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Item 2. Management’s Discussion and Analysis

2022-08-08 compared with 2022-05-09 · 393 added, 330 removed, 1003 unchanged (42% of the section changed)

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perspective, of the material information necessary to assess Farmer Mac's financial condition and results

of operations for the quarter ended March 31, 2022.

of operations for the quarter ended June 30, 2022.

Financial information included in this report is

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Some statements made in this report, such as in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section, are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995 about management's current expectations for Farmer Mac's future financial results, business prospects, and business developments.

Forward-looking statements include, without limitation, any statement, including statements about the COVID-19 pandemic and its impact on Farmer Mac, that may predict, forecast, indicate, or imply future results, performance, or achievements.

Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate, or imply future results, performance, or achievements.

These statements typically include terms such as "anticipates," "believes," "continues," "estimates," "expects," "forecasts," "intends," "outlook," "plans," "potential," "project," "target," and similar terms, and future or conditional tense verbs like "could," "may," "might," "should," "will," and "would." This report includes forward-looking statements addressing Farmer Mac's:

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• the effects of the Federal Reserve’s efforts to achieve monetary policy normalization and slow inflation;

• other factors that could hinder agricultural mortgage lending or borrower repayment capacity, including the effects of severe weather, climate change, or fluctuations in agricultural real estate values;

• the duration, spread, and severity of the COVID-19 pandemic and its effects on the business operations of agricultural and rural borrowers, the capital markets, and Farmer Mac's business operations;

• the public response to the ongoing COVID-19 pandemic, including the possibility of government actions to mitigate the pandemic and its effects, and any social or economic disruption that may be caused by any new COVID-19 variants or any further outbreaks.

• other factors that could hinder agricultural mortgage lending or borrower repayment capacity, including the effects of severe weather and drought, climate change, or fluctuations in agricultural real estate values;

• the duration, mitigation efforts, spread, severity, and social and economic disruption of the ongoing COVID-19 pandemic and its effects on the business operations of agricultural and rural borrowers, the capital markets, and Farmer Mac's business operations.

Considering these potential risks and uncertainties, no undue reliance should be placed on any forward-looking statements expressed in this report.

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Farmer Mac offers those entities a variety of investment opportunities that may diversify their investment portfolios and provide the opportunity to earn a competitive return on their investment dollars.

Farmer Mac’s performance during first quarter 2022, described in more detail below, reflects the success of our continued focus on pursuing new channels and innovative ways to further our mission to help build a strong and vital rural America.

Farmer Mac’s performance during second quarter 2022, described in more detail below, reflects the success of our continued focus on pursuing new channels and innovative ways to further our mission to help build a strong and vital rural America.

Despite ongoing macroeconomic concerns and potential headwinds such as deteriorating macroeconomic conditions, inflation, rising interest rates, the continuing COVID-19 pandemic, and war in Ukraine, Farmer Mac delivered solid financial results.

These financial results in the first half of 2022 reflected a variety of factors, including:

(1) the resilience of the farm economy, as producers have benefited from healthy farm incomes and liquidity from relatively high commodity prices resulting from heightened demand, with revenues rising faster than the costs of inputs;

(2) an increase in Farmer Mac's outstanding business volume at higher spreads while credit quality improved;

(3) Farmer Mac's disciplined approach to interest rate risk management that helps to protect earnings from the effects of interest rate volatility;

and (4) Farmer Mac's effective funding strategies that resulted in advantageous funding during the first half of 2022.

The discussion below of Farmer Mac's financial information includes "non-GAAP measures," which are measures of financial performance not presented in accordance with generally accepted accounting principles in the United States ("GAAP").

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For the Three Months Ended

March 31, 2022 December 31, 2021 March 31, 2021

June 30, 2022 March 31, 2022 June 30, 2021

(in thousands)

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Core earnings 30,748 25,761 29,986

The $11.2 million sequential increase in net income attributable to common stockholders was due to a $14.5 million after-tax increase in the fair value of undesignated financial derivatives and a $3.5 million after-tax increase in net interest income.

These factors were partially offset by the non-recurrence of the fourth quarter 2021 $5.2 million after-tax gain on sale of mortgage loans, a net change in our (release)/provision for credit losses of $1.1 million after tax, and a $0.7 million after-tax increase in operating expenses.

The $13.1 million year-over-year increase in net income attributable to common stockholders was due to a $9.3 million after-tax increase in the fair value of undesignated financial derivatives and a $6.8 million after-tax increase in net interest income.

The $1.9 million sequential decrease in net income attributable to common stockholders was due to a $10.0 million after-tax decrease in the fair value of undesignated financial derivatives.

This factor was partially offset by a $5.9 million after-tax increase in net interest income, an increase in our release of credit losses of $1.2 million after tax, and a $1.1 million after-tax decrease in operating expenses.

The $13.7 million year-over-year increase in net income attributable to common stockholders was due to a $11.3 million after-tax increase in net interest income, a $5.1 million after-tax increase in the fair value of undesignated financial derivatives, and an increase in our release of credit losses of $0.4 million after tax.

These factors were partially offset by a $2.5 million after-tax increase in operating expenses and a $0.9 million increase in preferred stock dividends.

The $4.3 million sequential decrease in core earnings was due to the non-recurrence of the fourth quarter 2021 $5.2 million after-tax gain on sale of mortgage loans, a net change in our (release)/provision for credit losses of $1.1 million after tax, and a $0.7 million after-tax increase in operating expenses.

These factors were partially offset by a $2.8 million after-tax increase in net effective spread.

The $0.2 million year-over-year decrease in core earnings was due to the $2.0 million after-tax increase in operating expenses and the $1.5 million increase in preferred stock dividends.

These factors were partially offset by a $3.1 million after-tax increase in net effective spread.

The $5.0 million sequential increase in core earnings was due to a $2.5 million after-tax increase in net effective spread, an increase in our release of credit losses of $1.2 million after tax, and a $1.1 million after-tax decrease in operating expenses.

The $0.8 million year-over-year increase in core earnings was due to a $3.5 million after-tax increase in net effective spread and an increase in our release of credit losses of $0.4 million after tax.

These factors

were partially offset by a $2.5 million after-tax increase in operating expenses and a $0.9 million increase in preferred stock dividends.

For more information about net income attributable to common stockholders, the composition of core earnings, and a reconciliation of net income attributable to common stockholders to core earnings, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations." For more information about the non-GAAP measures Farmer Mac uses, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Use of Non-GAAP Measures."

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For the Three Months Ended

March 31, 2022 December 31, 2021 March 31, 2021

June 30, 2022 March 31, 2022 June 30, 2021

(in thousands)

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Net effective spread % 0.99 % 0.97 % 1.01 %

The $4.5 million sequential increase in net interest income was primarily due to a $1.9 million increase related to net new business volume, a $1.4 million decrease in funding costs, and a $0.8 million increase in cash-basis interest income.

In percentage terms, the sequential 0.05% increase was primarily attributable to a decrease of 0.03% in funding costs, an increase of 0.01% in net new business volume, and an increase of 0.01% in net fair value changes from financial derivatives designated in hedge accounting relationships (designated financial derivatives).

The $8.6 million year-over-year increase in net interest income was primarily due to a $5.0 million increase from net new business volume, a $2.0 million increase in the fair value of designated financial derivatives, a $0.8 million increase in net coupon yields related to our acquisition, in third quarter 2021, of the loan servicing rights on a sizeable portion of our Farm & Ranch loan and USDA Guaranteed Securities portfolios, and a $0.7 million increase in cash-basis interest income.

In percentage terms, the year-over-year 0.09% increase was primarily attributable to a decrease of 0.05% in funding costs and an increase of 0.03% in net fair value changes from designated financial derivatives.

The $7.5 million sequential increase in net interest income was primarily due to a $3.7 million increase in the fair value of designated financial derivatives, a $2.1 million increase related to net new business volume and a $1.7 million decrease in funding costs.

In percentage terms, the sequential 0.09% increase was primarily attributable to an increase of 0.06% in net fair value changes from financial derivatives designated in hedge accounting relationships (designated financial derivatives) and a decrease of 0.02% in funding costs.

The $14.3 million year-over-year increase in net interest income was primarily due to a $7.8 million increase in the fair value of designated financial derivatives, a $4.3 million increase from net new business volume, and a $2.5 million decrease in funding costs.

In percentage terms, the year-over-year 0.15% increase was primarily attributable to an increase of 0.12% in net fair value changes from designated financial derivatives and a decrease of 0.05% in funding costs.

The $3.1 million sequential increase in net effective spread in dollars was primarily due to an increase of $2.2 million from net new business volume, a $0.2 million decrease in non-GAAP funding costs, and a $0.7 million increase in cash-basis interest income.

In percentage terms, the sequential increase of 0.03% was primarily attributable to an increase of 0.01% in net new business volume and an increase of 0.01% in cash-basis interest income.

The $4.0 million year-over-year increase in net effective spread in dollars was primarily due to a $4.4 million increase from net new business volume, a $0.8 million increase in net coupon yields related to the acquisition of loan servicing rights referenced above, and a $0.7 million increase in cash-basis interest income.

These factors were partially offset by a $1.7 million increase in non-GAAP funding costs.

In percentage terms, net effective spread remained constant on a year-over-year basis.

In percentage terms, the sequential increase of 0.02% was primarily attributable to a decrease of 0.02% in non-GAAP funding costs.

The $4.4 million year-over-year increase in net effective spread in dollars was primarily due to a $4.8 million increase from net new business volume, a $0.9 million increase in net coupon yields related to the acquisition of loan servicing rights, and a $0.4 million increase in cash-basis interest income.

factors were partially offset by a $1.4 million increase in non-GAAP funding costs.

In percentage terms, the year-over-year decrease of 0.02% was primarily attributable to an increase of 0.02% in non-GAAP funding costs.

For more information about Farmer Mac's use of net effective spread as a financial measure, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Use of Non-GAAP Measures." For a reconciliation of net interest income to net effective spread, see Table 11 in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Net Interest Income."

Business Volume

Our outstanding business volume was $24.2 billion as of March 31, 2022, a net increase of $0.6 billion from December 31, 2021 after taking into account all new business, maturities, sales, and paydowns on existing assets.

The net increase was primarily attributable to net increases of $0.5 billion in the Agricultural Finance line of business and $0.1 billion in the Rural Infrastructure Finance line of business.

Our outstanding business volume was $24.5 billion as of June 30, 2022, a net increase of $0.2 billion from March 31, 2022 after taking into account all new business, maturities, sales, and paydowns on existing assets.

The net increase was primarily attributable to net increases of $0.2 billion in the Rural Infrastructure Finance line of business and $43.0 million in the Agricultural Finance line of business.

For more information about Farmer Mac's business volume, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Business Volume."

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

(in thousands)

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Credit Quality

The following table presents Agricultural Finance on-balance sheet loan purchase and off-balance sheet LTSPCs and Farmer Mac Guaranteed Securities substandard assets, in dollars and as a percentage of the respective portfolio as of March 31, 2022 and December 31, 2021:

On-Balance Sheet Off-Balance Sheet

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(dollars in thousands)

June 30, 2022 $ 169,310 2.4 % $ 44,362 1.5 %

March 31, 2022 181,303 2.6 % 34,516 1.2 %

December 31, 2021 185,758 2.7 % 60,922 2.1 %

Increase/(decrease) from prior quarter-ending $ (11,993) (0.2) % $ 9,846 0.3 %

Increase/(decrease) from prior year-ending $ (16,448) (0.3) % $ (16,560) (0.6) %

The decrease of $4.5 million in on-balance sheet substandard assets during first quarter was primarily driven by credit upgrades during the quarter in crops, permanent plantings, livestock, and part-time farms, partially offset by credit downgrades in storage and processing.

The decrease of $12.0 million in on-balance sheet substandard assets during second quarter was primarily driven by credit upgrades during the quarter in crops, livestock, and agricultural storage and processing, partially offset by credit downgrades in permanent plantings and part-time farms.

The on-balance sheet Agricultural Finance mortgage loan portfolio grew by $266.6 million, which, when coupled with credit upgrades, caused the percentage of substandard assets to decrease.

The $26.4 million decrease in substandard assets in our off-balance sheet LTSPC and Farmer Mac Guaranteed Securities portfolios during first quarter was primarily due to credit upgrades across the portfolios, particularly crops and livestock.

There were no substandard assets in the Rural Infrastructure Finance loan purchase portfolio as of March 31, 2022 and one loan classified as substandard in that portfolio as of December 31, 2021.

The $9.8 million increase in substandard assets in our off-balance sheet LTSPC and Farmer Mac Guaranteed Securities portfolios during second quarter was primarily due to credit downgrades in permanent plantings, crops, and part-time farms, partially offset by credit upgrades in livestock.

There were no substandard assets in the Rural Infrastructure Finance portfolio as of June 30, 2022 and one loan classified as substandard in that portfolio as of December 31, 2021.

For an analysis of current loan-to-value ratios across substandard and other internally assigned risk ratings, see Table 27 in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk—Loans and Guarantees."

The following table presents 90-day delinquencies for on-balance sheet Agricultural Finance mortgage loan purchases and off-balance sheet LTSPCs and Farmer Mac Guaranteed Securities, in dollars and as a percentage of the respective balance sheet category as of March 31, 2022 and December 31, 2021:

On-Balance Sheet Off-Balance Sheet

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(dollars in thousands)

June 30, 2022 $ 18,751 0.26 % $ 1,872 0.06 %

March 31, 2022 53,960 0.78 % 1,887 0.06 %

December 31, 2021 43,710 0.64 % 3,597 0.12 %

Increase/(decrease) from prior quarter-ending $ (35,209) (0.52) % $ (15) — %

Increase/(decrease) from prior year-ending $ (24,959) (0.38) % $ (1,725) (0.06) %

On-balance sheet Agricultural Finance loans 90 or more days delinquent increased in all commodity groups, except crops.

Off-balance sheet Agricultural Finance LTSPCs and Farmer Mac Guaranteed Securities 90 days or more delinquent decreased in livestock and permanent plantings, while all other commodity groups remained constant.

The top ten borrower exposures over 90 days delinquent in either the on- or off-balance sheet Agricultural Finance portfolio represented over half of the aggregate 90-day delinquencies as of March 31, 2022.

As of both March 31, 2022 and December 31, 2021, there were no 90-day delinquencies in Farmer Mac's portfolio of Rural Infrastructure Finance loan purchases and loans underlying LTSPCs.

On-balance sheet Agricultural Finance loans 90 or more days delinquent decreased in all commodity groups, except part-time farms.

Off-balance sheet Agricultural Finance LTSPCs and Farmer Mac Guaranteed Securities 90 days or more delinquent decreased in crops and permanent plantings, partially offset by increases in part-time farms.

As of both June 30, 2022 and December 31, 2021, there were no 90-day delinquencies in Farmer Mac's portfolio of Rural Infrastructure Finance loan purchases and loans underlying LTSPCs.

For more information about Farmer Mac's credit metrics, including 90-day delinquencies, the total allowance for losses, and substandard assets, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk—Loans and Guarantees."

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Farmer Mac has operated successfully throughout the COVID-19 pandemic with most employees still working remotely.

Farmer Mac has maintained uninterrupted access to the debt capital markets during that time and remains a source of capital and liquidity to rural borrowers facing economic or market volatility stemming from the ongoing pandemic.

Farmer Mac has adopted a "Presence with Purpose" work arrangement, a flexible, hybrid approach under which employees spend a combination of time working remotely or in one of Farmer Mac's offices depending on the nature of the work and the related business needs.

Farmer Mac has maintained uninterrupted access to the debt capital markets and remains a source of capital and liquidity to rural borrowers facing economic or market volatility stemming from the ongoing pandemic.

For more information on the effects of the COVID-19 pandemic on Farmer Mac's business, see "Business—Human Capital" in the 2021 Annual Report and "Management's Discussion and Analysis of Financial Condition and Results of Operations—Outlook" in the 2021 Annual Report and in this report.

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Specifically, Farmer Mac uses the following non-GAAP measures:

"core earnings," "core earnings per share," and "net effective spread." Farmer Mac uses these non-GAAP measures to measure corporate economic performance and develop financial plans because, in management's view, they are useful alternative measures in understanding Farmer Mac's economic performance, transaction economics, and business trends.

"core earnings," "core earnings per share," and "net

effective spread." Farmer Mac uses these non-GAAP measures to measure corporate economic performance and develop financial plans because, in management's view, they are useful alternative measures in understanding Farmer Mac's economic performance, transaction economics, and business trends.

The non-GAAP financial measures that Farmer Mac uses may not be comparable to similarly labeled non-GAAP financial measures disclosed by other companies.

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As further explained below, net effective spread differs from net interest income and net interest yield by excluding certain items from net interest income and net interest yield and including certain other items that net interest income and net interest yield do not contain.

Farmer Mac excludes from net effective spread the premiums and discounts on assets consolidated at fair value because they either do not reflect actual cash premiums paid for the assets at acquisition or are not expected to have an economic effect on Farmer Mac's financial performance if the assets are held to maturity, as is expected.

Farmer Mac also excludes from net effective spread the interest income and interest expense associated with the consolidated trusts and the average balance of the loans underlying these trusts to reflect management's view that the net interest income Farmer Mac earns on the related Farmer Mac Guaranteed Securities owned by third parties is effectively a guarantee fee.

Farmer Mac excludes from net effective spread the interest income and interest expense associated with the consolidated trusts and the average balance of the loans underlying these trusts to reflect management's view that the net interest income Farmer Mac earns on the related Farmer Mac Guaranteed Securities owned by third parties is effectively a guarantee fee.

Accordingly, the excluded interest income and interest expense associated with consolidated trusts is reclassified to guarantee and commitment fees in determining Farmer Mac's core earnings.

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Net effective spread also differs from net interest income and net interest yield because it includes the accrual of income and expense related to the contractual amounts due on financial derivatives that are not designated in hedge accounting relationships ("undesignated financial derivatives").

Farmer Mac uses interest rate swaps to manage its interest rate risk exposure by synthetically modifying the interest rate reset or maturity characteristics of certain assets and liabilities.

The accrual of the contractual amounts

due on interest rate swaps designated in hedge accounting relationships is included as an adjustment to the yield or cost of the hedged item and is included in net interest income.

For undesignated financial derivatives, Farmer Mac records the income or expense related to the accrual of the contractual amounts due in "Gains on financial derivatives" on the consolidated statements of operations.

Farmer Mac uses

interest rate swaps to manage its interest rate risk exposure by synthetically modifying the interest rate reset or maturity characteristics of certain assets and liabilities.

The accrual of the contractual amounts due on interest rate swaps designated in hedge accounting relationships is included as an adjustment to the yield or cost of the hedged item and is included in net interest income.

For undesignated financial derivatives, Farmer Mac records the income or expense related to the accrual of the contractual amounts due in "Gains/(losses) on financial derivatives" on the consolidated statements of operations.

However, the accrual of the contractual amounts due for undesignated financial derivatives are included in Farmer Mac's calculation of net effective spread.

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For the Three Months Ended

March 31, 2022 March 31, 2021

June 30, 2022 June 30, 2021

(in thousands, except per share amounts)

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Less reconciling items:

Gains on undesignated financial derivatives due to fair value changes (see Table 14) 1,698 1,695

Gains/(losses) on undesignated financial derivatives due to fair value changes (see Table 14) 2,473 (3,721)

Gains/(losses) on hedging activities due to fair value changes 5,916 (2,097)

Unrealized gains/(losses) on trading securities 94 (14)

Unrealized losses on trading securities (285) (61)

Net effects of amortization of premiums/discounts and deferred gains on assets consolidated at fair value (62) 20

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(4) Includes the tax impact of non-GAAP reconciling items between net income attributable to common stockholders and core earnings.

Reconciliation of Net Income Attributable to Common Stockholders to Core Earnings

For the Six Months Ended

June 30, 2022 June 30, 2021

(in thousands, except per share amounts)

Net income attributable to common stockholders $ 80,150 $ 53,402

Less reconciling items:

Gains/(losses) on undesignated financial derivatives due to fair value changes (see Table 14) 4,171 (2,026)

Gains/(losses) on hedging activities due to fair value changes 7,940 (2,368)

Unrealized losses on trading securities (191) (75)

Net effects of amortization of premiums/discounts and deferred gains on assets consolidated at fair value (42) 36

Net effects of terminations or net settlements on financial derivatives 18,048 1,274

Income tax effect related to reconciling items (6,285) 664

Sub-total 23,641 (2,495)

Core earnings $ 56,509 $ 55,897

Composition of Core Earnings:

Net effective spread (1)

$ 118,785 $ 110,410

Guarantee and commitment fees (2)

Total revenues 128,872 119,736

Credit related expense (GAAP):

Release of losses (1,589) (1,014)

Total credit related expense (1,589) (1,014)

Operating expenses (GAAP):

Compensation and employee benefits 25,013 21,574

General and administrative 14,798 12,685

Regulatory fees 1,625 1,500

Total operating expenses 41,436 35,759

Net earnings 89,025 84,991

Income tax expense (4)

18,933 17,983

Preferred stock dividends (GAAP) 13,583 11,111

Core earnings $ 56,509 $ 55,897

Core earnings per share:

Basic $ 5.24 $ 5.20

Diluted $ 5.20 $ 5.16

Weighted-average shares:

Basic 10,782 10,751

Diluted 10,876 10,829

(1) Net effective spread is a non-GAAP measure.

See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Use of Non-GAAP Measures—Net Effective Spread" for an explanation of net effective spread.

See Table 11 for a reconciliation of net interest income to net effective spread.

(2) Includes interest income and interest expense related to consolidated trusts owned by third parties reclassified from net interest income to guarantee and commitment fees to reflect management's view that the net interest income Farmer Mac earns is effectively a guarantee fee on the consolidated Farmer Mac Guaranteed Securities.

(3) Reflects reconciling adjustments for the reclassification to exclude expenses related to interest rate swaps not designated as hedges and terminations or net settlements on financial derivatives, and reconciling adjustments to exclude fair value adjustments on financial derivatives and trading assets and the recognition of deferred gains over the estimated lives of certain Farmer Mac Guaranteed Securities and USDA Securities.

(4) Includes the tax impact of non-GAAP reconciling items between net income attributable to common stockholders and core earnings.

Reconciliation of GAAP Basic Earnings Per Share to Core Earnings - Basic Earnings Per Share

For the Three Months Ended

March 31, 2022 March 31, 2021

For the Three Months Ended For the Six Months Ended

June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

(in thousands, except per share amounts)

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Less reconciling items:

Gains on undesignated financial derivatives due to fair value changes (see Table 14) 0.16 0.16

Gains/(losses) on undesignated financial derivatives due to fair value changes (see Table 14) 0.23 (0.35) 0.39 (0.19)

Gains/(losses) on hedging activities due to fair value changes 0.55 (0.19) 0.74 (0.22)

Unrealized gains on trading securities 0.01 —

Unrealized losses on trading securities (0.03) (0.01) (0.02) (0.01)

Net effects of amortization of premiums/discounts and deferred gains on assets consolidated at fair value (0.01) — — —

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Reconciliation of GAAP Diluted Earnings Per Share to Core Earnings - Diluted Earnings Per Share

For the Three Months Ended

March 31, 2022 March 31, 2021

For the Three Months Ended For the Six Months Ended

June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

(in thousands, except per share amounts)

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Less reconciling items:

Gains on undesignated financial derivatives due to fair value changes (see Table 14) 0.16 0.16

Gains/(losses) on undesignated financial derivatives due to fair value changes (see Table 14) 0.23 (0.34) 0.38 (0.18)

Gains/(losses) on hedging activities due to fair value changes 0.55 (0.19) 0.73 (0.22)

Unrealized gains on trading securities 0.01 —

Unrealized losses on trading securities (0.03) (0.01) (0.02) (0.01)

Net effects of amortization of premiums/discounts and deferred gains on assets consolidated at fair value (0.01) — — —

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The non-GAAP reconciling items between net income attributable to common stockholders and core earnings are:

Losses on financial derivatives due to fair value changes are presented by two reconciling items in Table 6 above:

(a) Gains on undesignated financial derivatives due to fair value changes;

Gains/(losses) on financial derivatives due to fair value changes are presented by two reconciling items in Table 6 above:

(a) Gains/(losses) on undesignated financial derivatives due to fair value changes;

and (b) Gains/(losses) on hedging activities due to fair value changes.

The table below calculates the non-GAAP reconciling item for losses on hedging activities due to fair value changes:

Non-GAAP Reconciling Items for (Losses)/Gains on Hedging Activities due to Fair Value Changes

For the Three Months Ended

March 31, 2022 March 31, 2021

The table below calculates the non-GAAP reconciling item for gains/(losses) on hedging activities due to fair value changes:

Non-GAAP Reconciling Items for Gains/(Losses) on Hedging Activities due to Fair Value Changes

For the Three Months Ended For the Six Months Ended

June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

(in thousands)

Gains due to fair value changes (see Table 4.2) $ 2,364 $ 345

Gains/(losses) due to fair value changes (see Table 4.2) $ 6,037 $ (1,725) $ 8,403 $ (1,379)

Initial cash payment (received) at inception of swap (121) (372) (463) (989)

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When there is no direct payment arrangement between a swap dealer counterparty and a debt dealer issuing Farmer Mac's medium-term notes for a particular transaction, Farmer Mac may receive an initial cash payment from the swap dealer at the inception of the swap to offset dollar-for-dollar the amount of the discount on the associated hedged debt.

For GAAP purposes, changes in fair value of the swaps are recognized in "Gains on financial derivatives," while the economically offsetting discount on the associated hedged debt is amortized over the term of the debt as an adjustment to its yield.

For GAAP purposes, changes in fair value of the swaps are recognized in "Gains/(losses) on financial derivatives," while the economically offsetting discount on the associated hedged debt is amortized over the term of the debt as an adjustment to its yield.

For purposes of core earnings, these initial cash payments are deferred and amortized as net yield adjustments over the term of the related debt, which generally ranges from 3 to 25 years.

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Net Interest Income .

The following table provides information about interest-earning assets and funding for the quarters ended March 31, 2022 and 2021.

The following table provides information about interest-earning assets and funding for the six months ended June 30, 2022 and 2021.

The average balance of non-accruing loans is included in the average balance of loans, Farmer Mac Guaranteed Securities, and USDA Securities presented, though the related income is accounted for on a cash basis.

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The interest income and expense associated with these trusts are shown in the net effect of consolidated trusts.

For the Three Months Ended

March 31, 2022 March 31, 2021

For the Six Months Ended

June 30, 2022 June 30, 2021

Balance Income/

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Net interest income/yield $ 25,154,338 $ 131,277 1.04 % $ 23,434,573 $ 108,380 0.93 %

(1) Excludes interest income of $8.1 million and $10.6 million in first quarter 2022 and 2021, respectively, related to consolidated trusts with beneficial interests owned by third parties.

(1) Excludes interest income of $16.0 million and $20.9 million in first half of 2022 and 2021, respectively, related to consolidated trusts with beneficial interests owned by third parties.

(2) Includes current portion of long-term notes.

(3) Excludes interest expense of $7.0 million and $9.4 million in first quarter 2022 and 2021, respectively, related to consolidated trusts with beneficial interests owned by third parties.

(3) Excludes interest expense of $13.8 million and $18.4 million in first half of 2022 and 2021, respectively, related to consolidated trusts with beneficial interests owned by third parties.

(4) Includes the effect of consolidated trusts with beneficial interests owned by third parties.

The $8.6 million year-over-year increase in net interest income was primarily due to a $5.0 million increase from net new business volume, a $2.0 million increase in the fair value of derivatives designated in fair value hedge accounting relationships (designated financial derivatives), a $0.8 million increase in net coupon yields related to the acquisition, in third quarter 2021, of the loan servicing rights on a sizeable portion of our Farm & Ranch loan and USDA Guaranteed Securities portfolios, and a $0.7 million increase in cash-basis interest income.

The $22.9 million year-over-year increase in net interest income was primarily due to a $9.8 million increase in the fair value of derivatives designated in fair value hedge accounting relationships (designated financial derivatives), a $7.3 million decrease in funding costs, a $5.9 million increase from net new business volume, and a $1.2 million increase in cash-basis interest income.

In percentage terms, the year-over-year 0.11% increase was primarily attributable to an increase of 0.08% in net fair value changes from designated financial derivatives and a decrease of 0.06% in funding costs.

The following table sets forth information about changes in the components of Farmer Mac's net interest income prior to consolidation of certain trusts for the periods indicated.

For each category, information is provided on changes attributable to changes in volume (change in volume multiplied by old rate), and changes in rate (change in rate multiplied by old volume), and then allocated based on the relative size of rate and volume changes from the prior period.

For the Three Months Ended March 31, 2022 Compared to Same Period in 2021

For the Six Months Ended June 30, 2022 Compared to Same Period in 2021

Increase/(Decrease) Due to

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See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Use of Non-GAAP Measures—Net Effective Spread" for more information about net effective spread.

For the Three Months Ended

March 31, 2022 March 31, 2021

Dollars Yield Dollars Yield

For the Three Months Ended For the Six Months Ended

June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

Dollars Yield Dollars Yield Dollars Yield Dollars Yield

(dollars in thousands)

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Net effective spread $ 60,946 0.99 % $ 56,551 1.01 % $ 118,785 0.98 % $ 110,410 0.99 %

The $4.0 million year-over-year increase in net effective spread in dollars was primarily due to an increase of $4.4 million increase from net new business volume, a $0.8 million increase in net coupon yields related to our acquisition, in third quarter 2021, of the loan servicing rights of a sizeable portion of our

Farm & Ranch loan and USDA Guaranteed Securities portfolios, and a $0.7 million increase in cash-basis interest income.

These factors were partially offset by a $1.7 million increase in non-GAAP funding costs.

In percentage terms, net effective spread remained constant on a year-over-year basis.

The $8.4 million year-over-year increase in net effective spread in dollars was primarily due to an increase of $9.0 million from net new business volume, a $3.1 million decrease in funding costs, a $1.7 million increase in net coupon yields related to the acquisition of loan servicing rights, and a $1.2 million increase in cash-basis interest income.

In percentage terms, net effective spread decreased by 0.01% as a result of decreased spreads on net new business volume.

See Note 10 to the consolidated financial statements for more information about net interest income and net effective spread from Farmer Mac's individual business segments.

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Provision for and Release of Allowance for Losses and Reserve for Losses .

The following table summarizes the components of Farmer Mac's total allowance for losses for the three months ended March 31, 2022 and 2021:

For the Three Months Ended

March 31, 2022 March 31, 2021

The following table summarizes the components of Farmer Mac's total allowance for losses for the three and six months ended June 30, 2022 and 2021:

As of June 30, 2022 As of June 30, 2021

Losses Reserve

4 unchanged sentences

(in thousands)

For the Three Months Ended

Beginning balance $ 14,464 $ 1,840 $ 16,304 $ 15,211 $ 2,333 $ 17,544

Provision for/(release of) losses 56 (110) (54) 913 (944) (31)

Release of losses (1,372) (163) (1,535) (761) (222) (983)

Charge-offs — — — — — —

Ending balance $ 13,092 $ 1,677 $ 14,769 $ 14,450 $ 2,111 $ 16,561

See Notes 5 and 6 to the consolidated financial statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk—Loans and Guarantees." During first quarter 2022, we recorded a $2.4 million release from the allowance for losses related to a Rural Utilities loan as a result of the upgrade of that loan under our internal ratings system after the borrower successfully securitized a large payable incurred during the arctic freeze that struck Texas in February 2021.

This securitization transaction received an investment grade credit rating and exhibited the inherent strength of rural electric cooperatives and the legislative support that these providers of essential energy services typically receive.

The release from the allowance for losses attributable to this one loan was offset by provisions to the allowance for losses attributable to new loan volume added during first quarter 2022 and other risk rating downgrades, resulting in an overall provision to the allowance for losses of $56,000 during first quarter 2022.

For the Six Months Ended

Beginning balance $ 14,492 $ 1,950 $ 16,442 $ 14,298 $ 3,277 $ 17,575

(Release of)/provision for losses (1,316) (273) (1,589) 152 (1,166) (1,014)

Charge-offs (84) — (84) — — —

Ending balance $ 13,092 $ 1,677 $ 14,769 $ 14,450 $ 2,111 $ 16,561

During the three and six months ended June 30, 2022, we recorded a $1.5 million and $1.6 million release from the allowance for losses, respectively, primarily as a result of updated credit loss model forecast assumptions and improvements in risk ratings.

These factors were partially offset by increased loan volume and a risk rating downgrade of one agricultural storage and processing loan.

Guarantee and Commitment Fees .

The following table presents guarantee and commitment fees, which compensate Farmer Mac for assuming the credit risk on loans underlying off-balance sheet Farmer Mac Guaranteed Securities and LTSPCs, for the three months ended March 31, 2022 and 2021:

For the Three Months Ended

March 31, 2022 March 31, 2021 $ %

(in thousands)

For the Three Months Ended For the Six Months Ended

Change Change

June 30, 2022 June 30, 2021 $ % June 30, 2022 June 30, 2021 $ %

(dollars in thousands)

Contractual guarantee fees $ 3,560 $ 2,997 $ 563 19 % $ 7,062 $ 6,027 $ 1,035 17 %

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Guarantee fee income $ 3,213 $ 2,997 $ 216 7 % $ 6,908 $ 6,027 $ 881 15 %

Guarantee and commitment fees increased for the quarter ended March 31, 2022 compared to 2021, which was due to increases in the average outstanding balance of LTSPCs and off-balance sheet Farmer Mac Guaranteed Securities during first quarter 2022.

As adjusted for the core earnings presentation, guarantee and commitment fees were $4.6 million for the three months ended March 31, 2022 compared to $4.2 million for first quarter 2021.

Guarantee and commitment fees increased for the three and six months ended June 30, 2022 compared to 2021, which was due to increases in the average outstanding balance of LTSPCs and off-balance sheet

Farmer Mac Guaranteed Securities during second quarter 2022.

As adjusted for the core earnings presentation, guarantee and commitment fees were $4.7 million and $9.3 million for the three and six months ended June 30, 2022, respectively, compared to $4.3 million and $8.6 million for the three and six months ended June 30, 2021, respectively.

In Farmer Mac's presentation of core earnings, guarantee and commitment fees include interest income and interest expense related to consolidated trusts owned by third parties to reflect management's view that the net interest income Farmer Mac earns is effectively a guarantee fee on those consolidated Farmer Mac Guaranteed Securities.

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For more information about net income attributable to common stockholders, the composition of core earnings, and a reconciliation of net income attributable to common stockholders to core earnings, see Table 6 in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations." For more information about the non-GAAP measures Farmer Mac uses, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Use of Non-GAAP Measures."

Gains on financial derivatives.

The components of gains and losses on financial derivatives for the three months ended March 31, 2022 and 2021 are summarized in the following table:

For the Three Months Ended

March 31, 2022 March 31, 2021 $ %

(in thousands)

Gains due to fair value changes $ 1,698 $ 1,695 $ 3 — %

Gains/(losses) on financial derivatives .

The components of gains and losses on financial derivatives for the three and six months ended June 30, 2022 and 2021 are summarized in the following table:

For the Three Months Ended For the Six Months Ended

Change Change

June 30, 2022 June 30, 2021 $ % June 30, 2022 June 30, 2021 $ %

(dollars in thousands)

Gains/(losses) due to fair value changes $ 2,473 $ (3,721) $ 6,194 (166) % $ 4,171 $ (2,026) $ 6,197 (306) %

Accrual of contractual payments (2,026) 970 (2,996) (309) % (3,020) 3,038 (6,058) (199) %

Gains due to terminations or net settlements 15,370 530 14,840 2800 %

Gains on financial derivatives $ 16,074 $ 4,293 $ 11,781 274 %

Gains/(losses) due to terminations or net settlements 2,971 (315) 3,286 (1,043) % 18,341 215 18,126 8,431 %

Gains/(losses) on financial derivatives $ 3,418 $ (3,066) $ 6,484 (211) % $ 19,492 $ 1,227 $ 18,265 1,489 %

These changes in fair value are primarily the result of fluctuations in long-term interest rates.

The accrual of periodic cash settlements for interest paid or received from Farmer Mac's interest rate swaps that are undesignated financial derivatives is shown as expense related to financial derivatives.

receipts to terminate undesignated derivative positions or net cash settled forward sales contracts on the debt of other GSEs and undesignated U.S.

Treasury security futures and initial cash payments received upon the inception of certain undesignated swaps are included in "Gains due to terminations or net settlements" in the table above.

Payments or receipts to terminate undesignated derivative positions or net cash settled forward sales contracts on the debt of other GSEs and undesignated U.S.

Treasury security futures and initial cash payments received upon the inception of certain undesignated swaps are included in "Gains/(losses) due to terminations or net settlements" in the table above.

For undesignated swaps, when there is no direct payment arrangement between a swap dealer counterparty and a debt dealer issuing Farmer Mac's medium-term notes for a particular transaction, Farmer Mac may receive an initial cash payment from the swap dealer at the inception of the swap to offset dollar-for-dollar the amount of the discount on the associated hedged debt.

Changes in the fair value of these swaps are recognized immediately in "Gains on financial derivatives," while the offsetting discount on the hedged debt is amortized over the term of the debt as an adjustment to its yield.

Changes in the fair value of these swaps are recognized immediately in "Gains/(losses) on financial derivatives," while the offsetting discount on the hedged debt is amortized over the term of the debt as an

adjustment to its yield.

The amounts of initial cash payments received by Farmer Mac vary depending on the number of the aforementioned type of swaps it executes during a quarter.

Other Income .

The following table presents other income for the three months ended March 31, 2022 and 2021:

For the Three Months Ended

March 31, 2022 March 31, 2021 $ %

(in thousands)

The following table presents other income for the three and six months ended June 30, 2022 and 2021:

For the Three Months Ended For the Six Months Ended

Change Change

June 30, 2022 June 30, 2021 $ % June 30, 2022 June 30, 2021 $ %

(dollars in thousands)

Late fees $ 291 $ 252 $ 39 15 % $ 645 $ 539 $ 106 20 %

Servicing fees 280 — 280 N/A

Mortgage servicing rights amortization (131) — (131) N/A

Servicing fees 252 — 252 N/A 532 — 532 N/A

Mortgage servicing rights amortization (136) — (136) N/A (266) — (266) N/A

Other 72 183 (111) (61) % 243 479 (236) (49) %

Total other income $ 479 $ 435 $ 44 10 % $ 1,154 $ 1,018 $ 136 13 %

The increase in other income for the three months ended March 31, 2022 compared to 2021 is primarily due to an increase in servicing fees, partially offset by a decrease in loan rate modification fees.

The increase in other income for the three and six months ended June 30, 2022 compared to 2021 is primarily due to an increase in servicing fees, partially offset by a decrease in loan rate modification fees.

Operating Expenses .

The components of operating expenses for the three months ended March 31, 2022 and 2021 are summarized in the following table:

For the Three Months Ended

March 31, 2022 March 31, 2021 $ %

(in thousands)

The components of operating expenses for the three and six months ended June 30, 2022 and 2021 are summarized in the following table:

For the Three Months Ended For the Six Months Ended

Change Change

June 30, 2022 June 30, 2021 $ % June 30, 2022 June 30, 2021 $ %

(dollars in thousands)

Compensation and employee benefits $ 11,715 $ 9,779 $ 1,936 20 % $ 25,013 $ 21,574 $ 3,439 16 %

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Compensation and Employee Benefits .

The increase in compensation and employee benefits expenses for first quarter 2022 compared to 2021 was due to increased headcount and increased stock compensation.

The increase in compensation and employee benefits expenses for 2022 compared to 2021 was due to increased headcount and increased stock compensation.

General and Administrative Expenses (G&A) .

The increase in G&A expenses for first quarter 2022 compared to 2021 was primarily due to increased spending on software licenses and information technology and other consultants to support growth and strategic initiatives.

The increase in G&A expenses for 2022 compared to 2021 was primarily due to increased spending on software licenses and information technology and other consultants to support growth and strategic initiatives.

We entered into a transition services agreement in connection with the strategic acquisition of loan servicing rights in third quarter 2021.

1 unchanged sentence

Income Tax Expense .

The following table presents income tax expense and the effective income tax rate for the three months ended March 31, 2022 and 2021:

For the Three Months Ended

March 31, 2022 March 31, 2021 $ %

The following table presents income tax expense and the effective income tax rate for the three and six months ended June 30, 2022 and 2021:

For the Three Months Ended For the Six Months Ended

Change Change

June 30, 2022 June 30, 2021 $ % June 30, 2022 June 30, 2021 $ %

(dollars in thousands)

2 unchanged sentences

Business Volume .

The following table sets forth the net growth or decrease in Farmer Mac's lines of business for the three months ended March 31, 2022 and 2021:

The following table sets forth the net growth or decrease in Farmer Mac's lines of business for the three and six months ended June 30, 2022 and 2021:

Net New Business Volume

For the Three Months Ended

March 31, 2022 March 31, 2021

Balance Sheet Net Growth/(Decrease) Net Growth/(Decrease)

For the Three Months Ended For the Six Months Ended

June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

Balance Sheet Net Growth/(Decrease) Net Growth/(Decrease) Net Growth/(Decrease) Net Growth/(Decrease)

(in thousands)

31 unchanged sentences

(1) An interest-only Farmer Mac Guaranteed Security retained as part of a structured securitization.

Farmer Mac's outstanding business volume was $24.2 billion as of March 31, 2022, a net increase of $0.6 billion from December 31, 2021 after taking into account all new business, maturities, sales, and paydowns on existing assets.

The $0.5 billion net increase in Farm & Ranch during first quarter 2022 resulted from $2.5 billion of new purchases, commitments, and guarantees, partially offset by $2.0 billion of scheduled maturities and repayments.

Farmer Mac purchased a total of $416.2 million in loans, which was primarily driven by farm real estate acquisitions due to improved borrower economics as well as a competitive, albeit an increasing interest rate environment resulting in demand for intermediate and long-term financing solutions.

Farmer Mac's outstanding business volume was $24.5 billion as of June 30, 2022, a net increase of $0.2 billion from March 31, 2022 after taking into account all new business, maturities, sales, and paydowns on existing assets.

The $16.4 million net increase in Farm & Ranch during second quarter 2022 resulted from $1.4 billion of new purchases, commitments, and guarantees, mostly offset by $1.4 billion of scheduled maturities and repayments.

Farmer Mac purchased a total of $432.6 million in loans, which was primarily driven by improved borrower economics as well as a competitive, albeit an increasing interest rate environment resulting in demand for intermediate and long-term financing solutions.

The $432.6 million in gross Farm & Ranch loan purchases was partially offset by $153.8 million in scheduled maturities and repayments.

Farmer Mac also purchased a total of $1.8 billion in Farm & Ranch AgVantage Securities during first quarter 2022, which primarily reflected the refinancing of maturing securities as well as financial counterparties seeking to add longer term AgVantage securities to manage their asset-liability maturity profile given recent increases in credit spreads and interest rates.

The $1.8 billion in gross purchases was partially offset by $1.3 billion in scheduled maturities.

Approximately $1.1 billion of the total $1.8 billion in gross purchases reflected purchases that refinanced maturing AgVantage securities and were issued at short-term tenors, which may create volatility in AgVantage volumes throughout the year.

However, Farmer Mac does not anticipate a material impact to its net effective spread given the low spread related to these securities due to the short maturities and the credit strength of the counterparties.

The $2.9 million net increase in Corporate AgFinance during first quarter 2022 resulted from $103.4 million of new loan and AgVantage security purchases, which was offset by $100.4 million of scheduled maturities and repayments.

Farmer Mac purchased a total of $61.7 million in loans, which was offset by $76.5 million in scheduled maturities and repayments.

This net decrease in loans was primarily due to scheduled amortization and prepayments due to strong land values and agricultural incomes.

The $111.2 million net increase in Rural Utilities during first quarter 2022 resulted from $378.0 million of new purchases, commitments, and guarantees, which was partially offset by $266.7 million of scheduled maturities and repayments.

Farmer Mac purchased a total of $208.0 million in Rural Utilities loans, which was fueled by a competitive but increasing interest rate environment resulting in demand for long-term financing solutions for planned maintenance and capital expenditures.

Farmer Mac also purchased a total of $0.8 billion in Farm & Ranch AgVantage Securities during second quarter 2022, which primarily reflected the refinancing of maturing securities as well as financial counterparties seeking to add longer term AgVantage securities to manage their asset-liability maturity profile given recent increases in credit spreads and interest rates.

The $0.8 billion in gross purchases was more than offset by $1.0 billion in scheduled maturities.

Approximately $0.3 billion of the total $0.8 billion in gross purchases reflected purchases that refinanced maturing AgVantage securities and were issued at short-term tenors, which may create some volatility in AgVantage volumes throughout the year.

The $26.6 million net increase in Corporate AgFinance during second quarter 2022 resulted from $107.9 million of new loan purchases, which was offset by $81.4 million of scheduled maturities, repayments, and sales.

Farmer Mac purchased a total of $85.4 million in loans, which was offset by $44.3 million in scheduled maturities, repayments, and sales.

This net increase in loans was primarily due to Farmer Mac's continued focus to support loans to larger and more complex agribusinesses focused on food and fiber processing, and other supply chain production.

The $165.6 million net increase in Rural Utilities during second quarter 2022 resulted from $326.9 million of new purchases, commitments, and guarantees, which was partially offset by $161.3 million of scheduled maturities and repayments.

Farmer Mac purchased a total of $196.5 million in Rural Utilities loans;

electric distribution and generation and transmission comprised $161.5 million and telecommunication comprised $35.0 million, which was fueled by a competitive but increasing interest rate environment resulting in demand for long-term financing solutions for planned maintenance and capital expenditures.

The $196.5 million in loan purchases was partially offset by $24.4 million in scheduled maturities and repayments.

The $33.8 million net increase in Renewable Energy during first quarter 2022 primarily reflects a $35.0 million commitment to a large solar project being constructed in the southeast United States, consisting of $6.6 million of funded loan purchases (which was partially offset by $1.2 million of other loan repayments) and $28.4 million in unfunded loan commitments expected to be drawn throughout 2022.

Farmer Mac's outstanding business volume was $21.9 billion as of March 31, 2021, a net decrease of $61.6 million from December 31, 2020 after taking into account all new business, scheduled maturities, and paydowns on existing assets.

The $134.8 million net decrease in Farm & Ranch during first quarter 2021 resulted from $1.2 billion of scheduled maturities and repayments, partially offset by $1.1 billion of new purchases and guarantees,

The $16.3 million net decrease in Corporate AgFinance during first quarter 2021 resulted from $202.7 million of scheduled maturities and repayments, partially offset by $186.4 million of new purchases.

The $68.8 million net increase in Rural Utilities during first quarter 2021 resulted from $171.5 million of new purchases and guarantees, which was partially offset by $102.8 million of scheduled maturities and repayments.

The $20.8 million net increase in Renewable Energy during first quarter 2021 resulted from $23.5 million of new purchases, which was partially offset by $2.7 million of repayments.

The $27.4 million net increase in Renewable Energy during second quarter 2022 primarily reflects $35.3 million in loan purchases, partially offset by $7.9 million in repayments.

Farmer Mac's outstanding business volume was $22.2 billion as of June 30, 2021, a net increase of $0.3 billion from March 31, 2021 after taking into account all new business, scheduled maturities, and paydowns on existing assets.

The $135.9 million net increase in Farm & Ranch during second quarter 2021 resulted from $0.9 billion of new purchases and guarantees, partially offset by $0.8 billion of scheduled maturities and repayments.

The $16.3 million net increase in Corporate AgFinance during second quarter 2021 resulted from $160.0 million of new purchases, partially offset by $143.7 million of scheduled maturities and repayments.

The $183.8 million net increase in Rural Utilities during second quarter 2021 resulted from $410.7 million of new purchases and guarantees, which was partially offset by $226.9 million of scheduled maturities and repayments.

The level and composition of Farmer Mac’s outstanding business volume is based on the relationship between new business, loan sales, scheduled maturities, and repayments on existing assets from year to year.

4 unchanged sentences

The following table sets forth information about the Farmer Mac Guaranteed Securities issued during the periods indicated:

For the Three Months Ended

March 31, 2022 March 31, 2021

(in thousands)

For the Three Months Ended For the Six Months Ended

June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

(dollars in thousands)

AgVantage securities $ 905,796 $ 468,616 $ 2,847,156 $ 911,528

2 unchanged sentences

Farmer Mac either retains the loans it purchases or securitizes them and retains or sells Farmer Mac Guaranteed Securities backed by those loans.

During the three months ended March 31, 2022 and 2021, Farmer Mac realized no gains or losses from the securitization of loans that it holds in consolidated trusts.

During the three and six months ended June 30, 2022 and 2021, Farmer Mac realized no gains or losses from the securitization of loans that it holds in consolidated trusts.

Farmer Mac consolidates these loans and presents them as "Loans held for investment in consolidated trusts, at amortized cost" on the consolidated balance sheets.

During the three months ended March 31, 2022 and 2021, Farmer Mac realized no gains or losses from the issuance of Farmer Mac Guaranteed USDA Securities or AgVantage Securities.

During the three and six months ended June 30, 2022 and 2021, Farmer Mac realized no gains or losses from the issuance of Farmer Mac Guaranteed USDA Securities or AgVantage Securities.

The following table sets forth information about outstanding volume in each of Farmer Mac's lines of business as of the dates indicated:

Outstanding Business Volume

Balance Sheet As of March 31, 2022 As of December 31, 2021

Balance Sheet As of June 30, 2022 As of December 31, 2021

(in thousands)

31 unchanged sentences

(1) An interest-only Farmer Mac Guaranteed Security retained as part of a structured securitization.

The following table summarizes by maturity date the scheduled principal amortization of loans held, loans underlying off-balance sheet Farmer Mac Guaranteed Securities (excluding AgVantage securities) and LTSPCs, USDA Securities, and Farmer Mac Guaranteed USDA Securities as of March 31, 2022:

Schedule of Principal Amortization as of March 31, 2022

Schedule of Principal Amortization as of June 30, 2022

Loans Loans Underlying Off-Balance Sheet Farmer Mac Guaranteed Securities and LTSPCs USDA Securities and Farmer Mac Guaranteed USDA Securities Total

7 unchanged sentences

Total $ 9,956,855 $ 3,502,149 $ 2,650,963 $ 16,109,967

Of Farmer Mac's $24.2 billion outstanding principal balance of business volume as of March 31, 2022, $8.5 billion were AgVantage securities included in the Agricultural Finance and Rural Infrastructure Finance lines of business.

Of Farmer Mac's $24.5 billion outstanding principal balance of business volume as of June 30, 2022, $8.3 billion were AgVantage securities included in the Agricultural Finance and Rural Infrastructure Finance lines of business.

Unlike business volume in the form of purchased loans, USDA Securities, and loans underlying LTSPCs and non-AgVantage Farmer Mac Guaranteed Securities, most AgVantage securities do not require periodic payments of principal based on amortization schedules and instead have fixed maturity dates when the secured general obligation is due.

The following table summarizes by maturity date the outstanding principal amount of both on- and off-balance sheet AgVantage securities as of March 31, 2022:

The following table summarizes by maturity date the outstanding principal amount of both on- and off-balance sheet AgVantage securities as of June 30, 2022:

AgVantage Balances by Year of Maturity

March 31, 2022

June 30, 2022

(in thousands)

4 unchanged sentences

(1) Includes various maturities ranging from 2027 to 2044.

The weighted-average remaining maturity of the outstanding AgVantage securities shown in the table above was 4.9 years as of March 31, 2022.

The weighted-average remaining maturity of the outstanding AgVantage securities shown in the table above was 4.9 years as of June 30, 2022.

Farmer Mac continues to provide a stable source of liquidity, capital, and risk management tools as a secondary market that helps meet the financing needs of rural America.

The pace and trajectory of Farmer Mac's growth will depend on the capital and liquidity needs of the lending institutions in the agriculture and rural utilities business and the overall financial health of borrowers in the sectors we serve.

The pace and trajectory of Farmer Mac's growth will depend on the capital and liquidity needs of the lending institutions in servicing agriculture and rural infrastructure businesses and the overall financial health of borrowers in the sectors we serve.

Farmer Mac foresees opportunities for profitable growth across our lines of business driven by several key factors:

5 unchanged sentences

• Expansion and acquisition opportunities for agricultural producers resulting from high agricultural incomes and rising costs have increased financing requirements for mergers and acquisitions, consolidation, and vertical integration across many sectors of the agricultural industry, which may also generate demand for Farmer Mac's loan products.

• While market rates have increased dramatically since the lows experienced in 2021, rates are near Farmer Mac's 15-year historical averages.

However, future changes to monetary policy and the overall level and pace of increases in interest rates could impact the pace and timing of Agricultural Finance mortgage loan purchase demand.

Russia's invasion of Ukraine has increased volatility for commodity prices and agricultural production costs for farmers and ranchers, who were already challenged by a strong inflationary environment.

While high commodity prices have thus far outpaced the significant increase in input costs, the impact on global commodity markets from the Ukraine conflict creates further uncertainty for farmers and ranchers in terms of global production, prices, and costs.

According to data from the USDA, Ukraine accounts for 10% of global wheat trade and 15% of global corn trade, so any disruption to production in 2022 could increase demand for U.S.

production and keep commodity prices elevated.

However, sanctions and trade restrictions have elevated oil and fertilizer prices, which influence U.S.

farmers' planting decisions,

particularly for acreage planted to corn, soybeans, and wheat.

Volatility is likely to persist until there is more certainty around the timing, pace, and conclusion of the conflict in Ukraine.

In addition to continued uncertainty from supply-side disruptions, market interest rates increased rapidly in first quarter 2022, driven by the Federal Reserve’s accelerated efforts to achieve monetary policy normalization and decelerate inflation.

• Investments necessary to support consumer demand could increase the need for financing within the food and agriculture supply chain, which may increase the need for incremental capital support from the secondary market.

• Market interest rates have increased significantly since the lows experienced in 2021, and rates are slightly above Farmer Mac's 15-year historical averages.

New loan origination and sales volumes tend to correlate inversely with changes in interest rates.

However, prepayment rates also generally correlate inversely with changes in interest rates, with higher interest rates typically slowing the pace of portfolio loan repayments.

Future changes to monetary policy and the overall level and pace of the increase in interest rates could continue to impact the pace and timing of Agricultural Finance mortgage loan purchase demand and repayments.

The war in Ukraine continues to increase volatility for commodity prices and agricultural production costs for farmers and ranchers, who were already challenged by a strong inflationary environment.

While agricultural commodity prices have thus far outpaced the significant increase in input costs, the impact on global commodity markets from the Ukraine conflict creates further uncertainty for farmers and ranchers in terms of global production, prices, and costs for the remainder of 2022 and 2023.

Heightened market volatility is likely to persist until there is more certainty around the timing, pace, and conclusion of the conflict in Ukraine.

In addition to continued uncertainty from supply-side disruptions, market interest rates increased rapidly in the first half of 2022, driven by the Federal Reserve’s accelerated efforts to achieve monetary policy normalization and decelerate inflation.

A higher interest rate environment could slow the pace of farm mortgage refinancing.

While lower refinances could result in lower levels of new loan purchases in Farm & Ranch and USDA Guarantees products, it could also result in lower portfolio prepayment speeds, as was Farmer Mac’s experience between 2014 and 2018.

Loan prepayment speeds in the first half of 2022 fell to pre-pandemic levels, and they are likely to inversely correlate with interest rates.

Farmer Mac offers a range of interest rates, tenors, and resetting options for loan products, allowing flexibility for originators and borrowers in all interest rate environments.

economy continued to slow in the second quarter of 2022 after a rapid expansion in 2021.

Higher consumer price inflation, particularly for food and energy, combined with a rising interest rate environment has curtailed economists’ outlook for the U.S.

economy in 2022 and into 2023.

And while employment and retail spending data indicate continued but slower growth, the probability of a U.S.

or global recession is increasing.

Farmer Mac believes that its portfolio is sufficiently balanced to withstand the market volatility that arises with an economic recession, as the agricultural, food, and infrastructure industries tend to not be directly correlated with the general economy.

Farmer Mac believes these sectors are generally well positioned to withstand an economic downturn due to ample consumer demand and government support.

Operating Expense .

Farmer Mac continues to expand its investments in human capital, technology, and business infrastructure to increase capacity and efficiency as it seeks to accommodate its growth opportunities and achieve its long-term strategic objectives.

Farmer Mac expects continued increases in its operating expenses over the next several years corresponding to business and revenue growth.

We expect these efforts to continue and increase over the next 12 - 18 months as we innovate and grow our business while monitoring the growth in operating expenses commensurate with the growth in our revenue.

Farmer Mac expects continued increases in its operating expenses over the next several years along with business and revenue growth.

We expect these efforts to continue and increase over the next 1 - 2 years as we continue to grow our revenue and diversify our funding sources.

We will continue making investments in our infrastructure and funding platforms to support these strategies and scale with our growth.

During 2021, we closed on a strategic acquisition that enhanced our operations by expanding our internal loan servicing function and acquiring the loan servicing rights for a sizeable portion of our Farm & Ranch loan and USDA Securities portfolios.

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Agricultural Industry .

The agricultural economy experienced generally favorable conditions in first quarter 2022, with higher commodity prices partially offset by higher input prices.

In response to Russia's invasion of Ukraine, grain commodity prices rose rapidly in February and March 2022.

Higher commodity prices for grains and many animal proteins are likely to substantially increase gross cash receipts for the 2022 and 2023 marketing years.

Farm expenses also rose in first quarter 2022, driven by rising feed, energy, interest, and labor costs.

However, growth in income outpaced growth in expense, and net cash farm income increased nearly 15% in 2021 to $134.2 billion, the highest level since 2013.

The agricultural economy experienced largely favorable conditions in the second quarter 2022, with higher commodity prices partially offset by higher input prices.

In response to Russia's

invasion of Ukraine, grain commodity prices rose rapidly during the first quarter of 2022 and continued to be elevated during much of the second quarter of 2022.

Higher commodity prices for grains and many animal proteins are likely to substantially increase gross cash receipts for the 2022 marketing year.

Farm expenses continued to rise in the second quarter of 2022, driven by rising feed, energy, interest, and labor costs.

Commodity prices showed signs of moderating in June and July of 2022 due to a strengthening U.S.

dollar and reduced demand due to the high-price conditions.

Despite the mid-year decline, prices are likely to remain elevated as a result of the global supply shortages in food and energy.

Growth in farm income outpaced growth in expense in 2021 and in the first half of 2022.

Net cash farm income increased nearly 15% in 2021 to $134.2 billion, the highest level since 2013.

Consumers have continued their return to restaurants and food service establishments in 2022, with a 13% annual increase in retail spending at food service and drinking places, according to advance retail sales data from the U.S.

Census Bureau.

Combined with an annual 8.4% increase in retail spending at food and drinking stores (e.g., grocery), consumers have demonstrated the ability to absorb increasing commodity prices in their food budgets in 2022.

Combined with an annual 7% increase in retail spending at food and beverage stores (e.g., grocery), consumers have demonstrated the ability to absorb increasing commodity prices in their food budgets so far in 2022.

The increase in farm profitability combined with low interest rates in 2020 and 2021 drove a rapid rise in land values and a decrease in farm delinquencies and bankruptcies.

Land value survey data from the USDA show a 12.4% increase in average farm real estate values from June 2021 to June 2022.

Annual farm real estate value gains were highest in the Northern Plains (9.4%) and the Southern Plains (9.0%) but also strong in Pacific states (8.6%) and the Corn Belt (7.7%).

The Federal Reserve Bank of Chicago AgLetter reported a 22% gain in farmland values in the Seventh District (primarily Iowa, Indiana, Illinois, and

Wisconsin) between January 2021 and January 2022.

Annual farm real estate value gains were highest in the Northern Plains (19.8%) and the Corn Belt (14.9%) but also strong in the Lake states (13.7%), the Southern Plains (11.3%), and the Pacific (9.7%).

The Federal Reserve Bank of Chicago AgLetter reported a 23% gain in farmland values in the Seventh District (primarily Iowa, Indiana, Illinois, and Wisconsin) between April 2021 and April 2022.

Data from the Federal Reserve Bank of Kansas City show a similar rise in land values in the Tenth District (primarily Kansas, Missouri, Nebraska, and Oklahoma).

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While regional averages for farmland values provide a good barometer for the overall movement in U.S.

farmland values, economic forces affecting land markets are highly localized, and some markets may experience greater volatility than state or national averages indicate.

Economic conditions are likely to bring mixed effects to credit demand throughout 2022.

farmland values, economic forces affecting land markets are highly localized, and some markets may experience greater volatility in farmland values than state or national averages indicate.

Economic conditions are likely to bring mixed effects to credit demand in the second half of 2022.

Strong asset appreciation and rising interest rates could signal a credit cycle expansion as financial decision-makers look to lock in long-term economics for their appreciating farm and agribusiness assets.

Farm profitability generally increases asset values and demand for the asset class, which also contributes to increasing credit demand.

The low interest rate environment in 2021 increased farmland mortgage refinancing and loan prepayment speeds throughout the year.

A reduction in loan refinancing is likely in 2022, as fewer borrowers will economically benefit from refinancing or restructuring their farm debt.

This could have mixed effects on mortgage portfolios, potentially lowering new sales and originations but also slowing portfolio prepayments and exits.

Finally, a rising yield curve coupled with widening market credit spreads could increase opportunities for corporate and institutional lending, as Farmer Mac's programs become more attractive at higher costs of capital.

Combined, these factors are expected to be generally supportive of continued net portfolio growth for Farmer Mac in 2022.

Positive economic conditions improved Farmer Mac's portfolio performance in early 2022, and they could continue to positively influence loan delinquencies and losses throughout the year.

Farmer Mac's 90-day delinquencies and substandard assets levels improved in first quarter 2022 relative to first quarter 2021.

One-quarter of the loan volume past due 90-days or more in fourth quarter 2021 cured or paid off by March 31, 2022.

The overall delinquency rate fell from 0.84% of the Farm & Ranch operating segment as of March 31, 2021 to 0.57% of the Farm & Ranch portfolio by March 31, 2022, a significant improvement.

The percentage of the portfolio rated substandard also continued to improve in first quarter 2022 to the lowest levels since 2016.

However, supply chain disruptions, rising input costs, and the potential for continued economic and weather-related stress increase the level of uncertainty inherent in the agricultural credit sector could alter the trajectory of the current agricultural cycle.

A rising interest rate environment could have mixed effects on mortgage portfolios, potentially lowering new sales and originations but also slowing portfolio prepayments.

Finally, a changing yield curve coupled with widening market credit spreads could increase opportunities for corporate and institutional lending, as Farmer Mac's programs become more attractive at higher costs of capital.

Combined, these factors are expected to be generally supportive of continued net portfolio growth for Farmer Mac in the second half of 2022.

Positive economic conditions in the agricultural economy improved Farmer Mac's portfolio performance in the first half of 2022, and they could continue to positively influence loan delinquencies and losses throughout the year.

Farmer Mac's 90-day delinquencies and substandard assets levels improved in second quarter 2022 relative to first quarter 2022.

Sixty-five percent of the loan volume past due 90-days or more in first quarter 2022 cured or paid off by June 30, 2022.

The overall delinquency rate fell from 0.57% of the Farm & Ranch operating segment as of March 31, 2022 to 0.20% of the Farm & Ranch operating segment by June 30, 2022, a significant improvement and the lowest levels since 2008.

The percentage of

the portfolio rated substandard also continued to improve in second quarter 2022 to the lowest levels since 2016.

However, rising input costs, market volatility, and the potential for continued economic and weather-related stress increase the level of uncertainty inherent in the agricultural credit sector which could negatively effect the trajectory of the current agricultural cycle.

Farmer Mac believes that its portfolio continues to be highly diversified, both geographically and by commodity and that its portfolio has been underwritten to high credit quality standards.

Therefore, Farmer Mac believes that its portfolio is well-positioned to endure reasonably foreseeable volatility from cyclical and external factors.

For more information about the loan balances, loan-to-value ratios, 90-day delinquencies, and substandard asset rate for the Agricultural Finance mortgage loans in Farmer Mac's portfolio as of March 31, 2022, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk—Loans and Guarantees."

For more information about the loan balances, loan-to-value ratios, 90-day delinquencies, and substandard asset rate for the Agricultural Finance mortgage loans in Farmer Mac's portfolio as of June 30, 2022, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk—Loans and Guarantees."

Exogenous factors facing farm and food producers can create uncertainty and market instability within the sector.

External market conditions that could adversely impact the farm and food sectors in 2022 include supply chain disruptions, foreign trade and trade policy, and environmental conditions.

The logistics of growing, harvesting, processing, packaging, shipping, storing, and retailing food are complex and intertwined.

Labor shortages and transportation disruptions created supply chain stoppages in 2020 and 2021, and they could continue to challenge producers throughout 2022.

External market conditions that could adversely impact the farm and food sectors in 2022 include U.S.

dollar strength, supply chain disruptions, foreign trade and trade policy, and environmental conditions.

agricultural sector has become increasingly dependent on foreign markets as a source of demand, making trade policy increasingly important to farms and food.

The USDA reports U.S.

agricultural exports in the fiscal year 2021 at $177 billion, 35% of the total estimated gross farm income in 2021.

The USDA's initial forecast for 2022 is a modest increase in export value, and through February 2022, agricultural exports are up 8%

in 2022 compared to 2021.

Disruptions to global grain supplies in Ukraine and Russia could boost demand for U.S.

agricultural products in 2022.

However, slower global growth could be a headwind for consumer-oriented products like animal proteins, dairy, fruits, and nuts.

However, because Farmer Mac has significant exposure to crop commodities like corn, soybeans, hay, wheat, and cotton, a sustained rally in agricultural commodities is likely to benefit Farmer Mac's overall portfolio credit quality more than degradation from downward pressure on livestock and consumer product profitability.

The USDA's initial forecast for 2022 is a modest increase in export value over 2021, and through May 2022, agricultural export values are up 14% in 2022 compared to 2021.

However, a deteriorating global economic outlook combined with increased tightening of U.S.

central bank policy has increased the relative value of the U.S.

dollar, which could provide a headwind for future export sales in 2022 and into 2023.

Disruptions to global grain supplies in Ukraine and Russia could provide a temporary boost to U.S.

agricultural product demand.

However, slower global growth could be a headwind for consumer-oriented products like animal proteins, dairy, fruits, and nuts, and Ukrainian corn and wheat may eventually reach market.

Because Farmer Mac has significant exposure to crop commodities like corn, soybeans, hay, wheat, and cotton, a sustained rally in agricultural commodities is likely to continue to benefit Farmer Mac's overall portfolio credit quality more than degradation from downward pressure on livestock and consumer product profitability.

Severe weather conditions and long-term environmental change continue to shape agricultural sectors.

experienced 20 separate billion-dollar weather disasters in 2021, the second-highest level in the 40 years tracked by the National Oceanic and Atmospheric Administration behind 2020.

experienced 20 separate billion-dollar weather disasters in 2021, the second-highest level in the 40 years tracked by the National Oceanic and Atmospheric Administration behind only 2020.

Many of those events affected agriculture, including a midwestern derecho, western wildfires, and western drought.

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Long and persistent drought conditions impacted western agriculture during much of 2021.

Although drought conditions improved in fourth quarter 2021 and early weeks of 2022, 20% of the continental U.S.

remained in exceptional or extreme drought as of April 19, 2022, according to data from the National Drought Mitigation Center.

Although drought conditions improved in fourth quarter 2021 and early weeks of 2022, roughly 17% of the continental U.S.

remained in exceptional or extreme drought as of July 12, 2022, according to data from the National Drought Mitigation Center.

Extended periods of drought and dryness can reduce agricultural productivity, cause lasting damage to permanent crops like fruit and tree nuts, and result in producers leaving some fields fallow due to lack of water.

States also regulate water use, and state laws like California's Sustainable Groundwater Management Act (SGMA) will continue to shape state-led efforts to manage water infrastructure and use.

States also regulate water use, and state laws like California's Sustainable Groundwater Management Act (SGMA) will continue to shape state-led efforts to manage water infrastructure and use and could potentially impact producers.

Agricultural production in California, Oregon, Washington, Arizona, and Utah is likely to experience the greatest impact from the 2021 and 2022 droughts.

For loans in areas that commonly experience exceptional drought (primarily in California), Farmer Mac's underwriting process includes an assessment of anticipated long-term water availability for the related property and how that impacts the collateral value and borrower's cash flow position to mitigate that risk.

For more information about Farmer Mac's environmental risk mitigation requirements, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk—Loans and Guarantees—Environmental Considerations" in Farmer Mac's 2021 Annual Report.

For more information about Farmer Mac's environmental risk mitigation requirements, see "Management's Discussion and Analysis of Financial

Condition and Results of Operations—Risk Management—Credit Risk—Loans and Guarantees—Environmental Considerations" in Farmer Mac's 2021 Annual Report.

Rural Infrastructure Industry .

Economic conditions affecting the rural infrastructure industry tend to follow those in the general economy.

Economic conditions affecting the rural infrastructure industry generally follow those in the general economy.

According to data from the U.S.

Energy Information Administration, sales and the revenue from the sale of electricity to customers increased by 2.3% and 8.8%, respectively, in the last 12 months through January 2022 compared to January 2021.

Energy Information Administration, sales and the revenue from the sale of electricity to customers increased by 2.6% and 8.6%, respectively, in the last 12 months through April 2022 compared to April 2021.

This increase was driven by a sharp recovery in sales to the commercial and industrial sectors and an increase in the retail price of electricity.

Several economic indicators remained positive in first quarter 2022, with improved employment, credit, and retail sales activity, but COVID-19 variants, trade disruptions, and higher inflation continue to impact economic activity.

Solid employment data, credit data, and retail sales activity remained positive economic indicators for the sector in the second quarter, but COVID-19 variants, trade disruptions, inflation,and a tight labor market continue to drag economic outlooks.

Higher energy input prices such as natural gas and coal are a potential headwind for the industry in 2022.

Natural gas prices have risen consistently in late 2021 and early 2022 as a result of reduced supply and additional demand for U.S.

Natural gas prices rose consistently in 2021 and early 2022 because of reduced supply and additional demand for U.S.

liquified natural gas from European countries.

Coal prices also trended higher in first quarter 2022, driven by higher natural gas prices and additional overseas demand to offset Russian coal exports.

Coal prices also trended higher in the second quarter of 2022, driven by higher natural gas prices and additional overseas demand to offset limited Russian coal exports.

Despite higher input costs, power producers are generally able to pass cost increases through higher retail electricity prices.

Through March 31, 2022, Farmer Mac had not observed material degradation in the financial performance of its rural infrastructure portfolio, and that portfolio has never experienced a serious delinquency or default since inception.

Prospects for loan growth within the rural infrastructure industry overall appear to be moderate in the near term, as ongoing normal-course capital expenditures related to maintaining and upgrading utility

infrastructure continue at typical levels.

Farmer Mac's future growth opportunities for financing the electric cooperative industry may be affected by the demand for electric power in rural areas, capital expenditures by electric cooperatives driven by regulatory or technological changes, the continuation of a low interest rate environment compared to historical rates, and competitive dynamics within the rural utilities cooperative finance industry.

In December 2020, the Federal Communications Commission's Rural Digital Opportunity Fund (RDOF) auction awarded $9.2 billion in broadband-related operating cost subsidies to winning bidders.

As RDOF auction winners submit plans to the FCC and begin development, Farmer Mac could see increased lending activity for rural utilities providers.

In addition to RDOF broadband, Farmer Mac could see an increase in financing opportunities for other telecommunications providers in rural areas with wireless broadband increasingly important to economic opportunity and precision agriculture.

Oil and natural gas prices abated in June and July, a positive signal for sector profitability in the second half of 2022.

Through June 30, 2022, Farmer Mac had not observed material degradation in the financial performance of its rural infrastructure portfolio, and that portfolio has never experienced a serious delinquency or default since inception.

Farmer Mac's future growth opportunities for financing the electric cooperative industry may be affected by the demand for electric power in rural areas, capital expenditures by electric cooperatives driven by regulatory or technological changes, the changing interest rate environment, increased policy initiatives to support rural connectivity, and competitive dynamics within the rural utilities cooperative finance industry.

Cooperatives and service providers have access to numerous federally funded programs in 2022, such as the Federal Communications Commission's Rural Digital Opportunity Fund (RDOF), the USDA’s ReConnect, and the USDA’s Telecommunications Infrastructure Loan and Loan Guarantee program.

In addition to capital projects spurred by these programs, Farmer Mac could see an increase in financing opportunities for other telecommunications providers in rural areas with wireless broadband increasingly important to economic opportunity and precision agriculture.

The growth in renewable energy generation and deployment of energy storage technologies may help deepen Farmer Mac's relationships with existing customers through new business opportunities.

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In response to this growth, Farmer Mac has deployed new financing products tailored to the renewable energy sector, which represents a new market opportunity for Farmer Mac.

Under this new initiative, Farmer Mac's total outstanding loan purchase balance of renewable energy financing transactions was $92.2 million as of March 31, 2022.

Weather is an ongoing source of uncertainty for the utilities sector.

Adverse weather can drive demand, outages, and damage to power and telecommunications facilities.

In February 2022, a Texas electric cooperative issued the first securitization financing to recover extraordinary costs arising from extreme weather events, showing a potential outlet for smoothing unpredictable and impactful weather events over future periods.

Farmer Mac believes that the current risk ratings applied to the Rural Infrastructure portfolio reflect any remaining financial stress resulting from recent weather events and elevated energy costs.

However, an increase in the frequency and severity of extreme weather events could elevate the probability of disruptions and credit stress in the future.

Under this new initiative, Farmer Mac's total outstanding loans and loan commitments of renewable energy financing transactions was $148.0 million as of June 30, 2022.

Legislative and Regulatory Outlook .

Farmer Mac continues to monitor potential legislative and regulatory changes that could affect Farmer Mac or its stakeholders, including:

• Farmer Mac is authorized to purchase certain U.S.

Department of Agriculture (USDA) loan guarantees, including those issued by the Farm Service Agency (FSA).

• Section 1005 of the American Rescue Plan Act of 2021 allows the USDA to provide debt relief to socially disadvantaged producers who had outstanding principal balances on FSA direct and guaranteed loans as of January 1, 2021.

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If ultimately implemented, this provision could lead to a short-term acceleration in the prepayment of the FSA guaranteed loans in Farmer Mac’s USDA Securities portfolio.

• Farmer Mac continues to monitor legislative developments that could lead to changes in the tax code that could affect Farmer Mac’s business.

Changes to the corporate tax rate (currently at 21%) have been proposed in recent years as a possible offset to increased federal spending.

Changes to the corporate tax rate may impact corporate earnings.

• The current farm bill is set to expire in 2023.

The farm bill is an omnibus piece of legislation that may impact several programs impacting farm profitability, the vitality of rural communities, and Farmer Mac’s charter.

This omnibus piece of legislation contains several programs that impact farm profitability and rural vitality, and could affect Farmer Mac’s charter as well.

The House and Senate Agriculture Committees began consideration of a new farm bill earlier this year.

Farmer Mac will continue to monitor this legislation for any impact it may have on Farmer Mac and farm profitability.

Farmer Mac will continue to monitor this legislation for any impact it may have on Farmer Mac and its stakeholders.

• Agricultural exports from the United States were valued at more than $177 billion in the 2021 fiscal year.

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food and agricultural sectors' competitiveness internationally.

• The prudential regulator of Farmer Mac is expected to undergo significant changes to its board this year.

The three-member board of the Farm Credit Administration (FCA) currently has one vacant seat, a member whose term expired in 2018, and a third member whose term expires in May 2022.

The two current board members continue to serve until any proposed replacements for them are nominated by the President and confirmed by the U.S.

• The prudential regulator of Farmer Mac is expected to undergo significant changes to its board.

The three-member board of the Farm Credit Administration (FCA) currently has one vacant seat, a member whose term expired in 2018, and a third member whose term expired in May 2022.

The two board members in holdover status will continue to serve until replacements for them are nominated by the President and confirmed by the U.S.

The Biden Administration recently announced a nominee to the vacant seat on the FCA board.

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COVID-19 Pandemic .

While disruptions caused by COVID-19 have significantly moderated, recent and rapid increases in cases of COVID-19 resulting from variants of coronavirus demonstrates the volatility and uncertainty stemming from the pandemic.

Future variants and outbreaks may result in increased market volatility and supply chain disruptions similar to the market dislocations experienced in 2020 and 2021.

Farmer Mac's mission is to support rural America, and the disruptions caused by COVID-19 may continue to present new and expanded opportunities for Farmer Mac to help meet the financing needs of rural America while also presenting uncertainties and risks.

While disruptions caused by COVID-19 have significantly moderated, recent and rapid increases in cases of COVID-19 resulting from variants of coronavirus demonstrate continued uncertainty stemming from the pandemic.

Farmer Mac's mission is to support rural America, and the social and economic disruptions caused by COVID-19 may continue to present new and expanded opportunities for Farmer Mac to help meet the financing needs of rural America while also presenting uncertainties and risks.

See "Risk Factors" in Part I, Item 1A of Farmer Mac's 2021 Annual Report for more information about the uncertainties and risks associated with the COVID-19 pandemic on Farmer Mac and its business.

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The following table summarizes Farmer Mac's balance sheet as of the periods indicated:

March 31, 2022 December 31, 2021 $ %

June 30, 2022 December 31, 2021 $ %

(in thousands)

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Total liabilities and equity $ 25,916,403 $ 25,145,491 $ 770,912 3 %

The increase in total assets was primarily attributable to a larger investment portfolio, new loan volume, and new Farmer Mac Guaranteed Securities loan volume.

The increase in total assets was primarily attributable to new loan volume and a larger investment portfolio.

Liabilities .

The increase in total liabilities was primarily due to an increase in other liabilities related to a $350 million AgVantage security that was traded, but did not yet settle, during first quarter 2022 and an increase in total notes payable to fund the acquisition of loan and Farmer Mac Guaranteed Securities volume.

The decrease in total equity was primarily due to a decrease in accumulated other comprehensive income, partially offset by an increase in retained earnings.

The increase in total liabilities was primarily due to an increase in total notes payable to fund the acquisition of loan volume.

The increase in total equity was primarily due to an increase in retained earnings, partially offset by a decrease in accumulated other comprehensive income.

Risk Management

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Agricultural Finance - Direct Credit Exposure

Farmer Mac's direct credit exposure to Agricultural Finance mortgage loans as of March 31, 2022 was $9.9 billion across 48 states.

Farmer Mac's direct credit exposure to Agricultural Finance mortgage loans as of June 30, 2022 was $10.1 billion across 48 states.

Farmer Mac applies credit underwriting standards and methodologies to help assess exposures to loan purchases, which may include collateral valuation, financial metrics, and other appropriate borrower financial and credit information.

For Corporate AgFinance loans, which are often larger loan exposures to agriculture production and agribusinesses that support agriculture production, food and fiber processing, and other supply chain production, and which may have risk profiles that differ from smaller agricultural mortgage loans, Farmer Mac has implemented methodologies and parameters

that help assess credit risk based on the appropriate sector, borrower construct, and transaction complexity.

For more information about Farmer Mac's underwriting and collateral valuation standards for Agricultural Finance mortgage loans, see "Business—Farmer Mac's Lines of Business—Agricultural Finance—Underwriting and Collateral Standards—Farm & Ranch" and "Business—Farmer Mac's Lines of Business—Agricultural Finance—Underwriting and Collateral Standards—Corporate AgFinance" in Farmer Mac's 2021 Annual Report.

For more information about Farmer Mac's underwriting and collateral valuation

standards for Agricultural Finance mortgage loans, see "Business—Farmer Mac's Lines of Business—Agricultural Finance—Underwriting and Collateral Standards—Farm & Ranch" and "Business—Farmer Mac's Lines of Business—Agricultural Finance—Underwriting and Collateral Standards—Corporate AgFinance" in Farmer Mac's 2021 Annual Report.

Farmer Mac's 90-day delinquency measure includes loans 90 days or more past due, as well as loans in foreclosure and non-performing loans where the borrower is in bankruptcy.

For Agricultural Finance mortgage loans to which Farmer Mac has direct credit exposure, Farmer Mac's 90-day delinquencies as of March 31, 2022, were $55.8 million (0.57% of the Agricultural Finance mortgage loan portfolio to which Farmer Mac has direct credit exposure), compared to $47.3 million (0.48% of the Agricultural Finance mortgage loan portfolio) as of December 31, 2021.

Those 90-day delinquencies were comprised of 40 and 32 delinquent loans as of March 31, 2022 and December 31, 2021, respectively.

The increase in 90-day delinquencies was primarily driven by increased delinquencies in permanent plantings, storage and processing, and part-time farms, partially offset by decreased delinquencies in crops and livestock.

The top ten borrower exposures over 90 days delinquent represented over half of the 90-day delinquencies as of March 31, 2022.

For Agricultural Finance mortgage loans to which Farmer Mac has direct credit exposure, Farmer Mac's 90-day delinquencies as of June 30, 2022, were $20.6 million (0.20% of the Agricultural Finance mortgage loan portfolio to which Farmer Mac has direct credit exposure), compared to $55.8 million (0.57% of the Agricultural Finance mortgage loan portfolio) as of March 31, 2022 and $47.3 million (0.48% of the Agricultural Finance mortgage loan portfolio) as of December 31, 2021.

Those 90-day delinquencies were comprised of 19 delinquent loans as of June 30, 2022, compared to 40 delinquent loans as of March 31, 2022 and 32 delinquent loans as of December 31, 2021.

The decrease in 90-day delinquencies was primarily driven by decreased delinquencies in crops, livestock, permanent plantings, and agricultural storage and processing, partially offset by increased delinquencies in part-time farms.

The top ten borrower exposures over 90 days delinquent represented over half of the 90-day delinquencies as of June 30, 2022.

Farmer Mac believes that it remains adequately collateralized on its delinquent loans.

Farmer Mac's 90-day delinquency rate as of March 31, 2022 was below Farmer Mac's historical average.

Farmer Mac's 90-day delinquency rate as of June 30, 2022 was below Farmer Mac's historical average.

In the near-term, our delinquency rate may exceed our historical average due to the impact of adverse weather events and/or supply chain disruptions on the agricultural economy.

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(dollars in thousands)

June 30, 2022 $ 10,128,083 $ 20,623 0.20 %

March 31, 2022 9,879,978 55,847 0.57 %

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June 30, 2020 8,017,850 68,682 0.86 %

March 31, 2020 7,811,594 79,722 1.02 %

Across all of Farmer Mac's lines of business, 90-day delinquencies represented 0.23% of total outstanding business volume as of March 31, 2022, compared to 0.20% as of December 31, 2021 and 0.33% as of March 31, 2021.

The following table presents outstanding Agricultural Finance mortgage loans and 90-day delinquencies as of March 31, 2022 by year of origination, geographic region, commodity/collateral type, original loan-to-value ratio, and range in the size of borrower exposure:

Agricultural Finance Mortgage Loans 90-Day Delinquencies as of March 31, 2022

Across all of Farmer Mac's lines of business, 90-day delinquencies represented 0.08% of total outstanding business volume as of June 30, 2022, compared to 0.20% as of December 31, 2021 and 0.28% as of June 30, 2021.

The following table presents outstanding Agricultural Finance mortgage loans and 90-day delinquencies as of June 30, 2022 by year of origination, geographic region, commodity/collateral type, original loan-to-value ratio, and range in the size of borrower exposure:

Agricultural Finance Mortgage Loans 90-Day Delinquencies as of June 30, 2022

Distribution of Agricultural Loans Agricultural Loans 90-Day Delinquencies (1)

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Assets categorized as "substandard" have a well-defined weakness or weaknesses, and there is a distinct possibility that some loss will be sustained if deficiencies are not corrected.

As of March 31, 2022, Farmer Mac's Agricultural Finance mortgage loans (to which it has direct credit exposure) comprising substandard assets were $215.8 million (2.2% of the portfolio), compared to $246.7 million (2.5% of the portfolio) as of December 31, 2021.

Those substandard assets comprised 254 loans as of March 31, 2022 and 274 loans as of December 31, 2021.

The decrease of $30.9 million in substandard assets during first quarter 2022 was driven by credit upgrades in both our on- and off-balance sheet portfolios.

Substandard assets decreased as a percentage of the total on- and off-balance sheet portfolios due to a combination of credit upgrades in both portfolios and growth in the on-balance sheet portfolio.

The percentage of substandard assets within the portfolio as of March 31, 2022 was below the historical average.

As of June 30, 2022, Farmer Mac's Agricultural Finance mortgage loans (to which it has direct credit exposure) comprising substandard assets were $213.7 million (2.1% of the portfolio), compared to $215.8 million (2.2% of the portfolio) as of March 31, 2022 and $246.7 million (2.5% of the portfolio) as of December 31, 2021.

Those substandard assets comprised 249 loans as of June 30, 2022, 254 loans as of March 31, 2022, and 274 loans as of December 31, 2021.

The decrease of $2.1 million in substandard assets during second quarter 2022 was driven by credit upgrades in our on-balance sheet portfolio, partially offset by credit downgrades in our off-balance sheet portfolio.

Substandard assets decreased as a percentage of the total on-balance sheet portfolio due to a combination of volume growth and credit upgrades.

Substandard assets increased as a percentage of the total off-balance sheet portfolio due to a combination of credit downgrades and decreased volume.

The percentage of substandard assets within the portfolio as of June 30, 2022 was below the historical average.

Farmer Mac's average substandard assets as a percentage of its Agricultural Finance mortgage loans over the last 15 years is approximately 4%.

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Loan-to-value ratios depend on the market value of a property, as determined in accordance with Farmer Mac's collateral valuation standards.

As of March 31, 2022 and December 31, 2021, the average unpaid principal balances for Agricultural Finance mortgage loans outstanding and to which Farmer Mac has direct credit exposure was $786,000 and $790,000, respectively.

As of June 30, 2022 and December 31, 2021, the average unpaid principal balances for Agricultural Finance mortgage loans outstanding and to which Farmer Mac has direct credit exposure was $799,000 and $790,000, respectively.

Farmer Mac calculates the "original loan-to-value" ratio of a loan by dividing the original loan principal balance by the original appraised property value.

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The original loan-to-value ratio of any cross-collateralized loans is calculated on a combined basis rather than on a loan-by-loan basis.

The weighted-average original loan-to-value ratio for Agricultural Finance mortgage loans purchased during first quarter 2022 was 46%, compared to 53% for loans purchased during first quarter 2021.

The weighted-average original loan-to-value ratio for Agricultural Finance mortgage loans and loans underlying off-balance sheet Agricultural Finance Guaranteed Securities and LTSPCs was 52% as of both March 31, 2022 and December 31, 2021.

The weighted-average original loan-to-value ratio for all 90-day delinquencies was 51% as of both March 31, 2022 and December 31, 2021.

The weighted-average current loan-to-value ratio (the loan to-value ratio based on original appraised value and current outstanding loan amount adjusted to reflect amortization) for Agricultural Finance mortgage loans and loans underlying off-balance sheet Agricultural Finance Guaranteed Securities and LTSPCs was 47% as of both March 31, 2022 and December 31, 2021.

The weighted-average original loan-to-value ratio for Agricultural Finance mortgage loans purchased during second quarter 2022 was 43%, compared to 48% for loans purchased during second quarter 2021.

The weighted-average original loan-to-value ratio for Agricultural Finance mortgage loans and loans underlying off-balance sheet Agricultural Finance Guaranteed Securities and LTSPCs was 51% and 52% as of June 30, 2022 and December 31, 2021, respectively.

The weighted-average original loan-to-value ratio for all 90-day delinquencies was 53% and 51% as of June 30, 2022 and December 31, 2021, respectively.

loans and loans underlying off-balance sheet Agricultural Finance Guaranteed Securities and LTSPCs was 46% and 47% as of June 30, 2022 and December 31, 2021, respectively.

The following table presents the current loan-to-value ratios for the Agricultural Finance mortgage loans to which Farmer Mac has direct credit exposure, as disaggregated by internally assigned risk ratings:

Agricultural Finance Mortgage Loans current loan-to-value ratio by internally assigned risk rating as of March 31, 2022

Agricultural Finance Mortgage Loans current loan-to-value ratio by internally assigned risk rating as of June 30, 2022

Acceptable Special Mention Substandard Total

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(1) The current loan-to-value ratio is based on original appraised value (or most recently obtained valuation, if available) and current outstanding loan amount adjusted to reflect loan amortization.

The following table presents Farmer Mac's cumulative net credit losses relative to the cumulative original balance for all Agricultural Finance mortgage loans as of March 31, 2022 by year of origination, geographic region, and commodity/collateral type.

The following table presents Farmer Mac's cumulative net credit losses relative to the cumulative original balance for all Agricultural Finance mortgage loans as of June 30, 2022 by year of origination, geographic region, and commodity/collateral type.

The purpose of this information is to present information about realized losses relative to original Farm & Ranch purchases, guarantees, and commitments.

Agricultural Finance Mortgage Loans Credit Losses Relative to Cumulative

Original Loans, Guarantees, and LTSPCs as of March 31, 2022

Original Loans, Guarantees, and LTSPCs as of June 30, 2022

Cumulative Original Loans, Guarantees and LTSPCs Cumulative Net Credit Losses/(Recoveries) Cumulative Loss Rate

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The following tables present concentrations of Agricultural Finance mortgage loans by commodity type within geographic region and cumulative credit losses by origination year and commodity type:

As of March 31, 2022

As of June 30, 2022

Agricultural Finance Mortgage Loans Concentrations by Commodity Type within Geographic Region

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Southeast (AL, FL, GA, MS, NC, SC, TN).

As of March 31, 2022

As of June 30, 2022

Agricultural Loans Cumulative Credit Losses by Origination Year and Commodity Type

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Rural Infrastructure Finance - Direct Credit Exposure

Farmer Mac's direct credit exposure to Rural Infrastructure Finance loans held and loans underlying LTSPCs as of March 31, 2022 was $3.1 billion across 45 states.

Farmer Mac's direct credit exposure to Rural Infrastructure Finance loans held and loans underlying LTSPCs as of June 30, 2022 was $3.3 billion across 45 states.

For more information about Farmer Mac's underwriting and collateral valuation standards for Rural Infrastructure Finance loans, see "Business—Farmer Mac's Lines of Business—Rural Infrastructure Finance—Underwriting and Collateral Standards" in Farmer Mac’s 2021 Annual Report.

As of March 31, 2022, there were no delinquencies in Farmer Mac's portfolio of Rural Infrastructure Finance loans.

As of June 30, 2022, there were no delinquencies in Farmer Mac's portfolio of Rural Infrastructure Finance loans.

Farmer Mac evaluates credit risk for these assets by reviewing a variety of borrower credit risk characteristics.

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The following table presents Farmer Mac’s portfolio of generation and transmission ("G&T") and distribution cooperative borrowers, as well as renewable energy loans, disaggregated by internally assigned risk ratings.

Rural Infrastructure Finance portfolio by internally assigned risk rating as of March 31, 2022

Rural Infrastructure Finance portfolio by internally assigned risk rating as of June 30, 2022

Acceptable Special Mention Substandard Total

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Renewable Energy 148,018 — — 148,018

Telecommunications 195,926 — — 195,926

Rural Utilities Total $ 3,330,922 $ — $ — $ — $ — $ — $ 3,330,922

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Therefore, Farmer Mac believes that we have little or no credit risk exposure to the USDA Securities in the Agricultural Finance line of business because of the USDA guarantee.

As of March 31, 2022, Farmer Mac had not experienced any credit losses on any USDA Securities or Farmer Mac Guaranteed USDA Securities and does not expect to incur any such losses in the future.

As of June 30, 2022, Farmer Mac had not experienced any credit losses on any USDA Securities or Farmer Mac Guaranteed USDA Securities and does not expect to incur any such losses in the future.

Because we do not expect credit losses on this portfolio, Farmer Mac does not provide an allowance for losses on its portfolio of USDA Securities.

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Farmer Mac has the ability to require a seller to cure, replace, or repurchase a loan sold or transferred to Farmer Mac if any breach of a representation or warranty is discovered that was material to Farmer Mac's decision to purchase the loan or that directly or indirectly causes a default or potential loss on a loan sold or transferred by the seller to Farmer Mac.

During the previous three years ended March 31, 2022, there have been no breaches of representations and warranties by sellers that resulted in Farmer Mac requiring a seller to cure, replace, or repurchase a loan.

During the previous three years ended June 30, 2022, there have been no breaches of representations and warranties by sellers that resulted in Farmer Mac requiring a seller to cure, replace, or repurchase a loan.

In addition to relying on the representations and warranties of sellers, Farmer Mac also underwrites the Agricultural Finance mortgage loans (other than rural housing and part-time farm mortgage loans) and Rural Infrastructure Finance loans on which it has direct credit exposure.

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Servicers are responsible to Farmer Mac for serious errors in the servicing of those loans.

If a servicer materially breaches the terms of its servicing agreement with Farmer Mac, such as failing to forward payments received or releasing collateral without

Farmer Mac's consent, or experiences insolvency or bankruptcy, the servicer is responsible for any corresponding damages to Farmer Mac and, in most cases, Farmer Mac has the right to terminate the servicing relationship for a particular loan or the entire portfolio serviced by the servicer.

If a servicer materially breaches the terms of its servicing

agreement with Farmer Mac, such as failing to forward payments received or releasing collateral without Farmer Mac's consent, or experiences insolvency or bankruptcy, the servicer is responsible for any corresponding damages to Farmer Mac and, in most cases, Farmer Mac has the right to terminate the servicing relationship for a particular loan or the entire portfolio serviced by the servicer.

Farmer Mac also can proceed against the servicer in arbitration or exercise any remedies available to it under law.

During the previous three years ended March 31, 2022, Farmer Mac had not exercised any remedies or taken any formal action against any servicers.

During the previous three years ended June 30, 2022, Farmer Mac had not exercised any remedies or taken any formal action against any servicers.

For more information about Farmer Mac's servicing requirements, see "Business—Farmer Mac's Lines of Business—Agricultural Finance—Loan Servicing" and "Business—Farmer Mac's Lines of Business—Rural Infrastructure Finance—Lenders and Loan Servicing" in Farmer Mac’s 2021 Annual Report.

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For AgVantage counterparties that are institutional real estate investors or financial funds and other similar entities, Farmer Mac also typically requires that the counterparty (1) maintain a higher collateralization level, through either a higher overcollateralization percentage or lower loan-to-value ratio thresholds and (2) comply with specified financial covenants for the life of the related AgVantage security to avoid default.

As of March 31, 2022, Farmer Mac had not experienced any credit losses on any AgVantage securities.

As of June 30, 2022, Farmer Mac had not experienced any credit losses on any AgVantage securities.

For a more detailed description of AgVantage securities, see "Business—Farmer Mac's Lines of Business—Agricultural Finance—Other Products – Agricultural Finance—AgVantage Securities" and "Business—Farmer Mac's Lines of Business—Rural Infrastructure Finance—Other Products – Rural Infrastructure Finance—AgVantage Securities" in Farmer Mac's 2021 Annual Report.

The unpaid principal balance of outstanding on-balance sheet AgVantage securities secured by loans eligible for the Agricultural Finance line of business totaled $5.5 billion as of March 31, 2022 and $5.1 billion as of December 31, 2021.

The unpaid principal balance of on-balance sheet AgVantage securities secured by loans eligible for the Rural Infrastructure Finance line of business totaled $3.0 billion as of both March 31, 2022 and December 31, 2021.

The unpaid principal balance of outstanding off-balance sheet AgVantage securities totaled $2.8 million as of both March 31, 2022 and December 31, 2021.

The following table provides information about the issuers of AgVantage securities and the required collateralization levels for those transactions as of March 31, 2022 and December 31, 2021:

As of March 31, 2022 As of December 31, 2021

The unpaid principal balance of outstanding on-balance sheet AgVantage securities secured by loans eligible for the Agricultural Finance line of business totaled $5.3 billion as of June 30, 2022 and $5.1 billion as of December 31, 2021.

The unpaid principal balance of outstanding off-balance sheet AgVantage securities totaled $2.8 million as of both June 30, 2022 and December 31, 2021.

The following table provides information about the issuers of AgVantage securities and the required collateralization levels for those transactions as of June 30, 2022 and December 31, 2021:

As of June 30, 2022 As of December 31, 2021

Counterparty Balance Required Collateralization Balance Required Collateralization

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Total outstanding $ 8,337,127 $ 8,128,481

(1) Consists of AgVantage securities issued by 13 different issuers as of both March 31, 2022 and December 31, 2021.

(1) Consists of AgVantage securities issued by 12 and 13 different issuers as of June 30, 2022 and December 31, 2021, respectively.

Farmer Mac manages institutional credit risk related to lenders and servicers by requiring those institutions to meet Farmer Mac's standards for creditworthiness.

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Credit Risk – Other Investments .

As of March 31, 2022, Farmer Mac had $0.9 billion of cash and cash equivalents and $4.2 billion of investment securities.

As of June 30, 2022, Farmer Mac had $0.9 billion of cash and cash equivalents and $4.3 billion of investment securities.

The management of the credit risk inherent in these investments is governed by Farmer Mac's internal policies as well as FCA regulations found at 12 C.F.R.

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The Liquidity and Investment Regulations and Farmer Mac's internal policies require that investments held in Farmer Mac's investment portfolio meet the following creditworthiness standards:

(1) at a minimum, at least one obligor of the investment must have a very strong capacity to meet financial commitments for the life of the investment, even under severely adverse or stressful conditions, and generally present a very low risk of default;

(2) if the obligor whose capacity to meet financial

commitments is being relied upon to meet the standard set forth in subparagraph (1) is located outside of the United States, the investment must also be fully guaranteed by a U.S.

generally present a very low risk of default;

(2) if the obligor whose capacity to meet financial commitments is being relied upon to meet the standard set forth in subparagraph (1) is located outside of the United States, the investment must also be fully guaranteed by a U.S.

government agency;

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The Liquidity and Investment Regulations and Farmer Mac's internal policies also establish concentration limits, which are intended to limit exposure to any single entity, issuer, or obligor.

The Liquidity and Investment Regulations limit Farmer Mac's total credit exposure to any single entity, issuer, or obligor of securities to 10% of Farmer Mac's regulatory capital ($124.9 million as of March 31, 2022).

However, Farmer Mac's current policy limits this total credit exposure to 5% of its regulatory capital ($62.4 million as of March 31, 2022).

However, Farmer Mac's current policy limits this total credit exposure to 5% of its regulatory capital ($63.8 million as of June 30, 2022).

These exposure limits do not apply to obligations of U.S.

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In addition, Farmer Mac enters into financial derivatives, primarily interest rate swaps, to better match the durations of Farmer Mac's assets and liabilities, thereby reducing overall sensitivity to changing interest rates.

Taking into consideration the prepayment provisions and the default probabilities associated with its portfolio of interest-earning assets, Farmer Mac incorporates behavioral prepayment models when projecting and valuing cash flows associated with these assets.

Taking into consideration the prepayment provisions and the default probabilities associated with its portfolio of interest-earning assets, Farmer Mac incorporates behavioral models when projecting and valuing cash flows associated with these assets.

In recognition that borrowers' behaviors in various interest rate environments may change over time, Farmer Mac periodically evaluates the effectiveness of these models compared to actual prepayment experience and adjusts and refines the models as necessary to improve the precision of future prepayment forecasts.

Changes in interest rates may affect the timing of asset prepayments which may, in turn, impact durations and values of the assets.

Declining interest rates generally results in increased prepayments, which shortens the duration of these assets, while rising interest rates generally results in lower prepayments, thereby extending the duration of the assets.

Declining interest rates generally result in increased prepayments, which shortens the duration of these assets, while rising interest rates generally result in lower prepayments, thereby extending the duration of the assets.

Farmer Mac is subject to interest rate risk on loans and securities it has committed to acquire but not yet purchased (other than delinquent loans purchased through LTSPCs or loans designated for securitization under a forward purchase agreement).

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Treasury securities and other financial derivatives.

Farmer Mac's $0.9 billion of cash and cash equivalents held as of March 31, 2022 mature within three months.

As of March 31, 2022, $3.1 billion of the $4.2 billion of investment securities (74%) were floating rate securities with rates that adjust within one year or fixed rate securities with original maturities between three months and one year.

Farmer Mac's $0.9 billion of cash and cash equivalents held as of June 30, 2022 mature within three months.

As of June 30, 2022, $3.2 billion of the $4.3 billion of investment securities (74%) were floating rate securities with rates that adjust within one year or fixed rate securities with original maturities between three months and one year.

Farmer Mac's floating rate investment securities are funded with floating rate debt.

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Actual results may differ to the extent there are material changes to Farmer Mac's financial asset portfolio or changes in funding or hedging strategies undertaken to mitigate unfavorable sensitivities to interest rate changes.

The following schedule summarizes the results of Farmer Mac's MVE and NES sensitivity analysis as of March 31, 2022 and December 31, 2021 to an immediate and instantaneous uniform or "parallel" shift in the yield curve:

The following schedule summarizes the results of Farmer Mac's MVE and NES sensitivity analysis as of June 30, 2022 and December 31, 2021 to an immediate and instantaneous uniform or "parallel" shift in the yield curve:

Percentage Change in MVE from Base Case

Interest Rate Scenario (1)

As of March 31, 2022 As of December 31, 2021 (1)

As of June 30, 2022 As of December 31, 2021 (1)

+100 basis points (1.9) % 3.7 %

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Percentage Change in NES from Base Case

Interest Rate Scenario As of March 31, 2022 As of December 31, 2021 (1)

Interest Rate Scenario As of June 30, 2022 As of December 31, 2021 (1)

+100 basis points 1.7 % 6.6 %

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(1) The down 100 basis points shock scenario was replaced in 2020 with a proportional shock relative to 50% of the 3-month Treasury bill rate, with the approval of the Financial Risk Committee of the Board of Directors.

The replacement down shock scenario was negative 25 basis points as of March 31, 2022 and negative 2 basis points as of December 31, 2021.

As of March 31, 2022, Farmer Mac's duration gap was positive 0.2 months, compared to negative 1.5 months as of December 31, 2021.

The replacement down shock scenario was negative 2 basis points as of December 31, 2021.

As of June 30, 2022, Farmer Mac's duration gap was positive 2.4 months, compared to negative 1.5 months as of December 31, 2021.

Farmer Mac updated its duration gap measure to interest-earning assets, debt, and financial derivatives as of December 31, 2021.

Interest rates within the yield curve increased significantly during first quarter 2022 with the 2-year and 10-year U.S.

Interest rates within the yield curve flattened during the first half of 2022 with the 2-year and 10-year U.S.

Treasury Note yield-to-maturity increasing by approximately 222 basis points and 150 basis points, respectively, versus year-end 2021.

This rate movement contributed to extending the duration of Farmer Mac's funded assets compared to its debt and financial derivatives, thereby narrowing Farmer Mac's duration gap.

This rate movement contributed to extending the duration of Farmer Mac's funded assets compared to its debt and financial derivatives, thereby lengthening Farmer Mac's duration gap.

Financial Derivatives Transactions

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Treasury securities.

As of March 31, 2022, Farmer Mac had $18.9 billion combined notional amount of interest rate swaps, with terms ranging from less than one year to just over thirty years, of which $8.1 billion were pay-fixed interest rate swaps, $9.5 billion were receive-fixed interest rate swaps, and $1.4 billion were basis swaps.

As of June 30, 2022, Farmer Mac had $20.3 billion combined notional amount of interest rate swaps, with terms ranging from less than one year to just over thirty years, of which $8.1 billion were pay-fixed interest rate swaps, $10.4 billion were receive-fixed interest rate swaps, and $1.8 billion were basis swaps.

Farmer Mac enters into interest rate swaps to more closely match the cash flow and duration characteristics of its interest-earning assets with those of its debt.

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As discussed in Note 4 to the consolidated financial statements, all financial derivatives are recorded on the balance sheet at fair value as derivative assets or as derivative liabilities.

Changes in the fair values of undesignated financial derivatives are reported in "Gains on financial derivatives" in the consolidated statements of operations.

Changes in the fair values of undesignated financial derivatives are reported in "Gains/(losses) on financial derivatives" in the consolidated statements of operations.

For financial derivatives designated in fair value hedge accounting relationships, changes in the fair values of the hedged items related to the risk being hedged are reported in "Net interest income" in the consolidated statements of operations.

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All of Farmer Mac's interest rate swap transactions are conducted under standard collateralized agreements that limit Farmer Mac's potential credit exposure to any counterparty.

As of both March 31, 2022 and December 31, 2021, Farmer Mac had no uncollateralized net exposures based on the mark-to-market value of the portfolio of interest rate swaps

As of both June 30, 2022 and December 31, 2021, Farmer Mac had no uncollateralized net exposures based on the mark-to-market value of the portfolio of interest rate swaps

Re-funding and repricing risk

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Changes in Farmer Mac's funding costs relative to the benchmark market index rate to which the assets are indexed can cause changes to net interest income when debt matures and is reissued at then current interest rates to continue funding those assets.

In addition, many of Farmer Mac's floating rate assets may prepay before the contractual maturity date.

Farmer Mac is subject to re-funding and repricing risk on a portion of its fixed rate assets as a result of its use of pay-fixed receive-floating interest rate swaps that effectively convert the required funding needed from fixed rate to floating rate.

These fixed rate assets are then effectively synthetically floating rate assets that require floating rate funding.

These fixed rate assets are then effectively floating rate assets that require floating rate funding.

Farmer Mac can meet floating rate funding needs in several ways, including:

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Farmer Mac's debt issuance strategy targets balancing liquidity risk and re-funding and repricing risk while maintaining an appropriate liability management profile that is consistent with Farmer Mac's risk tolerance.

Farmer Mac regularly adjusts its funding strategies to mitigate the effects of interest rate variability and seeks to maintain an effective mixture of funding structures in the context of its overall liability management and liquidity management strategies.

As of March 31, 2022, Farmer Mac held $5.1 billion of floating rate assets in its lines of business and its investment portfolio that reset based on floating rate market indices, such as LIBOR or SOFR.

As of June 30, 2022, Farmer Mac held $5.7 billion of floating rate assets in its lines of business and its investment portfolio that reset based on floating rate market indices, such as LIBOR or SOFR.

As of the same date, Farmer Mac also had $8.1 billion of interest rate swaps outstanding where Farmer Mac pays a fixed rate of interest and receives a floating rate of interest, primarily LIBOR or SOFR.

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

As of March 31, 2022, Farmer Mac held $3.2 billion of floating rate assets in its lines of business and its investment portfolio, had issued $0.3 billion of floating rate debt, and had entered into $12.9 billion notional amount of interest rate swaps, each of which reset based on LIBOR.

As of June 30, 2022, Farmer Mac held $3.1 billion of floating rate assets in its lines of business and its investment portfolio, had issued $0.3 billion of floating rate debt, and had entered into $11.9 billion notional amount of interest rate swaps, each of which reset based on LIBOR.

In addition, our Non-Cumulative Series C Preferred Stock currently pays a fixed rate of interest until July 17, 2024.

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The market transition away from LIBOR and towards alternative benchmark interest rate indices that may be developed is expected to be complicated and may require the development of term and credit adjustments to accommodate for differences between the benchmark interest rate indices.

The transition may also result in different financial performance for existing transactions, require different hedging strategies, or require renegotiation of existing transactions.

As of March 31, 2022, we had $1.8 billion outstanding in medium-term notes based on SOFR, a potential alternative benchmark interest rate index.

The transition

may also result in different financial performance for existing transactions, require different hedging strategies, or require renegotiation of existing transactions.

As of June 30, 2022, we had $1.8 billion outstanding in medium-term notes based on SOFR, a potential alternative benchmark interest rate index.

Liquidity and Capital Resources

Farmer Mac's primary sources of funds to meet its liquidity and funding needs are the proceeds of its debt issuances, guarantee and commitment fees, net effective spread, loan repayments, and maturities of AgVantage and investment securities.

Farmer Mac regularly accesses the debt capital markets for funding, and Farmer Mac has maintained access to the debt capital markets at relatively favorable interest rates throughout first quarter 2022.

Farmer Mac regularly accesses the debt capital markets for funding, and Farmer Mac has maintained steady access to the debt capital markets throughout second quarter 2022.

Farmer Mac funds its purchases of eligible loan assets, USDA Securities, Farmer Mac Guaranteed Securities, and investment assets and finances its operations primarily by issuing debt obligations of various maturities in the debt capital markets.

As of March 31, 2022, Farmer Mac had outstanding discount notes of $1.9 billion, medium-term notes that mature within one year of $4.7 billion, and medium-term notes that mature after one year of $16.7 billion.

As of June 30, 2022, Farmer Mac had outstanding discount notes of $1.5 billion, medium-term notes that mature within one year of $5.6 billion, and medium-term notes that mature after one year of $16.8 billion.

Assuming continued access to the debt capital markets, Farmer Mac believes it has sufficient liquidity and capital resources to support its operations for the next 12 months and for the foreseeable future.

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Farmer Mac must maintain a minimum of 90 days of liquidity under the Liquidity and Investment Regulations prescribed for Farmer Mac by FCA.

In accordance with the methodology for calculating available days of liquidity under those regulations, Farmer Mac maintained a monthly average of 408 days of liquidity during first quarter 2022 and had 416 days of liquidity as of March 31, 2022.

In accordance with the methodology for calculating available days of liquidity under those regulations, Farmer Mac maintained a monthly average of 387 days of liquidity during second quarter 2022 and had 364 days of liquidity as of June 30, 2022.

Farmer Mac maintains cash, cash equivalents (including U.S.

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• mortgage-backed securities.

The following table presents these assets as of March 31, 2022 and December 31, 2021:

As of March 31, 2022 As of December 31, 2021

The following table presents these assets as of June 30, 2022 and December 31, 2021:

As of June 30, 2022 As of December 31, 2021

(in thousands)

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Total $ 5,200,474 $ 4,790,146

The objective of the investment portfolio as of March 31, 2022 and December 31, 2021 was to provide a level of liquidity that mitigates enterprise risk, provides a reliable source of short-term and long-term liquidity, to prepare for the possibility of future volatility in the debt capital markets, and to support program asset growth.

The objective of the investment portfolio as of June 30, 2022 and December 31, 2021 was to provide a level of liquidity that mitigates enterprise risk, provides a reliable source of short-term and long-term liquidity, to prepare for the possibility of future volatility in the debt capital markets, and to support program asset growth.

Capital Requirements .

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Farmer Mac must comply with the higher of the minimum capital requirement and the risk-based capital requirement.

As of March 31, 2022, Farmer Mac was in compliance with its statutory capital requirements and was classified as within "level 1" (the highest compliance level).

As of June 30, 2022, Farmer Mac was in compliance with its statutory capital requirements and was classified as within "level 1" (the highest compliance level).

In accordance with FCA's rule on capital planning, Farmer Mac's board of directors has adopted a policy for maintaining a sufficient level of "Tier 1" capital (consisting of retained earnings, paid-in capital, common stock, and qualifying preferred stock).

That policy restricts Tier 1-eligible dividends and any discretionary bonus payments if Tier 1 capital falls below specified thresholds.

As of March 31, 2022 and December 31, 2021, Farmer Mac's Tier 1 capital ratio was 15.0% and 14.7%, respectively.

The increase in our Tier 1 capital ratio was due to that fact that capital growth, driven by increases in retained earnings, outpaced the growth in risk-weighted assets during first quarter 2022.

As of March 31, 2022, Farmer Mac was in compliance with its capital adequacy policy.

As of both June 30, 2022 and December 31, 2021, Farmer Mac's Tier 1 capital ratio was 14.7%, respectively.

As of June 30, 2022, Farmer Mac was in compliance with its capital adequacy policy.

Farmer Mac does not expect its compliance on an ongoing basis with FCA's rule on capital planning, including Farmer Mac's policy on Tier 1 capital, to materially affect Farmer Mac's operations or financial condition.

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For the quarter ended:

June 30, 2022 $ 1,418,397 $ 107,916 $ 326,899 $ 35,307 $ 1,888,519

March 31, 2022 2,452,539 103,353 377,965 41,636 2,975,493

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June 30, 2020 1,069,693 279,021 358,866 — 1,707,580

March 31, 2020 768,700 165,128 392,668 10,000 1,336,496

For the year ended:

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Unscheduled 286,303 30,203 1,791 — 318,297

June 30, 2022 $ 1,401,082 $ 72,365 $ 161,282 $ 7,898 $ 1,642,627

Scheduled $ 1,535,369 $ 39,480 $ 266,349 $ 7,790 $ 1,848,988

Unscheduled 434,794 60,947 397 — 496,138

March 31, 2022 $ 1,970,163 $ 100,427 $ 266,746 $ 7,790 $ 2,345,126

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June 30, 2020 $ 972,621 $ 160,280 $ 71,643 $ 240 $ 1,204,784

Scheduled $ 320,488 $ 94,775 $ 165,467 $ — $ 580,730

Unscheduled 326,078 8,318 — — 334,396

March 31, 2020 $ 646,566 $ 103,093 $ 165,467 $ — $ 915,126

For the year ended:

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(in thousands)

June 30, 2022 $ 16,591,999 $ 1,567,311 $ 6,172,063 $ 148,018 $ 24,479,391

March 31, 2022 16,575,595 1,540,760 6,006,446 120,609 24,243,410

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June 30, 2020 14,778,474 1,509,378 5,734,694 19,562 22,042,108

March 31, 2020 14,681,403 1,390,637 5,447,470 19,802 21,539,312

On-Balance Sheet Outstanding Business Volume

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(in thousands)

June 30, 2022 $ 13,798,771 $ 2,939,467 $ 3,993,956 $ 20,732,194

March 31, 2022 14,174,611 2,858,521 3,443,816 20,476,948

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June 30, 2020 10,793,629 2,845,266 5,076,445 18,715,340

March 31, 2020 10,296,598 2,818,869 4,996,478 18,111,945

The following table presents the quarterly net effective spread (a non-GAAP measure) by segment:

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For the quarter ended:

March 31, 2022 (2)

June 30, 2022 (2)

$ 32,590 1.05 % $ 6,929 1.87 % $ 3,733 0.27 % $ 468 1.78 % $ 18,508 0.30 % $ (1,282) (0.10) % $ 60,946 0.99 %

March 31, 2022 30,354 1.02 % 7,209 1.96 % 3,159 0.23 % 375 1.69 % 16,738 0.28 % 4 — % 57,839 0.97 %

December 31, 2021 28,998 0.99 % 6,321 1.84 % 2,521 0.19 % 356 1.53 % 15,979 0.28 % 158 0.01 % 54,333 0.94 %

1 unchanged sentence

June 30, 2021 (2)

March 31, 2021 (2)

29,163 1.06 % 6,676 1.65 % 1,759 0.14 % 378 1.80 % 18,449 0.33 % 126 0.01 % 56,551 1.01 %

March 31, 2021 26,461 0.98 % 6,921 1.67 % 1,720 0.14 % 249 1.28 % 18,394 0.33 % 114 0.01 % 53,859 0.97 %

December 31, 2020 25,596 0.95 % 6,237 1.53 % 1,838 0.15 % 123 1.20 % 20,585 0.37 % 143 0.01 % 54,522 0.98 %

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June 30, 2020 21,597 0.83 % 4,997 1.36 % 1,701 0.14 % 47 0.93 % 19,449 0.37 % (1,322) (0.13) % 46,469 0.89 %

March 31, 2020 19,230 0.76 % 4,421 1.32 % 1,315 0.11 % 58 1.51 % 19,150 0.39 % (11) — % 44,163 0.89 %

(1) Farmer Mac excludes the Corporate segment in the presentation above because the segment does not have any interest-earning assets.

(2) See Note 10 to the consolidated financial statements for a reconciliation of GAAP net interest income by segment to net effective spread by segment for the three months ended March 31, 2022 and 2021.

(2) See Note 10 to the consolidated financial statements for a reconciliation of GAAP net interest income by segment to net effective spread by segment for the three months ended June 30, 2022 and 2021.

The following table presents quarterly core earnings (a non-GAAP measure) reconciled to net income attributable to common stockholders:

Core Earnings by Quarter End

March 2022 December 2021 September 2021 June 2021 March 2021 December 2020 September 2020 June 2020 March 2020

2022 March 2022 December 2021 September 2021 June 2021 March 2021 December 2020 September 2020 June 2020

(in thousands)

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis