What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-07 compared with 2022-08-08 · 313 added, 310 removed, 1086 unchanged (36% 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 June 30, 2022.

of operations for the quarter ended September 30, 2022.

Financial information included in this report is

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• 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.

• the duration, mitigation efforts, spread, severity, and social and economic disruption 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.

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 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:

Farmer Mac’s performance during third 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 COVID-19 pandemic, and war in Ukraine, Farmer Mac delivered solid financial results.

These financial results in the first three quarters 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.

(3) Farmer Mac's disciplined approach to interest rate risk management that helps to protect earnings from the effects of interest rate volatility and are accretive to Farmer Mac during periods of rising interest rates;

and (4) Farmer Mac's effective funding strategies that resulted in advantageous funding during the first nine months of 2022, which have also benefited from the rising interest rate environment in the current period.

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

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

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

(in thousands)

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Core earnings 33,392 30,748 27,646

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 $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.

The $0.4 million sequential decrease in net income attributable to common stockholders was due to a $2.4 million after-tax decrease in the fair value of undesignated financial derivatives and a $1.6 million after-tax increase in the provision for credit losses.

These factors were partially offset by a $3.1 million after-tax increase in net interest income and a $0.5 million after-tax decrease in operating expenses.

The $6.1 million year-over-year increase in net income attributable to common stockholders was due to a $7.1 million after-tax increase in net interest income and a $1.3 million after-tax increase in the fair value of undesignated financial derivatives.

These factors were partially offset by a $1.8 million after-tax increase in operating expenses and a $0.4 million decrease in guarantee fees.

The $2.6 million sequential increase in core earnings was due to a $3.7 million after-tax increase in net effective spread and a $0.5 million after-tax decrease in operating expenses.

These factors were partially offset by an increase in our provision for credit losses of $1.6 million after tax.

The $5.7 million year-over-year increase in core earnings was due to a $7.7 million after-tax increase in net effective spread, partially offset by a $1.8 million after-tax increase in operating expenses.

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

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

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

(in thousands)

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Net effective spread % 1.03 % 0.99 % 0.99 %

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 0.02% 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.

The $3.9 million sequential increase in net interest income was primarily due to a $2.9 million decrease in funding costs, due to increasing yields on interest-earning assets on our short-term investments that are funded by non-interest bearing excess equity, and an increase of $1.9 million from net new business volume.

These factors were partially offset by a $1.2 million decrease in the fair value of designated financial derivatives.

In percentage terms, the sequential 0.04% increase was primarily attributable to a decrease of 0.04% in funding costs and an increase of 0.01% in net new business volume, partially offset by a decrease of 0.02% in net fair value changes from financial derivatives designated in hedge accounting relationships (designated financial derivatives).

The $8.9 million year-over-year increase in net interest income was primarily attributable to a $6.0 million increase from net new business volume and a $5.5 million decrease in funding costs, due to increasing yields on interest-earning assets on our short-term investments that are funded by non-interest bearing excess equity.

These factors were partially offset by a $2.6 million decrease in the fair value of designated financial derivatives.

In percentage terms, the year-over-year 0.04% increase was primarily attributable to a decrease of 0.07% in funding costs, partially offset by a decrease of 0.04% in net fair value changes from financial derivatives designated in hedge accounting relationships (designated financial derivatives).

The $4.7 million sequential increase in net effective spread in dollars was primarily due to an increase of $3.2 million from net new business volume and a $2.2 million decrease in non-GAAP funding costs, due to increasing yields on interest-earning assets on our short-term investments that are funded by non-interest bearing excess equity.

These factors were partially offset by a $0.4 million decrease in cash-basis

interest income.

In percentage terms, the sequential increase of 0.04% was primarily attributable to a decrease of 0.04% in non-GAAP funding costs and an increase of 0.02% in net new business volume.

The $9.7 million year-over-year increase in net effective spread in dollars was primarily due to a $7.1 million increase from net new business volume, a $2.3 million decrease in non-GAAP funding costs, due to increasing yields on interest-earning assets on our short-term investments that are funded by non-interest bearing excess equity, and a $0.6 million increase in cash-basis interest income.

In percentage terms, the year-over-year increase of 0.04% was primarily attributable to an decrease of 0.01% in non-GAAP funding costs and an increase of 0.02% in net new business volume.

For more information about Farmer Mac's use of net effective spread as a financial measure, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Use of Non-GAAP Measures." For a reconciliation of net interest income to net effective spread, see Table 10 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 $24.5 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.

Our outstanding business volume was $25.3 billion as of September 30, 2022, a net increase of $0.8 billion from June 30, 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 $0.7 billion 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."

June 30, 2022 December 31, 2021

September 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 June 30, 2022, March 31, 2022, and December 31, 2021:

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 September 30, 2022, June 30, 2022, and December 31, 2021:

On-Balance Sheet Off-Balance Sheet

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(dollars in thousands)

September 30, 2022 $ 174,737 2.4 % $ 32,139 1.0 %

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 %

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Increase/(decrease) from prior year-ending $ (11,021) (0.3) % $ (28,783) (1.1) %

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 $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.

The increase of $5.4 million in on-balance sheet substandard assets during third quarter was primarily driven by credit downgrades in permanent plantings, part-time farms, and agricultural storage and processing, partially offset by credit upgrades during the quarter in crops and livestock.

The on-balance sheet Agricultural Finance mortgage loan portfolio grew by $176.3 million, but the net credit downgrades had an offsetting impact, which caused the percentage of substandard assets to remain constant.

The $12.2 million decrease in substandard assets in our off-balance sheet LTSPC and Farmer Mac Guaranteed Securities portfolios during third quarter was primarily due to credit upgrades in permanent plantings, crops, livestock and part-time farms.

There were no substandard assets in the Rural Infrastructure Finance portfolio as of September 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 June 30, 2022, March 31, 2022, and December 31, 2021:

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 September 30, 2022, June 30, 2022, and December 31, 2021:

On-Balance Sheet Off-Balance Sheet

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(dollars in thousands)

September 30, 2022 $ 42,015 0.57 % $ 2,217 0.07 %

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 %

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Increase/(decrease) from prior year-ending $ (1,695) (0.07) % $ (1,380) (0.05) %

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.

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 June 30, 2022.

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.

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

Off-balance sheet Agricultural Finance LTSPCs and Farmer Mac Guaranteed Securities 90 days or more delinquent increased in permanent plantings and part-time farms.

As of both September 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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For the Three Months Ended

June 30, 2022 June 30, 2021

September 30, 2022 September 30, 2021

(in thousands, except per share amounts)

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Gains/(losses) on undesignated financial derivatives due to fair value changes (see Table 13) 6,441 (405)

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

Unrealized losses on trading securities (285) (61)

(Losses)/gains on hedging activities due to fair value changes (624) 1,818

Unrealized (losses)/gains on trading securities (757) 36

Net effects of amortization of premiums/discounts and deferred gains on assets consolidated at fair value 24 23

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Credit related expense (GAAP):

Release of losses (1,535) (983)

Provision for losses 450 255

Total credit related expense 450 255

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Reconciliation of Net Income Attributable to Common Stockholders to Core Earnings

For the Six Months Ended

June 30, 2022 June 30, 2021

For the Nine Months Ended

September 30, 2022 September 30, 2021

(in thousands, except per share amounts)

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Gains/(losses) on undesignated financial derivatives due to fair value changes (see Table 13) 11,899 (189)

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

Gains on hedging activities due to fair value changes 5,491 269

Unrealized losses on trading securities (948) (39)

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Guarantee and commitment fees (2)

13,467 12,896

Total revenues 199,187 180,670

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

For the Three Months Ended For the Six Months Ended

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

For the Three Months Ended For the Nine Months Ended

September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021

(in thousands, except per share amounts)

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Gains/(losses) on undesignated financial derivatives due to fair value changes (see Table 13) 0.60 (0.04) 1.10 (0.02)

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

(Losses)/gains on hedging activities due to fair value changes (0.06) 0.17 0.51 0.02

Unrealized losses on trading securities (0.07) — (0.09) —

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

For the Three Months Ended For the Six Months Ended

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

For the Three Months Ended For the Nine Months Ended

September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021

(in thousands, except per share amounts)

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Gains/(losses) on undesignated financial derivatives due to fair value changes (see Table 13) 0.59 (0.04) 1.09 (0.02)

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

(Losses)/gains on hedging activities due to fair value changes (0.06) 0.17 0.50 0.02

Unrealized losses on trading securities (0.07) — (0.09) —

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(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 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/(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)

Gains/(losses) on hedging activities due to fair value changes $ 5,916 $ (2,097) $ 7,940 $ (2,368)

Unrealized gains/(losses) on trading securities.

The unrealized gains/(losses) on trading securities are reported on Farmer Mac's consolidated statements of operations, which represent changes during the period in fair values for trading assets remaining on Farmer Mac's balance sheet as of the end of the reporting period.

and (b) (Losses)/gains on hedging activities due to fair value changes.

Unrealized (losses)/gains on trading securities.

The unrealized (losses)/gains on trading securities are reported on Farmer Mac's consolidated statements of operations, which represent changes during the period in fair values for trading assets remaining on Farmer Mac's balance sheet as of the end of the reporting period.

The net effects of amortization of premiums/discounts and deferred gains on assets consolidated at fair value.

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For core earnings purposes, these realized gains or losses are deferred and amortized as net yield adjustments over the term of the related debt, which generally ranges from 3 to 15 years.

• Initial cash payments received by Farmer Mac upon the inception of certain swaps.

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

For GAAP purposes, changes in fair value of the swaps are recognized in "Gains/(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.

The following sections provide more detail about specific components of Farmer Mac's results of operations.

Net Interest Income .

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

The following table provides information about interest-earning assets and funding for the nine months ended September 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 Six Months Ended

June 30, 2022 June 30, 2021

For the Nine Months Ended

September 30, 2022 September 30, 2021

Balance Income/

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Net interest income/yield $ 25,510,439 $ 197,305 1.03 % $ 23,451,188 $ 168,115 0.96 %

(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.

(1) Excludes interest income of $23.7 million and $30.1 million in first nine months 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 $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.

(3) Excludes interest expense of $20.6 million and $26.4 million in first nine months 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 $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 $29.2 million year-over-year increase in net interest income was primarily due to a $12.3 million increase from net new business volume, a $12.0 million decrease in funding costs, due to increasing yields on interest-earning assets, and a $4.5 million increase in the fair value of derivatives designated in fair value hedge accounting relationships (designated financial derivatives).

In percentage terms, the year-over-year 0.07% increase was primarily attributable to an increase of 0.06% related to the decrease 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 Six Months Ended June 30, 2022 Compared to Same Period in 2021

For the Nine Months Ended September 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 For the Six Months Ended

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

For the Three Months Ended For the Nine Months Ended

September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021

Dollars Yield Dollars Yield Dollars Yield Dollars Yield

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Net effective spread $ 65,641 1.03 % $ 55,925 0.99 % $ 184,426 1.00 % $ 166,335 0.99 %

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.

The $18.1 million year-over-year increase in net effective spread in dollars was primarily due to a $15.8 million increase from net new business volume and a $2.1 million increase in net coupon yields related to the acquisition of loan servicing rights.

In percentage terms, net effective spread increased by 0.01% as a result of increased 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 and six months ended June 30, 2022 and 2021:

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

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

As of September 30, 2022 As of September 30, 2021

Losses Reserve

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

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

Provision for/(release of) losses 617 (167) 450 366 (111) 255

Charge-offs — — — — — —

Ending balance $ 13,709 $ 1,510 $ 15,219 $ 14,816 $ 2,000 $ 16,816

For the Six Months Ended

For the Nine Months Ended

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

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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 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.

During the three months ended September 30, 2022, we recorded a $0.5 million provision to the allowance for losses primarily as a result of further deterioration of one agricultural storage and processing loan and net new loan volume.

During the nine months ended September 30, 2022 we recorded a $1.1 million release from the allowance primarily as a result of updated credit loss model forecast assumptions and improvements in risk ratings, partially offset by a risk rating downgrade of the one agricultural storage and processing loan mentioned previously.

Guarantee and Commitment Fees .

The following table presents guarantee and commitment fees, which compensate Farmer Mac for assuming the credit risk on loans underlying off-balance sheet Farmer Mac Guaranteed Securities and LTSPCs, for the three and six months ended June 30, 2022 and 2021:

For the Three Months Ended For the Six Months Ended

For the Three Months Ended For the Nine Months Ended

Change Change

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

September 30, 2022 September 30, 2021 $ % September 30, 2022 September 30, 2021 $ %

(dollars in thousands)

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Guarantee fee income $ 2,644 $ 3,155 $ (511) (16) % $ 9,551 $ 9,182 $ 369 4 %

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.

Guarantee and commitment fees decreased for the three months ended September 30, 2022 compared to 2021, which was due to a decrease in the fair value of retained beneficial interests in off-balance sheet structured securitizations during third quarter 2022.

Guarantee and commitment fees increased for the nine months ended September 30, 2022 compared to 2021, which was due to increases in the average outstanding balance of LTSPCs during the period.

As adjusted for the core earnings presentation, guarantee and commitment fees were $4.2 million and $13.5 million for the three and nine months ended September 30, 2022, respectively, compared to $4.3 million and $12.9 million for the three and nine months ended September 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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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

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

For the Three Months Ended For the Nine Months Ended

Change Change

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

September 30, 2022 September 30, 2021 $ % September 30, 2022 September 30, 2021 $ %

(dollars in thousands)

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Accrual of contractual payments (2,613) 117 (2,730) (2,333) % (5,633) 3,154 (8,787) (279) %

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

(Losses)/gains due to terminations or net settlements (3,056) (600) (2,456) 409 % 15,285 (384) 15,669 (4,080) %

Gains/(losses) on financial derivatives $ 772 $ (888) $ 1,660 (187) % $ 21,551 $ 2,581 $ 18,970 735 %

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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/(losses) on financial derivatives," while the offsetting discount on the hedged debt is amortized over the term of the debt as an

adjustment to its yield.

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

Other Income .

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

For the Three Months Ended For the Six Months Ended

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

For the Three Months Ended For the Nine Months Ended

Change Change

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

September 30, 2022 September 30, 2021 $ % September 30, 2022 September 30, 2021 $ %

(dollars in thousands)

Late fees $ 397 $ 266 $ 131 49 % $ 1,042 $ 805 $ 237 29 %

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

Servicing fees 232 35 197 563 % 764 35 729 2,083 %

Mortgage servicing rights amortization (80) — (80) N/A (347) — (347) N/A

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Total other income $ 651 $ 582 $ 69 12 % $ 1,805 $ 1,600 $ 205 13 %

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.

The increase in other income for the three and nine months ended September 30, 2022 compared to 2021 is primarily due to an increase in fees related to Farmer Mac's master and central servicing operations for off-balance sheet Farmer Mac Guaranteed Securities, partially offset by a decrease in loan rate modification fees.

Operating Expenses .

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

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

For the Three Months Ended For the Nine Months Ended

Change Change

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

September 30, 2022 September 30, 2021 $ % September 30, 2022 September 30, 2021 $ %

(dollars in thousands)

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Income Tax Expense .

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

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

For the Three Months Ended For the Nine Months Ended

Change Change

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

September 30, 2022 September 30, 2021 $ % September 30, 2022 September 30, 2021 $ %

(dollars in thousands)

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Business Volume .

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:

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

Net New Business Volume

For the Three Months Ended For the Six Months Ended

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

For the Three Months Ended For the Nine Months Ended

September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021

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

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Loans held in consolidated trusts:

Beneficial interests owned by third-party investors On-balance sheet (53,259) (96,532) (113,682) (209,052)

Beneficial interests owned by third-party investors (Pass-Through) On-balance sheet (11,835) (100,621) (125,517) (309,673)

Beneficial interests owned by third-party investors (Structured) On-balance sheet 297,298 — 297,298 —

On-balance sheet (469) — (1,205) —

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

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.

Farmer Mac's outstanding business volume was $25.3 billion as of September 30, 2022, a net increase of $0.8 billion from June 30, 2022 after taking into account all new business, maturities, sales, and paydowns on existing assets.

The $607.3 million net increase in Farm & Ranch during third quarter 2022 resulted from $1.9 billion of new purchases, commitments, and guarantees, mostly offset by $1.3 billion of scheduled maturities and repayments.

Farmer Mac purchased a total of $303.9 million in loans, which was primarily driven by improved borrower economics albeit navigating a substantially higher interest rate environment.

The $303.9 million in gross Farm & Ranch loan purchases was partially offset by $166.8 million in scheduled maturities and repayments.

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.

Farmer Mac also purchased a total of $1.0 billion in Farm & Ranch AgVantage Securities during third 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 $1.0 billion in gross purchases was partially offset by $0.7 billion in scheduled maturities.

The $67.5 million net increase in Corporate AgFinance during third quarter 2022 resulted from $169.9 million of new purchases and commitments, which was offset by $102.5 million of scheduled maturities and repayments.

Farmer Mac purchased a total of $136.0 million in loans, which was offset by $84.6 million in scheduled maturities and repayments.

The $124.2 million net increase in Rural Utilities during third quarter 2022 resulted from $547.1 million of new purchases, commitments, and guarantees, which was partially offset by $422.9 million of scheduled maturities and repayments.

Farmer Mac purchased a total of $400.0 million in AgVantage Securities, $75.8 million in telecommunications loans and $60.0 million in electric distribution and generation and transmission loans.

The $135.8 million in loan purchases was partially offset by $68.1 million in scheduled maturities and 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 $48.2 million net increase in Renewable Energy during third quarter 2022 primarily reflects $61.7 million in loan purchases, partially offset by $13.4 million in repayments.

Farmer Mac's outstanding business volume was $23.1 billion as of September 30, 2021, a net increase of $0.9 billion from June 30, 2021 after taking into account all new business, scheduled maturities, and paydowns on existing assets.

The $691.7 million net increase in Farm & Ranch during third quarter 2021 resulted from $1.8 billion of new purchases and guarantees, partially offset by $1.1 billion of scheduled maturities and repayments.

The $284.2 million net decrease in Corporate AgFinance during third quarter 2021 resulted from $406.3 million of scheduled maturities, repayments, and sales.

This was partially offset by $122.0 million of new purchases.

The $514.1 million net increase in Rural Utilities during third quarter 2021 resulted from $609.7 million of new purchases and guarantees, which was partially offset by $96.6 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.

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

For the Three Months Ended For the Six Months Ended

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

For the Three Months Ended For the Nine Months Ended

September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021

(dollars in thousands)

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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 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.

During third quarter 2022, Farmer Mac executed a structured securitization transaction, whereby it sold and securitized agricultural mortgage loans resulting in $297.7 million of Farmer Mac Guaranteed Securities.

In this transaction, Farmer Mac transferred selected loans to a depositor which then deposited the loans into a trust, at which time the loans became assets of the trust.

Farmer Mac does not consider these trust fund assets to be available to satisfy the claims of the creditors of Farmer Mac and/or the depositor.

During the three and nine months ended September 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 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.

During the three and nine months ended September 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 June 30, 2022 As of December 31, 2021

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

(in thousands)

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Loans held in consolidated trusts:

Beneficial interests owned by third-party investors On-balance sheet 834,941 948,623

Beneficial interests owned by third-party investors (Pass-Through) On-balance sheet 823,106 948,623

Beneficial interests owned by third-party investors (Structured) On-balance sheet 297,298 —

On-balance sheet 11,092 12,297

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(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 June 30, 2022:

Schedule of Principal Amortization as of June 30, 2022

Schedule of Principal Amortization as of September 30, 2022

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

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Total $ 10,260,851 $ 3,674,620 $ 2,640,406 $ 16,575,877

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.

Of Farmer Mac's $25.3 billion outstanding principal balance of business volume as of September 30, 2022, $8.7 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 June 30, 2022:

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

AgVantage Balances by Year of Maturity

June 30, 2022

September 30, 2022

(in thousands)

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2023 1,970,635

2024 1,098,655

Thereafter (1)

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(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 June 30, 2022.

The weighted-average remaining maturity of the outstanding AgVantage securities shown in the table above was 5.1 years as of September 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.

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

• As agricultural and rural infrastructure lenders seek to manage equity capital and return on equity capital requirements or reduce exposure due to lending or concentration limits, Farmer Mac can provide relief for those institutions through loan and portfolio purchases, participations, guarantees, LTSPCs, or wholesale funding.

• As a result of business and product development efforts and continued interest in the agricultural asset class from institutional investors and nontraditional agricultural real estate lenders, Farmer Mac's customer base and product set continue to expand and diversify, which may generate more demand for Farmer Mac's products from new sources.

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• 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.

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

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

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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.

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

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.

In addition to continued uncertainty from supply-side disruptions, market interest rates increased rapidly during third quarter 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.

Loan prepayment speeds in 2022 have fallen to pre-pandemic levels, and they are likely to correlate inversely 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.

economy continued to slow in third quarter 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’ outlooks for the U.S.

economy heading into 2023.

And while labor markets remain resilient, slower consumer spending and declines in residential housing investment indicate that 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 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 not to 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.

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Agricultural Industry .

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

The agricultural economy experienced largely favorable conditions in third quarter 2022, with strong commodity prices partially offset by elevated 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.

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

Farm expenses remained elevated in third quarter 2022, driven by rising feed, energy, interest, and labor costs.

While commodity prices declined in the second quarter due to a strengthening U.S.

dollar and reduced demand due to the high-price conditions, most major commodities remained elevated in third quarter 2022.

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 again in 2022.

Net cash farm income increased by nearly 25% in 2021 to $146.4 billion.

The USDA forecasts that net cash farm income will climb another 15% to $168.5 billion by the end of 2022, a new all-time high.

For both years, the primary driver of increased profitability is higher cash revenues and not government support payments like in 2019 and 2020.

The USDA forecasts production expenses to rise by 17.8% in 2022, a level experienced in the 1970s and again in the 2012-2014 agricultural economy expansion.

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.

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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.

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 July 2021 and July 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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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.

Economic conditions are likely to bring mixed effects to credit demand heading into 2023.

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.

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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.

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

Positive economic conditions in the agricultural economy improved Farmer Mac's portfolio performance in 2022, and they could continue to positively influence loan delinquencies and losses into 2023.

Farmer Mac's 90-day delinquency levels increased in third quarter 2022 relative to second quarter 2022.

The overall delinquency rate increased from 0.20% of the Farm & Ranch operating segment as of June 30, 2022 to 0.42% of the Farm & Ranch operating segment as of September 30, 2022, although the third quarter percentage is lower than the 0.58% delinquency rate as of September 30, 2021.

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

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 affect 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 June 30, 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 September 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 U.S.

External market conditions that could adversely impact the farm and food sectors in the remaining months of 2022 and into 2023 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'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.

The USDA's estimate for fiscal year 2022 is a sizable increase in export value over 2021, and through August 2022, agricultural export values are up 16% in 2022 compared to 2021.

However, a deteriorating global economic outlook combined with the continued 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.

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

Disruptions to global grain supplies in Ukraine and Russia could continue to boost 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.

Slower global growth could be a headwind for consumer-oriented products like animal proteins, dairy, fruits, and nuts, and Ukrainian corn and wheat production may eventually stabilize.

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 only 2020.

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

experienced 15 separate billion-dollar weather disasters in 2022 through October 11, 2022, as tracked by the National Oceanic and Atmospheric Administration.

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

Federal crop insurance provides a strong mitigator against this risk, but farmers and ranchers face increasingly-severe weather incidents.

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

Although drought conditions improved in fourth quarter 2021 and early weeks of 2022, 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.

Long and persistent drought conditions have impacted agricultural production regions in the West and Midwest in 2021 and 2022, but there has been a modest improvement in conditions in third quarter 2022.

Roughly 14% of the continental U.S.

remained in exceptional or extreme drought as of October 25, 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.

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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.

During the latter part of third quarter 2022, hurricane Ian made landfall in southwestern Florida, and after crossing over the Florida peninsula, the hurricane made a second landfall in South Carolina.

The storm caused significant damage and has

impacted numerous counties and communities in its wake.

Farmer Mac is assessing any potential impacts to farmers, ranchers, and rural utility customers that were in the path of the hurricane Ian, but at this time, we do not anticipate any material risks to Farmer Mac customers or credit exposures.

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 generally follow those in the general economy.

Economic conditions affecting the rural infrastructure industry typically 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 2.6% 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.

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

Energy Information Administration, sales and the revenue from the sale of electricity to customers increased by 3.9% and 14.2%, respectively, in the last 12 months through July 2022 compared to July 2021.

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

Higher energy input prices such as natural gas and coal have become more of a headwind in 2022.

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

liquified natural gas from European countries.

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.

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.

Coal prices also rapidly increased in third quarter 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, which has contributed to the increase in electricity costs impacting retail customers during third quarter 2022.

Oil and natural gas prices were volatile during third quarter 2022 and have recently come off their 2022 highs, a positive signal for sector profitability entering fourth quarter 2022.

Through September 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.

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.

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Energy Information Administration, renewable electricity capacity is expected to grow by 48% in the next five years, compared to total electric capacity growth of 10%.

The rising cost of fossil fuel-based inputs combined with the falling costs of renewable power generation may hasten this increase in capacity.

The rising cost of fossil fuel-based inputs combined with the falling costs of renewable power generation may hasten this increase in capacity along with recently enacted legislature, such as the Inflation Reduction Act of 2022, aimed at incentivizing domestic production in clean energy technologies such as solar and wind.

This growth may broaden Farmer Mac's customer base with cooperative lenders focused on lending to renewable energy customers.

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

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

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

Under this new initiative, Farmer Mac's total outstanding loans and loan commitments of renewable energy financing transactions was $196.2 million as of September 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:

• 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.

Multiple lawsuits have been filed challenging the constitutionality of the debt relief and delaying its implementation.

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.

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

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.

• On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 ("IRA") which included debt relief for economically distressed borrowers of Farm Service Agency direct and guaranteed farm ownership and operating loans programs.

Farmer Mac provides a secondary market for the USDA guaranteed portion of these loans.

On October 18, 2022, USDA announced that approximately 11,000 delinquent direct and guaranteed borrowers had their accounts brought current.

Notably, the relief provided was not full debt forgiveness that had been previously contemplated by the American Recovery Act.

Farmer Mac does not anticipate an acceleration of prepayments on the USDA-guaranteed loans it holds due to the IRA debt relief provision.

• The IRA also included $20 billion for financial and technical assistance to help farmers and ranchers implement and expand conservation practices that help address climate change, as well as several renewable energy initiatives aimed at boosting long-term resiliency, reliability, and affordability of rural electric systems.

Under the IRA, rural electric cooperatives are directly eligible for energy innovation tax credits for the first time.

A new voluntary $9.7 billion USDA loan and grant program was also established for rural electric cooperatives that build or purchase renewable energy systems.

These initiatives, together with other provisions in the IRA, aim to boost renewable energy production in rural areas, which could lead to increased business volumes for Farmer Mac’s Rural Infrastructure Finance business segment.

• The IRA also included a fifteen-percent alternative minimum tax on corporations with book incomes over $1 billion for taxable years beginning after December 31, 2022 and a one-percent excise tax on stock repurchases by public companies that occur after December 31, 2022.

The IRA's corporate alternative minimum tax is not expected to apply to Farmer Mac any time in the near future based on the company's current level of reported financial statement income.

Farmer Mac has sponsored a stock repurchase program since 2015 but has not repurchased any shares of its Class C common stock since first quarter 2020.

Farmer Mac's current repurchase program authorizes up to $9.8 million in repurchases of its Class C common stock.

The IRA's excise tax on stock repurchases will apply to the extent Farmer Mac buys back any shares of Class C common stock after December 31, 2022.

• Congress is scheduled to reauthorize the farm bill in 2023.

This omnibus piece of legislation contains several programs that impact farm profitability, agricultural credit, and rural infrastructure.

Farmer Mac has been seeking modifications to its charter during the farm bill reauthorization to enhance its partners and services in support of farmers, ranchers, agribusinesses, and rural infrastructure.

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

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In 2021, Congress passed a $550 billion bipartisan infrastructure bill that provides for key investments to improve roads, bridges, freight rail, electric, broadband, ports, and waterways that are expected to support farmers and ranchers' profitability, competitiveness, and access to global markets.

As these investments are made, they may have a positive impact on the global

competitiveness of U.S.

The ability to produce food and fiber and transport it efficiently across the globe is critical for the U.S.

food and agricultural sectors' competitiveness internationally.

• 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.

That nominee will need to be confirmed by the U.S.

Senate before officially joining the FCA board.

• The Farm Credit Administration ("FCA") is the prudential regulator of Farmer Mac.

On September 29, 2022, the U.S.

Senate confirmed Vincent Logan to be a member of the FCA board.

Logan was subsequently appointed to be the Chairman and CEO of the FCA by President Biden on October 21, 2022.

Logan is expected to serve in this role until his term expires on May 21, 2026.

As a board member, he and the other board members are responsible for making policy, adopting regulations, and overseeing and examining Farmer Mac.

• Two of FCA's three board members are currently serving in holdover status because their terms have expired.

They will continue to serve in their roles until the President nominates individuals to replace the board members and they are confirmed by the U.S.

Farmer Mac will continue to monitor changes to the composition of the FCA board, as it may affect Farmer Mac's regulatory environment.

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 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.

Balance Sheet Review

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

June 30, 2022 December 31, 2021 $ %

September 30, 2022 December 31, 2021 $ %

(in thousands)

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Agricultural Finance - Direct Credit Exposure

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's direct credit exposure to Agricultural Finance mortgage loans as of September 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 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.

For Agricultural Finance mortgage loans to which Farmer Mac has direct credit exposure, Farmer Mac's 90-day delinquencies as of September 30, 2022, were $44.2 million (0.42% of the Agricultural Finance mortgage loan portfolio to which Farmer Mac has direct credit exposure), compared to $20.6 million (0.20% of the Agricultural Finance mortgage loan portfolio) as of June 30, 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 31 delinquent loans as of September 30, 2022, compared to 19 delinquent loans as of June 30, 2022 and 32 delinquent loans as of December 31, 2021.

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

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

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

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

Farmer Mac's 90-day delinquency rate as of September 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)

September 30, 2022 $ 10,508,549 $ 44,232 0.42 %

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

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September 30, 2020 8,249,349 88,041 1.07 %

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

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

Across all of Farmer Mac's lines of business, 90-day delinquencies represented 0.17% of total outstanding business volume as of September 30, 2022, compared to 0.20% as of December 31, 2021 and 0.24% as of September 30, 2021.

The following table presents outstanding Agricultural Finance mortgage loans and 90-day delinquencies as of September 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 September 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 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.

As of September 30, 2022, Farmer Mac's Agricultural Finance mortgage loans (to which it has direct credit exposure) comprising substandard assets were $206.9 million (2.0% of the portfolio), compared to $213.7 million (2.1% of the portfolio) as of June 30, 2022 and $246.7 million (2.5% of the portfolio) as of December 31, 2021.

Those substandard assets comprised 251 loans as of September 30, 2022, 249 loans as of June 30, 2022, and 274 loans as of December 31, 2021.

The decrease of $6.8 million in substandard assets during third quarter 2022 was driven by credit upgrades in our off-balance sheet portfolio, partially offset by credit downgrades in our on-balance sheet portfolio.

Substandard assets remained constant as a percentage of the total on-balance sheet portfolio due to volume growth being offset by credit downgrades.

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

The percentage of substandard assets within the portfolio as of September 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 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.

As of September 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 $804,000 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 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.

The weighted-average original loan-to-value ratio for Agricultural Finance mortgage loans purchased during third quarter 2022 was 37%, compared to 51% for loans purchased during third quarter 2021.

The weighted-average original loan-to-value ratio for all 90-day delinquencies was 55% and 51% as of September 30, 2022 and December 31, 2021, respectively.

The weighted-average current loan-to-value ratio (the loan to-value ratio based on original appraised value and current outstanding loan amount adjusted to reflect amortization) for Agricultural Finance mortgage

loans and loans underlying off-balance sheet Agricultural Finance Guaranteed Securities and LTSPCs was 46% and 47% 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 September 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 June 30, 2022

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

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

As of September 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 June 30, 2022

As of September 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 June 30, 2022 was $3.3 billion across 45 states.

Farmer Mac's direct credit exposure to Rural Infrastructure Finance loans held and loans underlying LTSPCs as of September 30, 2022 was $3.4 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 June 30, 2022, there were no delinquencies in Farmer Mac's portfolio of Rural Infrastructure Finance loans.

As of September 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 June 30, 2022

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

Acceptable Special Mention Substandard Total

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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 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.

As of September 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 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.

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

During the previous three years ended September 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 June 30, 2022, Farmer Mac had not experienced any credit losses on any AgVantage securities.

As of September 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 $5.3 billion as of June 30, 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 June 30, 2022 and 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

The unpaid principal balance of outstanding on-balance sheet AgVantage securities secured by loans eligible for the Agricultural Finance line of business totaled $5.7 billion as of September 30, 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 $3.1 billion as of September 30, 2022 and $3.0 billion as of December 31, 2021.

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

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

Counterparty Balance Required Collateralization Balance Required Collateralization

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Total outstanding $ 8,719,270 $ 8,128,481

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

(1) Consists of AgVantage securities issued by 12 and 13 different issuers as of September 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 June 30, 2022, Farmer Mac had $0.9 billion of cash and cash equivalents and $4.3 billion of investment securities.

As of September 30, 2022, Farmer Mac had $0.9 billion of cash and cash equivalents and $4.4 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.

§§ 652.1-652.45 (the "Liquidity and Investment Regulations").

In addition to establishing a portfolio of highly liquid investments as an available source of cash, the goals of Farmer Mac's investment policies are designed to minimize Farmer Mac's exposure to financial market volatility, preserve capital, and support Farmer Mac's access to the debt markets.

In addition to establishing a portfolio of highly liquid investments as an available source of cash, the goals of Farmer Mac's investment

policies are designed to minimize Farmer Mac's exposure to financial market volatility, preserve capital, and support Farmer Mac's access to the debt markets.

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

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

generally present a very low risk of default;

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

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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 ($127.7 million as of June 30, 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).

However, Farmer Mac's current policy limits this total credit exposure to 5% of its regulatory capital ($65.5 million as of September 30, 2022).

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

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Farmer Mac's primary strategy for managing interest rate risk is to fund asset purchases with debt that together with financial derivatives have similar duration and convexity characteristics and help mitigate impacts from interest rate changes across the yield curve.

As part of this debt issuance strategy, Farmer Mac seeks to issue debt securities across a variety of maturities that together with financial derivatives closely align the forecasted debt and financial derivative cash flows with forecasted asset cash flows.

As part of this strategy, Farmer Mac seeks to issue debt securities across a variety of maturities that together with financial derivatives closely align the forecasted debt and financial derivative cash flows with forecasted asset cash flows.

Farmer Mac issues discount notes and both callable and non-callable medium-term notes across a spectrum of maturities to execute its debt issuance strategy.

Callable debt is issued to mitigate prepayment risk associated with certain interest-earning assets held on balance sheet.

Portions of Farmer Mac's callable debt is issued to mitigate prepayment risk associated with certain interest-earning assets held on balance sheet.

In general, as interest rates decline, prepayments typically increase, and Farmer Mac is able to economically extinguish certain callable debt issuances.

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Treasury securities and other financial derivatives.

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 $0.9 billion of cash and cash equivalents held as of September 30, 2022 mature within three months.

As of September 30, 2022, $3.3 billion of the $4.4 billion of investment securities (75%) 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 June 30, 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 September 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 June 30, 2022 As of December 31, 2021 (1)

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

+100 basis points (2.5) % 3.7 %

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Percentage Change in NES from Base Case

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

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

+100 basis points 1.5 % 6.6 %

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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.

As of September 30, 2022, Farmer Mac's duration gap was positive 2.8 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 flattened during the first half of 2022 with the 2-year and 10-year U.S.

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

Treasury Note yield-to-maturity increasing by approximately 355 basis points and 232 basis points, respectively, versus year-end 2021.

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Treasury securities.

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.

As of September 30, 2022, Farmer Mac had $22.4 billion combined notional amount of interest rate swaps, with terms ranging from less than one year to just over thirty years, of which $8.7 billion were pay-fixed interest rate swaps, $11.9 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.

For example, Farmer Mac transacts pay-fixed interest rate swaps and issues floating rate debt to effectively create fixed rate funding that approximately matches the duration of the corresponding fixed rate assets being funded.

evaluates the overall cost of using interest rate swaps in conjunction with debt issuance as a funding alternative to duration-matched debt and enters into interest rate swaps to manage interest rate risks across the balance sheet.

For example, Farmer Mac transacts pay-fixed interest rate swaps and issues floating rate debt to effectively create fixed rate funding that

approximately matches the duration of the corresponding fixed rate assets being funded.

Farmer Mac evaluates the overall cost of using interest rate swaps in conjunction with debt issuance as a funding alternative to duration-matched debt and enters into interest rate swaps to manage interest rate risks across the balance sheet.

Certain financial derivatives are designated as fair value hedges of fixed rate assets classified as available for sale or liabilities to protect against fair value changes in the assets or liabilities related to a benchmark interest rate (e.g., LIBOR or Secured Overnight Financing Rate (“SOFR”)).

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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 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

As of both September 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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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 and liquidity management strategies.

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 September 30, 2022, Farmer Mac held $6.2 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 $8.7 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 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.

As of September 30, 2022, Farmer Mac held $2.9 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 $11.1 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 June 30, 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 September 30, 2022, we had $1.2 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 steady access to the debt capital markets throughout second 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 third 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 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.

As of September 30, 2022, Farmer Mac had outstanding discount notes of $0.9 billion, medium-term notes that mature within one year of $6.5 billion, and medium-term notes that mature after one year of $16.7 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 387 days of liquidity during second quarter 2022 and had 364 days of liquidity as of June 30, 2022.

In accordance with the methodology for calculating available days of liquidity under those regulations, Farmer Mac maintained a monthly average of 351 days of liquidity during third quarter 2022 and had 355 days of liquidity as of September 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 June 30, 2022 and December 31, 2021:

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

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

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

(in thousands)

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Total $ 5,315,145 $ 4,790,146

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.

The objectives of the investment portfolio as of September 30, 2022 and December 31, 2021 are 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 June 30, 2022, Farmer Mac was in compliance with its statutory capital requirements and was classified as within "level 1" (the highest compliance level).

As of September 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 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.

As of September 30, 2022 and December 31, 2021, Farmer Mac's Tier 1 capital ratio was 14.9% and 14.8%, respectively.

As of September 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:

September 30, 2022 $ 1,927,209 $ 169,932 $ 547,117 $ 61,653 $ 2,705,911

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

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September 30, 2020 1,059,891 212,829 52,300 10,000 1,335,020

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

For the year ended:

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Unscheduled 296,763 64,439 — — 361,202

September 30, 2022 $ 1,021,343 $ 102,457 $ 422,917 $ 13,429 $ 1,560,146

Scheduled $ 1,114,779 $ 42,162 $ 159,491 $ 7,898 $ 1,324,330

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

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

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September 30, 2020 $ 1,100,882 $ 75,527 $ 211,152 $ 279 $ 1,387,840

Scheduled $ 523,721 $ 109,543 $ 67,708 $ 240 $ 701,212

Unscheduled 448,900 50,737 3,935 — 503,572

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

For the year ended:

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(in thousands)

September 30, 2022 $ 17,199,347 $ 1,634,786 $ 6,296,263 $ 196,242 $ 25,326,638

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

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September 30, 2020 14,737,485 1,646,679 5,575,841 29,283 21,989,288

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

On-Balance Sheet Outstanding Business Volume

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(in thousands)

September 30, 2022 $ 13,810,162 $ 2,960,596 $ 4,644,958 $ 21,415,716

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

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September 30, 2020 10,879,372 2,811,547 5,013,640 18,704,559

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

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

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For the quarter ended:

June 30, 2022 (2)

September 30, 2022 (2)

$ 33,343 1.04 % $ 7,600 1.99 % $ 4,220 0.30 % $ 705 1.97 % $ 22,564 0.36 % $ (2,791) (0.21) % $ 65,641 1.03 %

June 30, 2022 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 %

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September 30, 2021 (2)

June 30, 2021 (2)

28,914 1.06 % 7,163 1.80 % 2,067 0.16 % 236 1.09 % 17,386 0.31 % 159 0.01 % 55,925 0.99 %

June 30, 2021 29,163 1.06 % 6,676 1.65 % 1,759 0.14 % 378 1.80 % 18,449 0.33 % 126 0.01 % 56,551 1.01 %

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

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September 30, 2020 23,735 0.89 % 5,786 1.45 % 2,022 0.16 % 75 1.19 % 20,034 0.37 % 150 0.01 % 51,802 0.96 %

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

(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 June 30, 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 September 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

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

September 2022 June

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

(in thousands)

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Credit related expense/(income):

(Release of)/provision for losses (1,535) (54) (1,428) 255 (983) (31) 2,973 1,200 51

Provision for/(release of) losses 450 (1,535) (54) (1,428) 255 (983) (31) 2,973 1,200

REO operating expenses — — — — — — — —

Losses/(gains) on sale of REO — — — — — — 22 — —

Losses on sale of REO — — — — — — 22 —

Total credit related expense/(income) 450 (1,535) (54) (1,428) 255 (983) (31) 2,995 1,200

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Gains/(losses) on undesignated financial derivatives due to fair value changes $ 6,441 $ 2,846 $ 2,612 $ (1,242) $ (405) $ (3,020) $ 3,236 $ (3,005) $ (4,286)

Gains/(losses) on hedging activities due to fair value changes 5,916 2,024 1,476 (2,093) (2,097) (271) 3,827 (5,245) (2,676)

Unrealized gains/(losses) on trading assets (285) 94 (76) 36 (61) (14) 223 (258) (20)

(Losses)/gains on hedging activities due to fair value changes (624) 428 5,687 (2,079) 1,818 (5,866) 4,317 7,954 1,562

Unrealized (losses)/gains on trading assets (757) (285) 94 (76) 36 (61) (14) 223 (258)

Net effects of amortization of premiums/discounts and deferred gains on assets consolidated at fair value 24 (62) 20 71 23 20 16 (77) 97

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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