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Item 1. Financial Statements

2023-11-06 compared with 2023-08-07 · 264 added, 278 removed, 1509 unchanged (26% of the section changed)

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

(in thousands)

60 unchanged sentences

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended For the Six Months Ended

June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022

For the Three Months Ended For the Nine Months Ended

September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

(in thousands, except per share amounts)

6 unchanged sentences

Net interest income 87,643 67,853 245,378 197,305

(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

Release of/(provision for) losses 136 ( 617 ) ( 1,484 ) 699

Net interest income after release of/(provision for) losses 87,779 67,236 243,894 198,004

Non-interest income/(expense):

2 unchanged sentences

(Losses)/gains on trading securities ( 2 ) ( 41 ) 14 ( 75 )

(Provision for)/release of reserve for losses ( 69 ) 163 ( 272 ) 273

Release of/(provision for) reserve for losses

45 167 ( 227 ) 440

Other income 1,271 651 3,239 1,805

16 unchanged sentences

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Three Months Ended For the Six Months Ended

June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022

For the Three Months Ended For the Nine Months Ended

September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

(in thousands

3 unchanged sentences

Net changes in held-to-maturity securities ( 31,525 ) ( 622 ) ( 32,628 ) 220

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 )

Net unrealized gains on cash flow hedges

7,566 24,596 5,553 72,684

Other comprehensive (loss)/income before tax

( 1,883 ) ( 17,853 ) 18,993 ( 85,369 )

Income tax benefit/(expense) related to other comprehensive (loss)/income

395 3,748 ( 3,989 ) 17,927

Other comprehensive (loss)/income net of tax

( 1,488 ) ( 14,105 ) 15,004 ( 67,442 )

Comprehensive income $ 56,649 $ 27,313 $ 167,388 $ 67,284

27 unchanged sentences

Balance as of June 30, 2023 19,980 $ 484,531 10,836 $ 10,836 $ 130,147 $ ( 34,351 ) $ 755,392 $ 1,346,555

Net Income — — — — — — 58,137 58,137

Other comprehensive loss, net of tax

— — — — — ( 1,488 ) — ( 1,488 )

Cash dividends:

Preferred stock — — — — — — ( 6,792 ) ( 6,792 )

Common stock (cash dividend of $ 1.10 per share)

— — — — — — ( 11,923 ) ( 11,923 )

Issuance of Class C Common Stock — — 4 4 64 — — 68

Stock-based compensation cost — — — — 1,221 — — 1,221

Other stock-based award activity — — — — ( 511 ) — — ( 511 )

Balance as of September 30, 2023 19,980 $ 484,531 10,840 $ 10,840 $ 130,921 $ ( 35,839 ) $ 794,814 $ 1,385,267

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, 2021 19,980 $ 484,531 10,766 $ 10,766 $ 125,993 $ 3,853 $ 588,557 $ 1,213,700

19 unchanged sentences

Balance as of June 30, 2022 19,980 $ 484,531 10,797 $ 10,797 $ 127,569 $ ( 49,484 ) $ 647,797 $ 1,221,210

Net Income — — — — — — 41,418 41,418

Other comprehensive loss, net of tax — — — — — ( 14,105 ) — ( 14,105 )

Cash dividends:

Preferred stock — — — — — — ( 6,791 ) ( 6,791 )

Common stock (cash dividend of $ 0.95 per share)

— — — — — — ( 10,260 ) ( 10,260 )

Issuance of Class C Common Stock — — 3 3 48 — — 51

Stock-based compensation cost — — — — 832 — — 832

Other stock-based award activity — — — — ( 332 ) — — ( 332 )

Balance as of September 30, 2022 19,980 $ 484,531 10,800 $ 10,800 $ 128,117 $ ( 63,589 ) $ 672,164 $ 1,232,023

The accompanying notes are an integral part of these consolidated financial statements.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended

June 30, 2023 June 30, 2022

For the Nine Months Ended

September 30, 2023 September 30, 2022

(in thousands)

52 unchanged sentences

Purchases of securities - traded, not yet settled 16,012 268,370

Transfers of available-for-sale Farmer Mac Guaranteed Securities to held-to-maturity

The accompanying notes are an integral part of these consolidated financial statements.

23 unchanged sentences

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.

updated information for the three and nine months ended September 30, 2023.

Principles of Consolidation

4 unchanged sentences

Consolidation of Variable Interest Entities

As of June 30, 2023

As of September 30, 2023

Agricultural Finance Treasury Total

21 unchanged sentences

(1) Includes borrower remittances of $ 0.4 million.

The borrower remittances had not been passed through to third-party investors as of June 30, 2023.

The borrower remittances had not been passed through to third-party investors as of September 30, 2023.

(2) Includes $ 89.2 million in unamortized discount related to structured securitization transactions.

35 unchanged sentences

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:

The following schedule reconciles basic and diluted EPS for the three and nine months ended September 30, 2023 and 2022:

For the Three Months Ended

June 30, 2023 June 30, 2022

September 30, 2023 September 30, 2022

Income Weighted-Average Shares $ per

5 unchanged sentences

Diluted EPS $ 51,345 10,938 $ 4.69 $ 34,627 10,874 $ 3.18

(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

(1) For the three months ended September 30, 2023 and 2022, SARs and restricted stock of 16,761 and 18,432 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 September 30, 2023 and 2022, contingent shares of unvested restricted stock of 32,469 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 Nine Months Ended

September 30, 2023 September 30, 2022

Income Weighted-Average Shares $ per

5 unchanged sentences

Diluted EPS $ 132,010 10,924 $ 12.08 $ 114,352 10,875 $ 10.51

(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.

(1) For the nine months ended September 30, 2023 and 2022, SARs and restricted stock of 37,990 and 37,120 respectively, were outstanding but not included in the computation of diluted earnings per share of common stock because they were anti-dilutive.

For the nine months ended September 30, 2023 and 2022, contingent shares of unvested restricted stock of 32,407 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.

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.

As of June 30, 2023 As of June 30, 2022

The following table presents the changes in accumulated other comprehensive income ("AOCI"), net of tax, by component for the three and nine months ended September 30, 2023 and 2022.

As of September 30, 2023 As of September 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

6 unchanged sentences

Ending Balance $ ( 79,168 ) $ ( 9,419 ) $ 52,748 $ ( 35,839 ) $ ( 131,967 ) $ 16,326 $ 52,052 $ ( 63,589 )

For the Six Months Ended:

For the Nine Months Ended:

Beginning Balance $ ( 115,561 ) $ 16,357 $ 48,361 $ ( 50,843 ) $ ( 6,932 ) $ 16,153 $ ( 5,368 ) $ 3,853

3 unchanged sentences

Ending Balance $ ( 79,168 ) $ ( 9,419 ) $ 52,748 $ ( 35,839 ) $ ( 131,967 ) $ 16,326 $ 52,052 $ ( 63,589 )

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:

For the Three Months Ended

June 30, 2023 June 30, 2022

September 30, 2023 September 30, 2022

Before Tax Provision (Benefit) After Tax Before Tax Provision (Benefit) After Tax

9 unchanged sentences

Held-to-maturity securities:

Change in fair value (3)

$ ( 31,898 ) $ ( 6,699 ) $ ( 25,199 ) $ — $ — $ —

Less reclassification adjustments included in:

8 unchanged sentences

Total $ 7,566 $ 1,588 $ 5,978 $ 24,596 $ 5,166 $ 19,430

Other comprehensive income/(loss) $ 32,292 $ 6,781 $ 25,511 $ ( 12,430 ) $ ( 2,611 ) $ ( 9,819 )

Other comprehensive loss

$ ( 1,883 ) $ ( 395 ) $ ( 1,488 ) $ ( 17,853 ) $ ( 3,748 ) $ ( 14,105 )

(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) Represents the accumulated unrealized loss on the AgVantage Securities transferred from available-for-sale to held-to-maturity.

(4) Relates to the amortization of unrealized gains or losses prior to the reclassification of these securities from available-for-sale to held-to-maturity.

2 unchanged sentences

(5) Relates to the recognition of unrealized gains and losses on cash flow hedges recorded in AOCI.

For the Six Months Ended

June 30, 2023 June 30, 2022

For the Nine Months Ended

September 30, 2023 September 30, 2022

Before Tax Provision (Benefit) After Tax Before Tax Provision (Benefit) After Tax

9 unchanged sentences

Held-to-maturity securities:

Change in fair value (3)

$ ( 31,898 ) $ ( 6,699 ) $ ( 25,199 ) $ — $ — $ —

Less reclassification adjustments included in:

11 unchanged sentences

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

(3) Represents the accumulated unrealized loss on the AgVantage Securities transferred from available-for-sale to held-to-maturity.

(4) Relates to the amortization of unrealized gains or losses prior to the reclassification of these securities from available-for-sale to held-to-maturity.

9 unchanged sentences

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.

January 1, 2020 During the second quarter 2023, 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.

14 unchanged sentences

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.

Farmer Mac does not currently hedge interest rate risk for single closed 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.

(d) Reclassifications

2 unchanged sentences

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:

As of June 30, 2023

The following tables set forth information about Farmer Mac's available-for-sale and held-to-maturity investment securities as of September 30, 2023 and December 31, 2022:

As of September 30, 2023

Amount Outstanding Unamortized Premium/(Discount) Amortized

16 unchanged sentences

Total held-to-maturity $ 45,032 $ — $ 45,032 $ — $ 930 $ — $ 45,962

(1) Amounts presented exclude $ 12.2 million of accrued interest receivable on investment securities as of June 30, 2023.

(1) Amounts presented exclude $ 17.4 million of accrued interest receivable on investment securities as of September 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.

(3) The held-to-maturity investment securities had a weighted average yield of 6.5 % as of September 30, 2023.

As of December 31, 2022

19 unchanged sentences

(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:

As of June 30, 2023

Farmer Mac did no t sell any securities from its available-for-sale investment portfolio during the three and nine months ended September 30, 2023 and 2022.

As of September 30, 2023 and December 31, 2022, unrealized losses on available-for-sale investment securities were as follows:

As of September 30, 2023

Available-for-Sale Securities

27 unchanged sentences

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 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 September 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.

As of both September 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.

Securities in unrealized loss positions for 12 months or longer have a fair value as of September 30, 2023 that is, on average, approximately 92.7 % 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.

The amortized cost, fair value, and weighted-average yield of available-for-sale investment securities by remaining contractual maturity as of September 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.

As of June 30, 2023

As of September 30, 2023

Available-for-Sale Securities

7 unchanged sentences

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:

As of June 30, 2023

The following tables set forth information about on-balance sheet Farmer Mac Guaranteed Securities and USDA Securities as of September 30, 2023 and December 31, 2022:

As of September 30, 2023

Unpaid Principal Balance Unamortized Premium/(Discount) Amortized

16 unchanged sentences

$ 1,314 $ 57 $ 1,371 $ — $ — $ ( 69 ) $ 1,302

(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.

(1) Amounts presented exclude $ 53.3 million, $ 58.9 million, and $ 38,000 of accrued interest receivable on available-for-sale, held-to-maturity, and trading securities, respectively, as of September 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.

1 unchanged sentence

(3) Fair value includes $ 10.0 million of an interest-only security with a notional amount of $ 239.1 million.

(4) The trading USDA securities had a weighted average yield of 5.51 % as of June 30, 2023.

(4) The trading USDA securities had a weighted average yield of 5.50 % as of September 30, 2023.

As of December 31, 2022

22 unchanged sentences

(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:

As of June 30, 2023

On July 1, 2023, Farmer Mac transferred $ 2.7 billion of AgVantage Securities from available-for-sale to held-to-maturity to reflect Farmer Mac's positive intent and ability to hold these securities until maturity or payoff.

Farmer Mac transferred these securities at fair value as of the date of the transfer, which included a cost basis adjustment of unrealized losses of $ 31.9 million.

The accumulated unrealized losses were retained in accumulated other comprehensive income in the amount of $ 31.9 million.

Farmer Mac accounts for held-to-maturity securities at amortized cost.

Both the cost basis adjustment and accumulated unrealized depreciation will be amortized as an adjustment to the yield on the held-to-maturity AgVantage Securities over the remaining term of the transferred securities.

As of September 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:

As of September 30, 2023

Held-to-Maturity and Available-for-Sale Securities

31 unchanged sentences

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 unrealized losses presented above are principally due to changes in interest rates from the date of acquisition to September 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.

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 unrealized losses from AgVantage securities were on 76 and 95 available-for-sale securities as of September 30, 2023 and December 31, 2022, respectively.

There were 59 and 37 held-to-maturity AgVantage securities with an unrealized loss as of September 30, 2023 and December 31, 2022, respectively.

As of September 30, 2023 and December 31, 2022, 64 and 13 available-for-sale AgVantage securities, respectively, had been in a loss position for more than 12 months.

As of September 30, 2023 and December 31, 2022, there were 26 and 4 held-to-maturity AgVantage securities, respectively, in a loss position for more than 12 months.

During the three and nine months ended September 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.

The balances presented are based on their contractual maturities, although the actual maturities may differ due to prepayments of the underlying assets.

As of June 30, 2023

As of September 30, 2023

Available-for-Sale Securities

7 unchanged sentences

(1) Amounts presented exclude $ 53.3 million of accrued interest receivable.

As of June 30, 2023

As of September 30, 2023

Held-to-Maturity Securities

16 unchanged sentences

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.

permanently funded, primarily through the use of 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

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.

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

1 unchanged sentence

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 table below includes accrued interest on cleared swaps, but excludes $ 14.3 million and $ 6.1 million of accrued interest receivable and $ 6.3 million and $ 3.6 million of accrued interest payable on uncleared swaps as of September 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.

As of June 30, 2023

As of September 30, 2023

Fair Value Weighted-

49 unchanged sentences

(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.

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:

For the Three Months Ended June 30, 2023

As of September 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 September 30, 2023.

During the three and nine months ended September 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.

The following tables summarize the net income/(expense) recognized in the consolidated statements of operations related to derivatives for the three and nine months ended September 30, 2023 and 2022:

For the Three Months Ended September 30, 2023

Net Income/(Expense) Recognized in Consolidated Statement of Operations on Derivatives

8 unchanged sentences

Income/(expense) related to interest settlements on fair value hedging relationships $ 19,579 $ 86,417 $ 33,781 $ ( 184,920 ) $ — $ ( 45,143 )

(Losses)/gains on fair value hedging relationships:

Gains/(losses) on fair value hedging relationships:

Recognized on derivatives $ 42,051 $ 110,196 $ 107,265 $ 9,475 $ — $ 268,987

Recognized on hedged items ( 41,944 ) ( 107,965 ) ( 105,403 ) ( 10,465 ) — ( 265,777 )

(Losses)/gains on fair value hedging relationships $ ( 1,145 ) $ ( 1,059 ) $ ( 2,619 ) $ ( 78 ) $ — $ ( 4,901 )

Gains/(losses) on fair value hedging relationships

$ 107 $ 2,231 $ 1,862 $ ( 990 ) $ — $ 3,210

Expense related to interest settlements on cash flow hedging relationships:

8 unchanged sentences

Gains on financial derivatives not designated in hedge relationships $ — $ — $ — $ — $ 2,671 $ 2,671

For the Three Months Ended June 30, 2022

For the Three Months Ended September 30, 2022

Net Income/(Expense) Recognized in Consolidated Statement of Operations on Derivatives

9 unchanged sentences

Income/(expense) related to interest settlements on fair value hedging relationships $ 5,515 $ 35,413 $ 16,694 $ ( 58,491 ) $ — $ ( 869 )

Gains/(losses) on fair value hedging relationships:

(Losses)/gains on fair value hedging relationships:

Recognized on derivatives $ 49,373 $ 201,864 $ 105,683 $ ( 197,884 ) $ — $ 159,036

Recognized on hedged items ( 52,308 ) ( 204,765 ) ( 100,490 ) 197,902 — ( 159,661 )

Gains/(losses) on fair value hedging relationships $ 1,169 $ ( 1,084 ) $ 2,072 $ ( 1,608 ) $ — $ 549

(Losses)/gains on fair value hedging relationships

$ ( 2,935 ) $ ( 2,901 ) $ 5,193 $ 18 $ — $ ( 625 )

Expense related to interest settlements on cash flow hedging relationships:

8 unchanged sentences

Gains on financial derivatives not designated in hedge relationships $ — $ — $ — $ — $ 772 $ 772

For the Six Months Ended June 30, 2023

For the Nine Months Ended September 30, 2023

Net Income/(Expense) Recognized in Consolidated Statement of Operations on Derivatives

22 unchanged sentences

Gains on financial derivatives not designated in hedge relationships $ — $ — $ — $ — $ 4,763 $ 4,763

For the Six Months Ended June 30, 2022

For the Nine Months Ended September 30, 2022

Net Income/(Expense) Recognized in Consolidated Statement of Operations on Derivatives

9 unchanged sentences

Income/(expense) related to interest settlements on fair value hedging relationships $ 8,081 $ 64,436 $ 31,578 $ ( 82,171 ) $ — $ 21,924

Gains/(losses) on fair value hedging relationships:

(Losses)/gains on fair value hedging relationships:

Recognized on derivatives $ 106,935 $ 563,897 $ 347,034 $ ( 523,432 ) $ — $ 494,434

Recognized on hedged items ( 108,002 ) ( 564,679 ) ( 337,443 ) 521,643 — ( 488,481 )

Gains/(losses) on fair value hedging relationships $ 1,868 $ 2,119 $ 4,398 $ ( 1,807 ) $ — $ 6,578

(Losses)/gains on fair value hedging relationships

$ ( 1,067 ) $ ( 782 ) $ 9,591 $ ( 1,789 ) $ — $ 5,953

Expense related to interest settlements on cash flow hedging relationships:

8 unchanged sentences

Gains on financial derivatives not designated in hedge relationships $ — $ — $ — $ — $ 21,551 $ 21,551

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:

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

September 30, 2023 December 31, 2022 September 30, 2023 December 31, 2022

(in thousands)

5 unchanged sentences

(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:

June 30, 2023

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 September 30, 2023 and December 31, 2022:

September 30, 2023

Gross Amounts Not Offset in the Consolidated Balance Sheet

25 unchanged sentences

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").

If Farmer Mac had breached certain provisions of the derivative contracts as of September 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 September 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 $ 24.5 billion notional amount of interest rate swaps outstanding as of September 30, 2023, $ 19.5 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.

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

1 unchanged sentence

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

As of both June 30, 2023 and December 31, 2022, Farmer Mac had no loans held for sale.

As of both September 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.

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:

As of June 30, 2023 As of December 31, 2022

The following table includes loans held for investment and displays the composition of the loan balances as of September 30, 2023 and December 31, 2022:

As of September 30, 2023 As of December 31, 2022

Unsecuritized In Consolidated Trusts Total Unsecuritized In Consolidated Trusts Total

13 unchanged sentences

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:

June 30, 2023 December 31, 2022

The following table is a summary, by asset type, of the allowance for losses as of September 30, 2023 and December 31, 2022:

September 30, 2023 December 31, 2022

Allowance for Losses Allowance for Losses

6 unchanged sentences

Total $ 16,614 $ 15,089

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:

June 30, 2023 June 30, 2022

The following is a summary of the changes in the allowance for losses for the three and nine months ended September 30, 2023 and 2022:

September 30, 2023 September 30, 2022

Agricultural Finance loans Rural Infrastructure

9 unchanged sentences

Beginning Balance $ 3,935 $ 7,367 $ 11,302 $ 5,446 $ 2,265 $ 1,750 $ 4,015 $ 8,388

Provision for/(release of) losses 2 328 330 745 ( 610 ) 677 67 ( 1,234 )

(Release of)/provision for losses ( 25 ) ( 3,689 ) ( 3,714 ) 3,580 ( 153 ) 334 181 418

Charge-offs — — — — — — — —

Ending Balance $ 3,910 $ 3,678 $ 7,588 $ 9,026 $ 2,112 $ 2,084 $ 4,196 $ 8,806

For the Six Months Ended

For the Nine Months Ended

Beginning Balance $ 4,044 $ 2,731 $ 6,775 $ 8,314 $ 2,882 $ 560 $ 3,442 $ 10,599

2 unchanged sentences

Ending Balance $ 3,910 $ 3,678 $ 7,588 $ 9,026 $ 2,112 $ 2,084 $ 4,196 $ 8,806

(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

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:

As of June 30, 2023

(1) As of September 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 September 30, 2023 and 2022, allowance for losses for Agricultural Finance Corporate AgFinance loans includes $ 0.0 million and $ 1.7 million allowance for collateral dependent assets secured by agricultural real estate, respectively.

(3) As of both September 30, 2023 and 2022, allowance for losses for Rural Infrastructure Finance loans includes no allowance for collateral dependent assets.

The $ 3.6 million net provision to the allowance for the Rural Infrastructure Finance portfolio during the quarter ended September 30, 2023 was primarily attributable to a single telecommunications loan that was downgraded to substandard during the quarter.

The $ 3.7 million net release from the allowance for the Agricultural Finance mortgage loan portfolio during the quarter ended September 30, 2023 was primarily attributable to the full payoff of a single collateral dependent storage and processing loan.

The $ 0.7 million net provision to the allowance for the Rural Infrastructure Finance portfolio during the nine months ended September 30, 2023 was primarily attributable to a single telecommunications loan that was downgraded to substandard during the most recent quarter.

The $ 0.8 million net provision to the allowance for the Agricultural Finance mortgage loan portfolio during the nine months ended September 30, 2023 was primarily attributable to increased loan volume and certain risk rating downgrades.

The net provision to the allowance for Rural Infrastructure Finance loan losses of $ 0.4 million recorded

during third quarter 2022 was primarily attributable to net new loan volume.

The $ 0.2 million net

provision to the allowance for the Agricultural Finance mortgage loan portfolio during third quarter 2022

was primarily attributable to the deterioration of a single agricultural storage and processing loan.

The $ 1.8 million net release from the allowance for the Rural Infrastructure Finance portfolio for the nine

months ended September 30, 2022 was primarily attributable to improvements in forecasts of future

economic conditions, and a first quarter risk rating upgrade on a single loan.

The risk rating 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 $ 0.8 million net provision to the allowance for the

Agricultural Finance mortgage loan portfolio for the nine months ended September 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 September 30, 2023 and December 31, 2022:

As of September 30, 2023

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

11 unchanged sentences

(4) Includes $ 23.8 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.

During the three and nine months ended September 30, 2023, Farmer Mac received $ 0.4 million and $ 1.9 million in interest on nonaccrual loans, respectively.

As of December 31, 2022

14 unchanged sentences

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:

As of June 30, 2023

The following tables present credit quality indicators related to Agricultural Finance mortgage loans and Rural Infrastructure Finance loans held as of September 30, 2023 and December 31, 2022, by year of origination:

As of September 30, 2023

Year of Origination:

9 unchanged sentences

Total $ 396,304 $ 1,213,248 $ 1,702,094 $ 1,163,359 $ 360,067 $ 1,172,364 $ 403,236 $ 6,410,672

For the Three Months Ended June 30, 2023:

For the Three Months Ended September 30, 2023:

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

For the Six Months Ended June 30, 2023:

For the Nine Months Ended September 30, 2023:

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

2 unchanged sentences

(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 June 30, 2023

As of September 30, 2023

Year of Origination:

9 unchanged sentences

Total $ 180,030 $ 113,149 $ 278,204 $ 174,541 $ 120,043 $ 114,779 $ 243,031 $ 1,223,777

For the Three Months Ended June 30, 2023:

For the Three Months Ended September 30, 2023:

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

For the Six Months Ended June 30, 2023:

For the Nine Months Ended September 30, 2023:

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

2 unchanged sentences

(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 June 30, 2023

As of September 30, 2023

Year of Origination:

9 unchanged sentences

Total $ 450,241 $ 724,129 $ 189,385 $ 598,689 $ 711,794 $ 610,062 $ 58,413 $ 3,342,713

For the Three Months Ended June 30, 2023:

For the Three Months Ended September 30, 2023:

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

For the Six Months Ended June 30, 2023:

For the Nine Months Ended September 30, 2023:

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

14 unchanged sentences

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:

For the Three Months Ended September 30, 2022:

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

For the Six Months Ended June 30, 2022:

For the Nine Months Ended September 30, 2022:

Current period charge-offs $ — $ — $ — $ — $ — $ ( 84 ) $ — $ ( 84 )

14 unchanged sentences

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:

For the Three Months Ended September 30, 2022:

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

For the Six Months Ended June 30, 2022:

For the Nine Months Ended September 30, 2022:

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

14 unchanged sentences

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:

For the Three Months Ended September 30, 2022:

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

For the Six Months Ended June 30, 2022:

For the Nine Months Ended September 30, 2022:

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

3 unchanged sentences

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:

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 September 30, 2023 and December 31, 2022, not including offsets provided by any recourse provisions, recoveries from third parties, or collateral for the underlying loans:

Outstanding Balance of Off-Balance Sheet Farmer Mac Guaranteed Securities

As of June 30, 2023 As of December 31, 2022

As of September 30, 2023 As of December 31, 2022

(in thousands)

6 unchanged sentences

The following table summarizes the significant cash flows received from and paid to trusts used for Farmer Mac securitizations:

For the Six Months Ended

June 30, 2023 June 30, 2022

For the Nine Months Ended

September 30, 2023 September 30, 2022

(in thousands)

3 unchanged sentences

The following table presents the liability and the weighted-average remaining maturity of all loans underlying off-balance sheet Farmer Mac Guaranteed Securities:

As of June 30, 2023 As of December 31, 2022

As of September 30, 2023 As of December 31, 2022

(dollars in thousands)

6 unchanged sentences

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:

As of June 30, 2023 As of December 31, 2022

As of September 30, 2023 As of December 31, 2022

(dollars in thousands)

5 unchanged sentences

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:

June 30, 2023 December 31, 2022

The following table is a summary, by asset type, of the reserve for losses as of September 30, 2023 and December 31, 2022:

September 30, 2023 December 31, 2022

Reserve for Losses Reserve for Losses

3 unchanged sentences

Total $ 1,660 $ 1,433

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:

For the Three Months Ended For the Six Months Ended

June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022

The following is a summary of the changes in the reserve for losses for the three and nine month periods ended September 30, 2023 and 2022:

For the Three Months Ended For the Nine Months Ended

September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

Reserve for Losses Reserve for Losses Reserve for Losses Reserve for Losses

2 unchanged sentences

Beginning Balance $ 1,471 $ 882 $ 819 $ 1,068

Provision for/(release of )losses 75 ( 111 ) 652 ( 186 )

(Release of)/provision for losses

( 59 ) ( 139 ) 593 ( 325 )

Ending Balance $ 1,412 $ 743 $ 1,412 $ 743

1 unchanged sentence

Beginning Balance $ 234 $ 795 $ 614 $ 882

Release of losses ( 6 ) ( 52 ) ( 380 ) ( 87 )

Provision for/(release of) losses

14 ( 28 ) ( 366 ) ( 115 )

Ending Balance $ 248 $ 767 $ 248 $ 767

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:

As of June 30, 2023

The provision for the reserve for losses in the Agricultural Finance LTSPC portfolio recorded during the nine months ended September 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 nine months ended September 30, 2023 was primarily due to an updated estimate of expected losses based on additional available loss-given-default industry data.

The allowance for both the Agricultural Finance and Rural Infrastructure Finance LTSPC and Farmer Mac Guaranteed portfolios recorded during the three and nine months ended September 30, 2022 remained relatively constant.

As of September 30, 2023

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

18 unchanged sentences

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:

As of June 30, 2023

The following tables present credit quality indicators related to Agricultural Finance and Rural Infrastructure loans underlying LTSPCs and Farmer Mac Guaranteed Securities as of September 30, 2023 and December 31, 2022, by year of origination:

As of September 30, 2023

Year of Origination:

9 unchanged sentences

Total $ 148,802 $ 246,258 $ 515,135 $ 536,180 $ 273,798 $ 1,295,441 $ 364,615 $ 3,380,229

For the Three Months Ended June 30, 2023:

For the Three Months Ended September 30, 2023:

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

For the Six Months Ended June 30, 2023:

For the Nine Months Ended September 30, 2023:

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

1 unchanged sentence

(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

As of September 30, 2023

Year of Origination:

9 unchanged sentences

Total $ — $ — $ — $ — $ — $ 426,504 $ 61,013 $ 487,517

For the Three Months Ended June 30, 2023:

For the Three Months Ended September 30, 2023:

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

For the Six Months Ended June 30, 2023:

For the Nine Months Ended September 30, 2023:

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

13 unchanged sentences

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:

For the Three Months Ended September 30, 2022:

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

For the Six Months Ended June 30, 2022:

For the Nine Months Ended September 30, 2022:

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

13 unchanged sentences

Total $ — $ — $ — $ — $ — $ 470,659 $ 52,533 $ 523,192

For the Three Months Ended June 30, 2022:

For the Three Months Ended September 30, 2022:

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

For the Six Months Ended June 30, 2022:

For the Nine Months Ended September 30, 2022:

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

4 unchanged sentences

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:

June 30, 2023

Outstanding as of June 30

The following tables set forth information related to Farmer Mac's borrowings as of September 30, 2023 and December 31, 2022:

September 30, 2023

Outstanding as of September 30

Average Outstanding During the Quarter

37 unchanged sentences

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.

The maximum amount of Farmer Mac's discount notes outstanding at any month end during the nine months ended September 30, 2023 and 2022 was $ 1.5 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:

Debt Callable in 2023 as of June 30, 2023, by Maturity

The following table summarizes by maturity date the amounts and costs for Farmer Mac debt callable in 2023 as of September 30, 2023:

Debt Callable in 2023 as of September 30, 2023, by Maturity

Amount Weighted-Average Rate

6 unchanged sentences

Total $ 4,215,448 2.45 %

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:

The following schedule summarizes the earliest interest rate reset date, or debt maturities, of total borrowings outstanding as of September 30, 2023, including callable and non-callable medium-term notes, assuming callable notes are redeemed at the initial call date:

Earliest Interest Rate Reset Date, or Debt Maturities, of Borrowings Outstanding

9 unchanged sentences

Total principal net of discounts $ 25,602,487 3.03 %

During the six months ended June 30, 2023 and 2022, Farmer Mac called none and $ 26.0 million of callable medium-term notes, respectively.

During the nine months ended September 30, 2023 and 2022, Farmer Mac called $ 111.0 million and $ 26.0 million of callable medium-term notes, respectively.

Authority to Borrow from the U.S.

7 unchanged sentences

Treasury within a reasonable time.

As of June 30, 2023, Farmer Mac had not used this borrowing authority.

As of September 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.

During first and second quarter 2023, Farmer Mac paid a quarterly dividend of $ 1.10 per share on all classes of its common stock.

No outstanding debt repurchases were made in the nine months ended September 30, 2023 and 2022.

During each of the first, second, and third quarters 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.

7 unchanged sentences

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.

Farmer Mac did no t repurchase any shares of its Class C non-voting common stock during third quarter 2023.

As of September 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.

As of both September 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 September 30, 2023, Farmer Mac's minimum capital requirement was $ 840.1 million and its core capital level was $ 1.4 billion, which was $ 581.1 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.

2 unchanged sentences

Fair Value Classification and Transfers

The following tables present information about Farmer Mac's assets and liabilities measured at fair value on a recurring basis as of 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:

Assets and Liabilities Measured at Fair Value as of June 30, 2023

The following tables present information about Farmer Mac's assets and liabilities measured at fair value on a recurring basis as of September 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:

Assets and Liabilities Measured at Fair Value as of September 30, 2023

Level 1 Level 2 Level 3 (1)

49 unchanged sentences

(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.

There were no material assets or liabilities measured at fair value on a non-recurring basis as of September 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.

During the nine months ended September 30, 2023 and 2022, there were no transfers within the fair value hierarchy.

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

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.

Level 3 Assets and Liabilities Measured at Fair Value for the Three Months Ended June 30, 2023

There were no liabilities measured at fair value using significant unobservable inputs during the three and nine months ended September 30, 2023 and 2022.

Level 3 Assets and Liabilities Measured at Fair Value for the Three Months Ended September 30, 2023

Beginning Balance Purchases Settlements Allowance for Losses Realized and

unrealized losses included

in Income Unrealized gains

unrealized (losses)/gains included

Unrealized gains

included in Other

Comprehensive

Income Ending Balance

Income Transfers Out (1)

Ending Balance

(in thousands)

5 unchanged sentences

Available-for-sale:

AgVantage 8,217,420 852,000 ( 1,257,413 ) 8 ( 101,872 ) 27,667 7,737,810

7,737,810 100,000 ( 6,875 ) 133 ( 107,917 ) 9,653 ( 2,684,096 ) 5,048,708

Farmer Mac Guaranteed Securities 7,605 — ( 169 ) — — 2,553 — 9,989

7 unchanged sentences

Total Assets at fair value $ 7,770,126 $ 100,000 $ ( 7,172 ) $ 134 $ ( 106,203 ) $ 12,206 $ ( 2,684,096 ) $ 5,084,995

Level 3 Assets and Liabilities Measured at Fair Value for the Three Months Ended June 30, 2022

(1) Includes $ 2.7 billion of AgVantage Securities transferred from available-for-sale to held-to-maturity on July 1, 2023.

Level 3 Assets and Liabilities Measured at Fair Value for the Three Months Ended September 30, 2022

Beginning Balance Purchases Settlements Allowance for Losses Realized and

unrealized (losses)/gains included

in Income Unrealized gains/(losses)

unrealized losses included

Unrealized gains/(losses)

included in Other

19 unchanged sentences

Total Assets at fair value $ 6,477,184 $ 1,370,000 $ ( 628,211 ) $ — $ ( 205,206 ) $ ( 13,979 ) $ 6,999,788

Level 3 Assets and Liabilities Measured at Fair Value for the Six Months Ended June 30, 2023

Level 3 Assets and Liabilities Measured at Fair Value for the Nine Months Ended September 30, 2023

Beginning Balance Purchases Settlements Allowance for Losses Realized and

3 unchanged sentences

Comprehensive

Income Ending Balance

Income Transfers Out (1)

Ending Balance

(in thousands)

5 unchanged sentences

Available-for-sale:

AgVantage 7,599,379 1,539,650 ( 1,398,799 ) 40 ( 8,530 ) 6,070 7,737,810

7,599,379 1,639,650 ( 1,405,674 ) 173 ( 116,447 ) 15,723 ( 2,684,096 ) 5,048,708

Farmer Mac Guaranteed Securities 7,847 — ( 1,043 ) — — 3,185 — 9,989

7 unchanged sentences

Total Assets at fair value $ 7,632,487 $ 1,639,650 $ ( 1,407,702 ) $ 179 $ ( 114,431 ) $ 18,908 $ ( 2,684,096 ) $ 5,084,995

Level 3 Assets and Liabilities Measured at Fair Value for the Six Months Ended June 30, 2022

(1) Includes $ 2.7 billion of AgVantage Securities transferred from available-for-sale to held-to-maturity on July 1, 2023.

Level 3 Assets and Liabilities Measured at Fair Value for the Nine Months Ended September 30, 2022

Beginning Balance Purchases Settlements Allowance for Losses Realized and

22 unchanged sentences

Total Assets at fair value $ 6,358,451 $ 2,722,750 $ ( 1,440,110 ) $ ( 331 ) $ ( 565,190 ) $ ( 75,782 ) $ 6,999,788

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:

As of June 30, 2023

As of September 30, 2023

Financial Instruments Fair Value Valuation Technique Unobservable Input Range (Weighted-Average)

30 unchanged sentences

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:

As of June 30, 2023 As of December 31, 2022

The following table sets forth the estimated fair values and carrying values for financial assets, liabilities, and guarantees and commitments as of September 30, 2023 and December 31, 2022:

As of September 30, 2023 As of December 31, 2022

Fair Value Carrying

36 unchanged sentences

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.

The following tables present core earnings for Farmer Mac's segments and a reconciliation to consolidated net income for the three and nine months ended September 30, 2023 and 2022.

Core Earnings by Business Segment

For the Three Months Ended June 30, 2023

For the Three Months Ended September 30, 2023

Agricultural Finance Rural Infrastructure Treasury Corporate

11 unchanged sentences

Total revenues 37,972 8,328 6,641 1,174 34,415 538 240 7,795 97,103

(Provision for)/release of losses ( 5 ) ( 327 ) ( 632 ) ( 110 ) — 1 — — ( 1,073 )

(Provision for)/release of reserve for losses ( 75 ) — 6 — — — — — ( 69 )

Release of/(provision for) losses

13 3,694 ( 3,504 ) ( 66 ) — ( 1 ) — — 136

Release of/(provision for) reserve for losses

58 — ( 13 ) — — — — — 45

Operating expenses — — — — — — ( 24,034 ) — ( 24,034 )

15 unchanged sentences

Core Earnings by Business Segment

For the Three Months Ended June 30, 2022

For the Three Months Ended September 30, 2022

Agricultural Finance Rural Infrastructure Treasury Corporate

30 unchanged sentences

Core Earnings by Business Segment

For the Six Months Ended June 30, 2023

For the Nine Months Ended September 30, 2023

Agricultural Finance Rural Infrastructure Treasury Corporate

30 unchanged sentences

Core Earnings by Business Segment

For the Six Months Ended June 30, 2022

For the Nine Months Ended September 30, 2022

Agricultural Finance Rural Infrastructure Treasury Corporate

29 unchanged sentences

and segment core earnings reconciled to net income attributable to common stockholders.

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

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

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

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.

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

What changed 10-Q

Item 1. Financial Statements