FEDERAL AGRICULTURAL MORTGAGE CORP 10-Q

Item 1. Financial Statements FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (unaudited) As of June 30, 2023 December 31, 2022 (in thousands) Assets: Cash and cash equivalents $ 874,090 $ 861,002 Investment securities: Available-for-sale, at fair value (amortized cost of $ 4,894,715 and $ 4,769,426 , respectively) 4,717,619 4,579,564 Held-to-maturity, at amortized cost 45,032 45,032 Other investments 5,164 3,672 Total Investment Securities 4,767,815 4,628,268 Farmer Mac Guaranteed Securities: Available-for-sale, at fair value (amortized cost of $ 8,159,474 and $ 8,019,495 , respectively) 7,745,415 7,607,226 Held-to-maturity, at amortized cost 849,828 1,021,154 Total Farmer Mac Guaranteed Securities 8,595,243 8,628,380 USDA Securities: Trading, at fair value 1,348 1,767 Held-to-maturity, at amortized cost 2,336,212 2,409,834 Total USDA Securities 2,337,560 2,411,601 Loans: Loans held for investment, at amortized cost 9,129,176 9,008,979 Loans held for investment in consolidated trusts, at amortized cost 1,448,180 1,211,576 Allowance for losses ( 16,748 ) ( 15,089 ) Total loans, net of allowance 10,560,608 10,205,466 Financial derivatives, at fair value 26,824 37,409 Accrued interest receivable (includes $ 15,737 and $ 12,514 , respectively, related to consolidated trusts) 233,529 229,061 Guarantee and commitment fees receivable 46,181 47,151 Deferred tax asset, net 3,302 18,004 Prepaid expenses and other assets 214,413 266,768 Total Assets $ 27,659,565 $ 27,333,110 Liabilities and Equity: Liabilities: Notes payable $ 24,510,004 $ 24,469,113 Debt securities of consolidated trusts held by third parties 1,357,763 1,181,948 Financial derivatives, at fair value 188,652 175,326 Accrued interest payable (includes $ 8,556 and $ 8,081 , respectively, related to consolidated trusts) 143,977 117,887 Guarantee and commitment obligation 45,873 46,582 Accounts payable and accrued expenses 65,036 68,863 Reserve for losses 1,705 1,433 Total Liabilities 26,313,010 26,061,152 Commitments and Contingencies (Note 6) Equity: Preferred stock: Series C, par value $ 25 per share, 3,000,000 shares authorized, issued and outstanding 73,382 73,382 Series D, par value $ 25 per share, 4,000,000 shares authorized, issued and outstanding 96,659 96,659 Series E, par value $ 25 per share, 3,180,000 shares authorized, issued and outstanding 77,003 77,003 Series F, par value $ 25 per share, 4,800,000 shares authorized, issued and outstanding 116,160 116,160 Series G, par value $ 25 per share, 5,000,000 shares authorized, issued and outstanding 121,327 121,327 Common stock: Class A Voting, $ 1 par value, no maximum authorization, 1,030,780 shares outstanding 1,031 1,031 Class B Voting, $ 1 par value, no maximum authorization, 500,301 shares outstanding 500 500 Class C Non-Voting, $ 1 par value, no maximum authorization, 9,305,477 shares and 9,270,265 shares outstanding, respectively 9,305 9,270 Additional paid-in capital 130,147 128,939 Accumulated other comprehensive loss, net of tax ( 34,351 ) ( 50,843 ) Retained earnings 755,392 698,530 Total Equity 1,346,555 1,271,958 Total Liabilities and Equity $ 27,659,565 $ 27,333,110 The accompanying notes are an integral part of these consolidated financial statements. 3 FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) For the Three Months Ended For the Six Months Ended June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022 (in thousands, except per share amounts) Interest income: Investments and cash equivalents $ 69,779 $ 11,200 $ 129,482 $ 16,916 Farmer Mac Guaranteed Securities and USDA Securities 144,761 51,616 281,298 94,536 Loans 129,292 76,632 248,324 143,879 Total interest income 343,832 139,448 659,104 255,331 Total interest expense 265,155 75,534 501,369 125,879 Net interest income 78,677 63,914 157,735 129,452 (Provision for)/release of losses ( 1,073 ) 1,372 ( 1,620 ) 1,316 Net interest income after (provision for)/release of losses 77,604 65,286 156,115 130,768 Non-interest income/(expense): Guarantee and commitment fees 3,489 3,213 7,422 6,908 Gains on financial derivatives 1,693 3,791 2,092 20,779 (Losses)/gains on trading securities ( 9 ) 29 16 ( 34 ) (Provision for)/release of reserve for losses ( 69 ) 163 ( 272 ) 273 Other income 767 479 1,968 1,154 Non-interest income 5,871 7,675 11,226 29,080 Operating expenses: Compensation and employee benefits 13,937 11,715 29,288 25,013 General and administrative 9,420 7,520 16,947 14,798 Regulatory fees 831 813 1,666 1,625 Operating expenses 24,188 20,048 47,901 41,436 Income before income taxes 59,287 52,913 119,440 118,412 Income tax expense 12,075 11,058 25,193 25,104 Net income 47,212 41,855 94,247 93,308 Preferred stock dividends ( 6,791 ) ( 6,792 ) ( 13,582 ) ( 13,583 ) Net income attributable to common stockholders $ 40,421 $ 35,063 $ 80,665 $ 79,725 Earnings per common share: Basic earnings per common share $ 3.73 $ 3.25 $ 7.46 $ 7.40 Diluted earnings per common share $ 3.70 $ 3.23 $ 7.39 $ 7.33 The accompanying notes are an integral part of these consolidated financial statements. 4 FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited) For the Three Months Ended For the Six Months Ended June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022 (in thousands Net income $ 47,212 $ 41,855 $ 94,247 $ 93,308 Other comprehensive income/(loss): Net unrealized gains/(losses) on available-for-sale securities 23,334 ( 30,179 ) 23,992 ( 116,446 ) Net changes in held-to-maturity securities ( 321 ) 865 ( 1,103 ) 842 Net unrealized gains/(losses) on cash flow hedges 9,279 16,884 ( 2,013 ) 48,088 Other comprehensive income/(loss) before tax 32,292 ( 12,430 ) 20,876 ( 67,516 ) Income tax (expense)/benefit related to other comprehensive income/(loss) ( 6,781 ) 2,611 ( 4,384 ) 14,179 Other comprehensive income/(loss) net of tax 25,511 ( 9,819 ) 16,492 ( 53,337 ) Comprehensive income $ 72,723 $ 32,036 $ 110,739 $ 39,971 The accompanying notes are an integral part of these consolidated financial statements. 5 FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EQUITY (unaudited) Accumulated Additional Other Preferred Stock Common Stock Paid-In Comprehensive Retained Total Shares Amount Shares Amount Capital Income/(Loss) Earnings Equity (in thousands) Balance as of December 31, 2022 19,980 $ 484,531 10,801 $ 10,801 $ 128,939 $ ( 50,843 ) $ 698,530 $ 1,271,958 Net Income — — — — — — 47,035 47,035 Other comprehensive loss, net of tax — — — — — ( 9,019 ) — ( 9,019 ) Cash dividends: Preferred stock — — — — — — ( 6,791 ) ( 6,791 ) Common stock (cash dividend of $ 1.10 per share) — — — — — — ( 11,882 ) ( 11,882 ) Issuance of Class C Common Stock — — 19 19 51 — — 70 Stock-based compensation cost — — — — 2,254 — — 2,254 Other stock-based award activity — — — — ( 1,240 ) — — ( 1,240 ) Balance as of March 31, 2023 19,980 $ 484,531 10,820 $ 10,820 $ 130,004 $ ( 59,862 ) $ 726,892 $ 1,292,385 Net Income — — — — — — 47,212 47,212 Other comprehensive income, net of tax — — — — — 25,511 — 25,511 Cash dividends: Preferred stock — — — — — — ( 6,791 ) ( 6,791 ) Common stock (cash dividend of $ 1.10 per share) — — — — — — ( 11,921 ) ( 11,921 ) Issuance of Class C Common Stock — — 16 16 54 — — 70 Stock-based compensation cost — — — — 1,223 — — 1,223 Other stock-based award activity — — — — ( 1,134 ) — — ( 1,134 ) Balance as of June 30, 2023 19,980 $ 484,531 10,836 $ 10,836 $ 130,147 $ ( 34,351 ) $ 755,392 $ 1,346,555 Balance as of December 31, 2021 19,980 $ 484,531 10,766 $ 10,766 $ 125,993 $ 3,853 $ 588,557 $ 1,213,700 Net Income — — — — — — 51,453 51,453 Other comprehensive loss, net of tax — — — — — ( 43,518 ) — ( 43,518 ) Cash dividends: Preferred stock — — — — — — ( 6,791 ) ( 6,791 ) Common stock (cash dividend of $ 0.95 per share) — — — — — — ( 10,229 ) ( 10,229 ) Issuance of Class C Common Stock — — 22 22 46 — — 68 Stock-based compensation cost — — — — 2,113 — — 2,113 Other stock-based award activity — — — — ( 1,049 ) — — ( 1,049 ) Balance as of March 31, 2022 19,980 $ 484,531 10,788 $ 10,788 $ 127,103 $ ( 39,665 ) $ 622,990 $ 1,205,747 Net Income — — — — — — 41,855 41,855 Other comprehensive loss, net of tax — — — — — ( 9,819 ) — ( 9,819 ) Cash dividends: Preferred stock — — — — — — ( 6,792 ) ( 6,792 ) Common stock (cash dividend of $ 0.95 per share) — — — — — — ( 10,256 ) ( 10,256 ) Issuance of Class C Common Stock — — 9 9 46 — — 55 Stock-based compensation cost — — — — 862 — — 862 Other stock-based award activity — — — — ( 442 ) — — ( 442 ) Balance as of June 30, 2022 19,980 $ 484,531 10,797 $ 10,797 $ 127,569 $ ( 49,484 ) $ 647,797 $ 1,221,210 The accompanying notes are an integral part of these consolidated financial statements. 6 FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) For the Six Months Ended June 30, 2023 June 30, 2022 (in thousands) Cash flows from operating activities: Net income $ 94,247 $ 93,308 Adjustments to reconcile net income to net cash provided by operating activities: Net amortization of deferred gains, premiums, and discounts on loans, investments, Farmer Mac Guaranteed Securities, and USDA Securities ( 6,073 ) 2,819 Amortization of debt premiums, discounts, and issuance costs 13,514 5,655 Net change in fair value of trading securities, hedged assets, and financial derivatives 69,056 488,280 Total provision for/(release of) allowance for losses 1,892 ( 1,589 ) Excess tax benefits related to stock-based awards 257 ( 64 ) Deferred income taxes 10,318 3,816 Stock-based compensation expense 3,478 2,975 Proceeds from repayment of loans purchased as held for sale 18,114 17,381 Net change in: Interest receivable ( 10,549 ) ( 1,700 ) Guarantee and commitment fees receivable 261 214 Other assets ( 8,627 ) ( 89,106 ) Accrued interest payable 26,090 11,569 Custodial deposit liability ( 24,944 ) ( 11,070 ) Other liabilities ( 7,371 ) 3,522 Net cash provided by operating activities 179,663 526,010 Cash flows from investing activities: Purchases of available-for-sale investment securities ( 857,168 ) ( 1,439,695 ) Purchases of other investment securities ( 1,492 ) ( 308 ) Purchases of Farmer Mac Guaranteed Securities and USDA Securities ( 1,636,111 ) ( 3,061,500 ) Purchases of loans held for investment ( 1,045,498 ) ( 1,466,667 ) Proceeds from repayment of available-for-sale investment securities 856,133 917,618 Proceeds from repayment of Farmer Mac Guaranteed Securities and USDA Securities 1,739,248 2,867,305 Proceeds from repayment of loans purchased as held for investment 662,458 726,196 Proceeds from sale of loans previously classified as held for investment — 9,000 Proceeds from sale of Farmer Mac Guaranteed Securities — 25,928 Net cash used in investing activities ( 282,430 ) ( 1,422,123 ) Cash flows from financing activities: Proceeds from issuance of discount notes 22,223,928 27,110,295 Proceeds from issuance of medium-term notes 3,139,016 4,797,774 Proceeds from third parties from issuance of debt securities of consolidated trusts 222,188 — Payments to redeem discount notes ( 21,840,244 ) ( 27,804,791 ) Payments to redeem medium-term notes ( 3,531,650 ) ( 3,029,315 ) Payments to third parties on debt securities of consolidated trusts ( 57,763 ) ( 141,769 ) Proceeds from common stock issuance 105 92 Tax payments related to share-based awards ( 2,340 ) ( 1,460 ) Dividends paid on common and preferred stock ( 37,385 ) ( 34,068 ) Net cash provided by financing activities 115,855 896,758 Net change in cash and cash equivalents 13,088 645 Cash and cash equivalents at beginning of period 861,002 908,785 Cash and cash equivalents at end of period $ 874,090 $ 909,430 Non-cash activity: Loans securitized as Farmer Mac Guaranteed Securities 4,174 25,928 Loans held for investment transferred to consolidated trusts 281,027 — Reclassification of defaulted loans from loans held for investment in consolidated trusts to loans held for investment 1,863 569 Capitalized interest — 443 Matured securities receivable ( 97,500 ) — Charge-off from the allowance for losses — 84 Borrowers' payments not yet received from servicers ( 22,468 ) — Purchases of securities - traded, not yet settled 20,262 — The accompanying notes are an integral part of these consolidated financial statements. 7 FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The interim unaudited consolidated financial statements of the Federal Agricultural Mortgage Corporation ("Farmer Mac") and subsidiaries have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). These interim unaudited consolidated financial statements reflect all normal and recurring adjustments that are, in the opinion of management, necessary to present a fair statement of the financial position and the results of operations and cash flows of Farmer Mac and subsidiaries for the interim periods presented. Certain information and footnote disclosures normally included in the annual consolidated financial statements have been omitted as permitted by SEC rules and regulations. The December 31, 2022 consolidated balance sheet presented in this report has been derived from Farmer Mac's audited 2022 consolidated financial statements, as revised. Management believes that the disclosures are adequate to present fairly the consolidated financial statements as of the dates and for the periods presented. These interim unaudited consolidated financial statements should be read in conjunction with the 2022 consolidated financial statements of Farmer Mac and subsidiaries included in Farmer Mac's Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on February 24, 2023. Results for interim periods are not necessarily indicative of those that may be expected for the fiscal year. Presented below are Farmer Mac's significant accounting policies that contain updated information for the three and six months ended June 30, 2023. Farmer Mac has revised its prior period financial information to correct an error that was not material to those previous consolidated financial statements, taken as a whole. For more information on the revision, refer to Note 11, Revision of Prior Period Financial Statements. Principles of Consolidation The consolidated financial statements include the accounts of Farmer Mac and its two subsidiaries: (1) Farmer Mac Mortgage Securities Corporation, whose principal activities are to facilitate the purchase and issuance of Farmer Mac Guaranteed Securities; and (2) Farmer Mac II LLC, whose principal activity is the operation of substantially all of the business related to the USDA Securities included in the Agricultural Finance line of business. The consolidated financial statements also include the accounts of Variable Interest Entities ("VIEs") in which Farmer Mac determined itself to be the primary beneficiary. 8 Table 1.1 Consolidation of Variable Interest Entities As of June 30, 2023 Agricultural Finance Treasury Total (in thousands) On-Balance Sheet: Consolidated VIEs: Loans held for investment in consolidated trusts, at amortized cost $ 1,448,180 $ — $ 1,448,180 Debt securities of consolidated trusts held by third parties (1)(2) 1,357,763 — 1,357,763 Unconsolidated VIEs: Farmer Mac Guaranteed Securities: Carrying value 36,943 — 36,943 Maximum exposure to loss (3) 39,052 — 39,052 Investment securities: Carrying value (4) — 3,491,306 3,491,306 Maximum exposure to loss (3) (4) — 3,704,038 3,704,038 Off-Balance Sheet: Unconsolidated VIEs: Farmer Mac Guaranteed Securities: Maximum exposure to loss (3) (5) 481,397 — 481,397 (1) Includes borrower remittances of $ 0.9 million. The borrower remittances had not been passed through to third-party investors as of June 30, 2023. (2) Includes $ 91.2 million in unamortized discount related to structured securitization transactions. (3) Farmer Mac uses unpaid principal balance and outstanding face amount of investment securities to represent maximum exposure to loss. (4) Includes auction-rate certificates, government-sponsored enterprise ("GSE")-guaranteed mortgage-backed securities, and other mission related investments. (5) The amount under the Agricultural Finance line of business relates to unconsolidated trusts where it was determined that Farmer Mac was either not the primary beneficiary due to shared power with an unrelated party or a subordinate class majority holder has the unilateral right to remove Farmer Mac as Master Servicer without cause. 9 Consolidation of Variable Interest Entities As of December 31, 2022 Agricultural Finance Treasury Total (in thousands) On-Balance Sheet: Consolidated VIEs: Loans held for investment in consolidated trusts, at amortized cost $ 1,211,576 $ — $ 1,211,576 Debt securities of consolidated trusts held by third parties (1)(2) 1,181,948 — 1,181,948 Unconsolidated VIEs: Farmer Mac Guaranteed Securities: Carrying value 28,466 — 28,466 Maximum exposure to loss (3) 31,208 — 31,208 Investment securities: Carrying value (4) — 3,138,619 3,138,619 Maximum exposure to loss (3) (4) — 3,341,427 3,341,427 Off-Balance Sheet: Unconsolidated VIEs: Farmer Mac Guaranteed Securities: Maximum exposure to loss (3) (5) 500,953 — 500,953 (1) Includes borrower remittances of $ 8.1 million. The borrower remittances had not been passed through to third-party investors as of December 31, 2022. (2) Includes $ 37.7 million in unamortized discount related to a structured securitization transaction. (3) Farmer Mac uses unpaid principal balance and outstanding face amount of investment securities to represent maximum exposure to loss. (4) Includes auction-rate certificates, government-sponsored enterprise ("GSE")-guaranteed mortgage-backed securities, and other mission related investments. (5) The amount under the Agricultural Finance line of business relates to unconsolidated trusts where it was determined that Farmer Mac was either not the primary beneficiary due to shared power with an unrelated party or a subordinate class majority holder has the unilateral right to remove Farmer Mac as Master Servicer without cause. 10 (a) Earnings Per Common Share Basic earnings per common share ("EPS") is based on the daily weighted-average number of shares of common stock outstanding. Diluted earnings per common share is based on the daily weighted-average number of shares of common stock outstanding adjusted to include all potentially dilutive stock appreciation rights ("SARs") and unvested restricted stock awards. The following schedule reconciles basic and diluted EPS for the three and six months ended June 30, 2023 and 2022: Table 1.2 For the Three Months Ended June 30, 2023 June 30, 2022 Net Income Weighted-Average Shares $ per Share Net Income Weighted-Average Shares $ per Share (in thousands, except per share amounts) Basic EPS Net income attributable to common stockholders $ 40,421 10,833 $ 3.73 $ 35,063 10,796 $ 3.25 Effect of dilutive securities (1) SARs and restricted stock — 83 ( 0.03 ) — 68 ( 0.02 ) Diluted EPS $ 40,421 10,916 $ 3.70 $ 35,063 10,864 $ 3.23 (1) For the three months ended June 30, 2023 and 2022, SARs and restricted stock of 34,500 and 42,922 respectively, were outstanding but not included in the computation of diluted earnings per share of common stock because they were anti-dilutive. For the three months ended June 30, 2023 and 2022, contingent shares of unvested restricted stock of 32,282 and 18,535 respectively, were outstanding but not included in the computation of diluted earnings per share of common stock because performance conditions had not yet been met. For the Six Months Ended June 30, 2023 June 30, 2022 Net Income Weighted-Average Shares $ per Share Net Income Weighted-Average Shares $ per Share (in thousands, except per share amounts) Basic EPS Net income attributable to common stockholders $ 80,665 10,817 $ 7.46 $ 79,725 10,782 $ 7.40 Effect of dilutive securities (1) SARs and restricted stock — 100 ( 0.07 ) — 94 ( 0.07 ) Diluted EPS $ 80,665 10,917 $ 7.39 $ 79,725 10,876 $ 7.33 (1) For the six months ended June 30, 2023 and 2022, SARs and restricted stock of 48,605 and 46,464 respectively, were outstanding but not included in the computation of diluted earnings per share of common stock because they were anti-dilutive. For the six months ended June 30, 2023 and 2022, contingent shares of unvested restricted stock of 32,282 and 18,535 respectively, were outstanding but not included in the computation of diluted earnings per share of common stock because performance conditions had not yet been met. (b) Comprehensive Income Comprehensive income represents all changes in stockholders' equity except those resulting from investments by or distributions to stockholders, and is comprised of net income and unrealized gains and losses on available-for-sale securities, certain held-to-maturity securities transferred from the available-for-sale classification, and cash flow hedges, net of related taxes. 11 The following table presents the changes in accumulated other comprehensive income ("AOCI"), net of tax, by component for the three and six months ended June 30, 2023 and 2022. Table 1.3 As of June 30, 2023 As of June 30, 2022 Available-for-Sale Securities Held-to-Maturity Securities Cash Flow Hedges Total Available-for-Sale Securities Held-to-Maturity Securities Cash Flow Hedges Total (in thousands) For the Three Months Ended: Beginning Balance $ ( 115,041 ) $ 15,739 $ 39,440 $ ( 59,862 ) $ ( 75,083 ) $ 16,134 $ 19,284 $ ( 39,665 ) Other comprehensive income/(loss) before reclassifications 18,438 — 11,352 29,790 ( 23,839 ) — 12,426 ( 11,413 ) Amounts reclassified from AOCI ( 4 ) ( 253 ) ( 4,022 ) ( 4,279 ) ( 2 ) 684 912 1,594 Net comprehensive income/(loss) 18,434 ( 253 ) 7,330 25,511 ( 23,841 ) 684 13,338 ( 9,819 ) Ending Balance $ ( 96,607 ) $ 15,486 $ 46,770 $ ( 34,351 ) $ ( 98,924 ) $ 16,818 $ 32,622 $ ( 49,484 ) For the Six Months Ended: Beginning Balance $ ( 115,561 ) $ 16,357 $ 48,361 $ ( 50,843 ) $ ( 6,932 ) $ 16,153 $ ( 5,368 ) $ 3,853 Other comprehensive income/(loss) before reclassifications 18,963 — 5,900 24,863 ( 91,986 ) — 35,489 ( 56,497 ) Amounts reclassified from AOCI ( 9 ) ( 871 ) ( 7,491 ) ( 8,371 ) ( 6 ) 665 2,501 3,160 Net comprehensive income/(loss) 18,954 ( 871 ) ( 1,591 ) 16,492 ( 91,992 ) 665 37,990 ( 53,337 ) Ending Balance $ ( 96,607 ) $ 15,486 $ 46,770 $ ( 34,351 ) $ ( 98,924 ) $ 16,818 $ 32,622 $ ( 49,484 ) 12 The following table presents other comprehensive income activity, the impact on net income of amounts reclassified from each component of AOCI, and the related tax impact for the three and six months ended June 30, 2023 and 2022: Table 1.4 For the Three Months Ended June 30, 2023 June 30, 2022 Before Tax Provision (Benefit) After Tax Before Tax Provision (Benefit) After Tax (in thousands) Other comprehensive income: Available-for-sale-securities: Unrealized holding gains/(losses) on available-for-sale securities $ 23,339 $ 4,901 $ 18,438 $ ( 30,176 ) $ ( 6,337 ) $ ( 23,839 ) Less reclassification adjustments included in: Net interest income (1) — — — — — — Other income (2) ( 5 ) ( 1 ) ( 4 ) ( 3 ) ( 1 ) ( 2 ) Total $ 23,334 $ 4,900 $ 18,434 $ ( 30,179 ) $ ( 6,338 ) $ ( 23,841 ) Held-to-maturity securities: Less reclassification adjustments included in: Net interest income (3) ( 321 ) ( 68 ) ( 253 ) 865 181 684 Total $ ( 321 ) $ ( 68 ) $ ( 253 ) $ 865 $ 181 $ 684 Cash flow hedges Unrealized gains on cash flow hedges $ 14,370 $ 3,018 $ 11,352 $ 15,729 $ 3,303 $ 12,426 Less reclassification adjustments included in: Net interest income (4) ( 5,091 ) ( 1,069 ) ( 4,022 ) 1,155 243 912 Total $ 9,279 $ 1,949 $ 7,330 $ 16,884 $ 3,546 $ 13,338 Other comprehensive income/(loss) $ 32,292 $ 6,781 $ 25,511 $ ( 12,430 ) $ ( 2,611 ) $ ( 9,819 ) (1) Relates to the amortization of unrealized gains on hedged items prior to the application of fair value hedge accounting. (2) Represents amortization of deferred gains related to certain available-for-sale USDA Securities and Farmer Mac Guaranteed USDA Securities. (3) Relates to the amortization of unrealized gains or losses prior to the reclassification of these securities from available-for-sale to held-to-maturity. The amortization of unrealized gains or losses reported in AOCI for held-to-maturity securities will be offset by the amortization of the premium or discount created from the transfer into held-to-maturity securities, which occurred at fair value. These unrealized gains or losses will be recorded over the remaining life of the security with no impact on future net income. (4) Relates to the recognition of unrealized gains and losses on cash flow hedges recorded in AOCI. 13 For the Six Months Ended June 30, 2023 June 30, 2022 Before Tax Provision (Benefit) After Tax Before Tax Provision (Benefit) After Tax (in thousands) Other comprehensive income: Available-for-sale-securities: Unrealized holding gains/(losses) on available-for-sale securities $ 24,003 $ 5,040 $ 18,963 $ ( 116,439 ) $ ( 24,453 ) $ ( 91,986 ) Less reclassification adjustments included in: Net interest income (1) — — — — — — Other income (2) ( 11 ) ( 2 ) ( 9 ) ( 7 ) ( 1 ) ( 6 ) Total $ 23,992 $ 5,038 $ 18,954 $ ( 116,446 ) $ ( 24,454 ) $ ( 91,992 ) Held-to-maturity securities: Less reclassification adjustments included in: Net interest income (3) ( 1,103 ) ( 232 ) ( 871 ) 842 177 665 Total $ ( 1,103 ) $ ( 232 ) $ ( 871 ) $ 842 $ 177 $ 665 Cash flow hedges Unrealized gains on cash flow hedges $ 7,469 $ 1,569 $ 5,900 $ 44,922 $ 9,433 $ 35,489 Less reclassification adjustments included in: Net interest income (4) ( 9,482 ) ( 1,991 ) ( 7,491 ) 3,166 665 2,501 Total $ ( 2,013 ) $ ( 422 ) $ ( 1,591 ) $ 48,088 $ 10,098 $ 37,990 Other comprehensive income/(loss) $ 20,876 $ 4,384 $ 16,492 $ ( 67,516 ) $ ( 14,179 ) $ ( 53,337 ) (1) Relates to the amortization of unrealized gains on hedged items prior to the application of fair value hedge accounting. (2) Represents amortization of deferred gains related to certain available-for-sale USDA Securities and Farmer Mac Guaranteed USDA Securities. (3) Relates to the amortization of unrealized gains or losses prior to the reclassification of these securities from available-for-sale to held-to-maturity. The amortization of unrealized gains or losses reported in AOCI for held-to-maturity securities will be offset by the amortization of the premium or discount created from the transfer into held-to-maturity securities, which occurred at fair value. These unrealized gains or losses will be recorded over the remaining life of the security with no impact on future net income. (4) Relates to the recognition of unrealized gains and losses on cash flow hedges recorded in AOCI. 14 (c) New Accounting Standards Recently Adopted Accounting Guidance Standard Description Date of Adoption Effect on Consolidated Financial Statements ASU 2020-04 and 2021-01 , Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting The amendments in this Update provide optional guidance for a limited period of time to ease the potential burden in accounting for reference rate reform on financial reporting. They provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. January 1, 2020 During the period, Farmer Mac adopted optional expedients including those relating to qualifying hedging relationships and contract modification relief, and as of June 30, 2023, has no further variable-rate exposure to LIBOR. To date, these elections did not have a material effect on Farmer Mac's financial position, results of operations, or cash flows. Farmer Mac does not expect to elect further expedients through the ending date of December 31, 2024. ASU 2022-06 , Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848 The amendments in this Update deferred the sunset date in Topic 848 from December 31, 2022 to December 31, 2024. December 21, 2022 Farmer Mac does not expect to elect further expedients through the ending date of December 31, 2024. ASU 2022-02 , Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures The Update addresses and amends areas identified by the Financial Accounting Standards Board as part of its post-implementation review of the accounting standard that introduced the current expected credit losses (“CECL”) model. The amendments eliminate the accounting guidance for troubled debt restructurings by creditors that have adopted the CECL model and enhance the disclosure requirements for loan refinancings and restructurings made with borrowers experiencing financial difficulty. In addition, the amendments require disclosure of current-period gross write offs for financing receivables and net investment in leases by year of origination in the vintage disclosures. January 1, 2023 The adoption of this Update did not have a material effect on Farmer Mac's financial position, results of operations, or cash flows. ASU 2022-01 , Fair Value Hedging - Portfolio Layer Method The Update introduces the portfolio layer method, which expands the current single-layer method to allow multiple hedged layers of a single closed portfolio under the method (previously named, last-of-layer method). Additionally, it expands the scope of the portfolio layer method to include non-prepayable assets, specifies eligible hedging instruments in a single-layer hedge, provides additional guidance on the accounting for and disclosure of hedge basis adjustments under the portfolio layer method, specifies how hedge basis adjustments should be considered when determining credit losses for the assets included in the closed portfolio, and provides that an entity may reclassify HTM debt securities identified within 30 days of the date of adoption to AFS if the entity applies portfolio layer method hedging to those debt securities. January 1, 2023 Farmer Mac adopted this guidance as of January 1, 2023. Farmer Mac does not currently hedge interest rate risk for portfolios of financial assets, so adoption of this guidance had no effect on Farmer Mac's financial condition, results of operations, cash flows, or disclosures given current strategies. 15 (d) Reclassifications Certain reclassifications of prior period information were made to conform to the current period presentation. The reclassifications of prior period information were not material to the consolidated financial statements. 2. INVESTMENT SECURITIES The following tables set forth information about Farmer Mac's available-for-sale and held-to-maturity investment securities as of June 30, 2023 and December 31, 2022: Table 2.1 As of June 30, 2023 Amount Outstanding Unamortized Premium/(Discount) Amortized Cost (1) Allowance for losses (2) Unrealized Gains Unrealized Losses Fair Value (in thousands) Available-for-sale: Floating rate auction-rate certificates backed by Government guaranteed student loans $ 19,700 $ — $ 19,700 $ ( 28 ) $ — $ ( 640 ) $ 19,032 Floating rate Government/GSE guaranteed mortgage-backed securities 2,473,942 ( 1,348 ) 2,472,594 — 2,486 ( 32,470 ) 2,442,610 Fixed rate GSE guaranteed mortgage-backed securities 1,540,857 ( 45,223 ) 1,495,634 — 1,565 ( 136,415 ) 1,360,784 Floating rate U.S. Treasuries 50,000 ( 30 ) 49,970 — 28 — 49,998 Fixed rate U.S. Treasuries 863,760 ( 6,943 ) 856,817 — — ( 11,622 ) 845,195 Total available-for-sale 4,948,259 ( 53,544 ) 4,894,715 ( 28 ) 4,079 ( 181,147 ) 4,717,619 Held-to-maturity: Floating rate Government/GSE guaranteed mortgage-backed securities (3) 45,032 — 45,032 — 237 — 45,269 Total held-to-maturity $ 45,032 $ — $ 45,032 $ — $ 237 $ — $ 45,269 (1) Amounts presented exclude $ 12.2 million of accrued interest receivable on investment securities as of June 30, 2023. (2) Represents the amount of impairment that has resulted from credit-related factors, and therefore was recognized in the consolidated statement of operations as a provision for losses. Amount excludes unrealized losses relating to non-credit factors. (3) The held-to-maturity investment securities had a weighted average yield of 6.3 % as of June 30, 2023. 16 As of December 31, 2022 Amount Outstanding Unamortized Premium/(Discount) Amortized Cost (1) Allowance for losses (2) Unrealized Gains Unrealized Losses Fair Value (in thousands) Available-for-sale: Floating rate auction-rate certificates backed by Government guaranteed student loans $ 19,700 $ — $ 19,700 $ ( 33 ) $ — $ ( 640 ) $ 19,027 Floating rate Government/GSE guaranteed mortgage-backed securities 2,433,696 ( 200 ) 2,433,496 — 1,954 ( 42,910 ) 2,392,540 Fixed rate GSE guaranteed mortgage-backed securities 1,207,416 ( 30,321 ) 1,177,095 — 2,128 ( 130,837 ) 1,048,386 Fixed rate U.S. Treasuries 1,145,915 ( 6,780 ) 1,139,135 — 621 ( 20,145 ) 1,119,611 Total available-for-sale 4,806,727 ( 37,301 ) 4,769,426 ( 33 ) 4,703 ( 194,532 ) 4,579,564 Held-to-maturity: Floating rate Government/GSE guaranteed mortgage-backed securities (3) 45,032 — 45,032 — 2,433 — 47,465 Total held-to-maturity $ 45,032 $ — $ 45,032 $ — $ 2,433 $ — $ 47,465 (1) Amounts presented exclude $ 10.6 million of accrued interest receivable on investment securities as of December 31, 2022. (2) Represents the amount of impairment that has resulted from credit-related factors, and therefore was recognized in the consolidated statement of operations as a provision for losses. Amount excludes unrealized losses relating to non-credit factors. (3) The held-to-maturity investment securities had a weighted average yield of 4.5 % as of December 31, 2022. Farmer Mac did no t sell any securities from its available-for-sale investment portfolio during the three and six months ended June 30, 2023 and 2022. As of June 30, 2023 and December 31, 2022, unrealized losses on available-for-sale investment securities were as follows: Table 2.2 As of June 30, 2023 Available-for-Sale Securities Unrealized loss position for less than 12 months Unrealized loss position for more than 12 months Fair Value Unrealized Loss Fair Value Unrealized Loss (dollars in thousands) Floating rate auction-rate certificates backed by Government guaranteed student loans $ — $ — $ 19,032 $ ( 640 ) Floating rate Government/GSE guaranteed mortgage-backed securities 686,887 ( 5,392 ) 1,307,943 ( 27,078 ) Fixed rate Government/GSE guaranteed mortgage-backed securities 638,700 ( 24,472 ) 650,838 ( 111,943 ) Fixed rate U.S. Treasuries 379,728 ( 3,300 ) 465,468 ( 8,322 ) Total $ 1,705,315 $ ( 33,164 ) $ 2,443,281 $ ( 147,983 ) Number of securities in loss position 83 151 17 As of December 31, 2022 Available-for-Sale Securities Unrealized loss position for less than 12 months Unrealized loss position for more than 12 months Fair Value Unrealized Loss Fair Value Unrealized Loss (dollars in thousands) Floating rate auction-rate certificates backed by Government guaranteed student loans $ — $ — $ 19,027 $ ( 640 ) Floating rate Government/GSE guaranteed mortgage-backed securities 1,884,146 ( 36,976 ) 193,964 ( 5,934 ) Fixed rate Government/GSE guaranteed mortgage-backed securities 621,215 ( 56,434 ) 336,782 ( 74,403 ) Fixed rate U.S. Treasuries 314,524 ( 2,842 ) 704,780 ( 17,303 ) Total $ 2,819,885 $ ( 96,252 ) $ 1,254,553 $ ( 98,280 ) Number of securities in loss position 174 51 The unrealized losses presented above are principally due to a general widening of market spreads and changes in the levels of interest rates from the dates of acquisition to June 30, 2023 and December 31, 2022, as applicable. The resulting decrease in fair values reflects an increase in the perceived risk by the financial markets related to those securities. As of both June 30, 2023 and December 31, 2022, all of the investment securities in an unrealized loss position either were backed by the full faith and credit of the U.S. government, a U.S. government sponsored enterprise, or had credit ratings of at least "AA+." Securities in unrealized loss positions for 12 months or longer have a fair value as of June 30, 2023 that is, on average, approximately 94.3 % of their amortized cost basis. Farmer Mac believes that all of these unrealized losses are recoverable within a reasonable period of time by way of maturity, changes in credit spread, and changes in levels of interest rates. The amortized cost, fair value, and weighted-average yield of available-for-sale investment securities by remaining contractual maturity as of June 30, 2023 are set forth below. Asset-backed and mortgage-backed securities are included based on their final maturities, although the actual maturities may differ due to prepayments of the underlying assets. Table 2.3 As of June 30, 2023 Available-for-Sale Securities Amortized Cost Fair Value Weighted- Average Yield (dollars in thousands) Due within one year $ 591,260 $ 583,923 0.52 % Due after one year through five years 858,917 845,415 4.39 % Due after five years through ten years 2,625,267 2,484,672 4.14 % Due after ten years 819,271 803,609 5.38 % Total $ 4,894,715 $ 4,717,619 3.95 % 18 3. FARMER MAC GUARANTEED SECURITIES AND USDA SECURITIES The following tables set forth information about on-balance sheet Farmer Mac Guaranteed Securities and USDA Securities as of June 30, 2023 and December 31, 2022: Table 3.1 As of June 30, 2023 Unpaid Principal Balance Unamortized Premium/(Discount) Amortized Cost (1) Allowance for losses (2) Unrealized Gains Unrealized Losses Fair Value (in thousands) Held-to-maturity: AgVantage $ 820,635 $ ( 80 ) $ 820,555 $ ( 64 ) $ 260 $ ( 46,500 ) $ 774,251 Farmer Mac Guaranteed USDA Securities 29,304 33 29,337 — 13 ( 786 ) 28,564 Total Farmer Mac Guaranteed Securities 849,939 ( 47 ) 849,892 ( 64 ) 273 ( 47,286 ) 802,815 USDA Securities 2,312,632 23,580 2,336,212 — 439 ( 274,339 ) 2,062,312 Total held-to-maturity $ 3,162,571 $ 23,533 $ 3,186,104 $ ( 64 ) $ 712 $ ( 321,625 ) $ 2,865,127 Available-for-sale: AgVantage $ 8,149,002 $ 724 $ 8,149,726 $ ( 507 ) $ 1,778 $ ( 413,187 ) $ 7,737,810 Farmer Mac Guaranteed Securities (3) — 9,748 9,748 — — ( 2,143 ) 7,605 Total available-for-sale $ 8,149,002 $ 10,472 $ 8,159,474 $ ( 507 ) $ 1,778 $ ( 415,330 ) $ 7,745,415 Trading: USDA Securities (4) $ 1,350 $ 64 $ 1,414 $ — $ — $ ( 66 ) $ 1,348 (1) Amounts presented exclude $ 56.8 million, $ 33.6 million, and $ 33,000 of accrued interest receivable on available-for-sale, held-to-maturity, and trading securities, respectively, as of June 30, 2023. (2) Represents the amount of impairment that has resulted from credit-related factors, and therefore was recognized in the statement of financial operations as a provision for losses. Amount excludes unrealized losses relating to non-credit factors. (3) Fair value includes $ 7.6 million of an interest-only security with a notional amount of $ 243.2 million. (4) The trading USDA securities had a weighted average yield of 5.51 % as of June 30, 2023. 19 As of December 31, 2022 Unpaid Principal Balance Unamortized Premium/(Discount) Amortized Cost (1) Allowance for losses (2) Unrealized Gains Unrealized Losses Fair Value (in thousands) Held-to-maturity: AgVantage $ 1,000,689 $ ( 95 ) $ 1,000,594 $ ( 59 ) $ 353 $ ( 54,098 ) $ 946,790 Farmer Mac Guaranteed USDA Securities 20,586 33 20,619 — 2 ( 856 ) 19,765 Total Farmer Mac Guaranteed Securities 1,021,275 ( 62 ) 1,021,213 ( 59 ) 355 ( 54,954 ) 966,555 USDA Securities 2,384,946 24,888 2,409,834 — 668 ( 312,824 ) 2,097,678 Total held-to-maturity $ 3,406,221 $ 24,826 $ 3,431,047 $ ( 59 ) $ 1,023 $ ( 367,778 ) $ 3,064,233 Available-for-sale: AgVantage $ 8,008,067 $ 806 $ 8,008,873 $ ( 546 ) $ 2,061 $ ( 411,009 ) $ 7,599,379 Farmer Mac Guaranteed Securities (3) — 10,622 10,622 — — ( 2,775 ) $ 7,847 Total available-for-sale $ 8,008,067 $ 11,428 $ 8,019,495 $ ( 546 ) $ 2,061 $ ( 413,784 ) $ 7,607,226 Trading: USDA Securities (4) $ 1,770 $ 80 $ 1,850 $ — $ — $ ( 83 ) $ 1,767 (1) Amounts presented exclude $ 51.5 million, $ 44.4 million, and $ 47,000 of accrued interest receivable on available-for-sale, held-to-maturity, and trading securities, respectively, as of December 31, 2022. (2) Represents the amount of impairment that has resulted from credit-related factors, and therefore was recognized in the statement of financial operations as a provision for losses. Amount excludes unrealized losses relating to non-credit factors. (3) Fair value includes $ 7.8 million of an interest-only security with a notional amount of $ 250.1 million. (4) The trading USDA securities had a weighted average yield of 4.84 % as of December 31, 2022. As of June 30, 2023 and December 31, 2022, unrealized losses on held-to-maturity and available-for-sale on-balance sheet Farmer Mac Guaranteed Securities and USDA Securities were as follows: Table 3.2 As of June 30, 2023 Held-to-Maturity and Available-for-Sale Securities Unrealized loss position for less than 12 months Unrealized loss position for more than 12 months Fair Value Unrealized Loss Fair Value Unrealized Loss (in thousands) Held-to-maturity: AgVantage $ 134,812 $ ( 2,646 ) $ 619,073 $ ( 43,854 ) Farmer Mac Guaranteed USDA Securities 1,272 ( 33 ) 8,635 ( 753 ) USDA Securities — — 2,050,122 ( 274,339 ) Total held-to-maturity $ 136,084 $ ( 2,679 ) $ 2,677,830 $ ( 318,946 ) Available-for-sale: AgVantage $ 2,931,967 $ ( 45,218 ) $ 4,298,670 $ ( 367,969 ) Farmer Mac Guaranteed Securities — — 7,605 ( 2,143 ) Total available-for-sale $ 2,931,967 $ ( 45,218 ) $ 4,306,275 $ ( 370,112 ) 20 As of December 31, 2022 Held-to-Maturity and Available-for-Sale Securities Unrealized loss position for less than 12 months Unrealized loss position for more than 12 months Fair Value Unrealized Loss Fair Value Unrealized Loss (in thousands) Held-to-maturity: AgVantage $ 548,634 $ ( 11,455 ) $ 382,358 $ ( 42,643 ) Farmer Mac Guaranteed USDA Securities 19,790 ( 856 ) — — USDA Securities 2,086,108 ( 312,824 ) — — Total held-to-maturity $ 2,654,532 $ ( 325,135 ) $ 382,358 $ ( 42,643 ) Available-for-sale: AgVantage $ 4,642,096 $ ( 267,886 ) $ 1,548,551 $ ( 143,123 ) Farmer Mac Guaranteed Securities 7,847 ( 2,775 ) — — Total available-for-sale $ 4,649,943 $ ( 270,661 ) $ 1,548,551 $ ( 143,123 ) The unrealized losses presented above are principally due to changes in interest rates from the date of acquisition to June 30, 2023 and December 31, 2022, as applicable. The credit exposure related to Farmer Mac's USDA Securities in the Agricultural Finance line of business is covered by the full faith and credit guarantee of the United States of America. The unrealized losses from AgVantage securities were on 106 and 95 available-for-sale securities as of June 30, 2023 and December 31, 2022, respectively. There were 32 and 37 held-to-maturity AgVantage securities with an unrealized loss as of June 30, 2023 and December 31, 2022, respectively. As of June 30, 2023 and December 31, 2022, 57 and 13 available-for-sale AgVantage securities, respectively, had been in a loss position for more than 12 months. As of June 30, 2023 and December 31, 2022, there were 22 and 4 held-to-maturity AgVantage securities, respectively, in a loss position for more than 12 months. During the three and six months ended June 30, 2023 and 2022 Farmer Mac had no sales of AgVantage Farmer Mac Guaranteed Securities, USDA Farmer Mac Guaranteed Securities or USDA Trading Securities and, therefore, Farmer Mac realized no gains or losses. 21 The amortized cost, fair value, and weighted-average yield of available-for-sale and held-to-maturity Farmer Mac Guaranteed Securities and USDA Securities by remaining contractual maturity as of June 30, 2023 are set forth below. The balances presented are based on their contractual maturities, although the actual maturities may differ due to prepayments of the underlying assets. Table 3.3 As of June 30, 2023 Available-for-Sale Securities Amortized Cost (1) Fair Value Weighted- Average Yield (dollars in thousands) Due within one year $ 1,704,120 $ 1,694,039 5.02 % Due after one year through five years 3,553,450 3,399,931 3.80 % Due after five years through ten years 1,203,613 1,112,712 3.68 % Due after ten years 1,698,291 1,538,733 4.43 % Total $ 8,159,474 $ 7,745,415 4.16 % (1) Amounts presented exclude $ 56.8 million of accrued interest receivable. As of June 30, 2023 Held-to-Maturity Securities Amortized Cost (1) Fair Value Weighted- Average Yield (dollars in thousands) Due within one year $ 288,106 $ 282,871 2.77 % Due after one year through five years 570,623 523,236 2.20 % Due after five years through ten years 298,239 266,808 3.42 % Due after ten years 2,029,136 1,792,212 3.39 % Total $ 3,186,104 $ 2,865,127 3.10 % (1) Amounts presented exclude $ 33.6 million of accrued interest receivable. 4. FINANCIAL DERIVATIVES Farmer Mac enters into financial derivative transactions to protect against risk from the effects of market price, or interest rate movements, on the value of certain assets, future cash flows, or debt issuance, and not for trading or speculative purposes. Certain financial derivatives are designated as fair value hedges of fixed rate assets, classified as available-for-sale, to protect against fair value changes in the assets related to changes in a benchmark interest rate (e.g., SOFR). Certain other financial derivatives are designated as cash flow hedges to mitigate the volatility of future interest rate payments on floating rate debt. Certain financial derivatives are not designated in hedge accounting relationships. Farmer Mac manages the interest rate risk related to loans it has committed to acquire, but has not yet permanently funded, primarily through the use of forward sale contracts on the debt of other GSEs and futures contracts involving U.S. Treasury securities. Farmer Mac uses forward sale contracts on GSE securities to reduce its interest rate exposure to changes in both U.S. Treasury rates and spreads on Farmer Mac debt. Farmer Mac aims to achieve a duration-matched hedge ratio between the hedged item and the hedge instrument. Gains or losses generated by these hedge transactions are expected to offset changes in funding costs. All financial derivatives are recorded on the balance sheet at fair value as a freestanding asset or liability. 22 The following tables summarize information related to Farmer Mac's financial derivatives on a gross basis without giving consideration to master netting arrangements. The table below includes accrued interest on cleared swaps, but excludes $ 9.4 million and $ 6.1 million of accrued interest receivable and $ 5.4 million and $ 3.6 million of accrued interest payable on uncleared swaps as of June 30, 2023 and December 31, 2022, respectively. The aforementioned accrued interest on uncleared swaps is included within Accrued Interest Receivable and Accrued Interest Payable on the consolidated balance sheets. Table 4.1 As of June 30, 2023 Fair Value Weighted- Average Pay Rate Weighted- Average Receive Rate Weighted- Average Forward Price Weighted- Average Remaining Term (in years) Notional Amount Asset (Liability) (dollars in thousands) Fair value hedges: Interest rate swaps: Receive fixed non-callable $ 9,858,235 $ 2,520 $ ( 14 ) 5.16 % 2.50 % 1.60 Pay fixed non-callable 8,704,710 61 ( 14,237 ) 2.36 % 5.19 % 10.23 Receive fixed callable 3,716,577 — ( 176,165 ) 5.07 % 2.77 % 2.51 Cash flow hedges: Interest rate swaps: Pay fixed non-callable 570,000 25,782 ( 292 ) 1.93 % 5.54 % 4.71 No hedge designation: Interest rate swaps: Pay fixed non-callable 182,072 931 ( 82 ) 3.00 % 5.27 % 4.15 Receive fixed non-callable 785,198 78 ( 2 ) 5.09 % 4.00 % 0.62 Basis swaps 1,450,384 56 ( 535 ) 5.19 % 5.18 % 2.63 Treasury futures 11,300 71 — 112.89 Netting adjustments (1) ( 2,675 ) 2,675 Total financial derivatives $ 25,278,476 $ 26,824 $ ( 188,652 ) (1) Amounts represent the application of the netting requirements that allow Farmer Mac to settle positive and negative positions, including accrued interest, held or placed with the same clearing agent. 23 As of December 31, 2022 Fair Value Weighted- Average Pay Rate Weighted- Average Receive Rate Weighted- Average Forward Price Weighted- Average Remaining Term (in years) Notional Amount Asset (Liability) (dollars in thousands) Fair value hedges: Interest rate swaps: Receive fixed non-callable $ 10,033,750 $ 19 $ ( 4,686 ) 4.31 % 2.03 % 1.64 Pay fixed non-callable 8,149,871 13,689 ( 366 ) 2.23 % 4.33 % 10.76 Receive fixed callable 2,764,577 461 ( 174,757 ) 4.21 % 1.98 % 3.18 Cash flow hedges: Interest rate swaps: Pay fixed non-callable 588,000 27,275 — 1.93 % 4.72 % 5.05 No hedge designation: Interest rate swaps: Pay fixed non-callable 187,479 1,065 ( 1 ) 3.05 % 4.09 % 4.52 Receive fixed non-callable 287,750 — ( 130 ) 4.31 % 1.16 % 1.76 Basis swaps 1,860,384 112 ( 456 ) 4.40 % 4.42 % 2.46 Treasury futures 6,800 — ( 142 ) 114.38 Netting adjustments (1) ( 5,212 ) 5,212 Total financial derivatives $ 23,878,611 $ 37,409 $ ( 175,326 ) (1) Amounts represent the application of the netting requirements that allow Farmer Mac to settle positive and negative positions, including accrued interest, held or placed with the same clearing agent. As of June 30, 2023, Farmer Mac expects to reclassify $ 16.6 million after-tax from accumulated other comprehensive income to earnings over the next twelve months related to cash flow hedges. This amount could differ from amounts actually recognized due to changes in interest rates, hedge de-designations, and the addition of other hedges after June 30, 2023. During the three and six months ended June 30, 2023 and 2022, there were no gains or losses from interest rate swaps designated as cash flow hedges reclassified to earnings because it was probable that the originally forecasted transactions would occur. 24 The following tables summarize the net income/(expense) recognized in the consolidated statements of operations related to derivatives for the three and six months ended June 30, 2023 and 2022: Table 4.2 For the Three Months Ended June 30, 2023 Net Income/(Expense) Recognized in Consolidated Statement of Operations on Derivatives Net Interest Income Non-Interest Income Total Interest Income Investments and Cash Equivalents Interest Income Farmer Mac Guaranteed Securities and USDA Securities Interest Income Loans Total Interest Expense Gains on financial derivatives (in thousands) Total amounts presented in the consolidated statement of operations $ 69,779 $ 144,761 $ 129,292 $ ( 265,155 ) $ 1,693 $ 80,370 Income/(expense) related to interest settlements on fair value hedging relationships: Recognized on derivatives 8,452 34,999 15,754 ( 88,228 ) — ( 29,023 ) Recognized on hedged items 7,898 45,722 15,848 ( 80,552 ) — ( 11,084 ) Premium/discount amortization recognized on hedged items 508 — — ( 713 ) — ( 205 ) Income/(expense) related to interest settlements on fair value hedging relationships $ 16,858 $ 80,721 $ 31,602 $ ( 169,493 ) $ — $ ( 40,312 ) (Losses)/gains on fair value hedging relationships: Recognized on derivatives $ 30,824 $ 100,862 $ 46,762 $ ( 81,098 ) $ — $ 97,350 Recognized on hedged items ( 31,969 ) ( 101,921 ) ( 49,381 ) 81,020 — ( 102,251 ) (Losses)/gains on fair value hedging relationships $ ( 1,145 ) $ ( 1,059 ) $ ( 2,619 ) $ ( 78 ) $ — $ ( 4,901 ) Expense related to interest settlements on cash flow hedging relationships: Interest settlements reclassified from AOCI into net income on derivatives $ — $ — $ — $ 5,091 $ — $ 5,091 Recognized on hedged items — — — ( 7,848 ) — ( 7,848 ) Discount amortization recognized on hedged items — — — ( 14 ) — ( 14 ) Expense recognized on cash flow hedges $ — $ — $ — $ ( 2,771 ) $ — $ ( 2,771 ) Gains on financial derivatives not designated in hedging relationships: Gains on interest rate swaps $ — $ — $ — $ — $ 2,458 $ 2,458 Interest expense on interest rate swaps — — — — ( 1,568 ) ( 1,568 ) Treasury futures — — — — 803 803 Gains on financial derivatives not designated in hedge relationships $ — $ — $ — $ — $ 1,693 $ 1,693 25 For the Three Months Ended June 30, 2022 Net Income/(Expense) Recognized in Consolidated Statement of Operations on Derivatives Net Interest Income Non-Interest Income Total Interest Income Investments and Cash Equivalents Interest Income Farmer Mac Guaranteed Securities and USDA Securities Interest Income Loans Total Interest Expense Gains on financial derivatives (in thousands) Total amounts presented in the consolidated statement of operations: $ 11,200 $ 51,616 $ 76,632 $ ( 75,534 ) $ 3,791 $ 67,705 Income/(expense) related to interest settlements on fair value hedging relationships: Recognized on derivatives ( 1,008 ) ( 15,693 ) ( 4,459 ) 4,648 — ( 16,512 ) Recognized on hedged items 3,219 34,431 13,669 ( 23,443 ) — 27,876 Discount amortization recognized on hedged items ( 343 ) — — ( 484 ) — ( 827 ) Income/(expense) related to interest settlements on fair value hedging relationships $ 1,868 $ 18,738 $ 9,210 $ ( 19,279 ) $ — $ 10,537 Gains/(losses) on fair value hedging relationships: Recognized on derivatives $ 24,138 $ 148,182 $ 109,419 $ ( 86,481 ) $ — $ 195,258 Recognized on hedged items ( 22,969 ) ( 149,266 ) ( 107,347 ) 84,873 — ( 194,709 ) Gains/(losses) on fair value hedging relationships $ 1,169 $ ( 1,084 ) $ 2,072 $ ( 1,608 ) $ — $ 549 Expense related to interest settlements on cash flow hedging relationships: Interest settlements reclassified from AOCI into net income on derivatives $ — $ — $ — $ ( 1,155 ) $ — $ ( 1,155 ) Recognized on hedged items — — — ( 1,821 ) — ( 1,821 ) Discount amortization recognized on hedged items — — — ( 15 ) — ( 15 ) Expense recognized on cash flow hedges $ — $ — $ — $ ( 2,991 ) $ — $ ( 2,991 ) Gains on financial derivatives not designated in hedge relationships: Gains on interest rate swaps $ — $ — $ — $ — $ 4,284 $ 4,284 Interest expense on interest rate swaps — — — — ( 1,955 ) ( 1,955 ) Treasury futures — — — — 1,462 1,462 Gains on financial derivatives not designated in hedge relationships $ — $ — $ — $ — $ 3,791 $ 3,791 26 For the Six Months Ended June 30, 2023 Net Income/(Expense) Recognized in Consolidated Statement of Operations on Derivatives Net Interest Income Non-Interest Income Total Interest Income Investments and Cash Equivalents Interest Income Farmer Mac Guaranteed Securities and USDA Securities Interest Income Loans Total Interest Expense Gains on financial derivatives (in thousands) Total amounts presented in the consolidated statement of operations $ 129,482 $ 281,298 $ 248,324 $ ( 501,369 ) $ 2,092 $ 159,827 Income/(expense) related to interest settlements on fair value hedging relationships: Recognized on derivatives 15,001 63,909 28,933 ( 165,695 ) — ( 57,852 ) Recognized on hedged items 14,859 87,693 31,056 ( 151,527 ) — ( 17,919 ) Premium/discount amortization recognized on hedged items 776 — — ( 1,404 ) — ( 628 ) Income/(expense) related to interest settlements on fair value hedging relationships $ 30,636 $ 151,602 $ 59,989 $ ( 318,626 ) $ — $ ( 76,399 ) (Losses)/gains on fair value hedging relationships: Recognized on derivatives $ 3,671 $ 7,070 $ ( 9,919 ) $ 41,441 $ — $ 42,263 Recognized on hedged items ( 4,541 ) ( 8,625 ) 7,576 ( 41,679 ) — ( 47,269 ) (Losses)/gains on fair value hedging relationships $ ( 870 ) $ ( 1,555 ) $ ( 2,343 ) $ ( 238 ) $ — $ ( 5,006 ) Expense related to interest settlements on cash flow hedging relationships: Interest settlements reclassified from AOCI into net income on derivatives $ — $ — $ — $ 9,482 $ — $ 9,482 Recognized on hedged items — — — ( 15,038 ) — ( 15,038 ) Discount amortization recognized on hedged items — — — ( 27 ) — ( 27 ) Expense recognized on cash flow hedges $ — $ — $ — $ ( 5,583 ) $ — $ ( 5,583 ) Gains on financial derivatives not designated in hedging relationships: Gains on interest rate swaps $ — $ — $ — $ — $ 2,490 $ 2,490 Interest expense on interest rate swaps — — — — ( 3,193 ) ( 3,193 ) Treasury futures — — — — 2,795 2,795 Gains on financial derivatives not designated in hedge relationships $ — $ — $ — $ — $ 2,092 $ 2,092 27 For the Six Months Ended June 30, 2022 Net Income/(Expense) Recognized in Consolidated Statement of Operations on Derivatives Net Interest Income Non-Interest Income Total Interest Income Investments and Cash Equivalents Interest Income Farmer Mac Guaranteed Securities and USDA Securities Interest Income Loans Total Interest Expense Gains on financial derivatives (in thousands) Total amounts presented in the consolidated statement of operations: $ 16,916 $ 94,536 $ 143,879 $ ( 125,879 ) $ 20,779 $ 150,231 Income/(expense) related to interest settlements on fair value hedging relationships: Recognized on derivatives ( 2,492 ) ( 37,337 ) ( 11,405 ) 18,848 — ( 32,386 ) Recognized on hedged items 5,816 66,359 26,288 ( 41,599 ) — 56,864 Discount amortization recognized on hedged items ( 757 ) — — ( 924 ) — ( 1,681 ) Income/(expense) related to interest settlements on fair value hedging relationships $ 2,567 $ 29,022 $ 14,883 $ ( 23,675 ) $ — $ 22,797 Gains/(losses) on fair value hedging relationships: Recognized on derivatives $ 57,562 $ 362,033 $ 241,351 $ ( 323,494 ) $ — $ 337,452 Recognized on hedged items ( 55,694 ) ( 359,914 ) ( 236,953 ) 321,687 — ( 330,874 ) Gains/(losses) on fair value hedging relationships $ 1,868 $ 2,119 $ 4,398 $ ( 1,807 ) $ — $ 6,578 Expense related to interest settlements on cash flow hedging relationships: Interest settlements reclassified from AOCI into net income on derivatives $ — $ — $ — $ ( 3,166 ) $ — $ ( 3,166 ) Recognized on hedged items — — — ( 2,608 ) — ( 2,608 ) Discount amortization recognized on hedged items — — — ( 29 ) — ( 29 ) Expense recognized on cash flow hedges $ — $ — $ — $ ( 5,803 ) $ — $ ( 5,803 ) Gains on financial derivatives not designated in hedge relationships: Gains on interest rate swaps $ — $ — $ — $ — $ 5,901 $ 5,901 Interest expense on interest rate swaps — — — — ( 2,883 ) ( 2,883 ) Treasury futures — — — — 17,761 17,761 Gains on financial derivatives not designated in hedge relationships $ — $ — $ — $ — $ 20,779 $ 20,779 28 The following table shows the carrying amount and associated cumulative basis adjustment related to the application of hedge accounting that is included in the carrying amount of hedged assets and liabilities in fair value hedging relationships as of June 30, 2023 and December 31, 2022: Table 4.3 Hedged Items in Fair Value Relationship Carrying Amount of Hedged Assets/(Liabilities) Cumulative Amount of Fair Value Hedging Adjustments included in the Carrying Amount of the Hedged Assets/(Liabilities) June 30, 2023 December 31, 2022 June 30, 2023 December 31, 2022 (in thousands) Investment securities, Available-for-Sale, at fair value $ 1,130,332 $ 876,063 $ ( 111,648 ) $ ( 107,107 ) Farmer Mac Guaranteed Securities, Available-for-Sale, at fair value 5,029,633 4,814,784 ( 355,498 ) ( 346,873 ) Loans held for investment, at amortized cost 1,701,539 1,623,301 ( 319,702 ) ( 327,278 ) Notes Payable (1) ( 12,939,984 ) ( 12,151,382 ) 489,407 531,086 (1) Carrying amount represents amortized cost. The following tables present the fair value of financial assets and liabilities, based on the terms of Farmer Mac's master netting arrangements as of June 30, 2023 and December 31, 2022: Table 4.4 June 30, 2023 Gross Amounts Not Offset in the Consolidated Balance Sheet Gross Amount Recognized Gross Amounts offset in the Consolidated Balance Sheet Net Amount Presented in the Consolidated Balance Sheet (1) Netting Adjustments Financial instruments pledged Cash Collateral (2) Net Amount (in thousands) Assets: Uncleared derivatives $ 25,896 $ — $ 25,896 $ ( 25,826 ) $ — $ — $ 70 Cleared derivatives 2,675 ( 2,675 ) — — — — — Total $ 28,571 $ ( 2,675 ) $ 25,896 $ ( 25,826 ) $ — $ — $ 70 Liabilities: Uncleared derivatives $ ( 149,087 ) $ — $ ( 149,087 ) $ 25,826 $ — $ 120,415 $ ( 2,846 ) Cleared derivatives ( 14,627 ) 2,675 ( 11,952 ) — 220,611 — 208,659 Total $ ( 163,714 ) $ 2,675 $ ( 161,039 ) $ 25,826 $ 220,611 $ 120,415 $ 205,813 (1) Amounts presented may not agree to the consolidated balance sheet related to counterparties not subject to master netting agreements. (2) Cash collateral excludes $ 26.7 million of collateral posted related to counterparties not subject to master netting agreements. 29 December 31, 2022 Gross Amounts Not Offset in the Consolidated Balance Sheet Gross Amount Recognized Gross Amounts offset in the Consolidated Balance Sheet Net Amount Presented in the Consolidated Balance Sheet (1) Netting Adjustments Financial instruments pledged Cash Collateral (2) Net Amount (in thousands) Assets: Uncleared derivatives $ 27,132 $ — $ 27,132 $ ( 27,132 ) $ — $ — $ — Cleared derivatives 14,450 ( 5,212 ) 9,238 — 203,993 — 213,231 Total $ 41,582 $ ( 5,212 ) $ 36,370 $ ( 27,132 ) $ 203,993 $ — $ 213,231 Liabilities: Uncleared derivatives $ ( 149,864 ) $ — $ ( 149,864 ) $ 27,132 $ — $ 121,065 $ ( 1,667 ) Cleared derivatives ( 5,212 ) 5,212 — — — — — Total $ ( 155,076 ) $ 5,212 $ ( 149,864 ) $ 27,132 $ — $ 121,065 $ ( 1,667 ) (1) Amounts presented may not agree to the consolidated balance sheet related to counterparties not subject to master netting agreements. (2) Cash collateral excludes $ 23.7 million of collateral posted related to counterparties not subject to master netting agreements. Farmer Mac records posted cash as a reduction in the outstanding balance of cash and cash equivalents and an increase in the balance of prepaid expenses and other assets. Any investment securities posted as collateral are included in the investment securities balances on the consolidated balance sheets. If Farmer Mac had breached certain provisions of the derivative contracts as of June 30, 2023 or December 31, 2022, it could have been required to settle its obligations under the agreements, but would not have been required to post additional collateral. As of June 30, 2023 and December 31, 2022, there were no financial derivatives in a net payable position where Farmer Mac was required to pledge collateral which the counterparty had the right to sell or repledge. Of Farmer Mac's $ 25.3 billion notional amount of interest rate swaps outstanding as of June 30, 2023, $ 20.2 billion were cleared through the swap clearinghouse, the Chicago Mercantile Exchange ("CME"). Of Farmer Mac's $ 23.9 billion notional amount of interest rate swaps outstanding as of December 31, 2022, $ 19.5 billion were cleared through the CME. During 2023 and throughout 2022, Farmer Mac continued the use of non-cleared basis swaps to prepare for the transition away from the use of LIBOR as a reference rate, which was completed as of the end of the quarter. 5. LOANS Farmer Mac classifies loans as either held for investment or held for sale. Loans held for investment are recorded at the unpaid principal balance, net of unamortized premium or discount and other cost basis adjustments. Loans held for sale are reported at the lower of cost or fair value determined on a pooled basis. As of both June 30, 2023 and December 31, 2022, Farmer Mac had no loans held for sale. Under the Agricultural Finance line of business, Farmer Mac has two segments – Farm & Ranch and Corporate AgFinance. The segments are characterized by similarities in risk attributes and the manner in which Farmer Mac monitors and assesses credit risk. 30 The following table includes loans held for investment and displays the composition of the loan balances as of June 30, 2023 and December 31, 2022: Table 5.1 As of June 30, 2023 As of December 31, 2022 Unsecuritized In Consolidated Trusts Total Unsecuritized In Consolidated Trusts Total (in thousands) Agricultural Finance loans Farm & Ranch $ 4,952,272 $ 1,448,180 $ 6,400,452 $ 5,150,750 $ 1,211,576 $ 6,362,326 Corporate AgFinance 1,187,903 — 1,187,903 1,166,253 — 1,166,253 Total Agricultural Finance loans 6,140,175 1,448,180 7,588,355 6,317,003 1,211,576 7,528,579 Rural Infrastructure Finance loans 3,306,767 — 3,306,767 3,021,266 — 3,021,266 Total unpaid principal balance (1) 9,446,942 1,448,180 10,895,122 9,338,269 1,211,576 10,549,845 Unamortized premiums, discounts, fair value hedge basis adjustment, and other cost basis adjustments ( 317,766 ) — ( 317,766 ) ( 329,290 ) — ( 329,290 ) Total loans 9,129,176 1,448,180 10,577,356 9,008,979 1,211,576 10,220,555 Allowance for losses ( 16,200 ) ( 548 ) ( 16,748 ) ( 14,629 ) ( 460 ) ( 15,089 ) Total loans, net of allowance $ 9,112,976 $ 1,447,632 $ 10,560,608 $ 8,994,350 $ 1,211,116 $ 10,205,466 (1) Unpaid principal balance is the basis of presentation in disclosures of outstanding balances for Farmer Mac's lines of business. Allowance for Losses The following table is a summary, by asset type, of the allowance for losses as of June 30, 2023 and December 31, 2022: Table 5.2 June 30, 2023 December 31, 2022 Allowance for Losses Allowance for Losses (in thousands) Loans: Agricultural Finance loans Farm & Ranch $ 3,935 $ 4,044 Corporate AgFinance 7,367 2,731 Total Agricultural Finance Loans 11,302 6,775 Rural Infrastructure Finance loans 5,446 8,314 Total $ 16,748 $ 15,089 31 The following is a summary of the changes in the allowance for losses for the three and six months ended June 30, 2023 and 2022: Table 5.3 June 30, 2023 June 30, 2022 Agricultural Finance loans Rural Infrastructure Finance loans (3) Agricultural Finance loans Rural Infrastructure Finance loans (3) Farm & Ranch (1) Corporate AgFinance (2) Total Farm & Ranch (1) Corporate AgFinance (2) Total (in thousands) For the Three Months Ended Beginning Balance $ 3,933 $ 7,039 $ 10,972 $ 4,701 $ 2,875 $ 1,073 $ 3,948 $ 9,622 Provision for/(release of) losses 2 328 330 745 ( 610 ) 677 67 ( 1,234 ) Charge-offs — — — — — — — — Ending Balance $ 3,935 $ 7,367 $ 11,302 $ 5,446 $ 2,265 $ 1,750 $ 4,015 $ 8,388 For the Six Months Ended Beginning Balance $ 4,044 $ 2,731 $ 6,775 $ 8,314 $ 2,882 $ 560 $ 3,442 $ 10,599 (Release of)/provision for losses ( 109 ) 4,636 4,527 ( 2,868 ) ( 533 ) 1,190 657 ( 2,211 ) Charge-offs — — — — ( 84 ) — ( 84 ) — Ending Balance $ 3,935 $ 7,367 $ 11,302 $ 5,446 $ 2,265 $ 1,750 $ 4,015 $ 8,388 (1) As of June 30, 2023 and 2022, allowance for losses for Agricultural Finance Farm & Ranch loans includes $ 1.1 million and no allowance for collateral dependent assets secured by agricultural real estate, respectively. (2) As of June 30, 2023 and 2022, allowance for losses for Agricultural Finance Corporate AgFinance loans includes $ 4.6 million and $ 1.2 million allowance for collateral dependent assets secured by agricultural real estate, respectively. (3) As of both June 30, 2023 and 2022, allowance for losses for Rural Infrastructure Finance loans includes no allowance for collateral dependent assets. The $ 0.7 million net provision to the allowance for the Rural Infrastructure Finance portfolio during the quarter ended June 30, 2023 was primarily attributable to increased telecommunications loan volume. The $ 0.3 million net provision to the allowance for the Agricultural Finance mortgage loan portfolio during the quarter ended June 30, 2023 was primarily attributable to increased storage and processing loan volume. The $ 2.9 million net release from the allowance for the Rural Infrastructure Finance portfolio during the six months ended June 30, 2023 was primarily attributable to an updated estimate of expected losses based on newly available loss-given-default industry data. The $ 4.5 million net provision to the allowance for the Agricultural Finance mortgage loan portfolio during the six months ended June 30, 2023 was primarily attributable to declining valuation of a single agricultural storage and processing loan, due to its ongoing bankruptcy proceedings, and an updated estimate of expected losses based on additional availability of loss-given-default industry data. See Note 12 ("Subsequent Event") to the consolidated financial statements for more information about this loan based on events that occurred after June 30, 2023. The net release from the allowance for Rural Infrastructure Finance loan losses of $ 1.2 million recorded during second quarter 2022 was primarily attributable to updated credit loss model forecast assumptions and improvements in risk ratings. The $ 0.1 million net provision to the allowance for the Agricultural Finance mortgage loan portfolio during second quarter 2022 was primarily attributable to a risk rating downgrade on a single agricultural storage and processing loan. The $ 2.2 million net release from the allowance for the Rural Infrastructure Finance portfolio for the six months ended June 30, 2022 was primarily attributable to the updated credit loss model forecast assumptions mentioned above and a first quarter risk rating upgrade on a single loan. The risk rating 32 upgrade on that loan reflected that borrower's successful securitization of its large payable that arose during the arctic freeze that struck Texas in February 2021. The $ 0.7 million net provision to the allowance for the Agricultural Finance mortgage loan portfolio for the six months ended June 30, 2022 was primarily attributable to a risk rating downgrade on a single agricultural storage and processing loan. The following table presents the unpaid principal balances by delinquency status of Farmer Mac's loans and non-performing assets as of June 30, 2023 and December 31, 2022: Table 5.4 As of June 30, 2023 Accruing Current 30-59 Days 60-89 Days 90 Days and Greater (2) Total Past Due Nonaccrual loans (3)(4) Total Loans (in thousands) Loans (1) : Agricultural Finance loans Farm & Ranch $ 6,329,423 $ 10,182 $ 1,853 $ 5,887 $ 17,922 $ 53,107 $ 6,400,452 Corporate AgFinance 1,173,307 — — — — 14,596 1,187,903 Total Agricultural Finance loans 7,502,730 10,182 1,853 5,887 17,922 67,703 7,588,355 Rural Infrastructure Finance loans 3,306,767 — — — — — 3,306,767 Total $ 10,809,497 $ 10,182 $ 1,853 $ 5,887 $ 17,922 $ 67,703 $ 10,895,122 (1) Amounts represent unpaid principal balance of risk-rated loans, which is the basis Farmer Mac uses to analyze its portfolio, and recorded investment of past due loans. (2) Includes loans in consolidated trusts with beneficial interests owned by third parties that are 90 days or more past due. (3) Includes loans that are 90 days or more past due, in foreclosure, or in bankruptcy with at least one missed payment, excluding loans performing under either their original loan terms or a court-approved bankruptcy plan. (4) Includes $ 24.1 million of nonaccrual loans for which there was no associated allowance. During the three and six months ended June 30, 2023, Farmer Mac received $ 1.0 million and $ 1.5 million in interest on nonaccrual loans, respectively. As of December 31, 2022 Accruing Current 30-59 Days 60-89 Days 90 Days and Greater (2) Total Past Due Nonaccrual loans (3)(4) Total Loans (in thousands) Loans (1) : Agricultural Finance loans Farm & Ranch $ 6,287,326 $ 10,066 $ 392 $ 1,140 $ 11,598 $ 63,402 $ 6,362,326 Corporate AgFinance 1,150,690 — — — — 15,563 1,166,253 Total Agricultural Finance loans 7,438,016 10,066 392 1,140 11,598 78,965 7,528,579 Rural Infrastructure Finance loans 3,021,266 — — — — — 3,021,266 Total $ 10,459,282 $ 10,066 $ 392 $ 1,140 $ 11,598 $ 78,965 $ 10,549,845 (1) Amounts represent unpaid principal balance of risk-rated loans, which is the basis Farmer Mac uses to analyze its portfolio, and recorded investment of past due loans. (2) Includes loans in consolidated trusts with beneficial interests owned by third parties that are 90 days or more past due. (3) Includes loans that are 90 days or more past due, in foreclosure, or in bankruptcy with at least one missed payment, excluding loans performing under either their original loan terms or a court-approved bankruptcy plan. (4) Includes $ 22.0 million of nonaccrual loans for which there was no associated allowance. During the year ended December 31, 2022, Farmer Mac received $ 5.6 million in interest on nonaccrual loans. 33 Credit Quality Indicators The following tables present credit quality indicators related to Agricultural Finance mortgage loans and Rural Infrastructure Finance loans held as of June 30, 2023 and December 31, 2022, by year of origination: Table 5.5 As of June 30, 2023 Year of Origination: 2023 2022 2021 2020 2019 Prior Revolving Loans - Amortized Cost Basis Total (in thousands) Agricultural Finance - Farm & Ranch loans (1) : Internally Assigned Risk Rating: Acceptable $ 242,874 $ 1,158,625 $ 1,669,627 $ 1,143,164 $ 328,246 $ 1,119,815 $ 362,794 $ 6,025,145 Special mention (2) 21,614 64,223 54,287 24,174 32,361 22,336 14,505 233,500 Substandard (3) 522 9,287 5,527 20,365 23,285 72,087 10,734 141,807 Total $ 265,010 $ 1,232,135 $ 1,729,441 $ 1,187,703 $ 383,892 $ 1,214,238 $ 388,033 $ 6,400,452 For the Three Months Ended June 30, 2023: Current period charge-offs $ — $ — $ — $ — $ — $ — $ — $ — For the Six Months Ended June 30, 2023: Current period charge-offs $ — $ — $ — $ — $ — $ — $ — $ — (1) Amounts represent unpaid principal balance of risk-rated loans, which is the basis Farmer Mac uses to analyze its portfolio, and recorded investment of past due loans. (2) Assets in the "Special mention" category generally have potential weaknesses due to performance issues but are currently considered to be adequately secured. (3) Substandard assets have a well-defined weakness or weaknesses and there is a distinct possibility that some loss will be sustained if deficiencies are not corrected. 34 As of June 30, 2023 Year of Origination: 2023 2022 2021 2020 2019 Prior Revolving Loans - Amortized Cost Basis Total (in thousands) Agricultural Finance - Corporate AgFinance (1) : Internally Assigned Risk Rating: Acceptable $ 88,300 $ 113,819 $ 284,134 $ 124,488 $ 107,044 $ 119,137 $ 262,218 $ 1,099,140 Special mention (2) — — — 51,124 20,541 — 2,502 74,167 Substandard (3) 9,871 — — 1,063 — — 3,662 14,596 Total $ 98,171 $ 113,819 $ 284,134 $ 176,675 $ 127,585 $ 119,137 $ 268,382 $ 1,187,903 For the Three Months Ended June 30, 2023: Current period charge-offs $ — $ — $ — $ — $ — $ — $ — $ — For the Six Months Ended June 30, 2023: Current period charge-offs $ — $ — $ — $ — $ — $ — $ — $ — (1) Amounts represent unpaid principal balance of risk-rated loans, which is the basis Farmer Mac uses to analyze its portfolio, and recorded investment of past due loans. (2) Assets in the "Special mention" category generally have potential weaknesses due to performance issues but are currently considered to be adequately secured. (3) Substandard assets have a well-defined weakness or weaknesses and there is a distinct possibility that some loss will be sustained if deficiencies are not corrected. 35 As of June 30, 2023 Year of Origination: 2023 2022 2021 2020 2019 Prior Revolving Loans - Amortized Cost Basis Total (in thousands) Rural Infrastructure Finance loans (1) : Internally Assigned Risk Rating: Acceptable $ 383,710 $ 732,146 $ 183,029 $ 610,440 $ 720,113 $ 632,462 $ 44,867 $ 3,306,767 Special mention (2) — — — — — — — — Substandard (3) — — — — — — — — Total $ 383,710 $ 732,146 $ 183,029 $ 610,440 $ 720,113 $ 632,462 $ 44,867 $ 3,306,767 For the Three Months Ended June 30, 2023: Current period charge-offs $ — $ — $ — $ — $ — $ — $ — $ — For the Six Months Ended June 30, 2023: Current period charge-offs $ — $ — $ — $ — $ — $ — $ — $ — (1) Amounts represent unpaid principal balance of risk-rated loans, which is the basis Farmer Mac uses to analyze its portfolio, and recorded investment of past due loans. (2) Assets in the "Special mention" category generally have potential weaknesses due to performance issues but are currently considered to be adequately secured. (3) Substandard assets have a well-defined weakness or weaknesses and there is a distinct possibility that some loss will be sustained if deficiencies are not corrected. As of December 31, 2022 Year of Origination: 2022 2021 2020 2019 2018 Prior Revolving Loans - Amortized Cost Basis Total (in thousands) Agricultural Finance - Farm & Ranch loans (1) : Internally Assigned Risk Rating: Acceptable $ 1,157,829 $ 1,704,547 $ 1,187,474 $ 360,704 $ 242,491 $ 947,535 $ 385,503 $ 5,986,083 Special mention (2) 91,099 68,260 25,629 11,254 5,325 17,797 2,452 221,816 Substandard (3) 3,094 8,814 22,976 23,937 17,845 67,654 10,107 154,427 Total $ 1,252,022 $ 1,781,621 $ 1,236,079 $ 395,895 $ 265,661 $ 1,032,986 $ 398,062 $ 6,362,326 For the Three Months Ended June 30, 2022: Current period charge-offs $ — $ — $ — $ — $ — $ — $ — $ — For the Six Months Ended June 30, 2022: Current period charge-offs $ — $ — $ — $ — $ — $ ( 84 ) $ — $ ( 84 ) (1) Amounts represent unpaid principal balance of risk-rated loans, which is the basis Farmer Mac uses to analyze its portfolio, and recorded investment of past due loans. (2) Assets in the "Special mention" category generally have potential weaknesses due to performance issues but are currently considered to be adequately secured. (3) Substandard assets have a well-defined weakness or weaknesses and there is a distinct possibility that some loss will be sustained if deficiencies are not corrected. 36 As of December 31, 2022 Year of Origination: 2022 2021 2020 2019 2018 Prior Revolving Loans - Amortized Cost Basis Total (in thousands) Agricultural Finance - Corporate AgFinance loans (1) : Internally Assigned Risk Rating: Acceptable $ 145,263 $ 299,729 $ 221,560 $ 108,230 $ 76,454 $ 44,827 $ 232,107 $ 1,128,170 Special mention (2) — — — 20,698 — — 2,145 22,843 Substandard (3) — — 4,598 — — — 10,642 15,240 Total $ 145,263 $ 299,729 $ 226,158 $ 128,928 $ 76,454 $ 44,827 $ 244,894 $ 1,166,253 For the Three Months Ended June 30, 2022: Current period charge-offs $ — $ — $ — $ — $ — $ — $ — $ — For the Six Months Ended June 30, 2022: Current period charge-offs $ — $ — $ — $ — $ — $ — $ — $ — (1) Amounts represent unpaid principal balance of risk-rated loans, which is the basis Farmer Mac uses to analyze its portfolio, and recorded investment of past due loans. (2) Assets in the "Special mention" category generally have potential weaknesses due to performance issues but are currently considered to be adequately secured. (3) Substandard assets have a well-defined weakness or weaknesses and there is a distinct possibility that some loss will be sustained if deficiencies are not corrected. As of December 31, 2022 Year of Origination: 2022 2021 2020 2019 2018 Prior Revolving Loans - Amortized Cost Basis Total (in thousands) Rural Infrastructure Finance loans (1) : Internally Assigned Risk Rating: Acceptable $ 741,021 $ 220,420 $ 629,223 $ 739,270 $ 7,932 $ 649,830 $ 33,570 $ 3,021,266 Special mention (2) — — — — — — — — Substandard (3) — — — — — — — — Total $ 741,021 $ 220,420 $ 629,223 $ 739,270 $ 7,932 $ 649,830 $ 33,570 $ 3,021,266 For the Three Months Ended June 30, 2022: Current period charge-offs $ — $ — $ — $ — $ — $ — $ — $ — For the Six Months Ended June 30, 2022: Current period charge-offs $ — $ — $ — $ — $ — $ — $ — $ — (1) Amounts represent unpaid principal balance of risk-rated loans, which is the basis Farmer Mac uses to analyze its portfolio, and recorded investment of past due loans. (2) Assets in the "Special mention" category generally have potential weaknesses due to performance issues but are currently considered to be adequately secured. 37 (3) Substandard assets have a well-defined weakness or weaknesses and there is a distinct possibility that some loss will be sustained if deficiencies are not corrected. 6. GUARANTEES AND COMMITMENTS The following table presents the maximum principal amount of potential undiscounted future payments that Farmer Mac could be required to make under all off-balance sheet Farmer Mac Guaranteed Securities as of June 30, 2023 and December 31, 2022, not including offsets provided by any recourse provisions, recoveries from third parties, or collateral for the underlying loans: Table 6.1 Outstanding Balance of Off-Balance Sheet Farmer Mac Guaranteed Securities As of June 30, 2023 As of December 31, 2022 (in thousands) Agricultural Finance Farmer Mac Guaranteed Securities $ 481,397 $ 500,953 Rural Infrastructure Finance Farmer Mac Guaranteed Securities 1,098 1,169 Total off-balance sheet Farmer Mac Guaranteed Securities $ 482,495 $ 502,122 Eligible loans and other eligible assets may be placed into trusts that are used as vehicles for the securitization of the transferred assets and the Farmer Mac-guaranteed beneficial interests in the trusts are sold to investors. The following table summarizes the significant cash flows received from and paid to trusts used for Farmer Mac securitizations: Table 6.2 For the Six Months Ended June 30, 2023 June 30, 2022 (in thousands) Proceeds from new securitizations $ 222,188 $ 25,928 Guarantee fees received 933 1,074 Farmer Mac presents a liability for its obligation to stand ready under its guarantee in "Guarantee and commitment obligation" on the consolidated balance sheets. The following table presents the liability and the weighted-average remaining maturity of all loans underlying off-balance sheet Farmer Mac Guaranteed Securities: Table 6.3 As of June 30, 2023 As of December 31, 2022 (dollars in thousands) Guarantee and commitment obligation $ 6,200 $ 6,461 Weighted average remaining maturity: Farmer Mac Guaranteed Securities 21.2 years 21.4 years AgVantage Securities 1.5 years 2.0 years 38 Long-Term Standby Purchase Commitments Farmer Mac has recorded a liability for its obligation to stand ready under the commitment in the guarantee and commitment obligation on the consolidated balance sheets. The following table presents the liability, the maximum principal amount of potential undiscounted future payments that Farmer Mac could be requested to make under all LTSPCs, not including offsets provided by any recourse provisions, recoveries from third parties, or collateral for the underlying loans, as well as the weighted-average remaining maturity of all loans underlying LTSPCs: Table 6.4 As of June 30, 2023 As of December 31, 2022 (dollars in thousands) Guarantee and commitment obligation (1) $ 39,672 $ 40,121 Maximum principal amount 3,450,164 3,423,155 Weighted-average remaining maturity 14.8 years 15.3 years (1) Relates to LTSPCs issued or modified on or after January 1, 2003. Reserve for Losses - LTSPCs and Farmer Mac Guaranteed Securities The following table is a summary, by asset type, of the reserve for losses as of June 30, 2023 and December 31, 2022: Table 6.5 June 30, 2023 December 31, 2022 Reserve for Losses Reserve for Losses (in thousands) Agricultural Finance $ 1,471 $ 819 Rural Infrastructure Finance 234 614 Total $ 1,705 $ 1,433 39 The following is a summary of the changes in the reserve for losses for the three and six month periods ended June 30, 2023 and 2022: Table 6.6 For the Three Months Ended For the Six Months Ended June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022 Reserve for Losses Reserve for Losses Reserve for Losses Reserve for Losses (in thousands) (in thousands) Agricultural Finance Beginning Balance $ 1,396 $ 993 $ 819 $ 1,068 Provision for/(release of )losses 75 ( 111 ) 652 ( 186 ) Ending Balance $ 1,471 $ 882 $ 1,471 $ 882 Rural Infrastructure Finance Beginning Balance $ 240 $ 847 $ 614 $ 882 Release of losses ( 6 ) ( 52 ) ( 380 ) ( 87 ) Ending Balance $ 234 $ 795 $ 234 $ 795 The provision for the reserve for losses in the Agricultural Finance LTSPC portfolio recorded during the six months ended June 30, 2023 was primarily due to an updated estimate of expected losses based on additional available loss-given-default industry data. The release from the reserve for losses in the Rural Infrastructure Finance LTSPC portfolio recorded during the six months ended June 30, 2023 was primarily due to an updated estimate of expected losses based on additional available loss-given-default industry data. The release from the reserve for losses in both the Agricultural Finance and Rural Infrastructure Finance LTSPC and Farmer Mac Guaranteed portfolios recorded during the three and six months ended June 30, 2022 was primarily due to improvements in risk ratings in those portfolios. The following table presents the unpaid principal balances by delinquency status of Agricultural Finance and Rural Infrastructure loans underlying LTSPCs and Farmer Mac Guaranteed Securities as of June 30, 2023 and December 31, 2022: 40 Table 6.7 As of June 30, 2023 Current 30-59 Days 60-89 Days 90 Days and Greater (1) Total Past Due Total Loans (in thousands) Agricultural Finance: $ 3,227,645 $ 5,630 $ — $ 4,570 $ 10,200 $ 3,237,845 Rural Infrastructure Finance: 490,414 — — — — 490,414 Total $ 3,718,059 $ 5,630 $ — $ 4,570 $ 10,200 $ 3,728,259 (1) Includes loans underlying off-balance sheet Farmer Mac Guaranteed Securities and LTSPCs that are 90 days of more past due, in foreclosure, or in bankruptcy with at least one missed payment, excluding loans performing under either their original loan terms or a court-approved bankruptcy plan. As of December 31, 2022 Current 30-59 Days 60-89 Days 90 Days and Greater (1) Total Past Due Total Loans (in thousands) Agricultural Finance: $ 3,174,939 $ 11,614 $ 622 $ 3,817 $ 16,053 $ 3,190,992 Rural Infrastructure Finance: 523,192 — — — — 523,192 Total $ 3,698,131 $ 11,614 $ 622 $ 3,817 $ 16,053 $ 3,714,184 (1) Includes loans underlying off-balance sheet Farmer Mac Guaranteed Securities and LTSPCs that are 90 days of more past due, in foreclosure, or in bankruptcy with at least one missed payment, excluding loans performing under either their original loan terms or a court-approved bankruptcy plan. Credit Quality Indicators The following tables present credit quality indicators related to Agricultural Finance and Rural Infrastructure loans underlying LTSPCs and Farmer Mac Guaranteed Securities as of June 30, 2023 and December 31, 2022, by year of origination: 41 Table 6.8 As of June 30, 2023 Year of Origination: 2023 2022 2021 2020 2019 Prior Revolving Loans - Amortized Cost Basis Total (in thousands) Agricultural Finance: Internally Assigned Risk Rating: Acceptable $ 80,415 $ 225,112 $ 488,832 $ 531,946 $ 250,650 $ 1,238,946 $ 333,072 $ 3,148,973 Special mention (1) 7,790 73 1,300 881 — 38,400 2,200 50,644 Substandard (2) — — — 154 997 32,874 4,203 38,228 Total $ 88,205 $ 225,185 $ 490,132 $ 532,981 $ 251,647 $ 1,310,220 $ 339,475 $ 3,237,845 For the Three Months Ended June 30, 2023: Current period charge-offs $ — $ — $ — $ — $ — $ — $ — $ — For the Six Months Ended June 30, 2023: Current period charge-offs $ — $ — $ — $ — $ — $ — $ — $ — (1) Assets in the "Special mention" category generally have potential weaknesses due to performance issues but are currently considered to be adequately secured. (2) Substandard assets have a well-defined weakness or weaknesses and there is a distinct possibility that some loss will be sustained if deficiencies are not corrected. As of June 30, 2023 Year of Origination: 2023 2022 2021 2020 2019 Prior Revolving Loans - Amortized Cost Basis Total (in thousands) Rural Infrastructure Finance: Internally Assigned Risk Rating: Acceptable $ — $ — $ — $ — $ — $ 433,896 $ 56,518 $ 490,414 Special mention (1) — — — — — — — — Substandard (2) — — — — — — — — Total $ — $ — $ — $ — $ — $ 433,896 $ 56,518 $ 490,414 For the Three Months Ended June 30, 2023: Current period charge-offs $ — $ — $ — $ — $ — $ — $ — $ — For the Six Months Ended June 30, 2023: Current period charge-offs $ — $ — $ — $ — $ — $ — $ — $ — (1) Assets in the "Special mention" category generally have potential weaknesses due to performance issues but are currently considered to be adequately secured. (2) Substandard assets have a well-defined weakness or weaknesses and there is a distinct possibility that some loss will be sustained if deficiencies are not corrected. 42 As of December 31, 2022 Year of Origination: 2022 2021 2020 2019 2018 Prior Revolving Loans - Amortized Cost Basis Total (in thousands) Agricultural Finance: Internally Assigned Risk Rating: Acceptable $ 202,998 $ 496,269 $ 535,798 $ 254,293 $ 207,379 $ 1,107,834 $ 296,508 $ 3,101,079 Special mention (1) — 1,319 1,778 — 1,198 42,680 3,205 50,180 Substandard (2) — — 176 — 3,588 32,597 3,372 39,733 Total $ 202,998 $ 497,588 $ 537,752 $ 254,293 $ 212,165 $ 1,183,111 $ 303,085 $ 3,190,992 For the Three Months Ended June 30, 2022: Current period charge-offs $ — $ — $ — $ — $ — $ — $ — $ — For the Six Months Ended June 30, 2022: Current period charge-offs $ — $ — $ — $ — $ — $ — $ — $ — (1) Assets in the "Special mention" category generally have potential weaknesses due to performance issues but are currently considered to be adequately secured. (2) Substandard assets have a well-defined weakness or weaknesses and there is a distinct possibility that some loss will be sustained if deficiencies are not corrected. As of December 31, 2022 Year of Origination: 2022 2021 2020 2019 2018 Prior Revolving Loans - Amortized Cost Basis Total (in thousands) Rural Infrastructure Finance: Internally Assigned Risk Rating: Acceptable $ — $ — $ — $ — $ — $ 470,659 $ 52,533 $ 523,192 Special mention (1) — — — — — — — — Substandard (2) — — — — — — — — Total $ — $ — $ — $ — $ — $ 470,659 $ 52,533 $ 523,192 For the Three Months Ended June 30, 2022: Current period charge-offs $ — $ — $ — $ — $ — $ — $ — $ — For the Six Months Ended June 30, 2022: Current period charge-offs $ — $ — $ — $ — $ — $ — $ — $ — (1) Assets in the "Special mention" category generally have potential weaknesses due to performance issues but are currently considered to be adequately secured. (2) Substandard assets have a well-defined weakness or weaknesses and there is a distinct possibility that some loss will be sustained if deficiencies are not corrected. 43 7. NOTES PAYABLE Farmer Mac's borrowings consist of discount notes and medium-term notes, both of which are unsecured general obligations of Farmer Mac. Discount notes generally have original maturities of 1 year or less, whereas medium-term notes generally have maturities of 0.5 years to 25.0 years. The following tables set forth information related to Farmer Mac's borrowings as of June 30, 2023 and December 31, 2022: Table 7.1 June 30, 2023 Outstanding as of June 30 Average Outstanding During the Quarter Amount Weighted- Average Rate Amount Weighted- Average Rate (dollars in thousands) Due within one year: Discount notes $ 954,611 4.91 % $ 802,684 4.67 % Medium-term notes 1,921,890 4.21 % 2,371,610 3.86 % Current portion of medium-term notes 5,454,397 2.05 % Total due within one year $ 8,330,898 2.87 % Due after one year: Medium-term notes due in: Two years $ 4,377,382 2.58 % Three years 3,346,872 2.00 % Four years 3,109,837 2.18 % Five years 2,096,324 3.81 % Thereafter 3,738,098 2.73 % Total due after one year $ 16,668,513 2.58 % Total principal net of discounts $ 24,999,411 2.68 % Hedging adjustments ( 489,407 ) Total $ 24,510,004 44 December 31, 2022 Outstanding as of December 31 Average Outstanding During the Year Amount Weighted- Average Rate Amount Weighted- Average Rate (dollars in thousands) Due within one year: Discount notes $ 565,578 3.91 % $ 1,325,026 0.96 % Medium-term notes 2,547,733 3.54 % 1,442,932 2.11 % Current portion of medium-term notes 4,920,864 1.49 % Total due within one year $ 8,034,175 2.31 % Due after one year: Medium-term notes due in: Two years $ 4,072,740 1.71 % Three years 3,506,480 2.10 % Four years 2,967,625 1.44 % Five years 2,361,197 3.12 % Thereafter 4,057,982 2.60 % Total due after one year $ 16,966,024 2.15 % Total principal net of discounts $ 25,000,199 2.20 % Hedging adjustments ( 531,086 ) Total $ 24,469,113 The maximum amount of Farmer Mac's discount notes outstanding at any month end during the six months ended June 30, 2023 and 2022 was $ 1.0 billion and $ 2.2 billion, respectively. Callable medium-term notes give Farmer Mac the option to redeem the debt at par value on a specified call date or at any time on or after a specified call date. The following table summarizes by maturity date the amounts and costs for Farmer Mac debt callable in 2023 as of June 30, 2023: Table 7.2 Debt Callable in 2023 as of June 30, 2023, by Maturity Amount Weighted-Average Rate (dollars in thousands) Maturity: 2024 $ 1,038,243 3.61 % 2025 771,937 2.10 % 2026 1,184,809 1.46 % 2027 650,076 2.30 % Thereafter 1,698,156 2.21 % Total $ 5,343,221 2.31 % 45 The following schedule summarizes the earliest interest rate reset date, or debt maturities, of total borrowings outstanding as of June 30, 2023, including callable and non-callable medium-term notes, assuming callable notes are redeemed at the initial call date: Table 7.3 Earliest Interest Rate Reset Date, or Debt Maturities, of Borrowings Outstanding Amount Weighted-Average Rate (dollars in thousands) Debt with interest rate resets, or debt maturities in: 2023 $ 6,635,570 3.56 % 2024 5,058,851 2.38 % 2025 3,817,242 2.32 % 2026 3,133,807 1.61 % 2027 2,433,415 3.06 % Thereafter 3,920,526 2.51 % Total principal net of discounts $ 24,999,411 2.68 % During the six months ended June 30, 2023 and 2022, Farmer Mac called none and $ 26.0 million of callable medium-term notes, respectively. Authority to Borrow from the U.S. Treasury Farmer Mac's statutory charter authorizes it, upon satisfying certain conditions, to borrow up to $ 1.5 billion from the U.S. Treasury through the issuance of debt obligations to the U.S. Treasury. Any funds borrowed from the U.S. Treasury may be used solely to fulfill Farmer Mac's guarantee obligations. Any debt obligations issued by Farmer Mac under this authority would bear interest at a rate determined by the U.S. Treasury, taking into consideration the average rate on outstanding marketable obligations of the United States as of the last day of the last calendar month ending before the date of the purchase of the obligations from Farmer Mac. The charter requires Farmer Mac to repurchase any of its debt obligations held by the U.S. Treasury within a reasonable time. As of June 30, 2023, Farmer Mac had not used this borrowing authority. Gains on Repurchases of Outstanding Debt No outstanding debt repurchases were made in the six months ended June 30, 2023 and 2022. 8. EQUITY Common Stock During first and second quarter 2023, Farmer Mac paid a quarterly dividend of $ 1.10 per share on all classes of its common stock. For each quarter in 2022, Farmer Mac paid a quarterly dividend of $ 0.95 per share on all classes of its common stock. Farmer Mac's board of directors approved a share repurchase program during third quarter 2015 authorizing Farmer Mac to repurchase up to $ 25.0 million of its outstanding Class C non-voting common stock. The share repurchase program, last modified on March 14, 2019, authorized Farmer Mac to 46 repurchase up to $ 10.0 million of Farmer Mac's outstanding Class C non-voting common stock. During first quarter 2020, Farmer Mac repurchased approximately 4,000 shares of Class C non-voting common stock at a cost of approximately $ 0.2 million. Shortly after these repurchases were completed, Farmer Mac indefinitely suspended its share repurchase program in an effort to preserve capital and liquidity in view of market volatility and uncertainty caused by the COVID-19 pandemic. In March 2021, Farmer Mac's board of directors reinstated the share repurchase program on its previous terms (with a remaining authorization of up to $ 9.8 million in stock repurchases) and extended the expiration date of the program to March 2023. Farmer Mac did no t repurchase any shares of its Class C non-voting common stock during that two-year period. In February 2023, Farmer Mac's board of directors renewed the share repurchase program on its previous terms (with a remaining authorization of up to $ 9.8 million in stock repurchases) and extended the expiration date of the program to February 2025. Farmer Mac did no t repurchase any shares of its Class C non-voting common stock during second quarter 2023. As of June 30, 2023, Farmer Mac had repurchased approximately 673,000 shares of Class C non-voting common stock at a cost of approximately $ 19.8 million under the share repurchase program since 2015. Capital Requirements Farmer Mac is required to comply with the higher of the minimum capital requirement and the risk-based capital requirement. As of both June 30, 2023 and December 31, 2022, the minimum capital requirement was greater than the risk-based capital requirement. Farmer Mac's ability to declare and pay dividends could be restricted if it fails to comply with applicable capital requirements. As of June 30, 2023, Farmer Mac's minimum capital requirement was $ 814.7 million and its core capital level was $ 1.4 billion, which was $ 566.2 million above the minimum capital requirement as of that date. As of December 31, 2022, Farmer Mac's minimum capital requirement was $ 805.9 million and its core capital level was $ 1.3 billion, which was $ 516.9 million above the minimum capital requirement as of that date. In accordance with a rule of the Farm Credit Administration ("FCA") on Farmer Mac's capital planning, and as part of Farmer Mac's capital plan, Farmer Mac has adopted a policy for maintaining a sufficient level of Tier 1 capital (consisting of retained earnings, paid-in-capital, common stock, and qualifying preferred stock) and imposing restrictions on Tier 1-eligible dividends and any discretionary bonus payments in the event that this capital falls below specified thresholds. 47 9. FAIR VALUE DISCLOSURES Fair Value Classification and Transfers The following tables present information about Farmer Mac's assets and liabilities measured at fair value on a recurring basis as of June 30, 2023 and December 31, 2022, respectively, and indicate the fair value hierarchy of the valuation techniques used by Farmer Mac to determine such fair value: Table 9.1 Assets and Liabilities Measured at Fair Value as of June 30, 2023 Level 1 Level 2 Level 3 (1) Total (in thousands) Recurring: Assets: Investment Securities: Available-for-sale: Floating rate auction-rate certificates backed by Government guaranteed student loans $ — $ — $ 19,032 $ 19,032 Floating rate Government/GSE guaranteed mortgage-backed securities — 2,442,610 — 2,442,610 Fixed rate GSE guaranteed mortgage-backed securities — 1,360,784 — 1,360,784 Floating rate U.S. Treasuries 49,998 — — 49,998 Fixed rate U.S. Treasuries 845,195 — — 845,195 Total Available-for-sale Investment Securities 895,193 3,803,394 19,032 4,717,619 Farmer Mac Guaranteed Securities: Available-for-sale: AgVantage — — 7,737,810 7,737,810 Farmer Mac Guaranteed Securities — — 7,605 7,605 Total Farmer Mac Guaranteed Securities — — 7,745,415 7,745,415 USDA Securities: Trading — — 1,348 1,348 Total USDA Securities — — 1,348 1,348 Financial derivatives 71 26,753 — 26,824 Guarantee Asset — — 4,331 4,331 Total Assets at fair value $ 895,264 $ 3,830,147 $ 7,770,126 $ 12,495,537 Liabilities: Financial derivatives $ — $ 188,652 $ — $ 188,652 Total Liabilities at fair value $ — $ 188,652 $ — $ 188,652 (1) Level 3 assets represent 28 % of total assets and 61 % of financial instruments measured at fair value. 48 Assets and Liabilities Measured at Fair Value as of December 31, 2022 Level 1 Level 2 Level 3 (1) Total (in thousands) Recurring: Assets: Investment Securities: Available-for-sale: Floating rate auction-rate certificates backed by Government guaranteed student loans $ — $ — $ 19,027 $ 19,027 Floating rate Government/GSE guaranteed mortgage-backed securities — 2,392,540 — 2,392,540 Fixed rate GSE guaranteed mortgage-backed securities — 1,048,386 — 1,048,386 Fixed rate U.S. Treasuries 1,119,611 — — 1,119,611 Total Available-for-sale Investment Securities 1,119,611 3,440,926 19,027 4,579,564 Farmer Mac Guaranteed Securities: Available-for-sale: AgVantage — — 7,599,379 7,599,379 Farmer Mac Guaranteed Securities — — 7,847 7,847 Total Farmer Mac Guaranteed Securities — — 7,607,226 7,607,226 USDA Securities: Trading — — 1,767 1,767 Total USDA Securities — — 1,767 1,767 Financial derivatives — 37,409 — 37,409 Guarantee Asset — — 4,467 4,467 Total Assets at fair value $ 1,119,611 $ 3,478,335 $ 7,632,487 $ 12,230,433 Liabilities: Financial derivatives $ 142 $ 175,184 $ — $ 175,326 Total Liabilities at fair value $ 142 $ 175,184 $ — $ 175,326 (1) Level 3 assets represent 28 % of total assets and 62 % of financial instruments measured at fair value. There were no material assets or liabilities measured at fair value on a non-recurring basis as of June 30, 2023 or December 31, 2022. Transfers in and/or out of the different levels within the fair value hierarchy are based on the fair values of the assets and liabilities as of the beginning of the reporting period. During the six months ended June 30, 2023 and 2022, there were no transfers within the fair value hierarchy. 49 The following tables present additional information about assets and liabilities measured at fair value on a recurring basis for which Farmer Mac has used significant unobservable inputs to determine fair value. Net transfers in and/or out of Level 3 are based on the fair values of the assets and liabilities as of the beginning of the reporting period. There were no liabilities measured at fair value using significant unobservable inputs during the three and six months ended June 30, 2023 and 2022. Table 9.2 Level 3 Assets and Liabilities Measured at Fair Value for the Three Months Ended June 30, 2023 Beginning Balance Purchases Settlements Allowance for Losses Realized and unrealized losses included in Income Unrealized gains included in Other Comprehensive Income Ending Balance (in thousands) Recurring: Assets: Investment Securities: Available-for-sale: Floating rate auction-rate certificates backed by Government guaranteed student loans $ 19,031 $ — $ — $ 1 $ — $ — $ 19,032 Total available-for-sale 19,031 — — 1 — — 19,032 Farmer Mac Guaranteed Securities: Available-for-sale: AgVantage 8,217,420 852,000 ( 1,257,413 ) 8 ( 101,872 ) 27,667 7,737,810 Farmer Mac Guaranteed Securities 8,034 — ( 441 ) — — 12 7,605 Total available-for-sale 8,225,454 852,000 ( 1,257,854 ) 8 ( 101,872 ) 27,679 7,745,415 USDA Securities: Trading 1,405 — ( 48 ) — ( 9 ) — 1,348 Total USDA Securities 1,405 — ( 48 ) — ( 9 ) — 1,348 Guarantee and commitment obligations: Guarantee Asset 4,570 — ( 191 ) — ( 48 ) — 4,331 Total Guarantee and commitment obligations 4,570 — ( 191 ) — ( 48 ) — 4,331 Total Assets at fair value $ 8,250,460 $ 852,000 $ ( 1,258,093 ) $ 9 $ ( 101,929 ) $ 27,679 $ 7,770,126 50 Level 3 Assets and Liabilities Measured at Fair Value for the Three Months Ended June 30, 2022 Beginning Balance Purchases Settlements Allowance for Losses Realized and unrealized (losses)/gains included in Income Unrealized gains/(losses) included in Other Comprehensive Income Ending Balance (in thousands) Recurring: Assets: Investment Securities: Available-for-sale: Floating rate auction-rate certificates backed by Government guaranteed student loans $ 18,961 $ — $ — $ 1 $ — $ 99 $ 19,061 Total available-for-sale 18,961 — — 1 — 99 19,061 Farmer Mac Guaranteed Securities: Available-for-sale: AgVantage 6,589,224 520,000 ( 513,342 ) 84 ( 149,205 ) ( 6,365 ) 6,440,396 Farmer Mac Guaranteed Securities 11,022 — ( 358 ) — — ( 848 ) 9,816 Total available-for-sale 6,600,246 520,000 ( 513,700 ) 84 ( 149,205 ) ( 7,213 ) 6,450,212 USDA Securities: Trading 3,386 — ( 1,140 ) — 29 — 2,275 Total USDA Securities 3,386 — ( 1,140 ) — 29 — 2,275 Guarantee and commitment obligations: Guarantee Asset 6,138 — ( 188 ) — ( 314 ) — 5,636 Total Guarantee and commitment obligations 6,138 — ( 188 ) — ( 314 ) — 5,636 Total Assets at fair value $ 6,628,731 $ 520,000 $ ( 515,028 ) $ 85 $ ( 149,490 ) $ ( 7,114 ) $ 6,477,184 Level 3 Assets and Liabilities Measured at Fair Value for the Six Months Ended June 30, 2023 Beginning Balance Purchases Settlements Allowance for Losses Realized and unrealized (losses)/gains included in Income Unrealized gains included in Other Comprehensive Income Ending Balance (in thousands) Recurring: Assets: Investment Securities: Available-for-sale: Floating rate auction-rate certificates backed by Government guaranteed student loans $ 19,027 $ — $ — $ 5 $ — $ — $ 19,032 Total available-for-sale 19,027 — — 5 — — 19,032 Farmer Mac Guaranteed Securities: Available-for-sale: AgVantage 7,599,379 1,539,650 ( 1,398,799 ) 40 ( 8,530 ) 6,070 7,737,810 Farmer Mac Guaranteed Securities 7,847 — ( 874 ) — — 632 7,605 Total available-for-sale 7,607,226 1,539,650 ( 1,399,673 ) 40 ( 8,530 ) 6,702 7,745,415 USDA Securities: Trading 1,767 — ( 435 ) — 16 — 1,348 Total USDA Securities 1,767 — ( 435 ) — 16 — 1,348 Guarantee and commitment obligations: Guarantee Asset 4,467 — ( 422 ) — 286 — 4,331 Total Guarantee and commitment obligations 4,467 — ( 422 ) — 286 — 4,331 Total Assets at fair value $ 7,632,487 $ 1,539,650 $ ( 1,400,530 ) $ 45 $ ( 8,228 ) $ 6,702 $ 7,770,126 51 Level 3 Assets and Liabilities Measured at Fair Value for the Six Months Ended June 30, 2022 Beginning Balance Purchases Settlements Allowance for Losses Realized and unrealized losses included in Income Unrealized losses included in Other Comprehensive Income Ending Balance (in thousands) Recurring: Assets: Investment Securities: Available-for-sale: Floating rate auction-rate certificates backed by Government guaranteed student loans $ 19,254 $ — $ — $ 3 $ — $ ( 196 ) $ 19,061 Total available-for-sale 19,254 — — 3 — ( 196 ) 19,061 Farmer Mac Guaranteed Securities: Available-for-sale: AgVantage 6,316,145 1,352,750 ( 808,626 ) ( 334 ) ( 359,792 ) ( 59,747 ) 6,440,396 Farmer Mac Guaranteed Securities 12,414 — ( 737 ) — — ( 1,861 ) 9,816 Total available-for-sale 6,328,559 1,352,750 ( 809,363 ) ( 334 ) ( 359,792 ) ( 61,608 ) 6,450,212 USDA Securities: Trading 4,401 — ( 2,092 ) — ( 34 ) — 2,275 Total USDA Securities 4,401 — ( 2,092 ) — ( 34 ) — 2,275 Guarantee and commitment obligations: Guarantee Asset 6,237 — ( 443 ) — ( 158 ) — 5,636 Total Guarantee and commitment obligations 6,237 — ( 443 ) — ( 158 ) — 5,636 Total Assets at fair value $ 6,358,451 $ 1,352,750 $ ( 811,898 ) $ ( 331 ) $ ( 359,984 ) $ ( 61,804 ) $ 6,477,184 52 The following tables present additional information about the significant unobservable inputs, such as discount rates and constant prepayment rates ("CPR"), used in the fair value measurements categorized in Level 3 of the fair value hierarchy as of June 30, 2023 and December 31, 2022: Table 9.3 As of June 30, 2023 Financial Instruments Fair Value Valuation Technique Unobservable Input Range (Weighted-Average) (in thousands) Assets: Investment securities: Floating rate auction-rate certificates backed by Government guaranteed student loans $ 19,032 Indicative bids Range of broker quotes 96.8 % - 96.8 % ( 96.8 %) Farmer Mac Guaranteed Securities: AgVantage $ 7,737,810 Discounted cash flow Discount rate 4.9 % - 6.9 % ( 5.5 %) Farmer Mac Guaranteed Securities $ 7,605 Discounted cash flow Discount rate 4.9 % - 5.4 % ( 5.2 %) CPR 8 % USDA Securities $ 1,348 Discounted cash flow Discount rate 5.6 % - 5.9 % ( 5.6 %) CPR 12 % - 13 % ( 13 %) Guarantee Asset $ 4,331 Discounted cash flow Discount rate 5.5 % - 6.0 % ( 5.7 %) CPR 8 % As of December 31, 2022 Financial Instruments Fair Value Valuation Technique Unobservable Input Range (Weighted-Average) (in thousands) Assets: Investment securities: Floating rate auction-rate certificates backed by Government guaranteed student loans $ 19,027 Indicative bids Range of broker quotes 96.8 % - 96.8 % ( 96.8 %) Farmer Mac Guaranteed Securities: AgVantage $ 7,599,379 Discounted cash flow Discount rate 4.7 % - 6.1 % ( 5.1 %) Farmer Mac Guaranteed Securities $ 7,847 Discounted cash flow Discount rate 4.8 % - 5.3 % ( 5.1 %) CPR 8 % USDA Securities $ 1,767 Discounted cash flow Discount rate 5.1 % - 5.7 % ( 5.3 %) CPR 19 % - 27 % ( 25 %) Guarantee Asset $ 4,467 Discounted cash flow Discount rate 5.4 % - 5.9 % ( 5.7 %) CPR 8 % The significant unobservable input used in the fair value measurements of AgVantage Farmer Mac Guaranteed Securities is the discount rate commensurate with the risks involved. Typically, significant increases (decreases) in this input in isolation may result in materially lower (higher) fair value measurements. Generally, in a rising interest rate environment, Farmer Mac would expect average discount rates to increase. Conversely, in a declining interest rate environment, Farmer Mac would expect average discount rates to decrease. Prepayment rates are not presented in the table above for AgVantage 53 securities because they generally have fixed maturity dates when the secured general obligations are due and do not prepay. The significant unobservable inputs used in the fair value measurements of USDA Securities are the prepayment rate and discount rate commensurate with the risks involved. Typically, significant increases (decreases) in any of these inputs in isolation may result in materially lower (higher) fair value measurements. Generally, in a rising interest rate environment, Farmer Mac would expect average discount rates to increase and would likely expect a corresponding decrease in forecasted prepayment rates. Conversely, in a declining interest rate environment, Farmer Mac would expect average discount rates to decrease and would likely expect a corresponding increase in forecasted prepayment rates. Disclosures on Fair Value of Financial Instruments The following table sets forth the estimated fair values and carrying values for financial assets, liabilities, and guarantees and commitments as of June 30, 2023 and December 31, 2022: Table 9.4 As of June 30, 2023 As of December 31, 2022 Fair Value Carrying Amount Fair Value Carrying Amount (in thousands) Financial assets: Cash and cash equivalents $ 874,090 $ 874,090 $ 861,002 $ 861,002 Investment securities 4,768,052 4,767,815 4,630,701 4,628,268 Farmer Mac Guaranteed Securities 8,548,230 8,595,243 8,573,781 8,628,380 USDA Securities 2,063,660 2,337,560 2,099,445 2,411,601 Loans 10,128,329 10,560,608 9,666,710 10,205,466 Financial derivatives 26,824 26,824 37,409 37,409 Guarantee and commitment fees receivable 52,818 46,181 50,653 47,151 Financial liabilities: Notes payable 23,713,528 24,510,004 23,591,330 24,469,113 Debt securities of consolidated trusts held by third parties 1,309,257 1,357,763 1,106,837 1,181,948 Financial derivatives 188,652 188,652 175,326 175,326 Guarantee and commitment obligations 52,509 45,873 50,083 46,582 The carrying value of cash and cash equivalents is a reasonable estimate of their approximate fair value and is classified as Level 1. The fair value of investments in U.S. Treasuries are valued based on unadjusted quoted prices in active markets and are classified as Level 1. A significant portion of Farmer Mac's investment portfolio is valued using a reputable nationally recognized third-party pricing service. The prices obtained are non-binding and generally representative of recent market trades and are classified as Level 2. Farmer Mac internally models the fair value of its loan portfolio, including loans held for investment and loans held for investment in consolidated trusts, Farmer Mac Guaranteed Securities, and USDA Securities by discounting the projected cash flows of these instruments at projected interest rates. The fair values are based on the present value of expected cash flows using management's best estimate of certain key assumptions, which include prepayment speeds, forward yield curves and discount rates commensurate with the risks involved. These fair value measurements do not take into consideration the fair value of the underlying property and are classified as Level 3. Financial derivatives primarily are valued using the market standard methodology of netting the discounted future fixed cash payments (or 54 receipts) and the discounted expected variable cash receipts (or payments) and are classified as Level 2. The fair value of the guarantee fees receivable/obligation and debt securities of consolidated trusts are estimated based on the present value of expected future cash flows of the underlying mortgage assets using management's best estimate of certain key assumptions, which include prepayments speeds, forward yield curves, and discount rates commensurate with the risks involved and are classified as Level 3. Notes payable are valued by discounting the expected cash flows of these instruments using a yield curve derived from market prices observed for similar agency securities and are also classified as Level 3. Because the cash flows of Farmer Mac's financial instruments may be interest rate path dependent, estimated fair values and projected discount rates for Level 3 financial instruments are derived using a Monte Carlo simulation model. Different market assumptions and estimation methodologies could significantly affect estimated fair value amounts. 10. BUSINESS SEGMENT REPORTING The following table presents the alignment of the Farmer Mac's seven segments: Agricultural Finance Rural Infrastructure Finance Treasury Farm & Ranch Corporate AgFinance Rural Utilities Renewable Energy Funding Investments Corporate The financial information presented below reflects the accounts of Farmer Mac and its subsidiaries on a consolidated basis. Accordingly, the core earnings for Farmer Mac's segments would differ from any stand-alone financial statements of Farmer Mac's subsidiaries. These differences would be due to various factors, including the exclusion of unrealized gains and losses related to fair value changes of trading assets and financial derivatives, as well as the allocation of certain expenses such as operating expenses, dividends and interest expense related to the issuance of capital and the issuance of indebtedness managed at the corporate level. The following tables present core earnings for Farmer Mac's segments and a reconciliation to consolidated net income for the three and six months ended June 30, 2023 and 2022. 55 Table 10.1 Core Earnings by Business Segment For the Three Months Ended June 30, 2023 Agricultural Finance Rural Infrastructure Treasury Corporate Farm & Ranch Corporate AgFinance Rural Utilities Renewable Energy Funding Investments Reconciling Adjustments Consolidated Net Income (in thousands) Net interest income $ 35,425 $ 7,444 $ 5,839 $ 1,100 $ 28,402 $ 467 $ — $ — $ 78,677 Less: reconciling adjustments (1)(2)(3) ( 1,037 ) — ( 31 ) — 4,096 127 — ( 3,155 ) — Net effective spread 34,388 7,444 5,808 1,100 32,498 594 — ( 3,155 ) — Guarantee and commitment fees 4,221 62 281 17 — — — ( 1,092 ) 3,489 Other income/(expense) (3) 342 12 — — — 11 44 2,042 2,451 Total revenues 38,951 7,518 6,089 1,117 32,498 605 44 ( 2,205 ) 84,617 (Provision for)/release of losses ( 5 ) ( 327 ) ( 632 ) ( 110 ) — 1 — — ( 1,073 ) (Provision for)/release of reserve for losses ( 75 ) — 6 — — — — — ( 69 ) Operating expenses — — — — — — ( 24,188 ) — ( 24,188 ) Total non-interest expense ( 75 ) — 6 — — — ( 24,188 ) — ( 24,257 ) Core earnings before income taxes 38,871 7,191 5,463 1,007 32,498 606 ( 24,144 ) ( 2,205 ) (4) 59,287 Income tax (expense)/benefit ( 8,163 ) ( 1,510 ) ( 1,147 ) ( 211 ) ( 6,825 ) ( 127 ) 5,444 464 ( 12,075 ) Core earnings before preferred stock dividends 30,708 5,681 4,316 796 25,673 479 ( 18,700 ) ( 1,741 ) (4) 47,212 Preferred stock dividends — — — — — — ( 6,791 ) — ( 6,791 ) Segment core earnings/(losses) $ 30,708 $ 5,681 $ 4,316 $ 796 $ 25,673 $ 479 $ ( 25,491 ) $ ( 1,741 ) (4) $ 40,421 Total Assets $ 14,456,296 $ 1,584,841 $ 6,169,811 $ 314,538 $ — $ 4,959,243 $ 174,836 $ — $ 27,659,565 Total on- and off-balance sheet program assets at principal balance $ 18,116,503 $ 1,680,756 $ 6,611,892 $ 327,901 $ — $ — $ — $ — $ 26,737,052 (1) Includes the amortization of premiums and discounts on assets consolidated at fair value, originally included in interest income, to reflect core earnings amounts. (2) Includes the reclassification of interest income and interest expense from consolidated trusts owned by third parties to guarantee and commitment fees, to reflect management's view that the net interest income Farmer Mac earns is effectively a guarantee fee. (3) Includes the reclassification of interest expense related to interest rate swaps not designated as hedges, which are included in "Gains on financial derivatives" on the consolidated financial statements, to determine the effective funding cost for each operating segment. (4) Net adjustments to reconcile to the corresponding income measures: core earnings before income taxes reconciled to income before income taxes; core earnings before preferred stock dividends reconciled to net income; and segment core earnings reconciled to net income attributable to common stockholders. 56 Core Earnings by Business Segment For the Three Months Ended June 30, 2022 Agricultural Finance Rural Infrastructure Treasury Corporate Farm & Ranch Corporate AgFinance Rural Utilities Renewable Energy Funding Investments Reconciling Adjustments Consolidated Net Income (in thousands) Net interest income $ 33,670 $ 6,929 $ 3,772 $ 468 $ 20,357 $ ( 1,282 ) $ — $ — $ 63,914 Less: reconciling adjustments (1)(2)(3) ( 1,080 ) — ( 39 ) — ( 1,849 ) — — 2,968 — Net effective spread 32,590 6,929 3,733 468 18,508 ( 1,282 ) — 2,968 — Guarantee and commitment fees 4,338 43 308 20 — — — ( 1,496 ) 3,213 Other income/(expense) (3) 161 143 — — — — 3 3,992 4,299 Total revenues 37,089 7,115 4,041 488 18,508 ( 1,282 ) 3 5,464 71,426 Release of/(provision for) losses 857 ( 650 ) 1,172 ( 8 ) — 1 — — 1,372 Release of reserve for losses 111 — 52 — — — — — 163 Operating expenses — — — — — — ( 20,048 ) — ( 20,048 ) Total non-interest expense 111 — 52 — — — ( 20,048 ) — ( 19,885 ) Core earnings before income taxes 38,057 6,465 5,265 480 18,508 ( 1,281 ) ( 20,045 ) 5,464 (4) 52,913 Income tax (expense)/benefit ( 7,991 ) ( 1,357 ) ( 1,105 ) ( 101 ) ( 3,887 ) 269 4,263 ( 1,149 ) ( 11,058 ) Core earnings before preferred stock dividends 30,066 5,108 4,160 379 14,621 ( 1,012 ) ( 15,782 ) 4,315 (4) 41,855 Preferred stock dividends — — — — — — ( 6,792 ) — ( 6,792 ) Segment core earnings/(losses) $ 30,066 $ 5,108 $ 4,160 $ 379 $ 14,621 $ ( 1,012 ) $ ( 22,574 ) $ 4,315 (4) $ 35,063 Total Assets $ 13,686,589 $ 1,521,102 $ 5,632,551 $ 126,513 $ — $ 4,781,990 $ 147,076 $ — $ 25,895,821 Total on- and off-balance sheet program assets at principal balance $ 16,591,999 $ 1,567,311 $ 6,172,063 $ 148,018 $ — $ — $ — $ — $ 24,479,391 (1) Includes the amortization of premiums and discounts on assets consolidated at fair value, originally included in interest income, to reflect core earnings amounts. (2) Includes the reclassification of interest income and interest expense from consolidated trusts owned by third parties to guarantee and commitment fees, to reflect management's view that the net interest income Farmer Mac earns is effectively a guarantee fee. (3) Includes the reclassification of interest expense related to interest rate swaps not designated as hedges, which are included in "Gains on financial derivatives" on the consolidated financial statements, to determine the effective funding cost for each operating segment. (4) Net adjustments to reconcile to the corresponding income measures: core earnings before income taxes reconciled to income before income taxes; core earnings before preferred stock dividends reconciled to net income; and segment core earnings reconciled to net income attributable to common stockholders. 57 Core Earnings by Business Segment For the Six Months Ended June 30, 2023 Agricultural Finance Rural Infrastructure Treasury Corporate Farm & Ranch Corporate AgFinance Rural Utilities Renewable Energy Funding Investments Reconciling Adjustments Consolidated Net Income (in thousands) Net interest income $ 68,936 $ 14,592 $ 11,379 $ 1,958 $ 60,946 $ ( 76 ) $ — $ — $ 157,735 Less: reconciling adjustments (1)(2)(3) ( 2,083 ) — ( 64 ) — 3,290 127 — ( 1,270 ) — Net effective spread 66,853 14,592 11,315 1,958 64,236 51 — ( 1,270 ) — Guarantee and commitment fees 8,513 115 562 45 — — — ( 1,813 ) 7,422 Other income/(expense) (3) 1,409 12 — — — 11 44 2,600 4,076 Total revenues 76,775 14,719 11,877 2,003 64,236 62 44 ( 483 ) 169,233 Release of/(provision for) losses 123 ( 4,628 ) 2,852 28 — 5 — — ( 1,620 ) (Provision for)/release of reserve for losses ( 652 ) — 380 — — — — — ( 272 ) Operating expenses — — — — — — ( 47,901 ) — ( 47,901 ) Total non-interest expense ( 652 ) — 380 — — — ( 47,901 ) — ( 48,173 ) Core earnings before income taxes 76,246 10,091 15,109 2,031 64,236 67 ( 47,857 ) ( 483 ) (4) 119,440 Income tax (expense)/benefit ( 16,012 ) ( 2,119 ) ( 3,173 ) ( 426 ) ( 13,490 ) ( 14 ) 9,939 102 ( 25,193 ) Core earnings before preferred stock dividends 60,234 7,972 11,936 1,605 50,746 53 ( 37,918 ) ( 381 ) (4) 94,247 Preferred stock dividends — — — — — — ( 13,582 ) — ( 13,582 ) Segment core earnings/(losses) $ 60,234 $ 7,972 $ 11,936 $ 1,605 $ 50,746 $ 53 $ ( 51,500 ) $ ( 381 ) (4) $ 80,665 Total Assets $ 14,456,296 $ 1,584,841 $ 6,169,811 $ 314,538 $ — $ 4,959,243 $ 174,836 $ — $ 27,659,565 Total on- and off-balance sheet program assets at principal balance $ 18,116,503 $ 1,680,756 $ 6,611,892 $ 327,901 $ — $ — $ — $ — $ 26,737,052 (1) Includes the amortization of premiums and discounts on assets consolidated at fair value, originally included in interest income, to reflect core earnings amounts. (2) Includes the reclassification of interest income and interest expense from consolidated trusts owned by third parties to guarantee and commitment fees, to reflect management's view that the net interest income Farmer Mac earns is effectively a guarantee fee. (3) Includes the reclassification of interest expense related to interest rate swaps not designated as hedges, which are included in "Gains on financial derivatives" on the consolidated financial statements, to determine the effective funding cost for each operating segment. (4) Net adjustments to reconcile to the corresponding income measures: core earnings before income taxes reconciled to income before income taxes; core earnings before preferred stock dividends reconciled to net income; and segment core earnings reconciled to net income attributable to common stockholders. 58 Core Earnings by Business Segment For the Six Months Ended June 30, 2022 Agricultural Finance Rural Infrastructure Treasury Corporate Farm & Ranch Corporate AgFinance Rural Utilities Renewable Energy Funding Investments Reconciling Adjustments Consolidated Net Income (in thousands) Net interest income $ 65,024 $ 14,138 $ 6,965 $ 843 $ 43,760 $ ( 1,278 ) $ — $ — $ 129,452 Less: reconciling adjustments (1)(2)(3) ( 2,080 ) — ( 73 ) — ( 8,514 ) — — 10,667 — Net effective spread 62,944 14,138 6,892 843 35,246 ( 1,278 ) — 10,667 — Guarantee and commitment fees 8,554 62 620 30 — — — ( 2,358 ) 6,908 Other income/(expense) (3) 561 257 — — — — 3 21,078 21,899 Total revenues 72,059 14,457 7,512 873 35,246 ( 1,278 ) 3 29,387 158,259 Release of/(provision for) losses 347 ( 1,165 ) 2,341 ( 210 ) — 3 — — 1,316 Release of reserve for losses 185 — 88 — — — — — 273 Operating expenses — — — — — — ( 41,436 ) — ( 41,436 ) Total non-interest expense 185 — 88 — — — ( 41,436 ) — ( 41,163 ) Core earnings before income taxes 72,591 13,292 9,941 663 35,246 ( 1,275 ) ( 41,433 ) 29,387 (4) 118,412 Income tax (expense)/benefit ( 15,243 ) ( 2,791 ) ( 2,087 ) ( 139 ) ( 7,402 ) 268 8,461 ( 6,171 ) ( 25,104 ) Core earnings before preferred stock dividends 57,348 10,501 7,854 524 27,844 ( 1,007 ) ( 32,972 ) 23,216 (4) 93,308 Preferred stock dividends — — — — — — ( 13,583 ) — ( 13,583 ) Segment core earnings/(losses) $ 57,348 $ 10,501 $ 7,854 $ 524 $ 27,844 $ ( 1,007 ) $ ( 46,555 ) $ 23,216 (4) $ 79,725 Total Assets $ 13,686,589 $ 1,521,102 $ 5,632,551 $ 126,513 $ — $ 4,781,990 $ 147,076 $ — $ 25,895,821 Total on- and off-balance sheet program assets at principal balance $ 16,591,999 $ 1,567,311 $ 6,172,063 $ 148,018 $ — $ — $ — $ — $ 24,479,391 (1) Includes the amortization of premiums and discounts on assets consolidated at fair value, originally included in interest income, to reflect core earnings amounts. (2) Includes the reclassification of interest income and interest expense from consolidated trusts owned by third parties to guarantee and commitment fees, to reflect management's view that the net interest income Farmer Mac earns is effectively a guarantee fee. (3) Includes the reclassification of interest expense related to interest rate swaps not designated as hedges, which are included in "Gains on financial derivatives" on the consolidated financial statements, to determine the effective funding cost for each operating segment. (4) Net adjustments to reconcile to the corresponding income measures: core earnings before income taxes reconciled to income before income taxes; core earnings before preferred stock dividends reconciled to net income; and segment core earnings reconciled to net income attributable to common stockholders. 11. REVISION OF PRIOR PERIOD FINANCIAL STATEMENTS Farmer Mac revised certain prior period financial statements to correct an error related to the recognition of accrual of interest for derivative contracts cleared through the swap clearinghouse, the CME. Farmer Mac determined that the error was immaterial to these previous consolidated financial statements, taken as a whole. Although Farmer Mac has concluded these errors are immaterial to the previously issued consolidated financial statements, Farmer Mac has corrected this error by revising the accompanying consolidated financial statements. Farmer Mac will also correct previously reported financial information 59 for such immaterial errors in future filings, as applicable. The following tables summarize the effect of the revision on each financial statement line item: Revised Consolidated Statements of Operations Three Months Ended June 30, 2022 Six Months Ended June 30, 2022 As previously Reported Adjustments As Revised As previously Reported Adjustments As Revised (in thousands) Interest Income: Farmer Mac Guaranteed Securities and USDA Securities $ 57,104 $ ( 5,488 ) $ 51,616 $ 96,361 $ ( 1,825 ) $ 94,536 Total interest income 144,936 ( 5,488 ) 139,448 257,156 ( 1,825 ) 255,331 Net interest income 69,402 ( 5,488 ) 63,914 131,277 ( 1,825 ) 129,452 Non-interest income/(expense): (Losses)/gains on financial derivatives 3,418 373 3,791 19,492 1,287 20,779 Non-Interest Income 7,302 373 7,675 27,793 1,287 29,080 Income before income taxes 58,028 ( 5,115 ) 52,913 118,950 ( 538 ) 118,412 Income tax expense 12,132 ( 1,074 ) 11,058 25,217 ( 113 ) 25,104 Net Income 45,896 ( 4,041 ) 41,855 93,733 ( 425 ) 93,308 Net Income attributable to common stockholders 39,104 ( 4,041 ) 35,063 80,150 ( 425 ) 79,725 Revised Consolidated Statements of Comprehensive Income Three Months Ended June 30, 2022 Six Months Ended June 30, 2022 As previously Reported Adjustments As Revised As previously Reported Adjustments As Revised (in thousands) Net Income $ 45,896 $ ( 4,041 ) $ 41,855 $ 93,733 $ ( 425 ) $ 93,308 Comprehensive Income 36,077 ( 4,041 ) 32,036 40,396 ( 425 ) 39,971 60 Revised Consolidated Statements of Equity Retained Earnings Total Equity As previously Reported Adjustments As Revised As previously Reported Adjustments As Revised (in thousands) Balance as of December 31, 2021 $ 579,270 $ 9,287 $ 588,557 $ 1,204,413 $ 9,287 $ 1,213,700 Net Income 47,837 3,616 51,453 47,837 3,616 51,453 Balance as of March 31, 2022 $ 610,087 $ 12,903 $ 622,990 $ 1,192,844 $ 12,903 $ 1,205,747 Net Income 45,896 ( 4,041 ) 41,855 45,896 ( 4,041 ) 41,855 Balance as of June 30, 2022 $ 638,935 $ 8,862 $ 647,797 $ 1,212,348 $ 8,862 $ 1,221,210 Revised Consolidated Statements of Cash Flows Six Months Ended June 30, 2022 As previously Reported Adjustments As Revised (in thousands) Cash flows from operating activities: Net income/(loss) $ 93,733 $ ( 425 ) $ 93,308 Adjustments to reconcile net income to net cash provided by operating activities: Net change in fair value of trading securities, hedged assets, and financial derivatives 461,598 26,682 488,280 Deferred income taxes 3,765 51 3,816 Net change in: Interest receivable ( 739 ) ( 961 ) ( 1,700 ) Other assets ( 89,794 ) 688 ( 89,106 ) Accrued interest payable 9,831 1,738 11,569 Other liabilities 31,295 ( 27,773 ) 3,522 Net cash provided by operating activities 526,010 — 526,010 12. SUBSEQUENT EVENT As described above in Note 5, Farmer Mac had a single agricultural storage and processing loan that was subject to bankruptcy proceedings during second quarter 2023. On July 31, 2023, an entity purchased the assets and assumed the liabilities of the borrower on this loan, which ended the bankruptcy proceedings. Farmer Mac received proceeds from this bankruptcy sale in an amount that closely approximated the loan's amortized cost. Farmer Mac will release the entire allowance for loan loss attributable to this loan during third quarter 2023, which was approximately $ 4.6 million as of June 30, 2023. 61