1,034 — 293 — — — — — 1,327

Operating expenses — — — — — — ( 73,416 ) — ( 73,416 )

Total non-interest expense 1,034 — 293 — — — ( 73,416 ) — ( 72,089 )

Core earnings before income taxes 140,827 26,919 9,361 1,041 70,208 542 ( 73,707 ) ( 7,578 ) (4)

2 unchanged sentences

Preferred stock dividends — — — — — — ( 24,677 ) — ( 24,677 )

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

Segment core earnings/(losses) $ 111,253 $ 21,266 $ 7,396 $ 822 $ 55,464 $ 428 $ ( 83,059 ) $ ( 5,987 ) (4)

Total assets at carrying value $ 6,305,975 $ 2,553,176 $ 2,365,996 $ 8,128,489 $ 5,001,865 $ — $ 24,355,501

Total Assets $ 13,112,193 $ 1,507,848 $ 5,344,707 $ 87,553 $ — $ 5,037,636 $ 55,554 $ — 25,145,491

Total on- and off-balance sheet program assets at principal balance $ 16,094,640 $ 1,537,834 $ 5,895,226 $ 86,763 $ — $ — $ — $ — 23,614,463

2 unchanged sentences

(3) Includes the reclassification of interest expense related to interest rate swaps not designated as hedges, which are included in "(Losses)/gains on financial derivatives" on the consolidated financial statements, to determine the effective funding cost for each operating segment.

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

(4) Net adjustments to reconcile to the corresponding income measures:

4 unchanged sentences

For the Year Ended December 31, 2020

Farm & Ranch USDA Guarantees Rural

Utilities Institutional Credit Corporate Reconciling

Consolidated Net Income

Agricultural Finance Rural Infrastructure Treasury Corporate

Farm & Ranch Corporate AgFinance Rural

Renewable Energy Funding Investments Reconciling

Adjustments Consolidated Net Income

(in thousands)

4 unchanged sentences

Guarantee and commitment fees 17,800 5 1,345 — — — — ( 6,601 ) 12,549

18,593 958 1,412 372 — ( 7,669 ) 13,666

Other income/(expense) (3)

3,652 — 32 — — — ( 534 ) 604 3,754

Non-interest income/(loss) 19,990 1,132 1,450 372 166 ( 2,168 ) 20,942

Provision for loan losses ( 3,504 ) — — — — — ( 3,504 )

Release of reserve for losses 3 — — — — — 3

Other non-interest expense ( 19,375 ) ( 5,757 ) ( 3,898 ) ( 8,390 ) ( 14,505 ) — ( 51,925 )

Non-interest expense (4)

( 19,372 ) ( 5,757 ) ( 3,898 ) ( 8,390 ) ( 14,505 ) — ( 51,922 )

Total revenues 111,610 21,446 8,253 303 79,218 ( 1,040 ) ( 534 ) ( 12,365 ) 206,891

(Provision for)/release of losses ( 2,941 ) 36 ( 4,763 ) ( 110 ) — ( 27 ) — — ( 7,805 )

Provision for reserve for losses ( 80 ) — ( 170 ) — — — — — ( 250 )

Operating expenses — — — — — — ( 61,403 ) — ( 61,403 )

Total non-interest expense ( 80 ) — ( 170 ) — — — ( 61,403 ) — ( 61,653 )

Core earnings before income taxes 108,589 21,482 3,320 193 79,218 ( 1,067 ) ( 61,937 ) ( 12,365 ) (4)

4 unchanged sentences

Segment core earnings/(losses) $ 85,787 $ 16,971 $ 2,623 $ 152 $ 62,582 $ ( 843 ) $ ( 66,660 ) $ ( 11,436 ) (4)

Total assets at carrying value $ 5,408,302 $ 2,311,932 $ 1,717,405 $ 8,606,912 $ 3,664,823 $ — $ 21,709,374

Total Assets $ 12,373,781 $ 1,663,581 $ 4,760,585 $ 73,493 $ — $ 5,441,426 $ 42,635 $ — $ 24,355,501

Total on- and off-balance sheet program assets at principal balance $ 14,872,894 $ 1,664,115 $ 5,314,051 $ 73,035 $ — $ — $ — $ — $ 21,924,095

2 unchanged sentences

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

(4) Net adjustments to reconcile to the corresponding income measures:

4 unchanged sentences

For the Year Ended December 31, 2019

Farm & Ranch USDA Guarantees Rural

Utilities Institutional Credit Corporate Reconciling

Consolidated Net Income

Agricultural Finance Rural Infrastructure Treasury Corporate

Farm & Ranch Corporate AgFinance Rural

Renewable Energy Funding Investments Reconciling

Adjustments Consolidated Net Income

(in thousands)

4 unchanged sentences

Guarantee and commitment fees 19,551 — 1,784 — — — — ( 7,669 ) 13,666

17,976 797 1,599 360 — ( 6,756 ) 13,976

Other income/(expense) (3)

1,571 — 37 — — — 167 5,501 7,276

Non-interest income/(loss) 19,347 817 1,632 360 ( 913 ) ( 9,503 ) 11,740

Provision for loan losses ( 238 ) — — — — — ( 238 )

Total revenues 97,253 13,757 6,887 22 73,244 388 167 2,359 194,077

Provision for losses ( 3,165 ) ( 339 ) — — — — — — ( 3,504 )

Release of reserve for losses 3 — — — — — — — 3

Other non-interest expense ( 19,026 ) ( 5,309 ) ( 3,062 ) ( 8,011 ) ( 14,411 ) — ( 49,819 )

Non-interest expense (4)

( 19,123 ) ( 5,309 ) ( 3,062 ) ( 8,011 ) ( 14,411 ) — ( 49,916 )

Operating expenses — — — — — — ( 51,925 ) — ( 51,925 )

Total non-interest expense 3 — — — — — ( 51,925 ) — ( 51,922 )

Core earnings before income taxes 94,091 13,418 6,887 22 73,244 388 ( 51,758 ) 2,359 (4)

2 unchanged sentences

Preferred stock dividends — — — — — — ( 13,940 ) — ( 13,940 )

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

Segment core earnings/(losses) $ 74,332 $ 10,600 $ 5,441 $ 17 $ 57,863 $ 306 $ ( 54,817 ) $ ( 92 ) (4)

Total assets at carrying value $ 4,701,736 $ 2,240,906 $ 945,282 $ 8,089,410 $ 2,716,994 $ — $ 18,694,328

Total Assets $ 11,889,538 $ 1,338,114 $ 4,625,125 $ 9,802 $ — $ 3,809,891 $ 36,904 $ — $ 21,709,374

Total on- and off-balance sheet program assets at principal balance $ 14,559,268 $ 1,328,602 $ 5,220,270 $ 9,802 $ — $ — $ — $ — $ 21,117,942

2 unchanged sentences

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

(4) Net adjustments to reconcile to the corresponding income measures:

4 unchanged sentences

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data