0000845877us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2021-01-012021-09-30



As filed with the Securities and Exchange Commission on November 9, 20178, 2021
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 20172021
Commission File Number 001-14951 
 ____________________________________________________________


agm-20210930_g1.jpg
FEDERAL AGRICULTURAL MORTGAGE CORPORATION
(Exact name of registrant as specified in its charter)
Federally chartered instrumentality
of the United States
52-1578738
(State or other jurisdiction of
incorporation or organization)
(I.R.S. employer identification number)
1999 K Street, N.W., 4th Floor,
Washington, D.C.
20006
Washington,DC20006
(Address of principal executive offices)(Zip code)
(202)872-7700
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbolExchange on which registered
Class A voting common stockAGM.ANew York Stock Exchange
Class C non-voting common stockAGMNew York Stock Exchange
6.000% Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series CAGM.PRCNew York Stock Exchange
5.700% Non-Cumulative Preferred Stock, Series DAGM.PRDNew York Stock Exchange
5.750% Non-Cumulative Preferred Stock, Series EAGM.PRENew York Stock Exchange
5.250% Non-Cumulative Preferred Stock, Series FAGM.PRFNew York Stock Exchange
4.875% Non-Cumulative Preferred Stock, Series GAGM.PRGNew York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: Class B voting common stock
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes        x☒                              No           o☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes        x☒                               No          o☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.  (Check one):
Large accelerated filero☒Accelerated filerx☐
Non-accelerated filer
o (Do not check if smaller reporting company)
☐
Smaller reporting companyo☐
Emerging growth companyo☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B)13(a) of the SecuritiesExchange Act.o

☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes         o☐                               No           x☒
As of November 1, 2017,2021, the registrant had outstanding 1,030,780 shares of Class A Voting Common Stock,voting common stock, 500,301 shares of Class B Voting Common Stock,voting common stock, and 9,086,9639,235,205 shares of Class C Non-Voting Common Stock.

non-voting common stock.



1




Table of Contents
34
Item 1.
Consolidated Financial Statements4
3
Consolidated Balance Sheets
4
Consolidated Statements of Operations
5
Consolidated Statements of Comprehensive Income
6
Consolidated Statements of Equity
7
Consolidated Statements of Cash Flows
89
Notes to Consolidated Financial Statements
910
Item 2.
9
2. Investment Securities
18
3. Farmer Mac Guaranteed Securities and USDA Securities
21
4. Financial Derivatives
24
5. Loans and Allowance for Losses
28
6. Guarantees and Long-Term Standby Purchase Commitments
41
7. Equity
42
8. Fair Value Disclosures
44
9. Business Segment Reporting
54
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
5860
Updates to Critical Accounting Estimates
60
Forward-Looking Statements
5860
Overview
6062
Use of Non-GAAP Measures
6466
Results of Operations
6668
Outlook
8283
Balance Sheet Review
8589
Off-Balance Sheet ArrangementsRisk Management
8589
Risk Management
87
Liquidity and Capital Resources
106
RegulatoryOther Matters
108107
Other Matters
108
Supplemental Information
109108
Item 3.
114112
Item 4.
114113
PART II - Other Information
114113
Item 1.
114
Item 1A.
114
Item 2.
115114
Item 3.
115114
Item 4.
115114
Item 5.
115114
Item 6.
115
117116




2






PART I


Item 1.Financial Statements


Item 1.Financial Statements

3


FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
As of
 September 30, 2021December 31, 2020
 (in thousands)
Assets:  
Cash and cash equivalents$899,052 $1,033,941 
Investment securities:  
Available-for-sale, at fair value (amortized cost of $3,684,066 and $3,843,666, respectively)3,696,204 3,853,692 
Held-to-maturity, at amortized cost45,032 45,032 
Other investments403 — 
Total Investment Securities3,741,639 3,898,724 
Farmer Mac Guaranteed Securities:  
Available-for-sale, at fair value (amortized cost of $5,909,989 and $6,594,992, respectively)6,138,759 6,947,701 
Held-to-maturity, at amortized cost2,248,303 1,175,792 
Total Farmer Mac Guaranteed Securities8,387,062 8,123,493 
USDA Securities:  
Trading, at fair value4,793 6,695 
Held-to-maturity, at amortized cost2,457,217 2,473,626 
Total USDA Securities2,462,010 2,480,321 
Loans:  
Loans held for sale, at lower of cost or fair value301,551 — 
Loans held for investment, at amortized cost7,758,286 7,261,933 
Loans held for investment in consolidated trusts, at amortized cost977,372 1,287,045 
Allowance for losses(14,294)(13,832)
Total loans, net of allowance9,022,915 8,535,146 
Financial derivatives, at fair value15,668 17,468 
Interest receivable (includes $7,400 and $16,401, respectively, related to consolidated trusts)144,078 186,429 
Guarantee and commitment fees receivable39,038 37,113 
Deferred tax asset, net11,084 18,321 
Prepaid expenses and other assets21,822 24,545 
Total Assets$24,744,368 $24,355,501 
Liabilities and Equity:  
Liabilities:  
Notes payable$22,365,121 $21,848,917 
Debt securities of consolidated trusts held by third parties990,961 1,323,786 
Financial derivatives, at fair value25,633 29,892 
Accrued interest payable (includes $6,550 and $14,370, respectively, related to consolidated trusts)83,263 92,738 
Guarantee and commitment obligation37,526 35,535 
Accounts payable and accrued expenses42,566 28,879 
Reserve for losses2,000 3,277 
Total Liabilities23,547,070 23,363,024 
Commitments and Contingencies (Note 6)00
Equity:  
Preferred stock:  
      Series C, par value $25 per share, 3,000,000 shares authorized, issued and outstanding73,382 73,382 
Series D, par value $25 per share, 4,000,000 shares authorized, issued and outstanding96,659 96,659 
Series E, par value $25 per share, 3,180,000 shares authorized, issued and outstanding77,003 77,003 
Series F, par value $25 per share, 4,800,000 shares authorized, issued and outstanding116,160 116,160 
Series G, par value $25 per share, 5,000,000 shares authorized, issued and outstanding121,327 — 
Common stock:  
Class A Voting, $1 par value, no maximum authorization, 1,030,780 shares outstanding1,031 1,031 
Class B Voting, $1 par value, no maximum authorization, 500,301 shares outstanding500 500 
Class C Non-Voting, $1 par value, no maximum authorization, 9,234,778 shares and 9,205,897 shares outstanding, respectively9,235 9,206 
Additional paid-in capital124,942 122,899 
Accumulated other comprehensive income/(loss), net of tax18,206 (13,923)
Retained earnings558,853 509,560 
Total Equity1,197,298 992,477 
Total Liabilities and Equity$24,744,368 $24,355,501 

 As of
 September 30, 2017 December 31, 2016
 (in thousands)
Assets:   
Cash and cash equivalents$366,764
 $265,229
Investment securities: 
  
Available-for-sale, at fair value2,234,966
 2,515,851
Farmer Mac Guaranteed Securities: 
  
Available-for-sale, at fair value5,443,746
 4,853,685
Held-to-maturity, at amortized cost2,158,810
 1,149,231
Total Farmer Mac Guaranteed Securities7,602,556
 6,002,916
USDA Securities: 
  
Trading, at fair value14,864
 20,388
Held-to-maturity, at amortized cost2,092,285
 2,009,225
Total USDA Securities2,107,149
 2,029,613
Loans: 
  
Loans held for investment, at amortized cost3,804,966
 3,379,884
Loans held for investment in consolidated trusts, at amortized cost1,329,212
 1,132,966
Allowance for loan losses(6,408) (5,415)
Total loans, net of allowance5,127,770
 4,507,435
Real estate owned, at lower of cost or fair value1,086
 1,528
Financial derivatives, at fair value2,020
 23,182
Interest receivable (includes $10,625 and $12,584, respectively, related to consolidated trusts)110,175
 122,782
Guarantee and commitment fees receivable36,679
 38,871
Deferred tax asset, net4,293
 12,291
Prepaid expenses and other assets96,780
 86,322
Total Assets$17,690,238
 $15,606,020
    
Liabilities and Equity: 
  
Liabilities: 
  
Notes payable: 
  
Due within one year$8,112,928
 $8,440,123
Due after one year7,399,961
 5,222,977
Total notes payable15,512,889
 13,663,100
Debt securities of consolidated trusts held by third parties1,333,417
 1,142,704
Financial derivatives, at fair value30,595
 58,152
Accrued interest payable (includes $8,874 and $10,881, respectively, related to consolidated trusts)61,804
 49,700
Guarantee and commitment obligation35,316
 37,282
Accounts payable and accrued expenses19,971
 9,415
Reserve for losses2,080
 2,020
Total Liabilities16,996,072
 14,962,373
Commitments and Contingencies (Note 6)

 

Equity: 
  
Preferred stock: 
  
Series A, par value $25 per share, 2,400,000 shares authorized, issued and outstanding58,333
 58,333
Series B, par value $25 per share, 3,000,000 shares authorized, issued and outstanding73,044
 73,044
      Series C, par value $25 per share, 3,000,000 shares authorized, issued and outstanding73,382
 73,382
Common stock: 
  
Class A Voting, $1 par value, no maximum authorization, 1,030,780 shares outstanding1,031
 1,031
Class B Voting, $1 par value, no maximum authorization, 500,301 shares outstanding500
 500
Class C Non-Voting, $1 par value, no maximum authorization, 9,082,335 shares and 9,007,481 shares outstanding, respectively9,082
 9,008
Additional paid-in capital119,130
 118,655
Accumulated other comprehensive income, net of tax40,795
 33,758
Retained earnings318,869
 275,714
Total Stockholders' Equity694,166
 643,425
Non-controlling interest—
 222
Total Equity694,166
 643,647
Total Liabilities and Equity$17,690,238
 $15,606,020
The accompanying notes are an integral part of these consolidated financial statements.




43






FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
For the Three Months Ended For the Nine Months EndedFor the Three Months EndedFor the Nine Months Ended
September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016 September 30, 2021September 30, 2020September 30, 2021September 30, 2020
(in thousands, except per share amounts) (in thousands, except per share amounts)
Interest income:       Interest income:
Investments and cash equivalents$9,223
 $6,994
 $24,834
 $20,235
Investments and cash equivalents$4,121 $7,096 $14,107 $35,236 
Farmer Mac Guaranteed Securities and USDA Securities54,350
 38,129
 146,978
 110,938
Farmer Mac Guaranteed Securities and USDA Securities38,428 45,335 123,246 178,644 
Loans40,924
 34,409
 117,349
 99,486
Loans61,923 56,204 181,631 172,230 
Total interest income104,497
 79,532
 289,161
 230,659
Total interest income104,472 108,635 318,984 386,110 
Total interest expense64,935
 43,969
 172,797
 127,098
Total interest expense49,467 63,974 155,599 251,789 
Net interest income39,562
 35,563
 116,364
 103,561
Net interest income55,005 44,661 163,385 134,321 
Provision for loan losses(270) (191) (1,234) (604)
Net interest income after provision for loan losses39,292
 35,372
 115,130
 102,957
Non-interest income:       
Provision for lossesProvision for losses(366)(653)(518)(4,542)
Net interest income after provision for lossesNet interest income after provision for losses54,639 44,008 162,867 129,779 
Non-interest income/(expense):Non-interest income/(expense):
Guarantee and commitment fees3,314
 3,798
 10,630
 11,079
Guarantee and commitment fees3,155 3,159 9,182 9,495 
Gains/(losses) on financial derivatives and hedging activities661
 (1,601) 2,530
 (13,079)
Losses on financial derivativesLosses on financial derivatives(2,347)(564)(1,120)(3,339)
Gains/(losses) on trading securities—
 1,182
 (84) 1,934
Gains/(losses) on trading securities37 (258)(38)(173)
Gains/(losses) on sale of available-for-sale investment securities89
 —
 89
 (9)
Gains on sale of available-for-sale investment securitiesGains on sale of available-for-sale investment securities253 — 253 — 
Gains on sale of real estate owned32
 15
 784
 15
Gains on sale of real estate owned— — — 485 
Release of/(provision for) reserve for lossesRelease of/(provision for) reserve for losses111 (547)1,277 (540)
Other income203
 707
 890
 1,221
Other income582 594 1,600 2,639 
Non-interest income4,299
 4,101
 14,839
 1,161
Non-interest income1,791 2,384 11,154 8,567 
Non-interest expense:       
Operating expenses:Operating expenses:
Compensation and employee benefits5,987
 5,438
 18,986
 16,823
Compensation and employee benefits10,027 8,791 31,601 27,005 
General and administrative3,890
 3,474
 11,611
 10,757
General and administrative6,330 5,044 19,015 15,702 
Regulatory fees625
 613
 1,875
 1,838
Regulatory fees750 725 2,250 2,175 
Real estate owned operating costs, net—
 —
 23
 39
Provision for/(release of) reserve for losses114
 (222) 60
 (114)
Non-interest expense10,616
 9,303
 32,555
 29,343
Operating expensesOperating expenses17,107 14,560 52,866 44,882 
Income before income taxes32,975
 30,170
 97,414
 74,775
Income before income taxes39,323 31,832 121,155 93,464 
Income tax expense11,193
 10,529
 33,103
 26,264
Income tax expense8,260 6,340 25,579 19,516 
Net income21,782
 19,641
 64,311
 48,511
Net income31,063 25,492 95,576 73,948 
Less: Net loss attributable to non-controlling interest—
 18
 165
 62
Net income attributable to Farmer Mac21,782
 19,659
 64,476
 48,573
Preferred stock dividends(3,295) (3,295) (9,886) (9,886)Preferred stock dividends(6,774)(5,166)(17,885)(12,536)
Loss on retirement of preferred stockLoss on retirement of preferred stock— (1,667)— (1,667)
Net income attributable to common stockholders$18,487
 $16,364
 $54,590
 $38,687
Net income attributable to common stockholders$24,289 $18,659 $77,691 $59,745 
       
Earnings per common share and dividends:       
Earnings per common share:Earnings per common share:
Basic earnings per common share$1.74
 $1.56
 $5.16
 $3.70
Basic earnings per common share$2.26 $1.74 $7.22 $5.57 
Diluted earnings per common share$1.71
 $1.54
 $5.06
 $3.60
Diluted earnings per common share$2.24 $1.73 $7.17 $5.54 
Common stock dividends per common share$0.36
 $0.26
 $1.08
 $0.78
The accompanying notes are an integral part of these consolidated financial statements.



4
5






FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
 For the Three Months Ended For the Nine Months Ended
 September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
 (in thousands)
Net income$21,782
 $19,641
 $64,311
 $48,511
Other comprehensive income before taxes:       
Net unrealized (losses)/gains on available-for-sale securities(886) 552
 19,283
 46,305
Net changes in held-to-maturity securities(1,879) (73) (7,491) (2,081)
Net unrealized gains/(losses) on cash flow hedges253
 1,336
 (966) (6,403)
Other comprehensive (loss)/income before tax(2,512) 1,815
 10,826
 37,821
Income tax expense related to other comprehensive (loss)/income879
 (635) (3,789) (13,238)
Other comprehensive (loss)/income net of tax(1,633) 1,180
 7,037
 24,583
Comprehensive income20,149
 20,821
 71,348
 73,094
Less: comprehensive loss attributable to non-controlling interest—
 18
 165
 62
Comprehensive income attributable to Farmer Mac$20,149
 $20,839
 $71,513
 $73,156
For the Three Months EndedFor the Nine Months Ended
 September 30, 2021September 30, 2020September 30, 2021September 30, 2020
 (in thousands)
Net income$31,063 $25,492 $95,576 $73,948 
Other comprehensive income/(loss) before taxes:
Net unrealized gains/(losses) on available-for-sale securities991 47,235 29,966 (9,554)
Net changes in held-to-maturity securities(2,385)(2,523)(6,195)(10,707)
Net unrealized gains/(losses) on cash flow hedges3,258 2,959 16,899 (27,429)
Other comprehensive income/(loss) before tax1,864 47,671 40,670 (47,690)
Income tax (expense)/benefit related to other comprehensive income/(loss)(391)(10,011)(8,541)10,014 
Other comprehensive income/(loss) net of tax1,473 37,660 32,129 (37,676)
Comprehensive income$32,536 $63,152 $127,705 $36,272 
The accompanying notes are an integral part of these consolidated financial statements.



5
6






FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(unaudited)
Accumulated
AdditionalOther
Preferred StockCommon StockPaid-InComprehensiveRetainedTotal
SharesAmountSharesAmountCapitalIncome/(Loss)EarningsEquity
(in thousands)
Balance as of December 31, 202014,980 $363,204 10,737 $10,737 $122,899 $(13,923)$509,560 $992,477 
Net Income— — — — — — 33,227 33,227 
Other comprehensive income, net of tax— — — — — 65,667 — 65,667 
Cash dividends:
Preferred stock— — — — — — (5,269)(5,269)
Common stock (cash dividend of $0.88 per share)— — — — — — (9,450)(9,450)
Issuance of Class C Common Stock— — 21 21 12 — — 33 
Stock-based compensation cost— — — — 1,665 1,665 
Other stock-based award activity— — — — (858)— — (858)
Balance as of March 31, 202114,980 $363,204 10,758 $10,758 $123,718 $51,744 $528,068 $1,077,492 
Net Income— — — — — — 31,286 31,286 
Other comprehensive loss, net of tax— — — — — (35,011)— (35,011)
Cash dividends:
Preferred stock— — — — — — (5,842)(5,842)
Common stock (cash dividend of $0.88 per share)— — — — — — (9,474)(9,474)
Issuance of Series G Preferred Stock5,000 121,327 — — — — — 121,327 
Issuance of Class C Common Stock— — 7 7 13 — — 20 
Stock-based compensation cost— — — — 891 — — 891 
Other stock-based award activity— — — — (474)— — (474)
Balance as of June 30, 202119,980 $484,531 10,765 $10,765 $124,148 $16,733 $544,038 $1,180,215 
Net Income— — — — — — 31,063 31,063 
Other comprehensive income, net of tax— — — — — 1,473 — 1,473 
Cash dividends:
Preferred stock— — — — — — (6,774)(6,774)
Common stock (cash dividend of $0.88 per share)— — — — — — (9,474)(9,474)
Issuance of Class C Common Stock— — 1 1 45 — — 46 
Stock-based compensation cost— — — — 749 — — 749 
Balance as of September 30, 202119,980 $484,531 10,766 $10,766 $124,942 $18,206 $558,853 $1,197,298 

6




           Accumulated      
         Additional Other      
 Preferred Stock Common Stock Paid-In Comprehensive Retained Non-controlling Total
 Shares Amount Shares Amount Capital Income/(Loss) Earnings Interest Equity
 (in thousands)
Balance as of December 31, 20158,400
 $204,759
 10,687
 $10,687
 $117,862
 $(11,019) $231,228
 $203
 $553,720
Net income/(loss):                 
Attributable to Farmer Mac—
 —
 —
 —
 —
 —
 48,573
 —
 48,573
Attributable to non-controlling interest—
 —
 —
 —
 —
 —
 —
 (62) (62)
Other comprehensive income, net of tax—
 —
 —
 —
 —
 24,583
 —
 —
 24,583
Cash dividends:                 
Preferred stock—
 —
 —
 —
 —
 —
 (9,886) —
 (9,886)
Common stock—
 —
 —
 —
 —
 —
 (8,145) —
 (8,145)
Issuance of Class C Common Stock—
 —
 101
 101
 390
 —
 —
 —
 491
Repurchase of Class C Common Stock—
 —
 (307) (307) —
 —
 (8,781) —
 (9,088)
Stock-based compensation cost—
 —
 —
 —
 2,566
 —
 —
 —
 2,566
Other stock-based award activity—
 —
 —
 —
 (1,921) —
 —
 —
 (1,921)
Investment in subsidiary - non-controlling interest—
 —
 —
 —
 —
 —
 —
 53
 53
Balance as of September 30, 20168,400
 $204,759
 10,481
 $10,481
 $118,897
 $13,564
 $252,989
 $194
 $600,884
                  
Balance as of December 31, 20168,400
 $204,759
 10,539
 $10,539
 $118,655
 $33,758
 $275,714
 $222
 $643,647
Net income/(loss):                 
Attributable to Farmer Mac—
 —
 —
 —
 —
 —
 64,476
 —
 64,476
Attributable to non-controlling interest—
 —
 —
 —
 —
 —
 —
 (165) (165)
Other comprehensive income, net of tax—
 —
 —
 —
 —
 7,037
 —
 —
 7,037
Cash dividends:                 
Preferred stock—
 —
 —
 —
 —
 —
 (9,886) —
 (9,886)
Common stock—
 —
 —
 —
 —
 —
 (11,435) —
 (11,435)
Issuance of Class C Common Stock—
 —
 74
 74
 228
 —
 —
 —
 302
Stock-based compensation cost—
 —
 —
 —
 2,597
 —
 —
 —
 2,597
Other stock-based award activity—
 —
 —
 —
 (2,350) —
 —
 —
 (2,350)
Redemption of interest in subsidiary—
 —
 —
 —
 —
 —
 —
 (57) (57)
Balance as of September 30, 20178,400
 $204,759
 10,613
 $10,613
 $119,130
 $40,795
 $318,869
 $—
 $694,166

Accumulated
AdditionalOther
Preferred StockCommon StockPaid-InComprehensiveRetainedTotal
SharesAmountSharesAmountCapitalIncome/(Loss)EarningsEquity
(in thousands)
Balance as of December 31, 20199,400 $228,374 10,712 $10,712 $119,304 $(16,161)$457,047 $799,276 
Cumulative effect adjustment from adoption of current expected credit loss standard— — — — — — (2,099)(2,099)
Balances as of January 1, 20209,400 $228,374 10,712 $10,712 $119,304 $(16,161)$454,948 $797,177 
Net Income— — — — — — 12,830 12,830 
Other comprehensive loss, net of tax— — — — — (105,276)— (105,276)
Cash dividends:
Preferred stock— — — — — — (3,431)(3,431)
Common stock (cash dividend of $0.80 per share)— — — — — — (8,571)(8,571)
Issuance of Class C Common Stock— — 15 15 19 — — 34 
Repurchase of Class C Common Stock— — (4)(4)— — (231)(235)
Stock-based compensation cost— — — — 1,293 — 1,293 
Other stock-based award activity— — — — (204)— — (204)
Balance as of March 31, 20209,400 $228,374 10,723 $10,723 $120,412 $(121,437)$455,545 $693,617 
Net Income— — — — — — 35,626 35,626 
Other comprehensive income, net of tax— — — — — 29,940 — 29,940 
Cash dividends:
Preferred stock— — — — — — (3,939)(3,939)
Common stock (cash dividend of $0.80 per share)— — — — — — (8,585)(8,585)
Issuance of Series E Preferred Stock3,180 77,003 — — — — — 77,003 
Issuance of Class C Common Stock— — 10 10 17 — — 27 
Stock-based compensation cost— — — — 719 — — 719 
Other stock-based award activity— — — — (292)— — (292)
Balance as of June 30, 202012,580 $305,377 10,733 $10,733 $120,856 $(91,497)$478,647 $824,116 
Net Income— — — — — — 25,492 25,492 
Other comprehensive income, net of tax— — — — — 37,660 — 37,660 
Cash dividends:
Preferred stock— — — — — — (5,166)(5,166)
Common stock (cash dividend of $0.80 per share)— — — — — — (8,589)(8,589)
Issuance of Series F Preferred Stock4,800 116,160 — — — — — 116,160 
Redemption of Series A preferred stock(2,400)(58,333)— — — — — (58,333)
Loss on retirement of preferred stock— — — — — — (1,667)(1,667)
Issuance of Class C Common Stock— — 3 3 8 — — 11 
Stock-based compensation cost— — — — 753 — — 753 
Other stock-based award activity— — — — (92)— — (92)
Balance as of September 30, 202014,980 $363,204 10,736 $10,736 $121,525 $(53,837)$488,717 $930,345 
The accompanying notes are an integral part of these consolidated financial statements.



7






FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)(unaudited)
For the Nine Months Ended
 September 30, 2021September 30, 2020
 (in thousands)
Cash flows from operating activities: 
Net income$95,576 $73,948 
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 Securities13,631 3,800 
Amortization of debt premiums, discounts, and issuance costs5,106 18,502 
Net change in fair value of trading securities, hedged assets, and financial derivatives226,895 (342,380)
Gain on sale of real estate owned— (485)
Gain on the sale of available-for-sale investment securities(253)— 
Total (release)/provision for allowance for losses(759)5,083 
Excess tax benefits related to stock-based awards292 (421)
Deferred income taxes(1,302)(2,763)
Stock-based compensation expense3,306 2,765 
Purchases of loans held for sale— (59,150)
Proceeds from the sale of loans held for sale— 15,000 
Proceeds from repayment of loans purchased as held for sale44,744 54,661 
Net change in:
Interest receivable40,509 44,706 
Guarantee and commitment fees receivable66 218 
Other assets2,431 (20,169)
Accrued interest payable(9,475)(14,311)
Custodial deposit liability20,798 — 
Other liabilities(8,346)(4,412)
Net cash provided by/(used in) operating activities433,219 (225,408)
Cash flows from investing activities: 
Purchases of available-for-sale investment securities(1,414,547)(2,177,560)
Purchases of other investment securities(403)— 
Purchases of Farmer Mac Guaranteed Securities and USDA Securities(2,658,305)(1,798,028)
Purchases of loans held for investment(2,107,746)(2,245,958)
Purchases of defaulted loans(8,713)(6,272)
Proceeds from repayment of available-for-sale investment securities1,303,141 1,612,075 
Proceeds from repayment of Farmer Mac Guaranteed Securities and USDA Securities2,282,970 1,725,500 
Proceeds from repayment of loans purchased as held for investment1,500,239 1,272,603 
Proceeds from sale of loans previously classified as held for investment10,000 — 
Proceeds from sale of available-for-sale investment securities257,524 — 
Proceeds from sale of Farmer Mac Guaranteed Securities84,131 64,612 
Proceeds from sale of real estate owned— 2,191 
Net cash used in investing activities(751,709)(1,550,837)
Cash flows from financing activities: 
Proceeds from issuance of discount notes46,784,100 51,936,788 
Proceeds from issuance of medium-term notes8,588,616 10,561,149 
Payments to redeem discount notes(46,182,144)(51,785,666)
Payments to redeem medium-term notes(8,640,370)(8,293,765)
Payments to third parties on debt securities of consolidated trusts(441,646)(431,093)
Proceeds from common stock issuance71 44 
Retirement of preferred stock— (60,000)
Proceeds from preferred stock issuance, net of stock issuance costs121,327 193,163 
Tax payments related to share-based awards(1,305)(560)
Purchases of common stock— (235)
Dividends paid on common and preferred stock(45,048)(37,369)
Net cash provided by financing activities183,601 2,082,456 
Net change in cash and cash equivalents(134,889)306,211 
Cash and cash equivalents at beginning of period1,033,941 604,381 
Cash and cash equivalents at end of period$899,052 $910,592 
Non-cash activity:
Loans acquired and securitized as Farmer Mac Guaranteed Securities84,131 64,612 
Consolidation of Farmer Mac Guaranteed Securities from off-balance sheet to loans held for investment in consolidated trusts and to debt securities of consolidated trusts held by third parties84,131 64,612 
Reclassification of defaulted loans from loans held for investment in consolidated trusts to loans held for investment24,690 42,393 
Reclassification of loans held for sale to loans held for investment— 24,150 
Reclassification of loans held for investment to loans held for sale301,551 — 
Capitalized interest1,253 937 
 For the Nine Months Ended
 September 30, 2017 September 30, 2016
 (in thousands)
Cash flows from operating activities:   
Net income$64,311
 $48,511
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 Securities1,701
 1,343
Amortization of debt premiums, discounts and issuance costs17,078
 24,789
Net change in fair value of trading securities, hedged assets, and financial derivatives(12,232) 1,672
Gains on sale of real estate owned(784) (15)
Total provision for losses1,294
 490
Excess tax benefits related to stock-based awards1,170
 —
Deferred income taxes1,910
 (1,270)
Other11
 9
Stock-based compensation expense2,597
 2,565
Proceeds from repayment of trading investment securities—
 2,212
Proceeds from repayment of loans purchased as held for sale54,919
 67,506
Net change in:   
Interest receivable12,678
 26,172
Guarantee and commitment fees receivable226
 534
Other assets(109) (46,832)
Accrued interest payable12,104
 (7,351)
Other liabilities435
 507
Net cash provided by operating activities157,309
 120,842
Cash flows from investing activities: 
  
Purchases of available-for-sale investment securities(614,423) (1,365,314)
Purchases of Farmer Mac Guaranteed Securities and USDA Securities(2,580,229) (2,203,574)
Purchases of loans held for investment(1,047,001) (762,018)
Purchases of defaulted loans(3,458) (2,516)
Proceeds from repayment of available-for-sale investment securities895,497
 957,973
Proceeds from repayment of Farmer Mac Guaranteed Securities and USDA Securities787,743
 1,467,052
Proceeds from repayment of loans purchased as held for investment368,826
 333,920
Proceeds from sale of available-for-sale investment securities5,089
 186,769
Proceeds from sale of Farmer Mac Guaranteed Securities404,246
 457,369
Proceeds from sale of real estate owned6,464
 295
Net cash used by investing activities(1,777,246) (930,044)
Cash flows from financing activities: 
  
Proceeds from issuance of discount notes40,262,122
 77,411,229
Proceeds from issuance of medium-term notes7,160,298
 4,763,631
Payments to redeem discount notes(42,174,697) (79,058,129)
Payments to redeem medium-term notes(3,416,300) (3,103,800)
Excess tax benefits related to stock-based awards—
 408
Payments to third parties on debt securities of consolidated trusts(86,582) (71,806)
Proceeds from common stock issuance235
 405
Tax payments related to share-based awards(2,283) (1,975)
Common stock repurchased—
 (9,286)
Investment in subsidiary - non-controlling interest—
 53
Dividends paid on common and preferred stock(21,321) (18,031)
Net cash provided/(used) by financing activities1,721,472
 (87,301)
Net increase in cash and cash equivalents101,535
 (896,503)
Cash and cash equivalents at beginning of period265,229
 1,210,084
Cash and cash equivalents at end of period$366,764
 $313,581
  The accompanying notes are an integral part of these consolidated financial statements.




8






FEDERAL AGRICULTURAL MORTGAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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, 20162020 consolidated balance sheet presented in this report has been derived
from Farmer Mac's audited 20162020 consolidated financial statements. 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 20162020 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, 20162020, as filed with the SEC
on March 9, 2017. That Form 10-K describes Farmer Mac's significant accounting policies, which include its policies on Principles of Consolidation; Cash and Cash Equivalents and Statements of Cash Flows; Transfers of Financial Assets and Liabilities; Investment Securities, Farmer Mac Guaranteed Securities, and USDA Securities; Loans; Securitization of Loans; Real Estate Owned; Financial Derivatives; Notes Payable; Allowance for Loan Losses and Reserve for Losses; Earnings Per Common Share; Income Taxes; Stock-Based Compensation; Comprehensive Income; Long-Term Standby Purchase Commitments; Fair Value Measurement; and Consolidation of Variable Interest Entities ("VIEs").February 25, 2021. 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 nine months ended September 30, 2017.2021.



Principles of Consolidation


The consolidated financial statements include the accounts of Farmer Mac and its three2 subsidiaries during the quarter:year: (1) Farmer Mac Mortgage Securities Corporation, ("FMMSC"), whose principal activities are to facilitate the purchase and issuance of Farmer Mac Guaranteed Securities; and (2) Farmer Mac II LLC, whose principal activity is the operation of substantially all of the business related to the USDA Guarantees line of business – primarily the acquisition of USDA Securities; and (3) Contour Valuation Services, LLC (which began doing business as AgVisory during first quarter 2016), whose principal activity is to appraise agricultural real estate. On May 1, 2017, Farmer Mac transferred its entire 65% ownership interest in AgVisory back to the limited liability company as a company redemption in exchange for $5,000. Farmer Mac recognized a loss of approximately $0.1 million after-tax upon the transfer.Securities. The consolidated financial statements also include the accounts of VIEsVariable Interest Entities ("VIEs") in which Farmer Mac determined itself to be the primary beneficiary.








9






Table 1.1

Consolidation of Variable Interest Entities
As of September 30, 2021
Farm & RanchUSDA GuaranteesCorporateTotal
(in thousands)
On-Balance Sheet:
Consolidated VIEs:
Loans held for investment in consolidated trusts, at amortized cost$977,372 $— $— $977,372 
Debt securities of consolidated trusts held by third parties (1)
990,961 — — 990,961 
   Unconsolidated VIEs:
   Farmer Mac Guaranteed Securities:
      Carrying value— 28,265 — 28,265 
      Maximum exposure to loss (2)
— 28,227 — 28,227 
   Investment securities:
        Carrying value (3)
— — 2,030,155 2,030,155 
        Maximum exposure to loss (2) (3)
— — 2,019,108 2,019,108 
Off-Balance Sheet:
 Unconsolidated VIEs:
   Farmer Mac Guaranteed Securities:
      Maximum exposure to loss (2) (4)
60,349 259,893 — 320,242 

(1)Includes borrower remittances of $13.6 million. The borrower remittances had not been passed through to third party investors as of September 30, 2021.
(2)Farmer Mac uses unpaid principal balance and outstanding face amount of investment securities to represent maximum exposure to loss.
(3)Includes auction-rate certificates, government-sponsored enterprise ("GSE")-guaranteed mortgage-backed securities, and other mission related investments.
(4)The following tables present, byamount under the Farm & Ranch line of business details aboutrelates to unconsolidated trusts where Farmer Mac determined it was not the consolidationprimary beneficiary due to shared power with an unrelated party.

Consolidation of Variable Interest Entities
As of December 31, 2020
Farm & RanchUSDA GuaranteesCorporateTotal
(in thousands)
On-Balance Sheet:
Consolidated VIEs:
Loans held for investment in consolidated trusts, at amortized cost$1,287,045 $— $— $1,287,045 
Debt securities of consolidated trusts held by third parties (1)
1,323,786 — — 1,323,786 
   Unconsolidated VIEs:
   Farmer Mac Guaranteed Securities:
      Carrying value (2)
— 34,537 — 34,537 
      Maximum exposure to loss (3)
— 34,456 — 34,456 
   Investment securities:
        Carrying value (4)
— — 1,918,672 1,918,672 
        Maximum exposure to loss (3) (4)
— — 1,909,535 1,909,535 
Off-Balance Sheet:
 Unconsolidated VIEs:
   Farmer Mac Guaranteed Securities:
      Maximum exposure to loss (3) (5)
79,312 299,298 — 378,610 
(1)Includes borrower remittances of VIEs:$36.7 million. The borrower remittances had not been passed through to third party investors as of December 31, 2020.

(2)Includes $0.1 million of unamortized premiums and discounts and fair value adjustments related to the USDA Guarantees line of business.
Table 1.1
(3)Farmer Mac uses unpaid principal balance and outstanding face amount of investment securities to represent maximum exposure to loss.
 Consolidation of Variable Interest Entities
 As of September 30, 2017
 Farm & Ranch USDA Guarantees Rural Utilities Institutional Credit Corporate Total
 (in thousands)
On-Balance Sheet:           
Consolidated VIEs:           
Loans held for investment in consolidated trusts, at amortized cost$1,329,212
 $—
 $—
 $—
 $—
 $1,329,212
Debt securities of consolidated trusts held by third parties (1)
1,333,417
 —
 —
 —
 —
 1,333,417
   Unconsolidated VIEs:           
   Farmer Mac Guaranteed Securities:           
      Carrying value (2)
—
 31,003
 —
 —
 —
 31,003
      Maximum exposure to loss (3)
—
 30,688
 —
 —
 —
 30,688
   Investment securities:           
        Carrying value (4)
—
 —
 —
 —
 783,665
 783,665
        Maximum exposure to loss (3) (4)
—
 —
 —
 —
 781,755
 781,755
Off-Balance Sheet:           
 Unconsolidated VIEs:           
   Farmer Mac Guaranteed Securities:           
      Maximum exposure to loss (3) (5)
354,823
 226,802
 —
 —
 —
 581,625
(1)
Includes borrower remittances of $4.2 million. The borrower remittances had not been passed through to third party investors as of September 30, 2017.
(2)
Includes $0.3 million of unamortized premiums and discounts and fair value adjustments related to the USDA Guarantees line of business.
(3)
Farmer Mac uses unpaid principal balance and outstanding face amount of investment securities to represent maximum exposure to loss.
(4)
Includes auction-rate certificates, asset-backed securities, and government-sponsored enterprise ("GSE")-guaranteed mortgage-backed securities.
(5)
The amount under the Farm & Ranch line of business relates to unconsolidated trusts where Farmer Mac determined it was not the primary beneficiary due to shared power with an unrelated party.

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


10






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


 Consolidation of Variable Interest Entities
 As of December 31, 2016
 Farm & Ranch USDA Guarantees Rural Utilities Institutional Credit Corporate Total
 (in thousands)
On-Balance Sheet:           
Consolidated VIEs:           
Loans held for investment in consolidated trusts, at amortized cost$1,132,966
 $—
 $—
 $—
 $—
 $1,132,966
Debt securities of consolidated trusts held by third parties (1)
1,142,704
 —
 —
 —
 —
 1,142,704
   Unconsolidated VIEs:           
   Farmer Mac Guaranteed Securities:           
      Carrying value (2)
—
 36,042
 —
 30,347
 —
 66,389
      Maximum exposure to loss (3)
—
 35,599
 —
 30,000
 —
 65,599
   Investment securities:           
        Carrying value (4)
—
 —
 —
 —
 827,874
 827,874
        Maximum exposure to loss (3) (4)
—
 —
 —
 —
 825,909
 825,909
Off-Balance Sheet:           
 Unconsolidated VIEs:           
   Farmer Mac Guaranteed Securities:           
      Maximum exposure to loss (3) (5)
415,441
 103,976
 —
 970,000
 —
 1,489,417
(1)
Includes borrower remittances of $9.7 million, which have not been passed through to third party investors as of December 31, 2016.
(2)
Includes $0.4 million of unamortized premiums and discounts and fair value adjustments related to the USDA Guarantees line of business. Includes fair value adjustments related to the Institutional Credit line of business of $0.3 million.
(3)
Farmer Mac uses unpaid principal balance and the outstanding face amount of investment securities to represent maximum exposure to loss.
(4)
Includes auction-rate certificates, asset-backed securities, and GSE-guaranteed mortgage-backed securities.
(5)
The amount under the Farm & Ranch line of business relates to unconsolidated trusts where Farmer Mac determined it was not the primary beneficiary due to shared power with an unrelated party.

(a)Earnings Per Common Share

(a)Statements of Cash Flows

The following table sets forth information regarding certain cash and non-cash transactions for the nine months ended September 30, 2017 and 2016:

Table 1.2

 For the Nine Months Ended
 September 30, 2017 September 30, 2016
 (in thousands)
Non-cash activity:   
Real estate owned acquired through loan liquidation5,261
 —
Loans acquired and securitized as Farmer Mac Guaranteed Securities404,246
 457,369
Consolidation of Farm & Ranch Guaranteed Securities from off-balance sheet to loans held for investment in consolidated trusts and to debt securities of consolidated trusts held by third parties277,307
 402,841
Purchases of securities - traded not yet settled9,987
 25,000


11



(b)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 common stock options, stock appreciation rights ("SARs"), and non-vestedunvested restricted stock awards.  The following schedule reconciles basic and diluted EPS for the three and nine months ended September 30, 20172021 and 2016:2020:


Table 1.31.2
For the Three Months Ended
September 30, 2021September 30, 2020
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$24,289 10,766 $2.26 $18,659 10,734 $1.74 
Effect of dilutive securities(1)
SARs and restricted stock— 76 (0.02)— 51 (0.01)
Diluted EPS$24,289 10,842 $2.24��$18,659 10,785 $1.73 
(1)For the three months ended September 30, 2021 and 2020, SARs and restricted stock of 28,575 and 66,445, 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, 2021 and 2020, contingent shares of unvested restricted stock of 18,183 and 12,680, 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, 2021September 30, 2020
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$77,691 10,756 $7.22 $59,745 10,725 $5.57 
Effect of dilutive securities(1)
SARs and restricted stock— 78 (0.05)— 56 (0.03)
Diluted EPS$77,691 10,834 $7.17 $59,745 10,781 $5.54 
(1)For the nine months ended September 30, 2021 and 2020, SARs and restricted stock of 52,434 and 78,963, 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, 2021 and 2020, contingent shares of unvested restricted stock of 18,183 and 12,680, 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
 For the Three Months Ended
 
September 30, 2017(1)
 September 30, 2016
 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$18,487
 10,605
 $1.74
 $16,364
 10,473
 $1.56
Effect of dilutive securities(2)
       
  
  
Stock options, SARs and restricted stock—
 210
 (0.03) —
 176
 (0.02)
Diluted EPS$18,487
 10,815
 $1.71
 $16,364
 10,649
 $1.54
(1)
For the effect of the adoption of the new Accounting Standard Update 2016-09, "Improvements to Employee Share-Based Payment Accounting," on Basic and Diluted EPS, see Note 1(d) "New Accounting Standards."
(2)
For the three months ended September 30, 2017 and 2016, stock options and SARs of 24,657 and 54,709, 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, 2017 and 2016, contingent shares of non-vested restricted stock of 32,892, and 37,284, 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, 2017(1) September 30, 2016
 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$54,590
 10,586
 $5.16
 $38,687
 10,464
 $3.70
Effect of dilutive securities(2)
       
  
  
Stock options, SARs and restricted stock—
 208
 (0.10) —
 291
 (0.10)
Diluted EPS$54,590
 10,794
 $5.06
 $38,687
 10,755
 $3.60
(1)
For the effect of the adoption of the new Accounting Standard Update 2016-09, "Improvements to Employee Share-Based Payment Accounting," on Basic and Diluted EPS, see Note 1(d) "New Accounting Standards."
(2)
For the nine months ended September 30, 2017 and 2016, stock options and SARs of 33,440 and 115,875, 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, 2017 and 2016, contingent shares of non-vested restricted stock of 32,892, and 37,284, 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.


(c)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.




1211







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, 20172021 and 2016:2020.



Table 1.3
As of September 30, 2021As of September 30, 2020
Available-for-Sale SecuritiesHeld-to-Maturity SecuritiesCash Flow HedgesTotalAvailable-for-Sale SecuritiesHeld-to-Maturity SecuritiesCash Flow HedgesTotal
(in thousands)
For the Three Months Ended:
Beginning Balance$8,954 $19,819 $(12,040)$16,733 $(88,261)$26,379 $(29,615)$(91,497)
Other comprehensive income before reclassifications1,275 — 1,049 2,324 38,099 — 904 39,003 
Amounts reclassified from AOCI(493)(1,884)1,526 (851)(783)(1,993)1,433 (1,343)
Net comprehensive income/(loss)782 (1,884)2,575 1,473 37,316 (1,993)2,337 37,660 
Ending Balance$9,736 $17,935 $(9,465)$18,206 $(50,945)$24,386 $(27,278)$(53,837)
For the Nine Months Ended:
Beginning Balance$(13,937)$22,829 $(22,815)$(13,923)$(43,397)$32,845 $(5,609)$(16,161)
Other comprehensive income/(loss) before reclassifications25,734 — 9,041 34,775 (5,210)— (24,684)(29,894)
Amounts reclassified from AOCI(2,061)(4,894)4,309 (2,646)(2,338)(8,459)3,015 (7,782)
Net comprehensive income/(loss)23,673 (4,894)13,350 32,129 (7,548)(8,459)(21,669)(37,676)
Ending Balance$9,736 $17,935 $(9,465)$18,206 $(50,945)$24,386 $(27,278)$(53,837)
Table 1.4



 As of September 30, 2017 As of September 30, 2016
 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$(1,276) $42,104
 $1,600
 $42,428
 $19,704
 $(1,781) $(5,539) $12,384
Other Comprehensive Income Before Reclassifications2,298
 —
 (97) 2,201
 2,746
 —
 527
 3,273
Amounts reclassified from AOCI(2,875) (1,221) 262
 (3,834) (2,388) (47) 342
 (2,093)
Net Comprehensive (Loss)/Income(577) (1,221)
165

(1,633) 358
 (47)
869

1,180
Ending Balance$(1,853) $40,883

$1,765

$40,795
 $20,062
 $(1,828)
$(4,670)
$13,564
                
For the Nine Months Ended:               
Beginning Balance$(14,387) $45,752
 $2,393
 $33,758
 $(10,035) $(476) $(508) $(11,019)
Other Comprehensive Income Before Reclassifications20,711
 —
 (1,522) 19,189
 37,446
 —
 (5,136) 32,310
Amounts reclassified from AOCI(8,177) (4,869) 894
 (12,152) (7,349) (1,352) 974
 (7,727)
Net Comprehensive Income/(Loss)12,534
 (4,869) (628) 7,037
 30,097
 (1,352) (4,162) 24,583
Ending Balance$(1,853) $40,883
 $1,765
 $40,795
 $20,062
 $(1,828) $(4,670) $13,564
12



13






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 nine months ended September 30, 20172021 and 2016:2020:


Table 1.51.4


For the Three Months Ended
September 30, 2021September 30, 2020
Before TaxProvision (Benefit)After TaxBefore TaxProvision (Benefit)After Tax
(in thousands)
Other comprehensive income:
Available-for-sale-securities:
Unrealized holding gains on available-for-sale securities$1,614 $339 $1,275 $48,226 $10,127 $38,099 
Less reclassification adjustments included in:
Net interest income(1)
(362)(76)(286)(976)(205)(771)
Gains on sale of available-for-sale investment securities(2)
(253)(53)(200)— — — 
Other income(3)
(8)(1)(7)(15)(3)(12)
Total$991 $209 $782 $47,235 $9,919 $37,316 
Held-to-maturity securities:
Less reclassification adjustments included in:
Net interest income(4)
(2,385)(501)(1,884)(2,523)(530)(1,993)
Total$(2,385)$(501)$(1,884)$(2,523)$(530)$(1,993)
Cash flow hedges
Unrealized gains on cash flow hedges$1,326 $277 $1,049 $1,145 $241 $904 
Less reclassification adjustments included in:
Net interest income(5)
1,932 406 1,526 1,814 381 1,433 
Total$3,258 $683 $2,575 $2,959 $622 $2,337 
Other comprehensive income$1,864 $391 $1,473 $47,671 $10,011 $37,660 
(1)Relates to the amortization of unrealized gains on hedged items prior to the application of fair value hedge accounting.
(2)Represents unrealized gains and losses on sales of available-for-sale securities.
(3)Represents amortization of deferred gains related to certain available-for-sale USDA Securities and Farmer Mac Guaranteed USDA Securities.
(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. 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.
(5)Relates to the recognition of unrealized gains and losses on cash flow hedges recorded in AOCI.


13




For the Three Months EndedFor the Nine Months Ended
September 30, 2017 September 30, 2016September 30, 2021September 30, 2020
Before Tax Provision (Benefit) After Tax Before Tax Provision (Benefit) After TaxBefore TaxProvision (Benefit)After TaxBefore TaxProvision (Benefit)After Tax
(in thousands)(in thousands)
Other comprehensive income:           Other comprehensive income:
Available-for-sale-securities:           Available-for-sale-securities:
Unrealized holding gains on available-for-sale-securities$3,536
 $1,238
 $2,298
 $4,225
 $1,479
 $2,746
Unrealized holding gains/(losses) on available-for-sale securitiesUnrealized holding gains/(losses) on available-for-sale securities$32,574 $6,840 $25,734 $(6,596)$(1,386)$(5,210)
Less reclassification adjustments included in:           Less reclassification adjustments included in:
Gains/(losses) on financial derivatives and hedging activities(1)
(4,326) (1,514) (2,812) (3,652) (1,278) (2,374)
Gains/(losses) on sale of available-for-sale investment securities(2)
(89) (31) (58) —
 —
 —
Other income(2)
(7) (2) (5) (21) (7) (14)
Net interest income(1)
Net interest income(1)
(2,333)(490)(1,843)(2,916)(612)(2,304)
Gains on sale of available-for-sale investment securities(2)
Gains on sale of available-for-sale investment securities(2)
(253)(53)(200)— — — 
Other income(3)
Other income(3)
(22)(4)(18)(42)(8)(34)
Total$(886) $(309) $(577) $552
 $194
 $358
Total$29,966 $6,293 $23,673 $(9,554)$(2,006)$(7,548)
Held-to-maturity securities:           Held-to-maturity securities:
Less reclassification adjustments included in:           Less reclassification adjustments included in:
Net interest income(3)
$(1,879) $(658) $(1,221) $(73) $(26) $(47)
Net interest income(4)
Net interest income(4)
(6,195)(1,301)(4,894)(10,707)(2,248)(8,459)
Total$(1,879) $(658) $(1,221) $(73) $(26) $(47)Total$(6,195)$(1,301)$(4,894)$(10,707)$(2,248)$(8,459)
Cash flow hedges           Cash flow hedges
Unrealized (losses)/gains on cash flow hedges$(150) $(53) $(97) $810
 $283
 $527
Unrealized gains/(losses) on cash flow hedgesUnrealized gains/(losses) on cash flow hedges$11,445 $2,404 $9,041 $(31,246)$(6,562)$(24,684)
Less reclassification adjustments included in:           Less reclassification adjustments included in:
Net interest income(4)
403
 141
 262
 526
 184
 342
Net interest income(5)
Net interest income(5)
5,454 1,145 4,309 3,817 802 3,015 
Total$253
 $88
 $165
 $1,336
 $467
 $869
Total$16,899 $3,549 $13,350 $(27,429)$(5,760)$(21,669)
Other comprehensive (loss)/income$(2,512) $(879) $(1,633) $1,815
 $635
 $1,180
Other comprehensive income/(loss)Other comprehensive income/(loss)$40,670 $8,541 $32,129 $(47,690)$(10,014)$(37,676)
(1)Relates to the amortization of unrealized gains on hedged items prior to the application of fair value hedge accounting.
(2)Represents unrealized gains and losses on sales of available-for-sale securities.
(3)Represents amortization of deferred gains related to certain available-for-sale USDA Securities and Farmer Mac Guaranteed USDA Securities.
(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. 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.
(5)Relates to the recognition of unrealized gains and losses on cash flow hedges recorded in AOCI.


(c)Custodial Deposit Liability

During the third quarter, Farmer Mac acquired the loan servicing rights for a sizeable portion of its Farm & Ranch loan and USDA Guaranteed Securities portfolios. In connection with this acquisition, Farmer Mac now collects cash from borrowers in advance of the borrower's contractual payment date. Farmer Mac's policy is to include the cash in the consolidated balance sheet as "Cash and cash equivalents" with an offsetting liability to "Accounts payable and accrued expenses" until the contractual payment is due, at which point the payment is applied to the loan. The net change in the amount of this custodial cash will also be disclosed in the consolidated statements of cash flows as "Custodial deposit liability".


14




(d)New Accounting Standards

Recently Adopted Accounting Guidance
(1)
Standard		Relates to the amortizationDescriptionDate of unrealized gainsAdoptionEffect on hedged items prior to the application of fair value hedge accounting.
Consolidated Financial Statements
(2)ASU 2020-04 and 2021-01, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting
Represents amortizationThe amendments in this Update provide optional guidance for a limited period of deferred gains relatedtime 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 available-for-sale USDA Securities and criteria are met.January 1, 2020Farmer Mac Guaranteed USDA Securities.adopted optional expedients specific to discounting transition on a retrospective basis, and as a result of this election, the discounting transition did not have a material effect on Farmer Mac's financial position, results of operations, or cash flows.
(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

2.INVESTMENT SECURITIES


 For the Nine Months Ended
 September 30, 2017 September 30, 2016
 Before Tax Provision (Benefit) After Tax Before Tax Provision (Benefit) After Tax
 (in thousands)
Other comprehensive income:           
Available-for-sale-securities:           
Unrealized holding gains on available-for-sale-securities$31,863
 $11,152
 $20,711
 $57,610
 $20,164
 $37,446
Less reclassification adjustments included in:           
Gains/(losses) on financial derivatives and hedging activities(1)
(12,470) (4,365) (8,105) (11,591) (4,056) (7,535)
Gains/(losses) on sale of available-for-sale investment securities(2)
(89) (31) (58) 9
 3
 6
Other income(3)
(21) (7) (14) 277
 97
 180
Total$19,283
 $6,749
 $12,534
 $46,305
 $16,208
 $30,097
Held-to-maturity securities:           
Less reclassification adjustments included in:           
Net interest income(4)
$(7,491) $(2,622) $(4,869) $(2,081) $(729) $(1,352)
Total$(7,491) $(2,622) $(4,869) $(2,081) $(729) $(1,352)
Cash flow hedges           
Unrealized losses on cash flow hedges(2,342) (820) $(1,522) $(7,901) $(2,765) $(5,136)
Less reclassification adjustments included in:           
Net interest income(5)
1,376
 482
 894
 1,498
 524
 974
Total$(966) $(338) $(628) $(6,403) $(2,241) $(4,162)
Other comprehensive income$10,826
 $3,789
 $7,037
 $37,821
 $13,238
 $24,583
(1)
Relates to the amortization of unrealized gains on hedged items prior to the application of fair value hedge accounting.
(2)
Represents unrealized losses on sales of available-for-sale investment securities.
(3)
Represents amortization of deferred gains related to certain available-for-sale USDA Securities and Farmer Mac Guaranteed USDA Securities.
(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. 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.
(5)
Relates to the recognition of unrealized gains and losses on cash flow hedges recorded in AOCI.



15


(d) New Accounting Standards

In March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-09, “Improvements to Employee Share-Based Payment Accounting,” which provides new guidance intended to simplify several aspects of accounting and presentation for employee share-based payment transactions. The ASU became effective for Farmer Mac on January 1, 2017. The adoption of the new guidance had the following effect on Farmer Mac's financial position, results of operations, and cash flows:

Consolidated Statements of Operations - The ASU requires the recognition of all net tax benefits related to share-based compensation awards in the income tax provision. Previously, these amounts were recognized in additional paid-in capital. Net tax benefits related to share-based compensation awards of $0.3 million and $1.2 million, respectively, were recognized as a reduction to income tax expense in the three and nine months ended September 30, 2017 in the consolidated statement of operations. Net tax benefits result from the excess of the tax deduction over the compensation expense recognized under GAAP for share-based compensation awards. That excess arises because the tax deduction is based upon the value of share-based awards upon their exercise (or vesting, in the case of restricted stock units), whereas the compensation expense under GAAP is based upon the value of the share-based awards upon their grant date.

The ASU also changed the calculation of diluted earnings per share. GAAP requires the "treasury stock method" to determine the number of dilutive securities in calculating diluted earnings per share. The ASU changed the calculation of "assumed proceeds" under the treasury stock method to exclude the amount of net tax benefits that would have been recognized in additional paid-in capital under the previous accounting standard. This change in the calculation reduces the amount of shares assumed to have been repurchased under the treasury stock method, thus increasing the number of dilutive shares.

Both of these changes in the guidance were applied prospectively beginning January 1, 2017 and for the three and nine months ended September 30, 2017. For the three months ended September 30, 2017, the change in the recognition of all net tax benefits related to share-based compensation awards in the income tax provision resulted in an increase of $0.03 in basic earnings per share and $0.02 in diluted earnings per share for the three months ended September 30, 2017. For the nine months ended September 30, 2017, the change in the recognition of all net tax benefits related to share-based compensation awards in the income tax provision resulted in an increase of $0.11 in basic earnings per share and $0.09 in diluted earnings per share. The change in the guidance for the calculation of diluted earnings per share had an immaterial impact on diluted earnings per share.

Additionally, the ASU allows companies to choose to either include an estimate of forfeitures expected to occur in share-based compensation expense or account for them as they occur. Previously, GAAP required companies to include an estimate of forfeitures expected to occur in their share-based compensations expense. Farmer Mac has elected to account for forfeitures in compensation expense as they occur. The cumulative impact of the change in the treatment of forfeitures was not material for the three and nine months ended September 30, 2017.

Consolidated Statements of Cash Flows - The ASU requires excess tax benefits from share-based employee awards to be reported within operating activities. Previously, these cash flows were


16


reported within financing activities. Farmer Mac has applied this guidance prospectively, resulting in an increase in net cash provided by operating activities and a corresponding decrease in net cash provided by financing activities of $0.3 million and $1.2 million, respectively, for the three and nine months ended September 30, 2017.

The ASU requires employee taxes paid when an employer withholds shares for tax purposes to be reported within financing activities. Under the previous guidance, these cash flows were included in operating activities. These changes were required to be applied on a retrospective basis. As a result, the consolidated statement of cash flows for prior periods was revised, resulting in an increase in net cash provided by operating activities and a decrease in net cash provided by financing activities of $2.0 million for the nine months ended September 30, 2016, compared to previously reported amounts. The amount of employee taxes paid for shares withheld was $2.3 million for the nine months ended September 30, 2017.

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments—Credit Losses," which will require entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.  Entities will be required to use forward-looking information to form their credit loss estimates.  The ASU will also require enhanced disclosures to help users of financial statements better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an entity’s portfolio.  The new standard is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2019.   Early application will be permitted for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.  Farmer Mac is currently evaluating the impact that the new guidance will have on its consolidated financial statements. That impact will primarily be from the new requirement to recognize all expected losses rather than just incurred losses as of the reporting date. 

In March 2017, the FASB issued ASU 2017-08, "Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities," which shortens the amortization period for certain callable debt securities held at a premium by requiring the premium to be amortized to the earliest call date. The ASU does not require an accounting change for securities held at a discount. The new standard is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2019. Farmer Mac does not expect that adoption of the new guidance will have a material effect on Farmer Mac's financial position, results of operations, or cash flows.

In August 2017, the FASB issued ASU 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities," which amends hedge accounting recognition and presentation requirements to better align a reporting entity's risk management activities and hedge accounting. The new guidance reduces the complexity and simplifies the application of hedge accounting by eliminating the requirement to separately measure and report hedge ineffectiveness and by requiring the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item. The new standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. Early adoption of the new guidance is permitted in any interim or annual period after issuance of the ASU. Farmer Mac is planning to adopt the new guidance as of January 1, 2018 and does not expect the adoption of the new guidance to have a material effect on Farmer Mac's financial position, results of operation, or cash flow upon the adoption of the new guidance.



17



2.INVESTMENT SECURITIES

The following tables set forth information about Farmer Mac's available-for-sale and held-to-maturity investment securities as of September 30, 20172021 and December 31, 2016:2020:
 
Table 2.1
 As of September 30, 2021
Amount OutstandingUnamortized 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 $(52)$— $(148)$19,500 
Floating rate Government/GSE guaranteed mortgage-backed securities2,386,373 4,127 2,390,500 — 14,827 (2,253)2,403,074 
Fixed rate GSE guaranteed mortgage-backed securities28,170 791 28,961 — 21 (85)28,897 
Fixed rate U.S. Treasuries1,239,500 5,405 1,244,905 — 162 (334)1,244,733 
Total available-for-sale3,673,743 10,323 3,684,066 (52)15,010 (2,820)3,696,204 
Held-to-maturity:
Floating rate Government/GSE guaranteed mortgage-backed securities(3)
45,032 — 45,032 — 996 — 46,028 
Total held-to-maturity$45,032 $— $45,032 $— $996 $— $46,028 

(1)Amounts presented exclude $4.7 million of accrued interest receivable on investment securities as of September 30, 2021.
(2)Represents the amount of impairment that has resulted from credit-related factors, and therefore was recognized in the consolidated statement of operations as a provision for losses. Amount excludes unrealized losses relating to non-credit factors.
(3)The held-to-maturity investment securities had a weighted average yield of 1.5% as of September 30, 2021.


15




 As of September 30, 2017
 Amount Outstanding Unamortized Premium/(Discount) Amortized
Cost		 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
 $—
 $(1,182) $18,518
Floating rate asset-backed securities35,870
 (165) 35,705
 20
 (123) 35,602
Floating rate Government/GSE guaranteed mortgage-backed securities1,308,236
 2,386
 1,310,622
 2,858
 (1,276) 1,312,204
Fixed rate GSE guaranteed mortgage-backed securities(1)
468
 2,247
 2,715
 2,250
 —
 4,965
Fixed rate senior agency debt100,000
 (8) 99,992
 —
 (121) 99,871
Fixed rate U.S. Treasuries765,318
 (1,054) 764,264
 —
 (458) 763,806
Total available-for-sale2,229,592
 3,406
 2,232,998
 5,128
 (3,160) 2,234,966
Total investment securities$2,229,592
 $3,406
 $2,232,998
 $5,128
 $(3,160) $2,234,966
(1)
Fair value includes $4.5 million of an interest-only security with a notional amount of $144.3 million.

 As of December 31, 2020
Amount OutstandingUnamortized 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 $(36)$— $(493)$19,171 
Floating rate asset-backed securities6,232 — 6,232 — — (1)6,231 
Floating rate Government/GSE guaranteed mortgage-backed securities2,350,963 (44)2,350,919 — 12,150 (3,043)2,360,026 
Fixed rate GSE guaranteed mortgage-backed securities279 — 279 — 34 — 313 
Fixed rate U.S. Treasuries1,449,408 17,128 1,466,536 — 1,458 (43)1,467,951 
Total available-for-sale3,826,582 17,084 3,843,666 (36)13,642 (3,580)3,853,692 
Held-to-maturity:
Floating rate Government/GSE guaranteed mortgage-backed securities(3)
45,032 — 45,032 — 1,201 — 46,233 
Total held-to-maturity$45,032 $— $45,032 $— $1,201 $— $46,233 
(1)Amounts presented exclude $9.0 million of accrued interest receivable on investment securities as of December 31, 2020.
 As of December 31, 2016
 Amount Outstanding Unamortized Premium/(Discount) Amortized
Cost		 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
 $—
 $(1,970) $17,730
Floating rate asset-backed securities44,442
 (202) 44,240
 1
 (390) 43,851
Floating rate corporate debt securities10,000
 —
 10,000
 41
 —
 10,041
Floating rate Government/GSE guaranteed mortgage-backed securities1,359,700
 2,827
 1,362,527
 1,768
 (3,266) 1,361,029
Fixed rate GSE guaranteed mortgage-backed securities(1)
538
 2,582
 3,120
 4,505
 —
 7,625
Floating rate GSE subordinated debt70,000
 —
 70,000
 —
 (3,047) 66,953
Fixed rate senior agency debt187,295
 106
 187,401
 —
 (268) 187,133
Fixed rate U.S. Treasuries821,619
 359
 821,978
 47
 (536) 821,489
Total available-for-sale2,513,294
 5,672
 2,518,966
 6,362
 (9,477) 2,515,851
Total investment securities$2,513,294
 $5,672
 $2,518,966
 $6,362
 $(9,477) $2,515,851
(1)
Fair value includes $7.0 million of an interest-only security with a notional amount of $146.1 million.

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

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

During the three and nine months ended September 30, 2017,2021, Farmer Mac received proceeds of $5.1$232.0 million and $257.5 million, respectively, from the sale of securities from its available-for-sale investment portfolio, resulting in gross realized gains of $0.1 million.$0.3 million and $0.3 million, respectively. Farmer Mac did not sell any securities from its available-for-sale investment portfolio during the three months ended September 30, 2016. During theand nine months ended September 30, 2017, Farmer Mac received proceeds of $5.1 million from the sale of securities from its available-for-sale investment portfolio, resulting in gross realized gains of $0.1 million, compared to proceeds of $186.8

2020.


1816







million for the same period in 2016, resulting in gross realized gains of $0.1 million and gross realized losses of $0.1 million.
As of September 30, 20172021 and December 31, 2016,2020, unrealized losses on available-for-sale investment securities were as follows:


Table 2.2
 As of September 30, 2021
 Available-for-Sale Securities
Unrealized loss position for
less than 12 months		Unrealized loss position for
more than 12 months
Fair ValueUnrealized
Loss		Fair ValueUnrealized
Loss
 (dollars in thousands)
Floating rate auction-rate certificates backed by Government guaranteed student loans$— $— $19,500 $(148)
Floating rate Government/GSE guaranteed mortgage-backed securities155,001 (1,823)29,211 (430)
Fixed rate Government/GSE guaranteed mortgage-backed securities28,706 (85)— — 
Fixed rate U.S. Treasuries472,909 (334)— — 
Total$656,616 $(2,242)$48,711 $(578)
Number of securities in loss position21 24 

 As of December 31, 2020
 Available-for-Sale Securities
Unrealized loss position for
less than 12 months		Unrealized loss position for
more than 12 months
Fair ValueUnrealized
Loss		Fair ValueUnrealized
Loss
 (dollars in thousands)
Floating rate auction-rate certificates backed by Government guaranteed student loans$— $— $19,171 $(493)
Floating rate asset-backed securities— — 6,231 (1)
Floating rate Government/GSE guaranteed mortgage-backed securities172,842 (593)324,423 (2,450)
Fixed rate U.S. Treasuries364,320 (43)— — 
Total$537,162 $(636)$349,825 $(2,944)
Number of securities in loss position27 62 

 As of September 30, 2017
 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)
Floating rate auction-rate certificates backed by Government guaranteed student loans$—
 $—
 $18,518
 $(1,182)
Floating rate asset-backed securities—
 —
 24,089
 (123)
Floating rate Government/GSE guaranteed mortgage-backed securities131,772
 (220) 277,196
 (1,056)
Fixed rate U.S. Treasuries738,815
 (431) 24,991
 (27)
Fixed rate senior agency debt49,929
 (73) 49,943
 (48)
Total$920,516
 $(724) $394,737
 $(2,436)

 As of December 31, 2016
 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)
Floating rate auction-rate certificates backed by Government guaranteed student loans$—
 $—
 $17,730
 $(1,970)
Floating rate asset-backed securities4,654
 (10) 38,077
 (380)
Floating rate Government/GSE guaranteed mortgage-backed securities384,586
 (1,030) 442,041
 (2,236)
Floating rate GSE subordinated debt—
 —
 66,953
 (3,047)
Fixed rate U.S. Treasuries732,371
 (536) —
 —
Fixed rate senior agency debt187,133
 (268) —
 —
Total$1,308,744
 $(1,844) $564,801
 $(7,633)

The unrealized losses presented above are principally due to a general widening of market spreads and an increasechanges in the levels of interest rates from the dates of acquisition to September 30, 20172021 and December 31, 2016,2020, 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 September 30, 2017,2021 and December 31, 2020, all of the investment securities in an unrealized loss position either were backed by the full faith and credit of the U.S. government or had credit ratings of at least "AA+." As of December 31, 2016, all of the investment securities in an unrealized loss position either were backed by the full faith and credit of the U.S. government or had credit ratings of at least "AA+," except one that was rated "A-." The unrealized losses were on 81 and 97 individual investment securities as of September 30, 2017 and December 31, 2016, respectively.




19


As of September 30, 2017, 44 of the securities in loss positions had been in loss positions for more than 12 months and had a total unrealized loss of $2.4 million. As of December 31, 2016, 36 of the securities in loss positions had been in loss positions for more than 12 months and had a total unrealized loss of $7.6 million.  Securities in unrealized loss positions for 12 months or longer have a fair value as of September 30, 20172021 that is, on average, approximately 99 percent98.8% 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 or changes in credit spreads. Accordingly, Farmer Mac has concluded that none of the unrealized losses on these available-for-sale investment securities are other-than-temporary impairment as of September 30, 2017 and December 31, 2016.


Farmer Mac did not own any held-to-maturity or trading investment securities as of September 30, 2017 and December 31, 2016.


17




The amortized cost, fair value, and weighted-average yield of available-for-sale investment securities by remaining contractual maturity as of September 30, 20172021 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 September 30, 2021
Available-for-Sale Securities
Amortized
Cost		Fair ValueWeighted-
Average
Yield
 (dollars in thousands)
Due within one year$678,261 $678,387 1.64%
Due after one year through five years845,628 846,303 0.55%
Due after five years through ten years1,446,607 1,450,446 0.64%
Due after ten years713,570 721,068 0.64%
Total$3,684,066 $3,696,204 0.81%


 As of September 30, 2017
 Available-for-Sale Securities
 Amortized
Cost		 Fair Value Weighted-
Average
Yield
 (dollars in thousands)
Due within one year$798,153
 $797,630
 0.92%
Due after one year through five years363,861
 364,132
 1.62%
Due after five years through ten years279,192
 281,792
 1.75%
Due after ten years791,792
 791,412
 1.86%
Total$2,232,998
 $2,234,966
 1.47%
3.FARMER MAC GUARANTEED SECURITIES AND USDA SECURITIES





20


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 September 30, 20172021 and December 31, 2016:2020:


Table 3.1
 As of September 30, 2021
Unpaid Principal BalanceUnamortized Premium/(Discount)
Amortized
Cost(1)
Allowance for losses(2)
Unrealized
Gains		Unrealized
Losses		Fair Value
 (in thousands)
Held-to-maturity:
AgVantage$2,220,224 $(13)$2,220,211 $(173)$13,626 $(8,134)$2,225,530 
Farmer Mac Guaranteed USDA Securities28,227 38 28,265 — 936 — 29,201 
Total Farmer Mac Guaranteed Securities2,248,451 25 2,248,476 (173)14,562 (8,134)2,254,731 
USDA Securities2,429,950 27,267 2,457,217 — 86,988 (791)2,543,414 
Total held-to-maturity$4,678,401 $27,292 $4,705,693 $(173)$101,550 $(8,925)$4,798,145 
Available-for-sale:    
AgVantage$5,908,666 $1,323 $5,909,989 $(290)$245,361 $(16,301)$6,138,759 
Trading:    
USDA Securities(3)
$4,632 $115 $4,747 $— $48 $(2)$4,793 

 As of September 30, 2017
 Unpaid Principal Balance Unamortized Premium/(Discount) Amortized
Cost		 Unrealized
Gains		 Unrealized
Losses		 Fair Value
 (in thousands)
Held-to-maturity:           
AgVantage$2,128,974
 $(1,166) $2,127,808
 $5,091
 $(6,073) $2,126,826
Farmer Mac Guaranteed USDA Securities30,688
 314
 31,002
 86
 (284) 30,804
Total Farmer Mac Guaranteed Securities2,159,662
 (852) 2,158,810
 5,177
 (6,357) 2,157,630
USDA Securities2,027,261
 65,024
 2,092,285
 —
 (64,741) 2,027,544
Total held-to-maturity$4,186,923
 $64,172
 $4,251,095
 $5,177
 $(71,098) $4,185,174
Available-for-sale:           
AgVantage$5,459,655
 $(141) $5,459,514
 $30,811
 $(46,579) $5,443,746
Trading:     
  
  
  
USDA Securities$14,204
 $1,092
 $15,296
 $31
 $(463) $14,864

 As of December 31, 2016
 Unpaid Principal Balance Unamortized Premium/(Discount) Amortized
Cost		 Unrealized
Gains		 Unrealized
Losses		 Fair Value
 (in thousands)
Held-to-maturity:           
AgVantage$1,115,465
 $(2,276) $1,113,189
 $7,187
 $(3,175) $1,117,201
Farmer Mac Guaranteed USDA Securities35,599
 443
 36,042
 5
 (239) 35,808
Total Farmer Mac Guaranteed Securities1,151,064
 (1,833) 1,149,231
 7,192
 (3,414) 1,153,009
USDA Securities1,935,440
 73,785
 2,009,225
 —
 (95,590) 1,913,635
Total held-to-maturity$3,086,504
 $71,952
 $3,158,456
 $7,192
 $(99,004) $3,066,644
Available-for-sale:           
AgVantage$4,889,007
 $(103) $4,888,904
 $28,715
 $(63,934) $4,853,685
Trading:     
  
  
  
USDA Securities$19,360
 $1,377
 $20,737
 $41
 $(390) $20,388

On October 1, 2016, Farmer Mac transferred $2.0 billion of USDA Securities(1)Amounts presented exclude $30.4 million, $37.5 million, and $32.8$0.1 million of Farmer Mac Guaranteed USDA Securities fromaccrued interest receivable on available-for-sale, to held-to-maturity, to reflect Farmer Mac’s positive intent and ability to hold thesetrading securities, until maturity or payoff. Farmer Mac transferred these securities at fair valuerespectively, as of the date of the transfer, which included a cost basis adjustment of unrealized appreciation inSeptember 30, 2021.
(2)Represents the amount of $73.1impairment that has resulted from credit-related factors, and therefore was recognized in the statement of financial operations as a provision for losses. Amount excludes unrealized losses relating to non-credit factors.
(3)The trading USDA securities had a weighted average yield of 5.13% as of September 30, 2021.

18




 As of December 31, 2020
Unpaid Principal BalanceUnamortized Premium/(Discount)
Amortized
Cost(1)
Allowance for losses(2)
Unrealized
Gains		Unrealized
Losses		Fair Value
 (in thousands)
Held-to-maturity:
AgVantage$1,141,430 $(55)$1,141,375 $(120)$23,986 $(61)$1,165,180 
Farmer Mac Guaranteed USDA Securities34,456 81 34,537 — 1,273 — 35,810 
Total Farmer Mac Guaranteed Securities1,175,886 26 1,175,912 (120)25,259 (61)1,200,990 
USDA Securities2,446,550 27,076 2,473,626 — 157,748 (560)2,630,814 
Total held-to-maturity$3,622,436 $27,102 $3,649,538 $(120)$183,007 $(621)$3,831,804 
Available-for-sale:    
AgVantage$6,593,518 $1,474 $6,594,992 $(310)$368,257 $(15,238)$6,947,701 
Trading:    
USDA Securities(3)
$6,413 $198 $6,611 $— $84 $— $6,695 
(1)Amounts presented exclude $32.3 million, for the USDA Securities$44.7 million, and $0.7$0.2 million for the Farmer Mac Guaranteed USDA Securities. The accumulated unrealized appreciation was retained in accumulated other comprehensive income inof accrued interest receivable on available-for-sale, held-to-maturity, and trading securities, respectively, as of December 31, 2020.
(2)Represents the amount of $73.8 million, before tax. Farmer Mac accountsimpairment that has resulted from credit-related factors, and therefore was recognized in the statement of financial operations as a provision for held-to-maturitylosses. Amount excludes unrealized losses relating to non-credit factors.
(3)The trading USDA securities at amortized cost. Both the cost basis adjustment and accumulated unrealized appreciation will be amortizedhad a weighted average yield of 5.05% as an adjustment to the yield on the held-to-maturity USDA Securities over the remaining term of the transferred securities.December 31, 2020.



21


As of September 30, 20172021 and December 31, 2016,2020, 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 September 30, 2021
 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 ValueUnrealized
Loss		Fair ValueUnrealized
Loss
 (in thousands)
Held-to-maturity:
AgVantage$1,596,866 $(8,134)$— $— 
USDA Securities— — 16,671 (791)
Total held-to-maturity$1,596,866 $(8,134)$16,671 $(791)
Available-for-sale:
AgVantage$1,204,379 $(13,381)$90,853 $(2,920)



19




As of September 30, 2017As of December 31, 2020
Held-to-Maturity and Available-for-Sale Securities Held-to-Maturity and Available-for-Sale Securities
Unrealized loss position for
less than 12 months		 Unrealized loss position for
more than 12 months		Unrealized loss position for
less than 12 months		Unrealized loss position for
more than 12 months
Fair Value Unrealized
Loss		 Fair Value Unrealized
Loss		Fair ValueUnrealized
Loss		Fair ValueUnrealized
Loss
(in thousands) (in thousands)
Held-to-maturity:       Held-to-maturity:
AgVantage$1,249,774
 $(3,888) $247,815
 $(2,185)AgVantage$49,939 $(61)$— $— 
Farmer Mac Guaranteed USDA Securities25,201
 (284) —
 —
USDA Securities1,940,984
 (64,696) 86,619
 (45)USDA Securities— — 21,061 (560)
Total held-to-maturity$3,215,959
 $(68,868) $334,434
 $(2,230)Total held-to-maturity$49,939 $(61)$21,061 $(560)
       
Available-for-sale:       Available-for-sale:
AgVantage$1,293,478
 $(14,376) $1,424,602
 $(32,203)AgVantage$133,703 $(231)$981,757 $(15,007)


 As of December 31, 2016
 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$358,575
 $(3,175) $—
 $—
Farmer Mac Guaranteed USDA Securities30,575
 (239) —
 —
USDA Securities1,816,366
 (95,582) 97,270
 (8)
Total held-to-maturity$2,205,516
 $(98,996) $97,270
 $(8)
        
Available-for-sale:       
AgVantage$982,538
 $(18,482) $1,131,930
 $(45,452)

The unrealized losses presented above are principally due to higherchanges in interest rates from the date of acquisition to September 30, 20172021 and December 31, 2016,2020, as applicable. In addition, theThe unrealized losses on the held-to-maturity USDA Securities as of both September 30, 20172021 and December 31, 20162020 reflect their increased cost basis resulting from their transfer to held-to-maturity as of October 1, 2016, as described above. 2016.

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

The unrealized losses from AgVantage securities were on 3011 available-for-sale securities as of both September 30, 2017.2021 and December 31, 2020. There were 188 and 2 held-to-maturity AgVantage securities with an unrealized loss as of September 30, 2017. The unrealized losses from AgVantage securities were on 22 available-for-sale securities as of2021 and December 31, 2016. There were 7 unrealized losses from held-to-maturity securities as2020, respectively. As of September 30, 2021 and December 31, 2016. As of September 30, 2017, 122020, 2 and 7 available-for-sale AgVantage securities, respectively, had been in a loss position for more than 12 months with a totalmonths.


22


unrealized loss of $32.2 million. As of December 31, 2016, 10 available-for-sale AgVantage securities had been in a loss position for more than 12 months with a total unrealized loss of $45.5 million. Farmer Mac has concluded that none of the unrealized losses on its held-to-maturity Farmer Mac Guaranteed Securities and USDA Securities and available-for-sale Farmer Mac Guaranteed Securities are other-than-temporary impairment as of either September 30, 2017 or December 31, 2016.  Farmer Mac does not intend to sell these securities, and it is not more likely than not that Farmer Mac will be required to sell the securities before recovery of the amortized cost basis.


During the three and nine months ended September 30, 20172021 and 2016,2020, Farmer Mac had no sales of Farmer Mac Guaranteed Securities or USDA Securities and, therefore, Farmer Mac realized no gains or losses from the sale of Farmer Mac Guaranteed Securities and USDA Securities.losses.



20




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 September 30, 20172021 are set forth below. The balances presented are based on their final maturities, although the actual maturities may differ due to prepayments of the underlying assets.


Table 3.3
As of September 30, 2021
Available-for-Sale Securities
Amortized
Cost(1)
Fair ValueWeighted-
Average
Yield
 (dollars in thousands)
Due within one year$1,643,186 $1,653,306 1.59 %
Due after one year through five years1,821,449 1,899,828 2.70 %
Due after five years through ten years865,954 897,786 2.11 %
Due after ten years1,579,400 1,687,839 2.46 %
Total$5,909,989 $6,138,759 2.24 %

(1)Amounts presented exclude $30.4 million of accrued interest receivable.

As of September 30, 2021
Held-to-Maturity Securities
Amortized
Cost(1)
Fair ValueWeighted-
Average
Yield
 (dollars in thousands)
Due within one year$1,442,247 $1,443,316 0.74 %
Due after one year through five years834,861 840,125 2.08 %
Due after five years through ten years248,841 257,529 2.79 %
Due after ten years2,179,744 2,257,175 3.17 %
Total$4,705,693 $4,798,145 2.19 %
(1)Amounts presented exclude $37.5 million of accrued interest receivable.



4.FINANCIAL DERIVATIVES
 As of September 30, 2017
 Available-for-Sale Securities
 Amortized
Cost		 Fair Value Weighted-
Average
Yield
 (dollars in thousands)
Due within one year$1,000,000
 $1,001,537
 1.90%
Due after one year through five years2,696,001
 2,706,480
 2.14%
Due after five years through ten years745,701
 750,299
 2.87%
Due after ten years1,017,812
 985,430
 1.98%
Total$5,459,514
 $5,443,746
 2.17%
 As of September 30, 2017
 Held-to-Maturity Securities
 Amortized
Cost		 Fair Value Weighted-
Average
Yield
 (dollars in thousands)
Due within one year$926,747
 $925,935
 1.78%
Due after one year through five years1,260,842
 1,258,848
 2.27%
Due after five years through ten years208,034
 201,899
 3.07%
Due after ten years1,855,472
 1,798,492
 3.35%
Total$4,251,095
 $4,185,174
 2.66%

As of September 30, 2017, Farmer Mac owned trading USDA Securities with an amortized cost of $15.3 million, a fair value of $14.9 million, and a weighted-average yield of 5.36 percent. As of December 31, 2016, Farmer Mac owned trading USDA Securities with an amortized cost of $20.7 million, a fair value of $20.4 million, and a weighted-average yield of 5.44 percent.  




23


4.FINANCIAL DERIVATIVES


Farmer Mac enters into financial derivative transactions principally 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. CertainFor more information about Farmer Mac's financial derivatives, are designated
see Note 6 in Farmer Mac's Annual Report on Form 10-K for the fiscal year ended December 31, 2020, as fair value hedges of fixed rate assets, primarily classified as available-for-sale, to protect against fair value changes in
filed with the assetsSEC on February 25, 2021.

The following tables summarize information related to a benchmark interest rate (i.e., LIBOR). OtherFarmer Mac's financial derivatives are designatedon a gross basis without giving consideration to master netting arrangements as cash flow hedges to mitigate the volatility of future interest rate payments on floating rate debt.

All financial derivatives are recorded on the balance sheet at fair value as a freestanding asset or liability. Changes in the fair values of financial derivatives not designated as cash flow hedges are reported in "Gains/(losses) on financial derivatives and hedging activities" in the consolidated statements of operations. For financial derivatives designated in fair value hedge accounting relationships, changes in the fair values of the hedged items, which are primarily fixed rate AgVantage securities and fixed rate medium-term notes, related to the risk being hedged are also reported in "Gains/(losses) on financial derivatives and hedging activities" in the consolidated statements of operations. Interest accruals on derivatives designated in fair value hedge accounting relationships are recorded in "Net interest income" in the consolidated statements of operations. For the three and nine months ended September 30, 2017 the amount of interest expense recognized on those derivatives was $1.9 million2021 and $6.9 million, respectively. For the three and nine months ended September 30, 2016, the amount of interest expense recognized on those derivatives was $4.0 million and $12.9 million, respectively. For financial derivatives designated in cash flow hedge accounting relationships, the effective portion of the derivative gain/loss is recorded in other comprehensive income and any ineffective portion is recognized immediately in "Gains/(losses) on financial derivatives and hedging activities" in the consolidated statements of operations. Because the hedging instrument is an interest rate swap and the hedged forecasted transactions are future interest payments on variable-rate debt, amounts recorded in accumulated other comprehensive income are reclassified to "Total interest expense" in conjunction with the recognition of interest expense on the debt. For the three and nine months ended September 30, 2017, $0.4 million and $1.4 million, respectively, was reclassified out of accumulated other comprehensive income into interest expense. For the three and nine months ended September 30, 2016, $0.5 million and $1.5 million, respectively, was reclassified out of accumulated other comprehensive income into interest expense. December 31, 2020:


21




Table 4.1
  As of September 30, 2021
  Fair ValueWeighted-
Average
Pay Rate		Weighted-
Average Receive Rate		Weighted-
Average
Forward
Price		Weighted-
Average
Remaining
Term (in years)
  Notional AmountAsset(Liability)
  (dollars in thousands)
Fair value hedges:
Interest rate swaps:
Pay fixed non-callable$5,322,606 $7,407 $(770)2.20%0.12%12.13
Receive fixed non-callable4,748,529 22 (9,657)0.17%0.90%2.17
Receive fixed callable1,459,577 1,246 (5,108)0.02%0.73%4.06
Cash flow hedges:
Interest rate swaps:
Pay fixed non-callable535,000 6,121 (4,149)1.96%0.49%5.69
No hedge designation:
Interest rate swaps:
Pay fixed non-callable238,809 — (5,826)3.31%0.14%4.99
Receive fixed non-callable1,373,250 — — 0.10%0.50%0.94
Basis swaps2,088,911 902 (135)0.14%0.18%2.77
Treasury futures154,500 —— 131.61 
Credit valuation adjustment(30)12    
Total financial derivatives$15,921,182 $15,668 $(25,633)      
Collateral (held)/pledged(2,198)175,189 
Net amount$13,470 $149,556 

22




  As of December 31, 2020
  Fair ValueWeighted-
Average
Pay Rate		Weighted-
Average Receive Rate		Weighted-
Average
Forward
Price		Weighted-
Average
Remaining
Term (in years)
  Notional AmountAsset(Liability)
  (dollars in thousands)
Fair value hedges:
Interest rate swaps:
Pay fixed non-callable$5,463,303 $10,157 $(2,585)2.26%0.21%11.95
Receive fixed non-callable2,611,029 2 (8,755)0.32%1.61%2.10
Receive fixed callable343,500 3,108 (4)0.16%1.78%3.16
Cash flow hedges:
Interest rate swaps:
Pay fixed non-callable472,000 2,584 (8,771)2.04%0.57%6.04
No hedge designation:
Interest rate swaps:
Pay fixed non-callable339,090 — (9,675)2.38%0.19%4.23
Receive fixed non-callable2,359,220 — — 0.16%0.87%1.07
Receive fixed callable200,000 1 (12)0.13%0.15%0.72
Basis swaps3,628,911 1,617 (43)0.18%0.23%2.03
Treasury futures30,500 — (82)137.81 
Credit valuation adjustment(1)35    
Total financial derivatives$15,447,553 $17,468 $(29,892)      
Collateral (held)/pledged(1,345)212,263 
Net amount$16,123 $182,371 

As of September 30, 2017,2021, Farmer Mac expects to reclassify $1.2 million pretax, or $0.8$5.7 million after-tax from accumulated other comprehensive income net of tax, to earnings over the next twelve months. This amount could differ from amounts actually recognized due to changes in interest rates, hedge de-designations, and the addition of other hedges subsequent toafter September 30, 2017.2021. During the three and nine months ended September 30, 2017 2021and 2016,2020, there were no gains or losses from interest rate swaps designated as cash flow hedges reclassified to earnings because it becamewas probable that the originaloriginally forecasted transactiontransactions would not occur.


Fees that Farmer Mac receives upon
















23




The following table summarizes the inception of swaps are also reported in "Gains/(losses) on financial derivatives and hedging activities"net income/(expense) recognized in the consolidated statements of operations. These fees are offset dollar-for-dollar by the discount on the associated hedged debt. However, the swap fees are recognized immediately in Gains/(losses) on financial derivatives and hedging activities, whereas the offsetting discount on the hedged debt is amortized over the term of the debt as an adjustment to its yield. Thus, there is a timing difference between the recognition of the swap fees in Gains/(losses) on financial derivatives and hedging activities and the recognition of the discount in interest expense. There is also a presentation difference because the swap fees are included in Gains/(losses) on financial derivatives and


24


hedging activities, whereas the amortization of the discount is included in interest expense. Additionally, the amount of swap fees varies depending upon the number of swaps initiated during a quarter.

The following tables summarize informationoperations related to Farmer Mac's financial derivatives on a gross basis without giving consideration to master netting arrangements as of September 30, 2017 and December 31, 2016 and the effects of financial derivatives on the consolidated statements of operations for the three and nine months ended September 30, 20172021 and 2016:2020:

Table 4.1
  As of September 30, 2017
    Fair Value Weighted-
Average
Pay Rate		 Weighted-
Average Receive Rate		 Weighted-
Average
Forward
Price		 Weighted-
Average
Remaining
Life (in years)
  Notional Amount Asset (Liability)    
  (dollars in thousands)
Fair value hedges:             
Interest rate swaps:             
Pay fixed non-callable$2,040,854
 $744
 $(8,768) 1.83% 1.31%   5.42
Receive fixed non-callable1,431,700
 64
 (1,985) 1.23% 1.42%   1.74
Cash flow hedges:             
Interest rate swaps:             
Pay fixed non-callable349,000
 960
 (555) 2.19% 1.55%   6.32
No hedge designation:             
Interest rate swaps:             
Pay fixed non-callable348,040
 166
 (19,318) 3.80% 1.31%   6.88
Receive fixed non-callable3,389,116
 —
 —
 1.12% 1.10%   0.85
Basis swaps1,225,000
 42
 (63) 1.20% 1.22%   0.95
Treasury futures7,400
 50
 —
     125.99
  
Credit valuation adjustment  (6) 94
        
Total financial derivatives$8,791,110
 $2,020
 $(30,595)           
Collateral pledged  —
 25,079
        
Net amount  $2,020
 $(5,516)        


25


  As of December 31, 2016
  
 Fair Value Weighted-
Average
Pay Rate		 Weighted-
Average Receive Rate		 Weighted-
Average
Forward
Price		 Weighted-
Average
Remaining
Life (in years)
  Notional Amount Asset (Liability)    
  (dollars in thousands)
Fair value hedges:             
Interest rate swaps:             
Pay fixed non-callable$1,642,609
 $18,508
 $(18,909) 1.73% 0.90%   4.70
Cash flow hedges:             
Interest rate swaps:             
Pay fixed non-callable207,000
 3,706
 (955) 2.18% 1.11%   7.28
No hedge designation:             
Interest rate swaps:             
Pay fixed non-callable435,827
 339
 (32,951) 4.06% 0.89%   5.90
Receive fixed non-callable4,991,821
 607
 (5,064) 0.74% 0.75%   0.60
Receive fixed callable30,000
 —
 (33) 0.82% 0.58%   0.33
Basis swaps765,000
 36
 (243) 0.78% 0.78%   0.87
Treasury futures28,000
 —
 (155)     123.73
  
Credit valuation adjustment  (14) 158
        
Total financial derivatives$8,100,257
 $23,182
 $(58,152)           
Collateral pledged  —
 25,643
        
Net amount  $23,182
 $(32,509)        


Table 4.2

For the Three Months Ended September 30, 2021
Net Income/(Expense) Recognized in Consolidated Statement of Operations on Derivatives
Net Interest IncomeNon-Interest IncomeTotal
Interest Income Investments and Cash Equivalents Interest Income Farmer Mac Guaranteed Securities and USDA SecuritiesInterest Income LoansTotal Interest ExpenseLosses on financial derivatives
(in thousands)
Total amounts presented in the consolidated statement of operations$4,121 $38,428 $61,923 $(49,467)$(2,347)$52,658 
Income/(expense) related to interest settlements on fair value hedging relationships:
Recognized on derivatives(141)(20,925)(6,911)10,886 — (17,091)
Recognized on hedged items274 28,937 11,817 (12,940)— 28,088 
Discount amortization recognized on hedged items— — — (287)— (287)
Income/(expense) related to interest settlements on fair value hedging relationships$133 $8,012 $4,906 $(2,341)$— $10,710 
Gains/(losses) on fair value hedging relationships:
Recognized on derivatives$1,827 $30,060 $19,652 $(9,727)$— $41,812 
Recognized on hedged items(1,737)(31,523)(19,184)8,712 — (43,732)
Gains/(losses) on fair value hedging relationships$90 $(1,463)$468 $(1,015)$— $(1,920)
Expense related to interest settlements on cash flow hedging relationships:
Interest settlements reclassified from AOCI into net income on derivatives$— $— $— $(1,932)$— $(1,932)
Recognized on hedged items— — — (685)— (685)
Discount amortization recognized on hedged items— — — (11)— (11)
Expense recognized on cash flow hedges$— $— $— $(2,628)$— $(2,628)
Losses on financial derivatives not designated in hedging relationships:
Losses on interest rate swaps$— $— $— $— $(2,093)$(2,093)
Interest expense on interest rate swaps— — — — 168 168 
Treasury futures— — — — (422)(422)
Losses on financial derivatives not designated in hedge relationships$— $— $— $— $(2,347)$(2,347)





24




 Gains/(losses) on financial derivatives and hedging activities
  For the Three Months Ended For the Nine Months Ended
  September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
 (in thousands)
Fair value hedges:       
Interest rate swaps(1)
$1,576
 $11,276
 $(5,466) $(30,062)
Hedged items166
 (10,550) 4,750
 35,778
Gains/(losses) on fair value hedges1,742
 726
 (716) 5,716
Cash flow hedges:       
Loss recognized (ineffective portion)(191) (68) (365) (322)
Losses on cash flow hedges(191) (68) (365) (322)
No hedge designation:       
Interest rate swaps(1,031) (2,333) 4,006
 (16,820)
Agency forwards—
 79
 (588) (789)
Treasury futures141
 (5) 193
 (864)
(Losses)/gains on financial derivatives not designated in hedging relationships(890) (2,259) 3,611
 (18,473)
Gains/(losses) on financial derivatives and hedging activities$661
 $(1,601) $2,530
 $(13,079)
(1)
Included in the assessment of hedge effectiveness as of September 30, 2017, but excluded from the amounts in the table, were losses of $1.6 million and gains of $0.7 million, respectively, for the three and nine months ended September 30, 2017, attributable to the fair value of the swaps at the inception of the hedging relationship. Accordingly, the amounts recognized as hedge ineffectiveness for three and nine months ended September 30, 2017 were gains of $0.1 million and zero, respectively. The comparable amounts as of September 30, 2016 were losses of $1.0 million and $4.2 million for the three and nine months ended September 30, 2016, attributable to the fair value of the swaps at the inception of the hedging relationship and, accordingly, losses of $0.2 million and gains of $1.5 million for the three and nine months ended September 30, 2016, attributable to hedge ineffectiveness.



For The Three Months Ended September 30, 2020
Net Income/(Expense) Recognized in Consolidated Statement of Operations on Derivatives
Net Interest IncomeNon-Interest IncomeTotal
Interest Income
Farmer Mac Guaranteed Securities and USDA Securities		Interest Income LoansTotal Interest ExpenseLosses on financial derivatives
(in thousands)
Total amounts presented in the consolidated statement of operations:$45,335 $56,204 $(63,974)$(564)$37,001 
Income/(expense) related to interest settlements on fair value hedging relationships:
Recognized on derivatives(20,373)(6,194)9,605 — (16,962)
Recognized on hedged items31,439 10,965 (12,328)— 30,076 
Discount amortization recognized on hedged items— — (191)— (191)
Income/(expense) related to interest settlements on fair value hedging relationships$11,066 $4,771 $(2,914)$— $12,923 
(Losses)/gains on fair value hedging relationships:
Recognized on derivatives$38,363 $28,198 $(9,665)$— $56,896 
Recognized on hedged items(41,855)(29,372)9,284 — (61,943)
(Losses)/gains on fair value hedging relationships$(3,492)$(1,174)$(381)$— $(5,047)
Expense related to interest settlements on cash flow hedging relationships:
Interest settlements reclassified from AOCI into net income on derivatives$— $— $(1,814)$— $(1,814)
Recognized on hedged items— — (711)— (711)
Discount amortization recognized on hedged items— — (4)— (4)
Expense recognized on cash flow hedges$— $— $(2,529)$— $(2,529)
Losses on financial derivatives not designated in hedge relationships:
Losses on interest rate swaps$— $— $— $(4,292)$(4,292)
Interest expense on interest rate swaps— — — 3,800 3,800 
Treasury futures— — — (72)(72)
Losses on financial derivatives not designated in hedge relationships$— $— $— $(564)$(564)


25




For the Nine Months Ended September 30, 2021
Net Income/(Expense) Recognized in Consolidated Statement of Operations on Derivatives
Net Interest IncomeNon-Interest IncomeTotal
Interest Income Investments and Cash Equivalents Interest Income Farmer Mac Guaranteed Securities and USDA SecuritiesInterest Income LoansTotal Interest ExpenseLosses on financial derivatives
(in thousands)
Total amounts presented in the consolidated statement of operations$14,107 $123,246 $181,631 $(155,599)$(1,120)$162,265 
Income/(expense) related to interest settlements on fair value hedging relationships:
Recognized on derivatives(177)(63,966)(20,185)30,178 — (54,150)
Recognized on hedged items341 90,278 34,940 (36,889)— 88,670 
Discount amortization recognized on hedged items— — — (765)— (765)
Income/(expense) related to interest settlements on fair value hedging relationships$164 $26,312 $14,755 $(7,476)$— $33,755 
Gains/(losses) on fair value hedging relationships:
Recognized on derivatives$1,651 $149,457 $100,276 $(41,838)$— $209,546 
Recognized on hedged items(1,549)(150,445)(99,955)39,104 — (212,845)
Gains/(losses) on fair value hedging relationships$102 $(988)$321 $(2,734)$— $(3,299)
Expense related to interest settlements on cash flow hedging relationships:
Interest settlements reclassified from AOCI into net income on derivatives$— $— $— $(5,454)$— $(5,454)
Recognized on hedged items— — — (1,983)— (1,983)
Discount amortization recognized on hedged items— — — (25)— (25)
Expense recognized on cash flow hedges$— $— $— $(7,462)$— $(7,462)
Losses on financial derivatives not designated in hedging relationships:
Losses on interest rate swaps$— $— $— $— $(4,363)$(4,363)
Interest expense on interest rate swaps— — — — 3,489 3,489 
Treasury futures— — — — (246)(246)
Losses on financial derivatives not designated in hedge relationships$— $— $— $— $(1,120)$(1,120)






26






For The Nine Months Ended September 30, 2020
Net Income/(Expense) Recognized in Consolidated Statement of Operations on Derivatives
Net Interest IncomeNon-Interest IncomeTotal
Interest Income
Farmer Mac Guaranteed Securities and USDA Securities		Interest Income LoansTotal Interest ExpenseLosses on financial derivatives
(in thousands)
Total amounts presented in the consolidated statement of operations:$178,644 $172,230 $(251,789)$(3,339)$95,746 
Income/(expense) related to interest settlements on fair value hedging relationships:
Recognized on derivatives(38,781)(12,607)16,671 — (34,717)
Recognized on hedged items95,366 29,454 (39,325)— 85,495 
Discount amortization recognized on hedged items— — (552)— (552)
Income/(expense) related to interest settlements on fair value hedging relationships$56,585 $16,847 $(23,206)$— $50,226 
(Losses)/gains on fair value hedging relationships:
Recognized on derivatives$(264,797)$(124,322)$52,991 $— $(336,128)
Recognized on hedged items257,575 119,072 (53,628)— 323,019 
(Losses)/gains on fair value hedging relationships$(7,222)$(5,250)$(637)$— $(13,109)
Expense related to interest settlements on cash flow hedging relationships:
Interest settlements reclassified from AOCI into net income on derivatives$— $— $(3,817)$— $(3,817)
Recognized on hedged items— — (3,863)— (3,863)
Discount amortization recognized on hedged items— — (6)— (6)
Expense recognized on cash flow hedges$— $— $(7,686)$— $(7,686)
(Losses)/gains on financial derivatives not designated in hedge relationships:
Losses on interest rate swaps$— $— $— $(2,415)$(2,415)
Interest expense on interest rate swaps— — — 1,143 1,143 
Treasury futures— — — (2,067)(2,067)
(Losses)/gains on financial derivatives not designated in hedge relationships$— $— $— $(3,339)$(3,339)


As

27




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 September 30, 20172021 and December 31, 2016,2020:

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)
September 30, 2021December 31, 2020September 30, 2021December 31, 2020
(in thousands)
Investment securities, Available-for-Sale, at fair value$167,970 $— $(1,549)$— 
Farmer Mac Guaranteed Securities, Available-for-Sale, at fair value(1)
3,798,859 4,244,027 232,379 382,825 
Loans held for investment, at amortized cost(2)
1,604,954 1,692,609 11,378 111,333 
Notes Payable(3)
(5,730,114)(3,006,140)(14,136)(53,240)
(1)Includes $1.4 million and $1.6 million of hedging adjustments on discontinued hedging relationships as of September 30, 2021 and December 31, 2020, respectively.
(2)Includes $1.2 million and $1.4 million of hedging adjustments on a discontinued hedging relationship as of September 30, 2021 and December 31, 2020, respectively.
(3)Carrying amount represents amortized cost.

The following table shows Farmer Mac's credit exposure to interest rate swap counterparties excludingas of September 30, 2021 and December 31, 2020:

Table 4.4
September 30, 2021
Gross Amount Recognized(1)
Counterparty NettingNet Amount Presented in the Consolidated Balance Sheet
(in thousands)
Assets:
Derivatives
Interest rate swap$116,064 $113,901 $2,163 
Liabilities:
Derivatives
Interest rate swap$397,989 $388,194 $9,795 
(1)Gross amount excludes netting arrangements and any adjustment for nonperformance risk, but includingincludes accrued interest, was $24.6 million and $24.5 million, respectively; however, includinginterest.


December 31, 2020
Gross Amount Recognized(1)
Counterparty NettingNet Amount Presented in the Consolidated Balance Sheet
(in thousands)
Assets:
Derivatives
Interest rate swaps$112,287 $111,761 $526 
Liabilities:
Derivatives
Interest rate swaps$620,236 $595,867 $24,369 

28




(1)Gross amount excludes netting arrangements and any adjustment for nonperformance risk, but includes accrued interest, Farmer Mac's credit exposure was $0.1 million and $0.2 million as of September 30, 2017 and December 31, 2016, respectively. interest.

As of September 30, 2017,2021, Farmer Mac held $2.2 million ofcash and no cashinvestment securities as collateral for its derivatives in net asset positions, resulting in uncollateralized net asset positionscompared to $1.3 million of $0.1 million. As of December 31, 2016, Farmer Mac heldcash and no cashinvestment securities as collateral for its derivatives in net asset positions resulting in uncollateralized net asset positionsas of $0.2 million.

As of September 30, 2017 and December 31, 2016, the fair value of Farmer Mac's derivatives in a net liability position including accrued interest but excluding netting arrangements and any adjustment for nonperformance risk, was $61.1 million and $65.7 million, respectively; however, including netting arrangements and accrued interest, the fair value of Farmer Mac's derivatives in a net liability position at the counterparty level was $27.3 million and $41.4 million as of September 30, 2017 and December 31, 2016, respectively.  2020.

Farmer Mac posted $6.0 million cash of $0.1 million and $25.0$169.2 million of investment securities as of September 30, 20172021 and posted $11.2 million cash of $1.0 million and $24.6$201.1 million investment securities as of December 31, 2016.2020.  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 September 30, 20172021 and December 31, 2016,2020, it could have been required to settle its obligations under the agreements, orbut would not have been required to post additional collateral of $2.3 millionand $15.8 million, respectively.collateral. As of September 30, 20172021 and December 31, 2016,2020, there were no financial derivatives in a net payable position where Farmer Mac was required to pledge collateral which the counterparty had the right to sell or repledge.


For certain derivatives, Farmer Mac clears interest rate swaps through a clearinghouse, the Chicago Mercantile Exchange ("CME"). Farmer Mac posts initial and variation margins to this clearinghouse through which centrally-cleared derivatives and futures contracts are traded. These collateral postings expose Farmer Mac to institutional credit risk in the event that either the clearinghouse or the futures commission merchant that Farmer Mac uses to post collateral to the clearinghouse fails to meet its obligations. Conversely, the use of centrally-cleared derivatives mitigates Farmer Mac's credit risk to individual counterparties because clearinghouses assume the credit risk among counterparties in centrally-cleared derivatives transactions. Of Farmer Mac's $8.8$15.8 billion notional amount of interest rate swaps outstanding as of September 30, 2017, $7.72021, $13.2 billion were cleared through the swap clearinghouses.clearinghouse, the Chicago Mercantile Exchange ("CME"). Of Farmer Mac's $8.1$15.4 billion notional amount of interest rate swaps outstanding as of December 31, 2016, $6.92020, $12.8 billion were cleared through swap clearinghouses.

Effective January 3, 2017, the CME implemented a change in its rules related toCME. During the exchangefirst nine months of variation margin. Specifically, the exchange of variation margin between derivatives counterparties is now deemed by CME to be a partial settlement of each respective derivative contract rather than as collateral pledged by a counterparty. Accordingly, beginning in first quarter 2017,2021, Farmer Mac presented its cleared derivatives portfolio netcontinued the use of variation margin payments on its consolidated balance sheets and recognized realized gains or lossesnon-cleared basis swaps to prepare for the transition away from the use of LIBOR as a result of these payments within "Gains/(losses) on financial derivatives and hedging activities" on its consolidated statements of operations. Prior to first quarter 2017, Farmer Mac accounted for variation margin as collateral and associated unrealized gains or losses on those centrally cleared derivative contracts. Farmer Mac included those unrealized gains or losses within "Gains/(losses) on financial derivatives and hedging activities" in its consolidated statements of operations prior to firstreference rate.



27

5.LOANS


quarter 2017. See Note 9 for information about the effect of this rule change on the calculation of core earnings beginning in 2017.


5.LOANS AND ALLOWANCE FOR LOSSES

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. During third quarter 2021, Farmer Mac reclassified $301.6 million from loans held for investment to loans held for sale related to the FARM Series 2021-1 securitization. See note 11 for more information on the securitization. As of September 30, 20172021 and December 31, 2016,2020, Farmer Mac had $301.6 million and no loans held for sale, respectively. Farmer Mac did not record any lower of cost or fair value adjustments during the three or nine months ended September 30, 2021 related to its loans held for sale.

The following table includes loans held for investment and loans held for sale and displays the composition of the loan balances as of September 30, 20172021 and December 31, 2016:2020:


29





Table 5.1
As of September 30, 2021As of December 31, 2020
UnsecuritizedIn Consolidated TrustsTotalUnsecuritizedIn Consolidated TrustsTotal
(in thousands)
Farm & Ranch$5,800,376 $977,373 $6,777,749 $4,889,393 $1,287,045 $6,176,438 
Rural Utilities2,243,172 — 2,243,172 2,260,412 — 2,260,412 
Total unpaid principal balance(1)
8,043,548 977,373 9,020,921 7,149,805 1,287,045 8,436,850 
Unamortized premiums, discounts, fair value hedge basis adjustment, and other cost basis adjustments16,288 — 16,288 112,128 — 112,128 
Total loans8,059,836 977,373 9,037,209 7,261,933 1,287,045 8,548,978 
Allowance for losses(13,621)(673)(14,294)(12,943)(889)(13,832)
Total loans, net of allowance$8,046,215 $976,700 $9,022,915 $7,248,990 $1,286,156 $8,535,146 

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


30
 As of September 30, 2017 As of December 31, 2016
 Unsecuritized In Consolidated Trusts Total Unsecuritized In Consolidated Trusts Total
 (in thousands)
Farm & Ranch$2,739,681
 $1,329,212
 $4,068,893
 $2,381,488
 $1,132,966
 $3,514,454
Rural Utilities1,066,482
 —
 1,066,482
 999,512
 —
 999,512
Total unpaid principal balance(1)
3,806,163
 1,329,212
 5,135,375
 3,381,000
 1,132,966
 4,513,966
Unamortized premiums, discounts and other cost basis adjustments(1,197) —
 (1,197) (1,116) —
 (1,116)
Total loans3,804,966
 1,329,212
 5,134,178
 3,379,884
 1,132,966
 4,512,850
Allowance for loan losses(5,195) (1,213) (6,408) (4,437) (978) (5,415)
Total loans, net of allowance$3,799,771
 $1,327,999
 $5,127,770
 $3,375,447
 $1,131,988
 $4,507,435
(1)




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

Allowance for Losses


Farmer Mac maintains anThe following table is a summary, by asset type, of the allowance for losses presented in two components on its consolidated balance sheets: (1) an allowance for loan losses to account for estimated probable losses on loans held, and (2) a reserve for losses to account for estimated probable losses on loans underlying LTSPCs and off-balance sheet Farmer Mac Guaranteed Securities (excluding AgVantage securities).  Farmer Mac's total allowance for losses was $8.5 million as of September 30, 20172021 and $7.4 million as of December 31, 2016. See Note 6 for more information about off-balance sheet Farmer Mac Guaranteed Securities and LTSPCs.  2020:



Table 5.2
September 30, 2021December 31, 2020
Allowance for LossesAllowance for Losses
(in thousands)
Loans:
Farm & Ranch$3,506 $3,745 
Rural Utilities10,788 10,087 
Total$14,294 $13,832 

28



The following is a summary of the changes in the total allowance for losses for the three and nine month period ended September 30, 2021 and 2020:

Table 5.3
For the Three Months EndedFor the Nine Months Ended
September 30, 2021September 30, 2020September 30, 2021September 30, 2020
Allowance for LossesAllowance for LossesAllowance for LossesAllowance for Losses
(in thousands)
Farm & Ranch:
Beginning Balance$3,092 $6,039 $3,745 $10,454 
Cumulative effect adjustment from adoption of current expected credit loss standard— — — (3,909)
Adjusted Beginning Balance3,092 6,039 3,745 6,545 
Provision for/(release of) losses414 (300)(239)(412)
Charge-offs— — — (394)
Ending Balance(1)
$3,506 $5,739 $3,506 $5,739 
Rural Utilities:
Beginning Balance$10,908 $8,900 $10,087 $— 
Cumulative effect adjustment from adoption of current expected credit loss standard— — — 5,378 
Adjusted Beginning Balance10,908 8,900 10,087 5,378 
(Release of)/provision for losses(120)1,182 701 4,704 
Charge-offs— — — — 
Ending Balance(2)
$10,788 $10,082 $10,788 $10,082 
(1)As of September 30, 2021 and 2020, allowance for losses for Farm & Ranch includes no allowance and $1.8 million, respectively, for collateral dependent assets secured by agricultural real estate.
(2)As of both September 30, 2021 and 2020, allowance for losses for Rural Utilities includes no allowance for collateral dependent assets.

The release from the allowance for Rural Utilities loan losses of $0.1 million recorded during third quarter 2021 was primarily attributable to the impact of improving economic factor forecasts. The $0.4 million provision to the allowance for the Farm & Ranch portfolio during third quarter 2021 was primarily attributable to a decline in the economic factor forecast for commodity prices in Farmer Mac's fruit and nuts portfolio.


31




The net provision recorded to the allowance for the nine months ended September 30, 2017 and 2016:

Table 5.2
 As of September 30, 2017 As of September 30, 2016
 Allowance
for Loan
Losses		 Reserve
for Losses		 Total
Allowance
for Losses		 Allowance
for Loan
Losses		 Reserve
for Losses		 Total
Allowance
for Losses
 (in thousands)
For the Three Months Ended:           
Beginning Balance$6,138
 $1,966
 $8,104
 $4,893
 $2,191
 $7,084
Provision for/(release of) losses270
 114
 384
 191
 (222) (31)
Charge-offs—
 —
 —
 (130) —
 (130)
Ending Balance$6,408
 $2,080
 $8,488
 $4,954
 $1,969
 $6,923
            
For the Nine Months Ended:           
Beginning Balance$5,415
 $2,020
 $7,435
 $4,480
 $2,083
 $6,563
Provision for/(release of) losses1,234
 60
 1,294
 604
 (114) 490
Charge-offs(241) —
 (241) (130) —
 (130)
Ending Balance$6,408
 $2,080
 $8,488
 $4,954
 $1,969
 $6,923

During third quarter 2017, Farmer Mac recorded2021 was primarily a result of the impact of the Texas Arctic Freeze on the Rural Utilities portfolio, partially offset by improving economic factor forecasts. The net provisions to itsrelease from the allowance for loan losses and reserve for lossesthe nine months ended September 30, 2021 was primarily a result of $0.3 million and $0.1 million, respectively. improving agricultural commodity prices on the Farm & Ranch portfolio in the first half of the year, partially offset by declines in the third quarter.

The net provisionsprovision to the allowance for loan losses of $0.9 million recorded during third quarter 2017 were 2020 was
primarily attributabledue to (1) an increasethe impact of net new loan volume in the specific allowance for certain impaired on-balance sheet cropRural Utilities portfolio and permanent planting loans resulting from both ancredit downgrades
on existing volume during the quarter. The impact of the Rural Utilities portfolio on the net increase into the outstanding balance of such loans and downgrades in risk ratings on certain of those loans, and (2) an increase in
provision was partially offset by improving economic factors that uniquely impacted the general allowance due to overall net volume growth in on-balance sheet Farm & Ranch loans.
portfolio, specifically continued improvements in commodity prices and continued expectations for stable
farm land values.

The net provision to the reserve for losses recorded during the third quarter 2017 was primarily attributable to an increase in the general reserve due to downgrades in risk ratings on certain unimpaired Agricultural Storage and Processing loans underlying LTSPCs. Farmer Mac recorded no charge-offs to its allowance for loan losses during third quarter 2017.

During third quarter 2016, Farmer Mac recorded net provisions to its allowance for loan losses of $0.2 million and net releases to its reserve for losses of $0.2 million. The net provisions to the allowance for loan losses recorded during third quarter 2016 were attributable to an increase in the general allowance due to overall net volume growth in on-balance sheet Farm & Ranch loans and downgrades in risk ratings for a small number of loans. The net releases to the reserve for losses$4.3 million recorded during the three months ended September 30, 2016 were attributable to the release of a specific reserve on an impaired livestock loan underlying an LTSPC that was required to be removed from the LTSPC pool by the originator during third quarter 2016. Farmer Mac recorded $0.1 million charge-offs to its allowance for loan losses during third quarter 2016.



29


The following tables present the changes in the total allowance for losses for the three and nine months ended
September 30, 20172020 was primarily due to the impact of net new loan volume in the Rural Utilities
portfolio and 2016 by commodity type:the impact of economic factor forecasts on the Rural Utilities portfolio, especially continued

expected higher unemployment, as a result of the COVID-19 pandemic and the resulting economic
Table 5.3volatility.


 September 30, 2017
 Crops Permanent
Plantings		 Livestock Part-time
Farm		 Ag. Storage and
Processing		 Other Total
 (in thousands)
For the Three Months Ended:             
Beginning Balance$3,735
 $2,164
 $1,234
 $397
 $558
 $16
 $8,104
Provision for/(release of) losses115
 162
 35
 4
 72
 (4) 384
Ending Balance$3,850
 $2,326
 $1,269
 $401
 $630
 $12
 $8,488
              
For the Nine Months Ended:             
Beginning Balance$3,365
 $1,723
 $1,375
 $405
 $533
 $34
 $7,435
Provision for/(release of) losses713
 603
 (93) (4) 97
 (22) 1,294
Charge-offs(228) —
 (13) —
 —
 —
 (241)
Ending Balance$3,850
 $2,326
 $1,269
 $401
 $630
 $12
 $8,488

 September 30, 2016
 Crops Permanent
Plantings		 Livestock Part-time
Farm		 Ag. Storage and
Processing		 Other Total
 (in thousands)
For the Three Months Ended:             
Beginning Balance$3,111
 $1,144
 $1,906
 $447
 $473
 $3
 $7,084
Provision for/(release of) losses103
 198
 (354) 36
 (13) (1) (31)
Charge-offs—
 —
 —
 (130) —
 —
 (130)
Ending Balance$3,214
 $1,342
 $1,552
 $353
 $460
 $2
 $6,923
              
For the Nine Months Ended:             
Beginning Balance$2,791
 $931
 $1,781
 $408
 $649
 $3
 $6,563
Provision for/(release of) losses423
 411
 (229) 75
 (189) (1) 490
Charge-offs—
 —
 —
 (130) —
 —
 (130)
Ending Balance$3,214
 $1,342
 $1,552
 $353
 $460
 $2
 $6,923


30



The following tables presenttable presents the unpaid principal balances by delinquency status of Farmer Mac's loans held and loans underlying LTSPCs and off-balance sheet Farmer Mac Guaranteed Securities (excluding AgVantage securities) and the related total allowance for losses by impairment method and commodity typenon-performing assets as of September 30, 20172021 and December 31, 2016:2020:


Table 5.4
As of September 30, 2021
Accruing
Current30-59 Days60-89 Days
90 Days and Greater(2)
Total Past Due
Nonaccrual loans(3)(4)
Total Loans
(in thousands)
Loans(1):
Farm & Ranch$6,633,343 $2,345 $482 $3,655 $6,482 $137,924 $6,777,749 
Rural Utilities2,243,172 — — — — — 2,243,172 
Total$8,876,515 $2,345 $482 $3,655 $6,482 $137,924 $9,020,921 

  As of September 30, 2017
 Crops Permanent
Plantings		 Livestock Part-time
Farm		 Ag. Storage and
Processing		 Other Total
  (in thousands)
Ending Balance:             
Collectively evaluated for impairment:             
On-balance sheet$2,278,701
 $767,275
 $623,499
 $246,416
 $13,248
 $9,004
 $3,938,143
Off-balance sheet1,237,846
 373,496
 668,280
 153,278
 34,820
 3,849
 2,471,569
Total$3,516,547
 $1,140,771
 $1,291,779
 $399,694
 $48,068
 $12,853
 $6,409,712
Individually evaluated for impairment:             
On-balance sheet$68,322
 $41,201
 $13,516
 $7,069
 $—
 $642
 $130,750
Off-balance sheet8,847
 2,249
 4,448
 945
 —
 79
 16,568
Total$77,169
 $43,450
 $17,964
 $8,014
 $—
 $721
 $147,318
Total Farm & Ranch loans:             
On-balance sheet$2,347,023
 $808,476
 $637,015
 $253,485
 $13,248
 $9,646
 $4,068,893
Off-balance sheet1,246,693
 375,745
 672,728
 154,223
 34,820
 3,928
 2,488,137
Total$3,593,716
 $1,184,221
 $1,309,743
 $407,708
 $48,068
 $13,574
 $6,557,030
Allowance for Losses: 
  
  
  
  
  
  
Collectively evaluated for impairment:             
On-balance sheet$1,868
 $973
 $748
 $219
 $87
 $6
 $3,901
Off-balance sheet560
 285
 212
 46
 543
 4
 1,650
Total$2,428
 $1,258
 $960
 $265
 $630
 $10
 $5,551
Individually evaluated for impairment:             
On-balance sheet$1,193
 $1,010
 $192
 $112
 $—
 $—
 $2,507
Off-balance sheet229
 58
 117
 24
 —
 2
 430
Total$1,422
 $1,068
 $309
 $136
 $—
 $2
 $2,937
Total Farm & Ranch loans:             
On-balance sheet$3,061
 $1,983
 $940
 $331
 $87
 $6
 $6,408
Off-balance sheet789
 343
 329
 70
 543
 6
 2,080
Total$3,850
 $2,326
 $1,269
 $401
 $630
 $12
 $8,488



31


  As of December 31, 2016
 Crops Permanent
Plantings		 Livestock Part-time
Farm		 Ag. Storage and
Processing		 Other Total
  (in thousands)
Ending Balance:             
Collectively evaluated for impairment:             
On-balance sheet$2,115,450
 $569,360
 $537,859
 $183,660
 $11,545
 $8,894
 $3,426,768
Off-balance sheet1,241,851
 437,575
 752,473
 131,889
 36,506
 4,503
 2,604,797
Total$3,357,301
 $1,006,935
 $1,290,332
 $315,549
 $48,051
 $13,397
 $6,031,565
Individually evaluated for impairment:             
On-balance sheet$41,648
 $27,770
 $10,658
 $7,610
 $—
 $—
 $87,686
Off-balance sheet11,549
 2,735
 4,854
 915
 —
 —
 20,053
Total$53,197
 $30,505
 $15,512
 $8,525
 $—
 $—
 $107,739
Total Farm & Ranch loans:             
On-balance sheet$2,157,098
 $597,130
 $548,517
 $191,270
 $11,545
 $8,894
 $3,514,454
Off-balance sheet1,253,400
 440,310
 757,327
 132,804
 36,506
 4,503
 2,624,850
Total$3,410,498
 $1,037,440
 $1,305,844
 $324,074
 $48,051
 $13,397
 $6,139,304
Allowance for Losses: 
  
  
  
  
  
  
Collectively evaluated for impairment:             
On-balance sheet$2,000
 $652
 $735
 $193
 $22
 $28
 $3,630
Off-balance sheet420
 281
 241
 54
 511
 6
 1,513
Total$2,420
 $933
 $976
 $247
 $533
 $34
 $5,143
Individually evaluated for impairment:             
On-balance sheet$613
 $770
 $270
 $132
 $—
 $—
 $1,785
Off-balance sheet332
 20
 129
 26
 —
 —
 507
Total$945
 $790
 $399
 $158
 $—
 $—
 $2,292
Total Farm & Ranch loans:             
On-balance sheet$2,613
 $1,422
 $1,005
 $325
 $22
 $28
 $5,415
Off-balance sheet752
 301
 370
 80
 511
 6
 2,020
Total$3,365
 $1,723
 $1,375
 $405
 $533
 $34
 $7,435



32


The following tables present by commodity type the(1)Amounts represent unpaid principal balances, recorded investment,balance of risk rated loans, which is the basis Farmer Mac uses to analyze its portfolio, and specific allowance for losses related to impaired loans and the recorded investment in loans on nonaccrual status as of September 30, 2017 and December 31, 2016:

Table 5.5
  As of September 30, 2017
 Crops Permanent
Plantings		 Livestock Part-time
Farm		 Ag. Storage and
Processing		 Other Total
  (in thousands)
Impaired Loans:             
With no specific allowance:             
Recorded investment$11,909
 $4,963
 $3,942
 $1,939
 $—
 $644
 $23,397
Unpaid principal balance11,885
 4,953
 3,935
 1,936
 —
 643
 23,352
With a specific allowance: 
  
  
  
  
  
  
Recorded investment(1)
65,391
 38,565
 14,048
 6,088
 —
 78
 124,170
Unpaid principal balance65,284
 38,497
 14,029
 6,078
 —
 78
 123,966
Associated allowance1,422
 1,068
 309
 136
 —
 2
 2,937
Total: 
  
  
  
  
  
  
Recorded investment77,300
 43,528
 17,990
 8,027
 —
 722
 147,567
Unpaid principal balance77,169
 43,450
 17,964
 8,014
 —
 721
 147,318
Associated allowance1,422
 1,068
 309
 136
 —
 2
 2,937
              
Recorded investment of loans on nonaccrual status(2)
$29,535
 $25,653
 $2,819
 $5,037
 $—
 $—
 $63,044
(1)
Impairment analysis was performed in the aggregate in consideration of similar risk characteristics of the assets and historical statistics on $123.3 million (84 percent) of impaired loans as of September 30, 2017, which resulted in a specific allowance of $2.7 million.
(2)
Includes no loans that are less than 90 days delinquent but which have not met Farmer Mac's performance criteria for returning to accrual status.
  As of December 31, 2016
 Crops Permanent
Plantings		 Livestock Part-time
Farm		 Ag. Storage and
Processing		 Other Total
  (in thousands)
Impaired Loans:             
With no specific allowance:             
Recorded investment$20,761
 $3,683
 $1,054
 $1,970
 $—
 $—
 $27,468
Unpaid principal balance20,816
 3,688
 1,055
 1,975
 —
 —
 27,534
With a specific allowance: 
  
  
  
  
  
  
Recorded investment(1)
32,326
 26,748
 14,322
 6,535
 —
 —
 79,931
Unpaid principal balance32,381
 26,817
 14,457
 6,550
 —
 —
 80,205
Associated allowance945
 790
 399
 158
 —
 —
 2,292
Total: 
  
  
  
  
  
  
Recorded investment53,087
 30,431
 15,376
 8,505
 —
 —
 107,399
Unpaid principal balance53,197
 30,505
 15,512
 8,525
 —
 —
 107,739
Associated allowance945
 790
 399
 158
 —
 —
 2,292
              
Recorded investment of loans on nonaccrual status(2)
$13,405
 $10,785
 $2,696
 $5,256
 $—
 $—
 $32,142
(1)
Impairment analysis was performed in the aggregate in consideration of similar risk characteristics of the assets and historical statistics on $76.5 million (71 percent) of impaired loans as of December 31, 2016, which resulted in a specific allowance of $1.6 million.
(2)
Includes $12.4 million of loans that are less than 90 days delinquent but which have not met Farmer Mac's performance criteria for returning to accrual status.


33


The following table presents by commodity type the average recorded investment and interest income recognized on impaired loans for the three and nine months ended September 30, 2017 and 2016:

Table 5.6

 September 30, 2017
 Crops Permanent
Plantings		 Livestock Part-time
Farm		 Ag. Storage and
Processing		 Other Total
  (in thousands)
For the Three Months Ended:             
Average recorded investment in impaired loans$72,180
 $38,396
 $15,582
 $7,944
 $—
 $401
 $134,503
Income recognized on impaired loans101
 244
 13
 61
 —
 —
 419
              
For the Nine Months Ended:             
Average recorded investment in impaired loans$65,244
 $35,101
 $14,620
 $8,096
 $—
 $201
 $123,262
Income recognized on impaired loans563
 464
 212
 235
 —
 —
 1,474

 September 30, 2016
 Crops Permanent
Plantings		 Livestock Part-time
Farm		 Ag. Storage and
Processing		 Other Total
  (in thousands)
For the Three Months Ended:             
Average recorded investment in impaired loans$33,032
 $22,980
 $12,120
 $8,172
 $—
 $—
 $76,304
Income recognized on impaired loans46
 236
 81
 74
 —
 —
 437
              
For the Nine Months Ended:             
Average recorded investment in impaired loans$28,293
 $25,277
 $13,704
 $8,654
 $4,668
 $—
 $80,596
Income recognized on impaired loans108
 789
 229
 251
 —
 —
 1,377

For the three months ended September 30, 2017, there were no troubled debt restructurings ("TDRs"). For the nine months ended September 30, 2017, the recorded investment of past due loans.
(2)Includes loans determined to be TDRs was$0.2in consolidated trusts with beneficial interests owned by third parties that are 90 days or more past due.
(3)Includes loans that are 90 days or more past due, in foreclosure, or in bankruptcy with at least one missed payment, excluding loans performing under either their original loan terms or a court-approved bankruptcy plan.
(4)Includes $44.8 million both before and after restructuring. Forof nonaccrual loans for which there was no associated allowance. During the three and nine months ended September 30, 2016, there were no TDRs. As of September 30, 2017 and 2016, there were no TDRs identified during the previous 12 months that were in default under the modified terms. The impact of TDRs on Farmer Mac's allowance for loan losses was immaterial for the three and nine months ended September 30, 2017 and 2016.

When particular criteria are met, such as the default of the borrower,2021, Farmer Mac becomes entitled to purchase the defaulted loans underlying Farmer Mac Guaranteed Securities (commonly referred to as "removal-of-account" provisions).  Farmer Mac records all such defaulted loans at theirreceived $1.4 million and $4.4 million, respectively, in interest on nonaccrual loans.


32




As of December 31, 2020
Accruing
Current30-59 Days60-89 Days
90 Days and Greater(2)
Total Past Due
Nonaccrual loans(3)(4)
Total Loans
(in thousands)
Loans(1):
Farm & Ranch$6,055,154 $4,582 $632 $1,072 $6,286 $114,998 $6,176,438 
Rural Utilities2,260,412 — — — — — 2,260,412 
Total$8,315,566 $4,582 $632 $1,072 $6,286 $114,998 $8,436,850 
(1)Amounts represent unpaid principal balance duringof risk rated loans, which is the period in whichbasis Farmer Mac becomes entitleduses to purchase theanalyze its portfolio, and recorded investment of past due loans.
(2)Includes loans and, therefore, regains effective control over the transferred loans. In accordancein consolidated trusts with the terms of all LTSPCs, Farmer Mac acquiresbeneficial interests owned by third parties that are 90 days or more past due.
(3)Includes loans that are either 90 days or 120 days delinquent (depending on the provisionsmore past due, in foreclosure, or in bankruptcy with at least one missed payment, excluding loans performing under either their original loan terms or a court-approved bankruptcy plan.
(4)Includes $44.2 million of the applicable agreement) upon the request of the counterparty. Subsequent to the purchase, these defaulted loans are treated as nonaccrual loans and, therefore, interest is accounted for onwhich there was no associated allowance. During the cash basis. Any decreases in expected cash flows are recognized as impairment.



34


The following tables present information related to Farmer Mac's acquisition of defaulted loans for the three and nine monthsyear endedSeptember 30, 2017 and 2016 and the outstanding balances and carrying amounts of all such loans as of September 30, 2017 and December 31, 2016:

Table 5.7

 For the Three Months Ended For the Nine Months Ended
 September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
 ($ in thousands)
Unpaid principal balance at acquisition date:       
Loans underlying LTSPCs$—
 $852
 $311
 $2,118
Loans underlying off-balance sheet Farmer Mac Guaranteed Securities (excluding AgVantage securities)3,043
 250
 3,147
 398
Total unpaid principal balance at acquisition date3,043
 1,102
 3,458
 2,516
Contractually required payments receivable3,073
 1,109
 3,490
 2,544
Impairment recognized subsequent to acquisition—
 —
 —
 208
Recovery/release of allowance for all outstanding acquired defaulted loans29
 21
 171
 31
        
Number of defaulted loans purchased6
 3
 10
 8

 As of
 September 30, 2017 December 31, 2016
 (in thousands)
Outstanding balance$16,514
 $14,669
Carrying amount15,379
 13,069





35


Net credit losses and 90-day delinquencies as of and for the periods indicated for loans held and loans underlying off-balance sheet securities representing interests in pools of eligible Farm & Ranch loans ("Farm & Ranch Guaranteed Securities") and LTSPCs are presented in the table below.  As of September 30, 2017, there were no delinquencies and no probable losses inherent in Farmer Mac's Rural Utilities loan portfolio and2020, Farmer Mac had not experienced credit lossesreceived $4.4 million in interest on any Rural Utilitiesnonaccrual loans.


Table 5.8

 
90-Day Delinquencies(1)
 Net Credit (Recoveries)/Losses
 As of For the Nine Months Ended
 September 30, 2017 December 31, 2016 September 30, 2017 September 30, 2016
 (in thousands)
On-balance sheet assets:       
Farm & Ranch:       
Loans$65,105
 $19,757
 $(520) $154
Total on-balance sheet$65,105
 $19,757
 $(520) $154
Off-balance sheet assets: 
    
  
Farm & Ranch: 
    
  
LTSPCs$1,276
 $1,281
 $—
 $—
Total off-balance sheet$1,276
 $1,281
 $—
 $—
Total$66,381
 $21,038
 $(520) $154
(1)
Includes loans and loans underlying off-balance sheet Farm & Ranch Guaranteed Securities and LTSPCs that are 90 days or more past due, in foreclosure, or in bankruptcy with at least one missed payment, excluding loans performing under either their original loan terms or a court-approved bankruptcy plan.

Of the $65.1 million of on-balance sheet loans reported as 90-day delinquencies as of September 30, 2017, $11,000 were loans subject to "removal-of-account" provisions. Of the $19.8 million of on-balance sheet loans reported as 90-day delinquencies as of December 31, 2016, $0.1 million were loans subject to "removal-of-account" provisions.




















36



Credit Quality Indicators


The following tables present credit quality indicators related to Farm & Ranch loans held and Rural Utilities loans underlying LTSPCs and off-balance sheet Farm & Ranch Guaranteed Securitiesheld as of September 30, 20172021 and December 31, 2016:  2020, by year of origination:


Table 5.95.5
As of September 30, 2021
Year of Origination:
20212020201920182017PriorRevolving Loans - Amortized Cost BasisTotal
(in thousands)
Farm & Ranch(1):
Internally Assigned Risk Rating:
Acceptable$1,570,766 $1,798,703 $660,485 $382,027 $318,043 $1,054,024 $531,063 $6,315,111 
Special mention(2)
83,224 88,848 36,050 13,828 6,962 18,998 10,531 258,441 
Substandard(3)
607 5,305 26,892 27,730 50,478 81,240 11,945 204,197 
Total$1,654,597 $1,892,856 $723,427 $423,585 $375,483 $1,154,262 $553,539 $6,777,749 
For the Three Months Ended September 30, 2021:
Current period charge-offs$— $— $— $— $— $— $— $— 
Current period recoveries— — — — — — — — 
Current period Farm & Ranch net charge-offs$— $— $— $— $— $— $— $— 
For the Nine Months Ended September 30, 2021:
Current period charge-offs$— $— $— $— $— $— $— $— 
Current period recoveries— — — — — — — — 
Current period Farm & Ranch net charge-offs$— $— $— $— $— $— $— $— 
(1)Amounts represent unpaid principal balance of risk-rated loans, which is the basis Farmer Mac uses to analyze its portfolio, and recorded investment of past due loans.
(2)Assets in the "Special mention" category generally have potential weaknesses due to performance issues but are currently considered to be adequately secured.  

  As of September 30, 2017
 Crops Permanent
Plantings		 Livestock Part-time
Farm		 Ag. Storage and
Processing		 Other Total
  (in thousands)
Credit risk profile by internally assigned grade(1)
             
On-balance sheet:             
Acceptable$2,240,054
 $760,251
 $603,653
 $241,208
 $13,248
 $9,004
 $3,867,418
Special mention(2)
38,647
 7,024
 19,846
 5,208
 —
 —
 70,725
Substandard(3)
68,322
 41,201
 13,516
 7,069
 —
 642
 130,750
Total on-balance sheet$2,347,023
 $808,476
 $637,015
 $253,485
 $13,248
 $9,646
 $4,068,893
Off-Balance Sheet:             
Acceptable$1,133,150
 $336,780
 $627,220
 $148,085
 $31,502
 $3,213
 $2,279,950
Special mention(2)
77,671
 8,359
 31,264
 1,832
 —
 169
 119,295
Substandard(3)
35,872
 30,606
 14,244
 4,306
 3,318
 546
 88,892
Total off-balance sheet$1,246,693
 $375,745
 $672,728
 $154,223
 $34,820
 $3,928
 $2,488,137
Total Ending Balance:             
Acceptable$3,373,204
 $1,097,031
 $1,230,873
 $389,293
 $44,750
 $12,217
 $6,147,368
Special mention(2)
116,318
 15,383
 51,110
 7,040
 —
 169
 190,020
Substandard(3)
104,194
 71,807
 27,760
 11,375
 3,318
 1,188
 219,642
Total$3,593,716
 $1,184,221
 $1,309,743
 $407,708
 $48,068
 $13,574
 $6,557,030
              
Commodity analysis of past due loans(1)
 
  
  
  
  
  
  
On-balance sheet$31,413
 $22,330
 $7,367
 $3,352
 $—
 $643
 $65,105
Off-balance sheet862
 —
 —
 414
 —
 —
 1,276
90 days or more past due$32,275
 $22,330
 $7,367
 $3,766
 $—
 $643
 $66,381
33
(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.



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(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 September 30, 2021
Year of Origination:
20212020201920182017PriorRevolving Loans - Amortized Cost BasisTotal
(in thousands)
Rural Utilities(1):
Internally Assigned Risk Rating:
Acceptable$60,793 $619,772 $784,153 $8,100 $89,263 $628,903 $28,988 $2,219,972 
Special mention(2)
— — — — — — — — 
Substandard(3)
— 23,200 — — — — — 23,200 
Total$60,793 $642,972 $784,153 $8,100 $89,263 $628,903 $28,988 $2,243,172 
For the Three Months Ended September 30, 2021:
Current period charge-offs$— $— $— $— $— $— $— $— 
Current period recoveries— — — — — — — — 
Current period Rural Utilities net charge-offs$— $— $— $— $— $— $— $— 
For the Nine Months Ended September 30, 2021:
Current period charge-offs$— $— $— $— $— $— $— $— 
Current period recoveries— — — — — — — — 
Current period Farm & Ranch net charge-offs$— $— $— $— $— $— $— $— 
(1)Amounts represent unpaid principal balance of risk-rated loans, which is the basis Farmer Mac uses to analyze its portfolio, and recorded investment of past due loans.
(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, 2016
 Crops Permanent
Plantings		 Livestock Part-time
Farm		 Ag. Storage and
Processing		 Other Total
  (in thousands)
Credit risk profile by internally assigned grade(1)
             
On-balance sheet:             
Acceptable$2,080,227
 $568,221
 $504,784
 $179,288
 $11,545
 $8,894
 $3,352,959
Special mention(2)
35,223
 1,139
 33,075
 4,372
 —
 —
 73,809
Substandard(3)
41,648
 27,770
 10,658
 7,610
 —
 —
 87,686
Total on-balance sheet$2,157,098
 $597,130
 $548,517
 $191,270
 $11,545
 $8,894
 $3,514,454
Off-Balance Sheet             
Acceptable$1,201,144
 $403,256
 $724,056
 $125,440
 $34,537
 $3,916
 $2,492,349
Special mention(2)
20,422
 16,881
 15,341
 2,344
 —
 6
 54,994
Substandard(3)
31,834
 20,173
 17,930
 5,020
 1,969
 581
 77,507
Total off-balance sheet$1,253,400
 $440,310
 $757,327
 $132,804
 $36,506
 $4,503
 $2,624,850
Total Ending Balance:             
Acceptable$3,281,371
 $971,477
 $1,228,840
 $304,728
 $46,082
 $12,810
 $5,845,308
Special mention(2)
55,645
 18,020
 48,416
 6,716
 —
 6
 128,803
Substandard(3)
73,482
 47,943
 28,588
 12,630
 1,969
 581
 165,193
Total$3,410,498
 $1,037,440
 $1,305,844
 $324,074
 $48,051
 $13,397
 $6,139,304
              
Commodity analysis of past due loans(1)
 
  
  
  
  
  
  
On-balance sheet$13,449
 $3,245
 $669
 $2,394
 $—
 $—
 $19,757
Off-balance sheet373
 407
 38
 463
 —
 —
 1,281
90 days or more past due$13,822
 $3,652
 $707
 $2,857
 $—
 $—
 $21,038
34
(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.



38






As of December 31, 2020
Year of Origination:
20202019201820172016PriorRevolving Loans - Amortized Cost BasisTotal
(in thousands)
Farm & Ranch(1):
Internally Assigned Risk Rating:
Acceptable$1,947,618 $774,315 $484,345 $500,768 $465,277 $1,068,693 $535,742 $5,776,758 
Special mention(2)
70,171 79,744 18,317 8,530 13,111 21,328 7,656 218,857 
Substandard(3)
3,400 5,821 21,879 52,709 37,173 50,582 9,259 180,823 
Total$2,021,189 $859,880 $524,541 $562,007 $515,561 $1,140,603 $552,657 $6,176,438 
For the Three Months Ended September 30, 2020:
Current period charge-offs$— $— $— $— $— $— $— $— 
Current period recoveries— — — — — — — — 
Current period Farm & Ranch net charge-offs$— $— $— $— $— $— $— $— 
For the Nine Months Ended September 30, 2020:
Current period charge-offs$— $— $— $— $— $394 $— $394 
Current period recoveries— — — — — — — — 
Current period Farm & Ranch net charge-offs$— $— $— $— $— $394 $— $394 
Concentrations(1)Amounts represent unpaid principal balance of Credit Riskrisk-rated loans, which is the basis Farmer Mac uses to analyze its portfolio, and recorded investment of past due loans.

The following table sets forth the geographic and commodity/collateral diversification, the range of original loan-to-value ratios, and the range(2)Assets in the size of borrower exposure for all Farm & Ranch loans held"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 loans underlying off-balance sheet Farm & Ranch Guaranteed Securities and LTSPCs as of September 30, 2017 and December 31, 2016:

Table 5.10there is a distinct possibility that some loss will be sustained if deficiencies are not corrected.

 As of
  September 30, 2017 December 31, 2016
  (in thousands)
By commodity/collateral type:   
Crops$3,593,716
 $3,410,498
Permanent plantings1,184,221
 1,037,440
Livestock1,309,743
 1,305,844
Part-time farm407,708
 324,074
Ag. Storage and Processing48,068
 48,051
Other13,574
 13,397
Total$6,557,030
 $6,139,304
By geographic region(1):
 
  
Northwest$723,616
 $657,403
Southwest1,917,692
 1,791,745
Mid-North2,205,750
 2,104,867
Mid-South899,293
 837,121
Northeast290,655
 229,679
Southeast520,024
 518,489
Total$6,557,030
 $6,139,304
By original loan-to-value ratio(2):
 
  
0.00% to 40.00%$1,274,050
 $1,220,432
40.01% to 50.00%1,622,767
 1,466,047
50.01% to 60.00%2,268,852
 2,078,099
60.01% to 70.00%1,130,748
 1,167,395
70.01% to 80.00%233,963
 191,664
80.01% to 90.00%26,650
 15,667
Total$6,557,030
 $6,139,304
By size of borrower exposure(3):
   
Less than $1,000,000$2,297,648
 $2,195,103
$1,000,000 to $4,999,9992,500,101
 2,398,843
$5,000,000 to $9,999,999815,411
 782,171
$10,000,000 to $24,999,999568,471
 469,681
$25,000,000 to $50,000,000375,399
 293,506
Total$6,557,030
 $6,139,304
35
(1)
Geographic regions:  Northwest (AK, ID, MT, OR, WA, WY); Southwest (AZ, CA, CO, HI, NM, NV, UT); Mid-North (IA, IL, IN, MI, MN, NE, ND, SD, WI); Mid-South (AR, KS, LA, MO, OK, TX); Northeast (CT, DE, KY, MA, MD, ME, NH, NJ, NY, OH, PA, RI, VA, VT, WV); Southeast (AL, FL, GA, MS, NC, SC, TN).
(2)
As of second quarter 2017, Farmer Mac revised its calculation of the original loan-to-value ratio of a loan to combine for any cross-collateralized loans: (i) the original loan principal balance amounts in the numerator and (ii) the original appraised property values in the denominator. In previous periods, the ratio was calculated on a loan-by-loan basis without considering the effects of any cross-collateralization. Prior period information has been reclassified to conform to the current period calculation and presentation.
(3)
Includes multiple loans to the same borrower or borrower-related entities.



39






As of December 31, 2020
Year of Origination:
20202019201820172016PriorRevolving Loans - Amortized Cost BasisTotal
(in thousands)
Rural Utilities(1):
Internally Assigned Risk Rating:
Acceptable$667,489 $809,921 $8,260 $89,842 $31,275 $641,145 $12,480 $2,260,412 
Special mention(2)
— — — — — — — — 
Substandard(3)
— — — — — — — — 
Total$667,489 $809,921 $8,260 $89,842 $31,275 $641,145 $12,480 $2,260,412 
For the Three Months Ended September 30, 2020:
Current period charge-offs$— $— $— $— $— $— $— $— 
Current period recoveries— — — — — — — — 
Current period Rural Utilities net charge-offs$— $— $— $— $— $— $— $— 
For the Nine Months Ended September 30, 2020:
Current period charge-offs$— $— $— $— $— $— $— $— 
Current period recoveries— — — — — — — — 
Current period Farm & Ranch net charge-offs$— $— $— $— $— $— $— $— 
The original loan-to-value ratio is calculated by dividing the loan(1)Amounts represent unpaid principal balance atof risk-rated loans, which is the time of guarantee, purchase, or commitment by the appraised value at the date of loan origination or, when available, the updated appraised value at the time of guarantee, purchase, or commitment.  Current loan-to-value ratios may be higher or lower than the original loan-to-value ratios.




40


6.GUARANTEES AND LONG-TERM STANDBY PURCHASE COMMITMENTS

basis Farmer Mac offers two credit enhancement alternativesuses to direct loan purchasesanalyze 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 allow approved lenders the ability to retain the cash flow benefits of their loans and increase their liquidity and lending capacity: (1) Farmer Mac Guaranteed Securities, whichsome loss will be sustained if deficiencies are available through each of the Farm & Ranch, USDA Guarantees, Rural Utilities, and Institutional Credit lines of business, and (2) LTSPCs, which are available through the Farm & Ranch or the Rural Utilities lines of business.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 September 30, 20172021 and December 31, 2016,2020, 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 September 30, 2021As of December 31, 2020
  (in thousands)
Farm & Ranch:  
Farmer Mac Guaranteed Securities$60,349 $79,312 
USDA Guarantees:
Farmer Mac Guaranteed USDA Securities259,893 299,298 
Institutional Credit:  
AgVantage Securities4,412 4,412 
Total off-balance sheet Farmer Mac Guaranteed Securities$324,654 $383,022 


36
Outstanding Balance of Off-Balance Sheet Farmer Mac Guaranteed Securities
  As of September 30, 2017 As of December 31, 2016
  (in thousands)
Farm & Ranch:   
Guaranteed Securities$354,823
 $415,441
USDA Guarantees: 
  
Farmer Mac Guaranteed USDA Securities226,802
 103,976
Institutional Credit: 
  
AgVantage Securities13,214
 983,214
Revolving floating rate AgVantage facility(1)
300,000
 300,000
Total off-balance sheet Farmer Mac Guaranteed Securities$894,839
 $1,802,631
(1)




Relates to a revolving floating rate AgVantage facility subject to specified contractual terms. Farmer Mac receives a fixed fee based on the full dollar amount of the facility.

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 Nine Months Ended
  September 30, 2021September 30, 2020
  (in thousands)
Proceeds from new securitizations$84,131 $64,612 
Guarantee fees received848 1,136 

 For the Nine Months Ended
  September 30, 2017 September 30, 2016
  (in thousands)
Proceeds from new securitizations$404,246
 $457,369
Guarantee fees received2,141
 2,333
Purchases of assets from the trusts(3,147) (2,118)

Farmer Mac has recordedpresents a liability for its obligation to stand ready under theits guarantee in the guarantee"Guarantee and commitment obligationobligation" on the consolidated balance sheets.  ThisThe following table presents the liability approximated $3.8 million as of September 30, 2017and$5.5 million as of December 31, 2016. As of September 30, 2017 and December 31, 2016, the weighted-average remaining maturity of all loans underlying off-balance sheet Farmer Mac Guaranteed Securities, excluding AgVantage securities, was 10.1 years and 10.7 years, respectively. As of September 30, 2017 and December 31, 2016, the weighted-average remaining maturity of the off-balance sheet AgVantage securities was 1.1 years and 0.7 years, respectively.Securities:



Table 6.3
As of September 30, 2021As of December 31, 2020
(dollars in thousands)
Guarantee and commitment obligation$1,257 $1,625 
Weighted average remaining maturity:
  Farmer Mac Guaranteed Securities8.9 years9.5 years
  AgVantage Securities3.2 years4.0 years
41



Long-Term Standby Purchase Commitments


An LTSPC is a commitment by Farmer Mac to purchase eligible loans from an identified pool of loans under specified circumstances set forth in the applicable agreement, either for cash or in exchange for Farmer Mac Guaranteed Securities, on one or more undetermined future dates.  As consideration for its assumption of the credit risk on loans underlying an LTSPC, Farmer Mac receives a commitment fee payable monthly in arrears in an amount approximating what would have been the guarantee fee if the transaction were structured as a swap for Farmer Mac Guaranteed Securities.

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, was $3.0 billion as of September 30, 2017 and $3.1 billion as of December 31, 2016.

As of both September 30, 2017 and December 31, 2016, the weighted-average remaining maturity of all loans underlying LTSPCs was 15.2 years and 15.1 years, respectively.  For those LTSPCs issued or modified on or after January 1, 2003, 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.  ThisThe following table presents the liability, approximated $31.5 millionthe maximum principal amount of potential undiscounted future payments that Farmer Mac could be requested to make under all Long-Term Standby Purchase Commitments ("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 September 30, 2021As of December 31, 2020
(dollars in thousands)
Guarantee and commitment obligation(1)
$36,270 $33,909 
Maximum principal amount3,181,516 2,881,856 
Weighted-average remaining maturity15.4 years15.3 years
(1) Relates to LTSPCs issued or modified on or after January 1, 2003.


37




Reserve for Losses

The following table is a summary, by asset type, of the reserve for losses as of September 30, 20172021 and $31.8 millionDecember 31, 2020:

Table 6.5
September 30, 2021December 31, 2020
Reserve for LossesReserve for Losses
(in thousands)
Farm & Ranch:
LTSPCs and Farmer Mac Guaranteed Securities$1,103 $2,097 
Rural Utilities
LTSPCs897 1,180 
Total$2,000 $3,277 


The following is a summary of the changes in the reserve for losses for the three and nine month period ended September 30, 2021 and 2020:

Table 6.6
For the Three Months EndedFor the Nine Months Ended
September 30, 2021September 30, 2020September 30, 2021September 30, 2020
Reserve for LossesReserve for LossesReserve for LossesReserve for Losses
(in thousands)
Farm & Ranch:
Beginning Balance$1,194 $1,650 $2,097 $2,164 
Cumulative effect adjustment from adoption of current expected credit loss standard— — — (148)
Adjusted Beginning Balance1,194 1,650 2,097 2,016 
(Release of)/provision for losses(91)628 (994)262 
Charge-offs— — — — 
Ending Balance$1,103 $2,278 $1,103 $2,278 
Rural Utilities:
Beginning Balance$917 $1,370 $1,180 $— 
Cumulative effect adjustment from adoption of current expected credit loss standard— — — 1,011 
Adjusted Beginning Balance917 1,370 1,180 1,011 
(Release of)/provision for losses(20)(80)(283)279 
Charge-offs— — — — 
Ending Balance$897 $1,290 $897 $1,290 

The release from the reserve for losses in the Rural Utilities LTSPC portfolio recorded during the three and nine months ended September 30, 2021 was primarily due to improving economic factor forecasts and ratings upgrades. The release in the Farm & Ranch LTSPC portfolio was primarily due to ratings upgrades and updated loss-given-default assumptions.


38




The provision to the reserve for losses recorded during the three and nine months ended September 30,
2020 was primarily due to credit downgrades in the LTSPC portfolio.

The following table presents the unpaid principal balances by delinquency status of Farm & Ranch loans underlying LTSPCs. Farm & Ranch Farmer Mac Guaranteed Securities, Rural Utilities loans underlying LTSPCs, and non-performing assets as of September 30, 2021 and December 31, 2016.2020:


Table 6.7
As of September 30, 2021
Current30-59 Days60-89 Days
90 Days and Greater(1)
Total Past DueTotal Loans
(in thousands)
Farm and Ranch:
LTSPCs and Farmer Mac Guaranteed Securities$2,659,372 $6,026 $45 $2,167 $8,238 $2,667,610 
Rural Utilities:
LTSPCs$574,255 $— $— $— $— $574,255 

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


As of December 31, 2020
Current30-59 Days60-89 Days
90 Days and Greater(1)
Total Past DueTotal Loans
(in thousands)
Farm and Ranch:
LTSPCs and Farmer Mac Guaranteed Securities$2,389,777 $2,189 $1,344 $11,433 $14,966 $2,404,743 
Rural Utilities:
LTSPCs$556,425 $— $— $— $— $556,425 
(1)Includes loans underlying off-balance sheet Farm & Ranch Guaranteed Securities and LTSPCs that are 90 days of more past due, in foreclosure, or in bankruptcy with at least one missed payment, excluding loans performing under either their original loan terms or a court-approved bankruptcy plan.

Credit Quality Indicators

The following tables present credit quality indicators related to Farm & Ranch loans underlying LTSPCs, Farm & Ranch Farmer Mac Guaranteed Securities, and Rural Utilities loans underlying LTSPCs as of September 30, 2021 and December 31, 2020, by year of origination:


39




Table 6.8
As of September 30, 2021
Year of Origination:
20212020201920182017PriorRevolving Loans - Amortized Cost BasisTotal
(in thousands)
Farm & Ranch LTSPCs and Farmer Mac Guaranteed Securities:
Internally Assigned Risk Rating:
Acceptable$306,664 $309,938 $206,652 $189,643 $225,421 $1,054,049 $228,509 $2,520,876 
Special mention(1)
— 3,915 — 1,382 3,190 58,112 6,058 72,657 
Substandard(2)
— 220 730 10,496 12,942 45,900 3,789 74,077 
Total$306,664 $314,073 $207,382 $201,521 $241,553 $1,158,061 $238,356 $2,667,610 
For the Three Months Ended September 30, 2021:
Current period charge-offs$— $— $— $— $— $— $— $— 
Current period recoveries— — — — — — — — 
Current period Farm & Ranch net charge-offs$— $— $— $— $— $— $— $— 
For the Nine Months Ended September 30, 2021:
Current period charge-offs$— $— $— $— $— $— $— $— 
Current period recoveries— — — — — — — — 
Current period Farm & Ranch net charge-offs$— $— $— $— $— $— $— $— 
(1)Assets in the "Special mention" category generally have potential weaknesses due to performance issues but are currently considered to be adequately secured.  
(2)Substandard assets have a well-defined weakness or weaknesses and there is a distinct possibility that some loss will be sustained if deficiencies are not corrected.

40




As of September 30, 2021
Year of Origination:
2021202020201920182017PriorRevolving Loans - Amortized Cost BasisTotal
(in thousands)
Rural Utilities LTSPCs:
Internally Assigned Risk Rating:
Acceptable$— $— $— $— $— $511,743 $62,512 $574,255 
Special mention(1)
— — — — — — — — 
Substandard(2)
— — — — — — — — 
Total$— $— $— $— $— $511,743 $62,512 $574,255 
For the Three Months Ended September 30, 2021:
Current period charge-offs$— $— $— $— $— $— $— $— 
Current period recoveries— — — — — — — — 
Current period Rural Utilities net charge-offs$— $— $— $— $— $— $— $— 
For the Nine Months Ended September 30, 2021:
Current period charge-offs$— $— $— $— $— $— $— $— 
Current period recoveries— — — — — — — — 
Current period Farm & Ranch net charge-offs$— $— $— $— $— $— $— $— 
(1)Assets in the "Special mention" category generally have potential weaknesses due to performance issues but are currently considered to be adequately secured.  
(2)Substandard assets have a well-defined weakness or weaknesses and there is a distinct possibility that some loss will be sustained if deficiencies are not corrected.

41




As of December 31, 2020
Year of Origination:
20202019201820172016PriorRevolving Loans - Amortized Cost BasisTotal
(in thousands)
Farm & Ranch LTSPCs and Farmer Mac Guaranteed Securities:
Internally Assigned Risk Rating:
Acceptable$178,213 $213,620 $183,948 $237,042 $207,296 $969,860 $211,620 $2,201,599 
Special mention(1)
3,920 1,742 1,502 5,603 19,644 50,004 10,058 92,473 
Substandard(2)
264 10,250 12,611 14,578 7,841 60,602 4,525 110,671 
Total$182,397 $225,612 $198,061 $257,223 $234,781 $1,080,466 $226,203 $2,404,743 
For the Three Months Ended September 30, 2020:
Current period charge-offs$— $— $— $— $— $— $— $— 
Current period recoveries— — — — — — — — 
Current period Farm & Ranch net charge-offs$— $— $— $— $— $— $— $— 
For the Nine Months Ended September 30, 2020:
Current period charge-offs$— $— $— $— $— $— $— $— 
Current period recoveries— — — — — — — — 
Current period Farm & Ranch net charge-offs$— $— $— $— $— $— $— $— 
(1)Assets in the "Special mention" category generally have potential weaknesses due to performance issues but are currently considered to be adequately secured.  
(2)Substandard assets have a well-defined weakness or weaknesses and there is a distinct possibility that some loss will be sustained if deficiencies are not corrected.

42




As of December 31, 2020
Year of Origination:
20202019201820172016PriorRevolving Loans - Amortized Cost BasisTotal
(in thousands)
Rural Utilities LTSPCs:
Internally Assigned Risk Rating:
Acceptable$— $— $— $— $— $549,405 $7,020 $556,425 
Special mention(1)
— — — — — — — — 
Substandard(2)
— — — — — — — — 
Total$— $— $— $— $— $549,405 $7,020 $556,425 
For the Three Months Ended September 30, 2020:
Current period charge-offs$— $— $— $— $— $— $— $— 
Current period recoveries— — — — — — — — 
Current period Rural Utilities net charge-offs$— $— $— $— $— $— $— $— 
For the Nine Months Ended September 30, 2020:
Current period charge-offs$— $— $— $— $— $— $— $— 
Current period recoveries— — — — — — — — 
Current period Farm & Ranch net charge-offs$— $— $— $— $— $— $— $— 
(1)Assets in the "Special mention" category generally have potential weaknesses due to performance issues but are currently considered to be adequately secured.  
(2)Substandard assets have a well-defined weakness or weaknesses and there is a distinct possibility that some loss will be sustained if deficiencies are not corrected.


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 1.0 year or less, whereas medium-term notes generally have maturities of 0.5 years to 25.0 years.


43




The following tables set forth information related to Farmer Mac's borrowings as of September 30, 2021 and December 31, 2020:

Table 7.1
 September 30, 2021
 Outstanding as of September 30Average Outstanding During the Quarter
  AmountWeighted- Average RateAmountWeighted- Average Rate
  (dollars in thousands)
Due within one year:    
Discount notes$2,400,268 0.04 %$1,744,214 0.09 %
Medium-term notes1,276,557 0.08 %2,247,220 0.12 %
Current portion of medium-term notes4,405,308 0.69 %
 Total due within one year$8,082,133 0.40 %  
Due after one year:   
Medium-term notes due in:   
Two years$3,692,620 0.87 %  
Three years2,513,348 0.87 %  
Four years1,684,685 1.01 %  
Five years2,288,647 0.88 %
Thereafter4,089,552 1.73 %  
Total due after one year$14,268,852 1.14 %  
Total principal net of discounts$22,350,985 0.87 %  
Hedging adjustments14,136 
Total$22,365,121 


 December 31, 2020
 Outstanding as of December 31Average Outstanding During the Year
  AmountWeighted- Average RateAmountWeighted- Average Rate
  (dollars in thousands)
Due within one year:    
Discount notes$1,797,175 0.11 %$2,343,702 0.63 %
Medium-term notes2,645,146 0.19 %1,593,253 0.60 %
Current portion of medium-term notes6,304,061 0.90 %
 Total due within one year$10,746,382 0.59 %  
Due after one year:    
Medium-term notes due in:    
Two years$3,004,203 1.00 %  
Three years2,809,551 1.24 %  
Four years927,119 1.67 %  
Five years1,342,250 1.03 %
Thereafter2,966,172 1.92 %  
Total due after one year$11,049,295 1.37 %  
Total principal net of discounts$21,795,677 0.98 %  
Hedging adjustments53,240 
Total$21,848,917 

44





The maximum amount of Farmer Mac's discount notes outstanding at any month end during the nine months ended September 30, 2021 and 2020 was $2.4 billion and $2.6 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 2021 as of September 30, 2021:

Table 7.2
Debt Callable in 2021 as of September 30, 2021, by Maturity
AmountWeighted-Average Rate
(dollars in thousands)
Maturity:
2022$116,487 0.11 %
2023210,867 0.99 %
2024149,405 0.83 %
2025137,896 0.66 %
Thereafter569,647 1.51 %
 Total$1,184,302 1.10 %

The following schedule summarizes the earliest interest rate reset date, or debt maturities, of total borrowings outstanding as of September 30, 2021, 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
AmountWeighted-Average Rate
  (dollars in thousands)
Debt with interest rate resets, or debt maturities in:  
2021$7,159,124 0.22 %
20223,242,709 0.89 %
20233,267,608 0.98 %
20241,870,603 0.98 %
20251,633,640 0.90 %
Thereafter5,177,301 1.63 %
Total principal net of discounts$22,350,985 0.87 %

During the nine months ended September 30, 2021 and 2020, Farmer Mac called $1.7 billion and $2.7 billion 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

45




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 September 30, 2021, Farmer Mac had not used this borrowing authority.

Gains on Repurchase of Outstanding Debt

During the three and nine months ended September 30, 2021, Farmer Mac repurchased $23.0 million of outstanding debt at a gain of $14,000; no outstanding debt repurchases were made in the three and nine months ended September 30, 2020.

8.EQUITY

Preferred Stock

In May 2021, Farmer Mac issued 5.0 million shares of 4.875% non-cumulative perpetual Series G
preferred stock, par value $25.00 per share. Farmer Mac incurred direct costs of $3.7 million related to
the issuance of the Series G preferred stock. The dividend rate on the Series G preferred stock will remain
at a non-cumulative, fixed rate of 4.875% per year, when, as, and if a dividend is declared by the Board of
Directors of Farmer Mac, for so long as the Series G preferred stock remains outstanding. The Series G
preferred stock has no maturity date, but Farmer Mac has the option to redeem the preferred stock at any
time on any dividend payment date on and after July 17, 2026.

Common Stock


ForDuring each of the first, second, and third quarters in 2017,2021, Farmer Mac paid a quarterly dividend of $0.36$0.88 per share on all classes of its common stock. For each quarter in 2016,2020, Farmer Mac paid a quarterly dividend of $0.26$0.80 per share on all classes of its common stock.


On September 8, 2015, Farmer Mac's board of directors approved a share repurchase program during third quarter 2015 authorizing Farmer Mac to repurchase up to $25$25.0 million of its outstanding Class C non-voting common stock through September 8, 2017. As of September 30, 2017,stock. The share repurchase program, last modified on March 14, 2019, authorized Farmer Mac hadto 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 668,0004,000 shares of Class C non-voting common stock at a cost of approximately $19.6 million pursuant to the$0.2 million. Shortly after these repurchases were completed, Farmer Mac indefinitely suspended its share repurchase program.program in an effort to preserve capital and liquidity in view of market volatility and uncertainty caused by the COVID-19 pandemic. In August 2017,March 2021, Farmer Mac's board of directors approved the continuation ofreinstated the share repurchase program on its existingprevious terms through August 2019 for the repurchase(with a remaining authorization of up to $5.4$9.8 million in stock repurchases) and extended the expiration date of the program to March 2023. Farmer Mac's outstandingMac did not repurchase any shares of its Class C non-voting common stock which isduring the amount currently remaining first nine months of 2021. As of September 30, 2021, Farmer Mac had repurchased approximately 673,000 shares of Class C non-voting common stock at a cost of approximately $19.8 millionunder the share repurchase program originally authorized in third quartersince 2015.

Preferred Stock

For each of the first, second, and third quarters in 2017 and for each quarter in 2016, Farmer Mac paid the following quarterly dividends on its outstanding preferred stock:

$0.3672 per share on its 5.875% Non-Cumulative Preferred Stock, Series A;
$0.4297 per share on its 6.875% Non-Cumulative Preferred Stock, Series B; and
$0.3750 per share on its 6.000% Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series C.


42




Capital Requirements

Farmer Mac is subject to the following capital requirements:
Statutory minimum capital requirement – Farmer Mac's statutory minimum capital level is an amount of core capital (stockholders' equity less accumulated other comprehensive income) equal to the sum of 2.75 percent of Farmer Mac's aggregate on-balance sheet assets, as calculated for regulatory purposes, plus 0.75 percent of the aggregate off-balance sheet obligations of Farmer Mac, specifically including:   
◦the unpaid principal balance of outstanding Farmer Mac Guaranteed Securities;
◦instruments issued or guaranteed by Farmer Mac that are substantially equivalent to Farmer Mac Guaranteed Securities, including LTSPCs; and
◦other off-balance sheet obligations of Farmer Mac.
Statutory critical capital requirement – Farmer Mac's critical capital level is an amount of core capital equal to 50 percent of the total minimum capital requirement at that time.
Risk-based capital requirement – Farmer Mac's charter directs the Farm Credit Administration ("FCA"), an independent agency in the executive branch of the United States government that regulates Farmer Mac, to establish a risk-based capital stress test for Farmer Mac, using specified stress-test parameters.


Farmer Mac is required to comply with the higher of the minimum capital requirement and the risk-based capital requirement. As of both September 30, 20172021 and December 31, 2016,2020, the minimum capital

46




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 September 30, 2017,2021, Farmer Mac's minimum capital requirement was $515.8$699.6 million and its core capital level was $653.4 million,$1.2 billion, which was $137.6$479.5 million above the minimum capital requirement as of that date. As of December 31, 2016,2020, Farmer Mac's minimum capital requirement was $466.5$680.9 million and its core capital level was $609.7 million,$1.0 billion, which was $143.2$325.5 million above the minimum capital requirement as of that date.


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





4347






8.FAIR VALUE DISCLOSURES

9.FAIR VALUE DISCLOSURES
As of September 30, 2017,
Fair Value Classification and Transfers

The following tables present information about Farmer Mac's assets and liabilities recordedmeasured at fair value included financial instruments valued at $5.5 billion whoseon a recurring basis as of September 30, 2021 and December 31, 2020, respectively, and indicate the fair values were estimatedvalue hierarchy of the valuation techniques used by management in the absence of readily determinableFarmer Mac to determine such fair values (i.e., level 3).  These financial instruments measured as levelvalue:

Table 9.1
Assets and Liabilities Measured at Fair Value as of September 30, 2021
 Level 1Level 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$— $— $19,500 $19,500 
Floating rate Government/GSE guaranteed mortgage-backed securities— 2,403,074 — 2,403,074 
Fixed rate GSE guaranteed mortgage-backed securities— 28,897 — 28,897 
Fixed rate U.S. Treasuries1,244,733 — — 1,244,733 
Total Available-for-sale Investment Securities1,244,733 2,431,971 19,500 3,696,204 
Farmer Mac Guaranteed Securities:    
Available-for-sale:    
AgVantage— — 6,138,759 6,138,759 
Total Farmer Mac Guaranteed Securities— — 6,138,759 6,138,759 
USDA Securities:    
Trading— — 4,793 4,793 
Total USDA Securities— — 4,793 4,793 
Financial derivatives— 15,668 — 15,668 
Total Assets at fair value$1,244,733 $2,447,639 $6,163,052 $9,855,424 
Liabilities:    
Financial derivatives$— $25,633 $— $25,633 
Total Liabilities at fair value$— $25,633 $— $25,633 
Non-recurring:
Assets
Loans held for sale$— $— $324,246 $324,246 
Total non-recurring assets at fair value$— $— $324,246 $324,246 
(1) Level 3 represented 31 percentassets represent 26% of total assets and 71 percent64% of financial instruments measured at fair value as of September 30, 2017. As of December 31, 2016, Farmer Mac'svalue.

48




Assets and Liabilities Measured at Fair Value as of December 31, 2020
 Level 1Level 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$— $— $19,171 $19,171 
Floating rate asset-backed securities— 6,231 — 6,231 
Floating rate Government/GSE guaranteed mortgage-backed securities— 2,360,026 — 2,360,026 
Fixed rate GSE guaranteed mortgage-backed securities— 313 — 313 
Fixed rate U.S. Treasuries1,467,951 — — 1,467,951 
Total Available-for-sale Investment Securities1,467,951 2,366,570 19,171 3,853,692 
Farmer Mac Guaranteed Securities:    
Available-for-sale:    
AgVantage— — 6,947,701 6,947,701 
Total Farmer Mac Guaranteed Securities— — 6,947,701 6,947,701 
USDA Securities:    
Trading— — 6,695 6,695 
Total USDA Securities— — 6,695 6,695 
Financial derivatives— 17,468 — 17,468 
Total Assets at fair value$1,467,951 $2,384,038 $6,973,567 $10,825,556 
Liabilities:    
Financial derivatives$82 $29,810 $— $29,892 
Total Liabilities at fair value$82 $29,810 $— $29,892 
(1) Level 3 assets and liabilities recorded at fair value included financial instruments valued at $4.9 billion whose fair values were estimated by management in the absence of readily determinable fair values.  These financial instruments measured as level 3 represented 31 percentrepresent 29% of total assets and 65 percent65% of financial instruments measured at fair value.

There were no significant assets or liabilities measured at fair value on a non-recurring basis as of September 30, 2021 or December 31, 2016.2020.


Transfers in and/or out of the different levels within the fair value hierarchy are based on the fair values of the assets and liabilities as of the beginning of the reporting period. During the first half of 2017nine months ended September 30, 2021 and 2020, there was one transfer within fair value hierarchy from Level 2 to Level 3 for the fair value measurement of a fixed-rate GSE guaranteed mortgage-backed security (interest only strip). The transfer to Level 3 was because unobservable inputs became significant to the overall estimate of the fair value of the security as of March 31, 2017. There were no transfers within the fair value hierarchy for fair value measurements of Farmer Mac's investment securities, Farmer Mac Guaranteed Securities, USDA Securities, and financial derivatives during the first nine months of 2016. See Note 3 for information about the transfer of available-for-sale USDA and Farmer Mac Guaranteed USDA securities to held-to-maturity as of October 1, 2016.


derivatives.


4449






The following tables present information about Farmer Mac's assets and liabilities measured at fair value on a recurring and non-recurring basis as of September 30, 2017 and December 31, 2016, respectively, and indicate the fair value hierarchy of the valuation techniques used by Farmer Mac to determine such fair value:

Table 8.1
Assets and Liabilities Measured at Fair Value as of September 30, 2017
 Level 1 Level 2 Level 3 Total
 (in thousands)
Recurring: 
Assets:       
Investment Securities:       
Available-for-sale:       
Floating rate auction-rate certificates backed by Government guaranteed student loans$—
 $—
 $18,518
 $18,518
Floating rate asset-backed securities—
 35,602
 —
 35,602
Floating rate Government/GSE guaranteed mortgage-backed securities—
 1,312,204
 —
 1,312,204
Fixed rate GSE guaranteed mortgage-backed securities—
 507
 4,458
 4,965
Fixed rate senior agency debt—
 99,871
 —
 99,871
Fixed rate U.S. Treasuries763,806
 —
 —
 763,806
Total Investment Securities763,806
 1,448,184
 22,976
 2,234,966
Farmer Mac Guaranteed Securities: 
  
  
  
Available-for-sale: 
  
  
  
AgVantage—
 —
 5,443,746
 5,443,746
Total Farmer Mac Guaranteed Securities—
 —
 5,443,746
 5,443,746
USDA Securities: 
  
  
  
Trading—
 —
 14,864
 14,864
Total USDA Securities—
 —
 14,864
 14,864
Financial derivatives50
 1,970
 —
 2,020
Total Assets at fair value$763,856
 $1,450,154
 $5,481,586
 $7,695,596
Liabilities: 
  
  
  
Financial derivatives$—
 $30,595
 $—
 $30,595
Total Liabilities at fair value$—
 $30,595
 $—
 $30,595
Non-recurring: 
  
  
  
Assets: 
  
  
  
Loans held for investment$—
 $—
 $636
 $636
REO—
 —
 455
 455
Total Non-recurring Assets at fair value$—
 $—
 $1,091
 $1,091



45


Assets and Liabilities Measured at Fair Value as of December 31, 2016
 Level 1 Level 2 Level 3 Total
 (in thousands)
Recurring: 
Assets:       
Investment Securities:       
Available-for-sale:       
Floating rate auction-rate certificates backed by Government guaranteed student loans$—
 $—
 $17,730
 $17,730
Floating rate asset-backed securities—
 43,851
 —
 43,851
Floating rate corporate debt securities—
 10,041
 —
 10,041
Floating rate Government/GSE guaranteed mortgage-backed securities—
 1,361,029
 —
 1,361,029
Fixed rate GSE guaranteed mortgage-backed securities—
 7,625
 —
 7,625
Floating rate GSE subordinated debt—
 66,953
 —
 66,953
Fixed rate senior agency debt—
 187,133
 —
 187,133
Fixed rate U.S. Treasuries821,489
 —
 —
 821,489
Total Investment Securities821,489
 1,676,632
 17,730
 2,515,851
Farmer Mac Guaranteed Securities: 
  
  
  
Available-for-sale: 
  
  
  
AgVantage—
 —
 4,853,685
 4,853,685
Total Farmer Mac Guaranteed Securities—
 —
 4,853,685
 4,853,685
USDA Securities: 
  
  
  
Trading—
 —
 20,388
 20,388
Total USDA Securities—
 —
 20,388
 20,388
Financial derivatives—
 23,182
 —
 23,182
Total Assets at fair value$821,489
 $1,699,814
 $4,891,803
 $7,413,106
Liabilities: 
  
  
  
Financial derivatives$155
 $57,997
 $—
 $58,152
Total Liabilities at fair value$155
 $57,997
 $—
 $58,152
Non-recurring: 
  
  
  
Assets: 
  
  
  
Loans held for investment$—
 $—
 $2,799
 $2,799
REO—
 —
 349
 349
Total Non-recurring Assets at fair value$—
 $—
 $3,148
 $3,148





46


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 levelLevel 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 nine months ended September 30, 20172021 and 2016.2020.


Table 8.29.2
Level 3 Assets and Liabilities Measured at Fair Value for the Three Months Ended September 30, 2021
Beginning BalancePurchasesSalesSettlementsAllowance for LossesRealized and
unrealized gains/(losses) 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$19,248 $— $— $— $6 $— $246 $19,500 
Total available-for-sale19,248 — — — 6 — 246 19,500 
Farmer Mac Guaranteed Securities:
Available-for-sale:
AgVantage6,877,405 — — (708,882)(70)(31,462)1,768 6,138,759 
Total available-for-sale6,877,405 — — (708,882)(70)(31,462)1,768 6,138,759 
USDA Securities:
Trading5,050 — — (294)— 37 — 4,793 
Total USDA Securities5,050 — — (294)037 — 4,793 
Total Assets at fair value$6,901,703 $— $— $(709,176)$(64)$(31,425)$2,014 $6,163,052 


Level 3 Assets and Liabilities Measured at Fair Value for the Three Months Ended September 30, 2017
  Beginning
Balance		 Purchases Sales Settlements Realized and
Unrealized Gains/(Losses) included
in Income		 Unrealized
Gains/(Losses)
included in Other
Comprehe- nsive
Income		 Ending
Balance
 (in thousands)
Recurring:             
Assets:             
Investment Securities:             
Available-for-sale:             
Floating rate auction-rate certificates backed by Government guaranteed student loans$18,518
 $—
 $—
 $—
 $—
 $—
 $18,518
Fixed rate GSE guaranteed mortgage-backed securities4,651
 —
 —
 (111) —
 (82) 4,458
Total available-for-sale23,169
 —
 —
 (111) —
 (82) 22,976
Farmer Mac Guaranteed Securities: 
  
  
    
    
Available-for-sale: 
  
  
    
    
AgVantage5,282,562
 193,800
 —
 (29,851) (1,171) (1,594) 5,443,746
Total available-for-sale5,282,562
 193,800
 —
 (29,851) (1,171) (1,594) 5,443,746
USDA Securities: 
  
  
    
    
Available-for-sale—
 40,844
 (40,844) —
 —
 —
 —
Trading(1)
16,294
 —
 —
 (1,430) —
 —
 14,864
Total USDA Securities16,294
 40,844
 (40,844) (1,430) —
 —
 14,864
Total Assets at fair value$5,322,025
 $234,644
 $(40,844)
$(31,392) $(1,171)
$(1,676)
$5,481,586
50
(1)
Includes unrealized gains of $34,000 attributable to assets still held as of September 30, 2017 that are recorded in "Gains/(losses) on trading securities."




47






Level 3 Assets and Liabilities Measured at Fair Value for the Three Months Ended September 30, 2020
Beginning BalancePurchasesSalesSettlementsAllowance for LossesRealized and
unrealized gains/(losses) 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$18,283 $— $— $— $1 $— $788 $19,072 
Total available-for-sale18,283 — — — 1 — 788 19,072 
Farmer Mac Guaranteed Securities:
Available-for-sale:
AgVantage7,898,387 122,892 — (513,864)(96)(41,832)46,151 7,511,638 
Total available-for-sale7,898,387 122,892 — (513,864)(96)(41,832)46,151 7,511,638 
USDA Securities:
Trading7,786 — — (697)— (259)— 6,830 
Total USDA Securities7,786 — — (697)0(259)— 6,830 
Total Assets at fair value$7,924,456 $122,892 $— $(514,561)$(95)$(42,091)$46,939 $7,537,540 


Level 3 Assets and Liabilities Measured at Fair Value for the Nine Months Ended September 30, 2021
Beginning BalancePurchasesSalesSettlementsAllowance for LossesRealized 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$19,171 $— $— $— $(16)$— $345 $19,500 
Total available-for-sale19,171 — — — (16)— 345 19,500 
Farmer Mac Guaranteed Securities:
Available-for-sale:
AgVantage6,947,701 578,115 — (1,263,117)19 (150,265)26,306 6,138,759 
Total available-for-sale6,947,701 578,115 — (1,263,117)19 (150,265)26,306 6,138,759 
USDA Securities:
Trading6,695 — — (1,864)— (38)— 4,793 
Total USDA Securities6,695 — — (1,864)0(38)— 4,793 
Total Assets at fair value$6,973,567 $578,115 $— $(1,264,981)$3 $(150,303)$26,651 $6,163,052 


Level 3 Assets and Liabilities Measured at Fair Value for the Three Months Ended September 30, 2016
  Beginning
Balance		 Purchases Sales Settlements Realized and
Unrealized Gains included
in Income		 Unrealized
Gains included in Other
Comprehe-nsive
Income		 Ending
Balance
 (in thousands)
Recurring:             
Assets:             
Investment Securities:             
Available-for-sale:             
Floating rate auction-rate certificates backed by Government guaranteed student loans$17,730
 $—
 $—
 $—
 $—
 $(148) $17,582
Total available-for-sale17,730
 —
 —
 —
 —
 (148) 17,582
Trading: 
  
  
    
    
Floating rate asset-backed securities(1)
281
 —
 —
 (1,887) 1,606
 —
 —
Total trading281
 —
 —
 (1,887) 1,606
 —
 —
Total Investment Securities18,011
 —
 —
 (1,887) 1,606
 (148) 17,582
Farmer Mac Guaranteed Securities: 
  
  
    
    
Available-for-sale: 
  
  
    
    
AgVantage4,697,584
 263,196
 —
 (64,895) (10,960) 19,732
 4,904,657
Farmer Mac Guaranteed USDA Securities33,447
 —
 —
 (504) —
 (119) 32,824
Total Farmer Mac Guaranteed Securities4,731,031
 263,196
 —
 (65,399) (10,960) 19,613
 4,937,481
USDA Securities: 
  
  
    
    
Available-for-sale1,967,759
 119,201
 (31,866) (55,772) —
 (18,995) 1,980,327
Trading(2)
24,787
 —
 —
 (874) (424) —
 23,489
Total USDA Securities1,992,546
 119,201
 (31,866) (56,646) (424) (18,995) 2,003,816
Total Assets at fair value$6,741,588
 $382,397
 $(31,866) $(123,932) $(9,778) $470
 $6,958,879
51
(1)
Unrealized gains are attributable to assets still held as of September 30, 2016 and are recorded in "Gains/(losses) on trading securities."
(2)
Includes unrealized losses of $0.4 million attributable to assets still held as of September 30, 2016 that are recorded in "Gains/(losses) on trading securities."




48






Level 3 Assets and Liabilities Measured at Fair Value for the Nine Months Ended September 30, 2020
Beginning BalancePurchasesSalesSettlementsAllowance for LossesRealized and
unrealized gains/(losses) 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$18,912 $— $— $— $(37)$— $197 $19,072 
Total available-for-sale18,912 — — — (37)— 197 19,072 
Farmer Mac Guaranteed Securities:
Available-for-sale:
AgVantage7,143,025 958,368 — (826,380)(330)257,597 (20,642)7,511,638 
Total available-for-sale7,143,025 958,368 — (826,380)(330)257,597 (20,642)7,511,638 
USDA Securities:
Trading8,913 — — (1,910)— (173)— 6,830 
Total USDA Securities8,913 — — (1,910)0(173)— 6,830 
Total Assets at fair value$7,170,850 $958,368 $— $(828,290)$(367)$257,424 $(20,445)$7,537,540 

Level 3 Assets and Liabilities Measured at Fair Value for the Nine Months Ended September 30, 2017
  Beginning
Balance		 Transfers in Purchases Sales Settlements Realized and
Unrealized Gains/(Losses) included
in Income		 Unrealized
Gains/(Losses)
included in Other
Comprehe- nsive
Income		 Ending
Balance
 (in thousands)
Recurring:               
Assets:               
Investment Securities:               
Available-for-sale:               
Floating rate auction-rate certificates backed by Government guaranteed student loans$17,730
 —
 $—
 $—
 $—
 $—
 $788
 $18,518
Fixed rate GSE guaranteed mortgage-backed securities—
 7,041
 —
 —
 (334) —
 (2,249) 4,458
Total available-for-sale17,730
 7,041
 —
 —
 (334) —
 (1,461) 22,976
Farmer Mac Guaranteed Securities: 
    
  
    
    
Available-for-sale: 
    
  
    
    
AgVantage4,853,685
 —
 927,615
 —
 (357,006) 5,166
 14,286
 5,443,746
Total available-for-sale4,853,685
 —
 927,615
 —
 (357,006) 5,166
 14,286
 5,443,746
USDA Securities: 
    
  
    
    
Available-for-sale—
 —
 126,939
 (126,939) —
 —
 —
 —
Trading(1)
20,388
 —
 —
 —
 (5,440) (84) —
 14,864
Total USDA Securities20,388
 —
 126,939
 (126,939) (5,440) (84) —
 14,864
Total Assets at fair value$4,891,803
 $7,041
 $1,054,554
 $(126,939) $(362,780) $5,082
 $12,825
 $5,481,586
52
(1)
Includes unrealized gains of $42,000 attributable to assets still held as of September 30, 2017 that are recorded in "Gains/(losses) on trading securities."




49






Level 3 Assets and Liabilities Measured at Fair Value for the Nine Months Ended September 30, 2016
  Beginning
Balance		 Purchases Sales Settlements Realized and
Unrealized Gains included
in Income		 Unrealized(Losses)/Gains
included in Other
Comprehe-nsive
Income		 Ending
Balance
 (in thousands)
Recurring:             
Assets:             
Investment Securities:             
Available-for-sale:             
Floating rate auction-rate certificates backed by Government guaranteed student loans$44,924
 $—
 $(26,806) $—
 $6
 $(542) $17,582
Total available-for-sale44,924
 —
 (26,806) —
 6
 (542) 17,582
Trading: 
  
  
    
    
Floating rate asset-backed securities(1)
491
 —
 —
 (2,213) 1,722
 —
 —
Total trading491
 —
 —
 (2,213) 1,722
 —
 —
Total Investment Securities45,415
 —
 (26,806) (2,213) 1,728
 (542) 17,582
Farmer Mac Guaranteed Securities: 
  
  
    
    
Available-for-sale: 
  
  
    
    
AgVantage4,121,244
 1,342,572
 —
 (594,124) 26,475
 8,490
 4,904,657
Farmer Mac Guaranteed USDA Securities31,361
 4,100
 —
 (3,240) —
 603
 32,824
Total Farmer Mac Guaranteed Securities4,152,605
 1,346,672
 —
 (597,364) 26,475
 9,093
 4,937,481
USDA Securities: 
  
  
    
    
Available-for-sale1,888,344
 351,914
 (58,628) (237,262) —
 35,959
 1,980,327
Trading(2)
28,975
 —
 —
 (5,698) 212
 —
 23,489
Total USDA Securities1,917,319
 351,914
 (58,628) (242,960) 212

35,959
 2,003,816
Total Assets at fair value$6,115,339
 $1,698,586
 $(85,434) $(842,537) $28,415
 $44,510
 $6,958,879
(1)
Unrealized gains are attributable to assets still held as of September 30, 2016 and are recorded in "Gains/(losses) on trading securities."
(2)
Includes unrealized gains of $0.1 million attributable to assets still held as of September 30, 2016 that are recorded in "Gains/(losses) on trading securities."




50


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 levelLevel 3 of the fair value hierarchy as of September 30, 20172021 and December 31, 2016.2020:


Table 8.39.3
As of September 30, 2021
Financial InstrumentsFair ValueValuation TechniqueUnobservable InputRange (Weighted-Average)
(in thousands)
Assets:
Investment securities:
Floating rate auction-rate certificates backed by Government guaranteed student loans$19,500 Indicative bidsRange of broker quotes99.3% - 99.3% (99.3%)
Farmer Mac Guaranteed Securities:
AgVantage$6,138,759 Discounted cash flowDiscount rate0.9% - 2.1% (1.4%)
USDA Securities$4,793 Discounted cash flowDiscount rate1.4% - 2.3% (1.8%)
CPR25% - 43% (34%)
As of December 31, 2020
Financial InstrumentsFair ValueValuation TechniqueUnobservable InputRange (Weighted-Average)
(in thousands)
Assets:
Investment securities:
Floating rate auction-rate certificates backed by Government guaranteed student loans$19,171 Indicative bidsRange of broker quotes97.5% - 97.5% (97.5%)
Farmer Mac Guaranteed Securities:
AgVantage$6,947,701 Discounted cash flowDiscount rate0.8% - 2.3% (1.3%)
USDA Securities$6,695 Discounted cash flowDiscount rate0.9% - 1.9% (1.4%)
CPR25% - 49% (44%)
  As of September 30, 2017
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 $18,518
 Indicative bids Range of broker quotes 94.0% - 94.0% (94.0%)
Fixed rate GSE guaranteed mortgage-backed securities $4,458
 Discounted cash flow Discount rate 3.7%
      CPR 0 %
Farmer Mac Guaranteed Securities:        
AgVantage $5,443,746
 Discounted cash flow Discount rate 2.0% - 3.3% (2.2%)
         
USDA Securities $14,864
 Discounted cash flow Discount rate 3.6% - 5.3% (5.0%)
      CPR 7% - 19% (17%)


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 securities because they generally have fixed maturity dates when the secured general obligations are due and do not prepay.
  As of December 31, 2016
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 $17,730
 Indicative bids Range of broker quotes 90.0% - 90.0% (90.0%)
Farmer Mac Guaranteed Securities:        
AgVantage $4,853,685
 Discounted cash flow Discount rate 1.5% - 3.3% (1.9%)
         
USDA Securities $20,388
 Discounted cash flow Discount rate 4.0% - 5.3% (5.0%)
      CPR 13% - 18% (17%)


The significant unobservable inputs used in the fair value measurements of Farmer Mac Guaranteed Securities and USDA Securities are the prepayment ratesrate and discount ratesrate 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. Prepayment rates are not presented in the table above for AgVantage securities because they generally do not pay down principal based on amortization schedules but instead typically have fixed maturity dates when the secured general obligations are due.





5153






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 September 30, 20172021 and December 31, 2016:2020:


Table 8.49.4
 As of September 30, 2021As of December 31, 2020
 Fair ValueCarrying
Amount		Fair ValueCarrying
Amount
 (in thousands)
Financial assets:    
Cash and cash equivalents$899,052 $899,052 $1,033,941 $1,033,941 
Investment securities3,742,635 3,741,639 3,899,925 3,898,724 
Farmer Mac Guaranteed Securities8,393,490 8,387,062 8,148,691 8,123,493 
USDA Securities2,548,207 2,462,010 2,637,509 2,480,321 
Loans9,526,315 9,022,915 9,167,525 8,535,146 
Financial derivatives15,668 15,668 17,468 17,468 
Guarantee and commitment fees receivable36,643 39,038 34,115 37,113 
Financial liabilities:
Notes payable22,448,508 22,365,121 22,130,263 21,848,917 
Debt securities of consolidated trusts held by third parties1,039,150 990,961 1,390,330 1,323,786 
Financial derivatives25,633 25,633 29,892 29,892 
Guarantee and commitment obligations35,131 37,526 32,537 35,535 

 As of September 30, 2017 As of December 31, 2016
 Fair Value Carrying
Amount		 Fair Value Carrying
Amount
 (in thousands)
Financial assets:       
Cash and cash equivalents$366,764
 $366,764
 $265,229
 $265,229
Investment securities2,234,966
 2,234,966
 2,515,851
 2,515,851
Farmer Mac Guaranteed Securities7,601,376
 7,602,556
 6,006,694
 6,002,916
USDA Securities2,042,408
 2,107,149
 1,934,023
 2,029,613
Loans5,140,669
 5,127,770
 4,481,019
 4,507,435
Financial derivatives2,020
 2,020
 23,182
 23,182
Guarantee and commitment fees receivable:       
LTSPCs31,986
 32,307
 34,720
 32,656
Farmer Mac Guaranteed Securities4,611
 4,372
 6,197
 6,215
Financial liabilities:       
Notes payable:       
Due within one year8,108,390
 8,112,928
 8,439,515
 8,440,123
Due after one year7,450,462
 7,399,961
 5,260,497
 5,222,977
Debt securities of consolidated trusts held by third parties1,310,240
 1,333,417
 1,107,513
 1,142,704
Financial derivatives30,595
 30,595
 58,152
 58,152
Guarantee and commitment obligations:       
LTSPCs31,169
 31,491
 33,860
 31,796
Farmer Mac Guaranteed Securities4,065
 3,825
 5,467
 5,486


The carrying value of cash and cash equivalents is a reasonable estimate of their approximate fair value and is classified as level 1 within theLevel 1. The fair value hierarchy. Investment securities primarilyof investments in U.S. Treasuries are valued based on unadjusted quoted prices in active markets and are classified as level 2 within the fair value hierarchy.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 within the fair value hierarchy.Level 3. Financial derivatives primarily are valued using unadjusted counterparty valuations and are classified as level 2 within the fair value hierarchy.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 within the fair value hierarchy.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 within the fair value hierarchy.Level 3. Because the cash flows of Farmer Mac's financial instruments may be


52


interest rate path dependent, estimated fair values and projected discount rates for levelLevel 3 financial instruments are derived using a Monte Carlo simulation model. Different market assumptions and estimation methodologies could significantly affect estimated fair value amounts.





5354






10.BUSINESS SEGMENT REPORTING
9.BUSINESS SEGMENT REPORTING


The following tables present core earnings for Farmer Mac's operating segments and a reconciliation to consolidated net income for the three and nine months ended September 30, 20172021 and 2016:2020:


Table 9.110.1

Core Earnings by Business Segment
For the Three Months Ended September 30, 2021
Farm & RanchUSDA Guarantees
Rural 
Utilities
Institutional CreditCorporateReconciling
Adjustments		Consolidated Net Income
 (in thousands)
Net interest income$24,893 $6,449 $7,018 $13,707 $2,938 $—  $55,005 
Less: reconciling adjustments(1)(2)(3)
(526)398 (554)1,652 (50)(920)— 
Net effective spread24,367 6,847 6,464 15,359 2,888 (920)— 
Guarantee and commitment fees(2)
3,831 166 320 5 — (1,167)3,155 
Other income/(expense)(3)
405 152 2 — 128 (2,162)(1,475)
Non-interest income/(loss)4,236 318 322 5 128 (3,329)1,680 
(Provision for)/release of losses(414)— 120 (78)6 —  (366)
Release of reserve for losses91 — 20 — — —  111 
Other non-interest expense(6,275)(2,284)(1,889)(2,514)(4,145)—  (17,107)
Non-interest expense(4)
(6,184)(2,284)(1,869)(2,514)(4,145)—  (16,996)
Core earnings before income taxes22,005 4,881 5,037 12,772 (1,123)(4,249)(5)39,323 
Income tax (expense)/benefit(4,621)(1,025)(1,058)(2,682)234 892 (8,260)
Core earnings before preferred stock dividends17,384 3,856 3,979 10,090 (889)(3,357)(5)31,063 
Preferred stock dividends— — — — (6,774)—  (6,774)
Segment core earnings/(losses)$17,384 $3,856 $3,979 $10,090 $(7,663)$(3,357)(5)$24,289 
Total assets at carrying value$6,883,879 $2,522,382 $2,249,071 $8,395,286 $4,693,750 $—  $24,744,368 
Total on- and off-balance sheet program assets at principal balance$9,445,359 $2,722,702 $2,817,427 $8,133,303 $— $—  $23,118,791 
(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 "Losses on financial derivatives" on the consolidated financial statements, to determine the effective funding cost for each operating segment.
(4)Includes directly attributable costs and an allocation of indirectly attributable costs based on employee headcount.
(5)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.

Core Earnings by Business Segment
For the Three Months Ended September 30, 2017
 Farm & Ranch USDA Guarantees 
Rural 
Utilities
 Institutional Credit Corporate Reconciling
Adjustments		 Consolidated Net Income
 (in thousands)
Net interest income$13,609
 $5,288
 $2,230
 $15,431
 $3,004
 $—
 $39,562
Less: reconciling adjustments(1)(2)(3)
(2,131) (433) 602
 (1,068) (305) 3,335
 —
Net effective spread11,478
 4,855
 2,832
 14,363
 2,699
 3,335
 —
Guarantee and commitment fees(2)
4,236
 130
 476
 93
 

 (1,621) 3,314
Other income/(expense)(3)(4)
214
 9
 5
 —
 233
 524
 985
Non-interest income/(loss)4,450
 139
 481
 93
 233
 (1,097) 4,299
              
Provision for loan losses(270) —
 —
 —
 —
 —
 (270)
              
Provision for reserve for losses(114) 

 

 

 

 —
 (114)
Other non-interest expense(4,077) (1,080) (608) (1,670) (3,067) —
 (10,502)
Non-interest expense(5)
(4,191) (1,080) (608) (1,670) (3,067) —
 (10,616)
Core earnings before income taxes11,467
 3,914
 2,705
 12,786
 (135) 2,238
(6) 
32,975
Income tax (expense)/benefit(4,014) (1,370) (947) (4,475) 396
 (783) (11,193)
Core earnings before preferred stock dividends and attribution of income to non-controlling interest7,453
 2,544
 1,758
 8,311
 261
 1,455
(6) 
21,782
Preferred stock dividends—
 —
 —
 —
 (3,295) —
 (3,295)
Segment core earnings/(losses)$7,453
 $2,544
 $1,758
 $8,311
 $(3,034) $1,455
(6) 
$18,487
              
Total assets at carrying value$4,128,778
 $2,165,749
 $1,073,525
 $7,612,572
 $2,709,614
 $—
 $17,690,238
Total on- and off-balance sheet program assets at principal balance$6,557,030
 $2,298,956
 $1,886,445
 $7,901,842
 $—
 $—
 $18,644,273
55
(1)
Excludes 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/(losses) on financial derivatives and hedging activities" on the consolidated financial statements, to determine the effective funding cost for each operating segment.
(4)
Includes reconciling adjustments for fair value adjustments on financial derivatives and trading assets. Also includes a reconciling adjustment related to the recognition of deferred gains over the estimated lives of certain Farmer Mac Guaranteed Securities and USDA Securities. In 2016 and prior periods, fair value adjustments on financial derivatives included variation margin payment amounts because those amounts were considered to be collateral of the related exposure and were accounted for as unrealized gains or losses. However, effective first quarter 2017, CME implemented a change in its rules related to the exchange of variation margin, whereby variation margin payments are considered to be a partial settlement of the respective derivatives contracts rather than as pledged collateral, and accounted for as realized gains and losses. See Note 4 for more information about this rule change. Farmer Mac believes that even though these variation margin amounts are now accounted for as realized gains or losses on financial derivatives and hedging activities as a result of the CME rule change, their economic character will remain the same as they were before the change. This is not expected to have a cumulative net impact on Farmer Mac's financial condition or results of operations reported in accordance with GAAP because the related financial instruments are expected to be held to maturity. Therefore, beginning in 2017, this reconciling adjustment includes realized gains and losses on financial derivatives centrally cleared through CME resulting from the exchange of variation margin. As a result, core earnings subsequent to 2016 will be presented on a consistent basis with core earnings in 2016 and prior periods.
(5)
Includes directly attributable costs and an allocation of indirectly attributable costs based on staffing.
(6)
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 and attribution of income to non-controlling interest reconciled to net income; and segment core earnings reconciled to net income attributable to common stockholders.



54






Core Earnings by Business Segment
For the Three Months Ended September 30, 2020
Farm & RanchUSDA GuaranteesRural 
Utilities		Institutional CreditCorporate
Reconciling
Adjustments
Consolidated Net Income
 (in thousands)
Net interest income$18,093 $4,747 $5,709 $14,171 $1,941 $—  $44,661 
Less: reconciling adjustments(1)(2)(3)
(68)1,118 1,230 4,430 431 (7,141)— 
Net effective spread18,025 5,865 6,939 18,601 2,372 (7,141)— 
Guarantee and commitment fees(2)
4,111 213 328 7 — (1,500)3,159 
Other income/(expense)(3)
443 135 — — (125)(681)(228)
Non-interest income/(loss)4,554 348 328 7 (125)(2,181)2,931 
Release of/(provision for) losses300 — (1,182)228 1 —  (653)
(Provision for)/release of reserve for losses(628)— 81 — — —  (547)
Other non-interest expense(5,381)(1,643)(1,438)(2,160)(3,938)—  (14,560)
Non-interest expense(4)
(6,009)(1,643)(1,357)(2,160)(3,938)—  (15,107)
Core earnings before income taxes16,870 4,570 4,728 16,676 (1,690)(9,322)(5)31,832 
Income tax (expense)/benefit(3,543)(960)(993)(3,502)701 1,957 (6,340)
Core earnings before preferred stock dividends13,327 3,610 3,735 13,174 (989)(7,365)(5)25,492 
Preferred stock dividends— — — — (5,166)—  (5,166)
Loss on retirement of preferred stock— — — — — (1,667)(1,667)
Segment core earnings/(losses)$13,327 $3,610 $3,735 $13,174 $(6,155)$(9,032)(5)$18,659 
Total assets at carrying value$5,961,307 $2,487,687 $2,256,011 $8,716,923 $4,576,909 $—  $23,998,837 
Total on- and off-balance sheet program assets at principal balance$8,249,349 $2,735,128 $2,685,309 $8,319,502 $— $—  $21,989,288 
(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 "Losses on financial derivatives" on the consolidated financial statements, to determine the effective funding cost for each operating segment.
(4)Includes directly attributable costs and an allocation of indirectly attributable costs based on employee headcount.
(5)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.


Core Earnings by Business Segment
For the Three Months Ended September 30, 2016
 Farm & Ranch USDA Guarantees Rural 
Utilities		 Institutional Credit Corporate 
Reconciling
Adjustments
 Consolidated Net Income
 (in thousands)
Net interest income$12,039
 $5,753
 $2,963
 $12,226
 $2,582
 $—
 $35,563
Less: reconciling adjustments(1)(2)(3)
(1,336) (564) (320) (799) (345) 3,364
 —
Net effective spread10,703
 5,189
 2,643
 11,427
 2,237
 3,364
 —
Guarantee and commitment fees(2)
3,516
 29
 529
 459
 —
 (735) 3,798
Other income/(expense)(3)(4)
276
 95
 —
 —
 (388) 320
 303
Non-interest income/(loss)3,792
 124
 529
 459
 (388) (415) 4,101
              
Provision for loan losses(191) —
 —
 —
 —
 —
 (191)
              
Provision for reserve for losses222
 —
 —
 —
 —
 —
 222
Other non-interest expense(3,673) (933) (553) (1,253) (3,113) —
 (9,525)
Non-interest expense(5)
(3,451) (933) (553) (1,253) (3,113) —
 (9,303)
Core earnings before income taxes10,853
 4,380
 2,619
 10,633
 (1,264) 2,949
(6) 
30,170
Income tax (expense)/benefit(3,799) (1,533) (917) (3,722) 474
 (1,032) (10,529)
Core earnings before preferred stock dividends and attribution of income to non-controlling interest7,054
 2,847
 1,702
 6,911
 (790) 1,917
(6) 
19,641
Preferred stock dividends—
 —
 —
 —
 (3,295) —
 (3,295)
Non-controlling interest—
 —
 —
 —
 18
 —
 18
Segment core earnings/(losses)$7,054
 $2,847
 $1,702
 $6,911
 $(4,067) $1,917
(6) 
$16,364
              
Total assets at carrying value$3,436,641
 $2,062,195
 $1,008,903
 $6,045,227
 $3,447,939
 $—
 $16,000,905
Total on- and off-balance sheet program assets at principal balance$6,004,728
 $2,020,834
 $1,867,666
 $7,354,511
 $—
 $—
 $17,247,739
56
(1)
Excludes 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/(losses) on financial derivatives and hedging activities" on the consolidated financial statements, to determine the effective funding cost for each operating segment.
(4)
Includes reconciling adjustments for fair value adjustments on financial derivatives and trading assets. Also includes a reconciling adjustment related to the recognition of deferred gains over the estimated lives of certain Farmer Mac Guaranteed Securities and USDA Securities.
(5)
Includes directly attributable costs and an allocation of indirectly attributable costs based on staffing.
(6)
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 and attribution of income to non-controlling interest reconciled to net income; and segment core earnings reconciled to net income attributable to common stockholders.






55






Core Earnings by Business Segment
For the Nine Months Ended September 30, 2021
Farm & RanchUSDA Guarantees
Rural 
Utilities
Institutional CreditCorporateReconciling
Adjustments		Consolidated Net Income
 (in thousands)
Net interest income$70,805 $18,227 $19,995 $46,124 $8,234 $—  $163,385 
Less: reconciling adjustments(1)(2)(3)
(1,006)1,969 (242)2,039 190 (2,950)— 
Net effective spread69,799 20,196 19,753 48,163 8,424 (2,950)— 
Guarantee and commitment fees(2)
11,403 522 956 15 — (3,714)9,182 
Other income/(expense)(3)
1,118 441 3 — (123)(744)695 
Non-interest income/(loss)12,521 963 959 15 (123)(4,458)9,877 
Release of/(provision for) losses239 — (701)(40)(16)—  (518)
Release of reserve for losses994 — 283 — — —  1,277 
Other non-interest expense(18,679)(7,080)(5,784)(7,420)(13,903)—  (52,866)
Non-interest expense(4)
(17,685)(7,080)(5,501)(7,420)(13,903)—  (51,589)
Core earnings before income taxes64,874 14,079 14,510 40,718 (5,618)(7,408)(5)121,155 
Income tax (expense)/benefit(13,623)(2,957)(3,047)(8,551)1,043 1,556 (25,579)
Core earnings before preferred stock dividends51,251 11,122 11,463 32,167 (4,575)(5,852)(5)95,576 
Preferred stock dividends— — — — (17,885)—  (17,885)
Segment core earnings/(losses)$51,251 $11,122 $11,463 $32,167 $(22,460)$(5,852)(5)$77,691 
Total assets at carrying value$6,883,879 $2,522,382 $2,249,071 $8,395,286 $4,693,750 $—  $24,744,368 
Total on- and off-balance sheet program assets at principal balance$9,445,359 $2,722,702 $2,817,427 $8,133,303 $— $—  $23,118,791 
(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 "Losses on financial derivatives" on the consolidated financial statements, to determine the effective funding cost for each operating segment.
(4)Includes directly attributable costs and an allocation of indirectly attributable costs based on employee headcount.
(5)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.

Core Earnings by Business Segment
For the Nine Months Ended September 30, 2017
 Farm & Ranch USDA Guarantees 
Rural 
Utilities
 Institutional Credit Corporate Reconciling
Adjustments		 Consolidated Net Income
 (in thousands)
Net interest income$39,701
 $15,747
 $8,181
 $44,364
 $8,371
 $—
 $116,364
Less: reconciling adjustments(1)(2)(3)
(6,208) (1,508) 26
 (3,025) (946) 11,661
 —
Net effective spread33,493
 14,239
 8,207
 41,339
 7,425
 11,661
 —
Guarantee and commitment fees(2)
12,722
 303
 1,455
 713
 —
 (4,563) 10,630
Other income/(expense)(3)(4)
1,402
 34
 15
 —
 626
 2,132
 4,209
Non-interest income/(loss)14,124
 337
 1,470
 713
 626
 (2,431) 14,839
              
Provision for loan losses(1,234) —
 —
 —
 —
 —
 (1,234)
              
Release of reserve for losses(60) —
 —
 —
 —
 —
 (60)
Other non-interest expense(12,588) (3,333) (1,838) (4,813) (9,923) —
 (32,495)
Non-interest expense(5)
(12,648) (3,333) (1,838) (4,813) (9,923) —
 (32,555)
Core earnings before income taxes33,735
 11,243
 7,839
 37,239
 (1,872) 9,230
(6) 
97,414
Income tax (expense)/benefit(11,806) (3,935) (2,744) (13,033) 1,646
 (3,231) (33,103)
Core earnings before preferred stock dividends and attribution of income to non-controlling interest21,929
 7,308
 5,095
 24,206
 (226) 5,999
(6) 
64,311
Preferred stock dividends—
 —
 —
 —
 (9,886) —
 (9,886)
Non-controlling interest—
 —
 —
 —
 165
 —
 165
Segment core earnings/(losses)$21,929
 $7,308
 $5,095
 $24,206
 $(9,947) $5,999
(6) 
$54,590
              
Total assets at carrying value$4,128,778
 $2,165,749
 $1,073,525
 $7,612,572
 $2,709,614
 $—
 $17,690,238
Total on- and off-balance sheet program assets at principal balance$6,557,030
 $2,298,956
 $1,886,445
 $7,901,842
 $—
 $—
 $18,644,273
57
(1)
Excludes 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/(losses) on financial derivatives and hedging activities" on the consolidated financial statements, to determine the effective funding cost for each operating segment.
(4)
Includes reconciling adjustments for fair value adjustments on financial derivatives and trading assets. Also includes a reconciling adjustment related to the recognition of deferred gains over the estimated lives of certain Farmer Mac Guaranteed Securities and USDA Securities. In 2016 and prior periods, fair value adjustments on financial derivatives included variation margin payment amounts because those amounts were considered to be collateral of the related exposure and were accounted for as unrealized gains or losses. However, effective first quarter 2017, CME implemented a change in its rules related to the exchange of variation margin, whereby variation margin payments are considered to be a partial settlement of the respective derivatives contracts rather than as pledged collateral, and accounted for as realized gains and losses. See Note 4 for more information about this rule change. Farmer Mac believes that even though these variation margin amounts are now accounted for as realized gains or losses on financial derivatives and hedging activities as a result of the CME rule change, their economic character will remain the same as they were before the change. This is not expected to have a cumulative net impact on Farmer Mac's financial condition or results of operations reported in accordance with GAAP because the related financial instruments are expected to be held to maturity. Therefore, beginning in 2017, this reconciling adjustment includes realized gains and losses on financial derivatives centrally cleared through CME resulting from the exchange of variation margin. As a result, core earnings subsequent to 2016 will be presented on a consistent basis with core earnings in 2016 and prior periods.
(5)
Includes directly attributable costs and an allocation of indirectly attributable costs based on staffing.
(6)
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 and attribution of income to non-controlling interest reconciled to net income; and segment core earnings reconciled to net income attributable to common stockholders.












56






Core Earnings by Business Segment
For the Nine Months Ended September 30, 2020
Farm & RanchUSDA GuaranteesRural 
Utilities		Institutional CreditCorporate
Reconciling
Adjustments
Consolidated Net Income
 (in thousands)
Net interest income$53,768 $14,691 $12,778 $48,059 $5,025 $—  $134,321 
Less: reconciling adjustments(1)(2)(3)
(4,072)488 4,597 7,026 74 (8,113)— 
Net effective spread49,696 15,179 17,375 55,085 5,099 (8,113)— 
Guarantee and commitment fees(2)
12,822 658 995 23 — (5,003)9,495 
Other income/(expense)(3)
2,197 864 12 — (413)(3,048)(388)
Non-interest income/(loss)15,019 1,522 1,007 23 (413)(8,051)9,107 
Release of/(provision for) losses412 — (4,704)(222)(28)—  (4,542)
Provision for reserve for losses(262)— (278)— — —  (540)
Other non-interest expense(16,632)(5,045)(4,428)(6,606)(12,171)—  (44,882)
Non-interest expense(4)
(16,894)(5,045)(4,706)(6,606)(12,171)—  (45,422)
Core earnings before income taxes48,233 11,656 8,972 48,280 (7,513)(16,164)(5)93,464 
Income tax (expense)/benefit(10,129)(2,448)(1,884)(10,139)1,689 3,395 (19,516)
Core earnings before preferred stock dividends38,104 9,208 7,088 38,141 (5,824)(12,769)(5)73,948 
Preferred stock dividends— — — — (12,536)—  (12,536)
Loss on retirement of preferred stock— — — — — (1,667)(1,667)
Segment core earnings/(losses)$38,104 $9,208 $7,088 $38,141 $(18,360)$(14,436)(5)$59,745 
Total assets at carrying value$5,961,307 $2,487,687 $2,256,011 $8,716,923 $4,576,909 $—  $23,998,837 
Total on- and off-balance sheet program assets at principal balance$8,249,349 $2,735,128 $2,685,309 $8,319,502 $— $—  $21,989,288 
(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 "Losses on financial derivatives" on the consolidated financial statements, to determine the effective funding cost for each operating segment.
(4)Includes directly attributable costs and an allocation of indirectly attributable costs based on employee headcount.
(5)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.SUBSEQUENT EVENT

On October 14, 2021, Farmer Mac completed a structured and syndicated agricultural mortgage-backed securitization (AMBS). The underlying mortgage pool for FARM Series 2021-1 consisted of 384 agricultural mortgage loans with an aggregate outstanding principal balance of approximately $302.7 million. The loans in the pool were underwritten to Farmer Mac’s standards and acquired by Farmer Mac between July 2019 and December 2020. This transaction included a $280.0 million senior tranche guaranteed by Farmer Mac and a $22.7 million unguaranteed subordinate tranche. During fourth quarter 2021, Farmer Mac expects to record a gain on this transaction of approximately $4 million after-tax.

58
Core Earnings by Business Segment
For the Nine Months Ended September 30, 2016
 Farm & Ranch USDA Guarantees Rural 
Utilities		 Institutional Credit Corporate 
Reconciling
Adjustments
 Consolidated Net Income
 (in thousands)
Net interest income$34,772
 $15,743
 $8,682
 $36,084
 $8,280
 $—
 $103,561
Less: reconciling adjustments(1)(2)(3)
(4,733) (1,658) (939) (2,160) (897) 10,387
 —
Net effective spread30,039
 14,085
 7,743
 33,924
 7,383
 10,387
 —
Guarantee and commitment fees(2)
11,390
 50
 1,197
 1,375
 —
 (2,933) 11,079
Other income/(expense)(3)(4)
451
 178
 —
 —
 (1,288) (9,259) (9,918)
Non-interest income/(loss)11,841
 228
 1,197
 1,375
 (1,288) (12,192) 1,161
              
Provision for loan losses(604) —
 —
 —
 —
 —
 (604)
              
Provision for reserve for losses114
 —
 —
 —
 —
 —
 114
Other non-interest expense(11,946) (3,118) (2,214) (2,330) (9,849) —
 (29,457)
Non-interest expense(5)
(11,832) (3,118) (2,214) (2,330) (9,849) —
 (29,343)
Core earnings before income taxes29,444
 11,195
 6,726
 32,969
 (3,754) (1,805)
(6) 
74,775
Income tax (expense)/benefit(10,307) (3,918) (2,355) (11,538) 1,221
 633
 (26,264)
Core earnings before preferred stock dividends and attribution of income to non-controlling interest19,137
 7,277
 4,371
 21,431
 (2,533) (1,172)
(6) 
48,511
Preferred stock dividends—
 —
 —
 —
 (9,886) —
 (9,886)
Non-controlling interest—
 —
 —
 —
 62
 —
 62
Segment core earnings/(losses)$19,137
 $7,277
 $4,371
 $21,431
 $(12,357) $(1,172)
(6) 
$38,687
              
Total assets at carrying value$3,436,641
 $2,062,195
 $1,008,903
 $6,045,227
 $3,447,939
 $—
 $16,000,905
Total on- and off-balance sheet program assets at principal balance$6,004,728
 $2,020,834
 $1,867,666
 $7,354,511
 $—
 $—
 $17,247,739
(1)
Excludes 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/(losses) on financial derivatives and hedging activities" on the consolidated financial statements, to determine the effective funding cost for each operating segment.
(4)
Includes reconciling adjustments for fair value adjustments on financial derivatives and trading assets. Also includes a reconciling adjustment related to the recognition of deferred gains over the estimated lives of certain Farmer Mac Guaranteed Securities and USDA Securities.
(5)
Includes directly attributable costs and an allocation of indirectly attributable costs based on staffing.
(6)
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 and attribution of income to non-controlling interest reconciled to net income; and segment core earnings reconciled to net income attributable to common stockholders.



57






Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations


The objective of this section of the report is to provide a discussion and analysis, from management’s perspective, of the material information necessary to assess Farmer Mac's financial condition and results of operations for the quarter ended September 30, 2021. Financial information included in this report is consolidated to include the accounts of Farmer Mac and its threetwo subsidiaries during the quarter – Farmer Mac Mortgage Securities Corporation and Farmer Mac II LLC, and Contour Valuation Services, LLC (which began doing business as AgVisory during first quarter 2016 and in which Farmer Mac redeemed its ownership interest on May 1, 2017) ("AgVisory").LLC. This discussion and analysis of financial condition and results of operations should be read together with: (1) the interim unaudited consolidated financial statements and the related notes that appear elsewhere in this report; and (2) Farmer Mac's Annual Report on Form 10-K for the fiscal year ended December 31, 20162020, as filed with the SEC on March 9, 2017.February 25, 2021 (the "2020 Annual Report").




Updates to Critical Accounting Estimates

None.


FORWARD-LOOKING STATEMENTS


In this report, the words "Farmer Mac," "we," "our," and "us" refer to the Federal Agricultural Mortgage Corporation unless otherwise stated or unless the context otherwise requires.

Some statements made in this report, and in particularsuch as in the "Management's Discussion &and Analysis of Financial Condition and Results of Operations" section, are "forward-looking statements" within the meaning ofas defined in the Private Securities Litigation Reform Act of 1995 pertaining toabout management's current expectations as tofor Farmer Mac's future financial results, business prospects, and business developments.  Forward-looking statements include, without limitation, any statement, including statements about the COVID-19 pandemic and its impact on Farmer Mac, that may predict, forecast, indicate, or imply future results, performance, or achievements. These statements typically are accompanied by, and identified with,include terms such as "anticipates," "believes," "continues," "estimates," "expects," "forecasts," "intends," "outlook," "plans," "potential," "project," "target" and similar terms, and future or conditional tense verbs like "could," "may," "might," "should," "will," and similar phrases."would."  This report includes forward-looking statements addressing Farmer Mac's:
 
•prospects for earnings;
•prospects for growth in business volume;
•assessment of the effect of the COVID-19 pandemic on our business, financial results, financial condition, and business plans and strategies;
•trends in net interest income and net effective spread;
•trends in portfolio credit quality, delinquencies, substandard assets, credit losses, and provisions for losses;
•assessment of economic and market trends;
•trends in expenses;
•trends in investment securities;
•prospects for asset impairments and allowance for losses;
•changes in capital position;
•future dividend payments; and
•other business and financial matters.


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Management's expectations for Farmer Mac's future necessarily involve a number of assumptions, and estimates, and the evaluation of risks and uncertainties.  Various factors or events, both known and unknown, could cause Farmer Mac's actual results to differ materially from the expectations as expressed or implied by the forward-looking statements, including the factors discussed under "Risk Factors" in Part II, Item 1A of this report and in Part I, Item 1A of Farmer Mac'sthe 2020 Annual Report, on Form 10-K for the fiscal period ended December 31, 2016 filed with the SEC on March 9, 2017, andas well as uncertainties regarding:about:
 
•the duration, spread, and severity of the COVID-19 pandemic and its effects on the business operations of agricultural and rural borrowers, the capital markets, and Farmer Mac's business operations;
•the actions taken to address the COVID-19 pandemic, including government actions to mitigate the economic impact of the pandemic, how quickly and to what extent normal economic and operating conditions can resume, the possibility of future disruptions to economic recovery caused by any further outbreaks, regulatory measures or voluntary actions to limit the spread of COVID-19, and the duration and efficacy of any restrictions that may be imposed;
•the availability to Farmer Mac of debt and equity financing and, if available, the reasonableness of rates and terms;
•legislative or regulatory developments that could affect Farmer Mac, its sources of business, or the agricultural or rural utilitiesinfrastructure industries;


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•fluctuations in the fair value of assets held by Farmer Mac and its subsidiaries;
•the rate and directionlevel of development of the secondary market for agricultural mortgage and rural utilities loans, including lender interest in Farmer Mac's products and the secondary market provided by Farmer Mac;
•the general rate of growth in agricultural mortgage and rural utilities indebtedness;
•the effect of economic conditions including the effects of drought and other weather-related conditions and fluctuations in agricultural real estate values,geopolitics on agricultural mortgage or rural utilities lending, and borrower repayment capacity;capacity, or collateral values, including fluctuations in interest rates, changes in U.S. trade policies, fluctuations in export demand for U.S. agricultural products, supply chain disruptions, increases in input costs, labor availability, and volatility in commodity prices;
•the degree to which Farmer Mac is exposed to interest rate risk resulting from fluctuations in Farmer Mac's borrowing costs relative to market indexes;
•developments in the financial markets, including possible investor, analyst, and rating agency reactions to events involving government-sponsored enterprises, including Farmer Mac;
changes in •the level and directioneffect of interest rates, which could, among other things, affect the value of collateral securing Farmer Mac's agricultural mortgage loan assets;
the degree to which Farmer Mac is exposed to basis risk, which results from fluctuationsany changes in Farmer Mac's borrowing costs relative to market indexes such as LIBOR;executive leadership; and
volatility•other factors that could hinder agricultural mortgage lending or borrower repayment capacity, including the effects of severe weather or fluctuations in commodity prices relative to costs of production and/or export demand for U.S. agricultural products.real estate values.


In light ofConsidering these potential risks and uncertainties, no undue reliance should be placed on any forward-looking statements expressed in this report.  Furthermore, Farmer Mac undertakes no obligation to release publicly the results of revisions to any forward-looking statements that may be made to reflect new information or any future events or circumstances, except as otherwise mandatedrequired by the SEC.applicable law. The information contained in this report is not necessarily indicative of future results.






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Overview


InFarmer Mac is a mission-focused, purpose-driven company determined to improve the economic opportunity in rural America by increasing the availability and affordability of credit. As the nation’s secondary market for agricultural and rural infrastructure loans, we provide a broad array of financial solutions to lenders that support flexible low-cost financing to farmers, ranchers, agribusinesses, renewable energy projects, rural utilities, and other institutions. Farmer Mac also serves as a critical investment tool for states, counties, municipalities, pension funds, banks, public trust funds, and credit unions by providing diversification in their investment portfolios, issuance structure flexibility, and a safe, competitive return on their investment dollars.

During third quarter 2017, Farmer Mac increased its outstanding business volume2021:

•we closed on a strategic acquisition that enhanced our operations by $0.4 billionto $18.6 billion, driven primarily by net portfolio growthexpanding our internal loan servicing function and acquiring the loan servicing rights for a sizeable portion of $0.2 billion inour Farm & Ranch loan purchases and $0.2USDA Guaranteed Securities portfolios;
•we continued to operate effectively while nearly all employees worked remotely;
•we provided $2.5 billion in purchases of AgVantage securities. With regardliquidity and lending capacity to credit, lenders serving rural America;
•we maintained uninterrupted access to the debt capital markets and a strong capital position; and
•we maintained strong liquidity in our investment portfolio well above regulatory requirements.

Farmer Mac's total allowance for losses increased modestly in dollars but remained unchanged as a percentage of the Farm & Ranch portfolioMac’s performance during third quarter 2017 compared2021 described in more detail in this report reflects the success of our continued focus on pursuing new channels and innovative ways to second quarter 2017. As of September 30, 2017, Farmer Mac's substandard assetsfurther our mission to help build a strong and 90-day delinquencies increased, in both dollars and as a percentage of the Farm & Ranch portfolio, compared to second quarter 2017 levels. Substandard assets as a percentage of the Farm & Ranch portfolio remained below Farmer Mac's historical average substandard asset rate, while 90-day delinquencies as a percentage of the Farm & Ranch portfolio was in line with Farmer Mac's historical average 90-day delinquency rate.

vital rural America. The discussion below of Farmer Mac's financial information includes certain "non-GAAP measures," which are measures of financial performance that are not presented in accordance with generally accepted accounting principles in the United States ("GAAP"). For more information about the non-GAAP measures Farmer Mac uses, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Use of Non-GAAP Measures."

Net Income and Core Earnings


Farmer Mac'sThe following table shows our net income attributable to common stockholders and core earnings for third quarter 2017 was $18.5 million, comparedthe periods presented. Core earnings and core earnings per share are non-GAAP measures that differ from net income attributable to $17.5 million in second quarter 2017common stockholders and $16.4 million in third quarter 2016.earnings per common share, respectively, by excluding the effects of fair value fluctuations and specified infrequent or unusual transactions.


Table 1
For the Three Months Ended
September 30, 2021June 30, 2021September 30, 2020
(in thousands)
Net income attributable to common stockholders$24,289 $25,444 $18,659 
Core earnings27,646 29,986 27,691 

The $1.0$1.2 million sequential increase was primarily driven by a $0.5 million after-tax decrease in non-interest expensenet income attributable to common stockholders was primarily due to lower compensation and employee benefits expenses. This decrease in compensation and benefits expenses was caused by the absence in third quarter 2017 of payouts of annual variable incentive compensation that occurred during second quarter 2017. Also contributing to the sequential increase was a $0.3$1.0 million after-tax increase in gains in fair value of financial derivatives and hedged assetsour provision for credit losses and a $0.2$0.9 million increase in tax benefits recognized from exercises of stock-based awards.


The $2.1 million year-over-year increase61




preferred stock dividends, which was drivenpartially offset by an increase in net interest income of $2.6 million, after tax. Also contributing to the year-over-year increase was a $0.8 million after-tax increase in gains in fair value of financial derivatives and hedged assets. The increase was offset in part by a $0.8 million after-tax decrease in unrealized gains in fair value of trading securities and a $0.6 million after-tax increase in non-interest expense. the fair value of undesignated financial derivatives due to fluctuations in long-term interest rates.

The $5.6 million year-over-year increase in non-interest expense was primarilynet income attributable to higher generalcommon stockholders was due to an $8.2 million after-tax increase in net interest income, the absence of a $1.7 million after-tax loss on the retirement of preferred stock recorded in the comparable prior period, and administrative ("G&A")a $0.7 million after-tax decrease in the provision for credit losses. These factors were partially offset by a $2.0 million after-tax increase in operating expenses, a $1.4 million after-tax decrease in the fair value of undesignated financial derivatives due to fluctuations in long-term interest rates, and compensation and employee benefits expenses.a $1.6 million increase in preferred stock dividends.

Farmer Mac's non-GAAP core earnings for third quarter 2017 were $17.0 million, compared to $16.0 million in second quarter 2017 and $14.4 million in third quarter 2016.


The $1.0$2.3 million sequential increasedecrease in core earnings was primarily driven by andue to a $1.0 million after-tax decrease of $0.5increase in our provision for credit losses and a $0.9 million increase in compensation and employee benefits expenses caused by the absence in third quarter 2017 of payouts of annual variable incentive compensation that occurred during second quarter 2017. Also contributing to the sequential increase waspreferred stock dividends.

Year-over-year core earnings were approximately equivalent because a $0.4$3.3 million after-tax increase in net effective spread and a $0.4 million after-tax increase in other income, primarily driven by a decrease in hedging costs. The sequential increase was offset in part by a $0.5$0.7 million after-tax decrease in net realized gains on the sale of real estate owned properties.


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The $2.6 million year-over-year increase in core earnings was primarily attributable to (1) a$2.6 million after-tax increase in net effective spread; (2) a $0.3 million increase in tax benefits recognized from exercises of stock-based awards in third quarter 2017 which did not occur in third quarter 2016; and (3) a $0.3 million after-tax increase in other income, primarily drivenprovision for credit losses, were partially offset by a decrease in hedging costs. Partially offsetting the year-over-year increase was a $0.6$2.0 million after-tax increase in operating expenses, attributable to both ana $1.6 million increase in compensationpreferred stock dividends, and employee benefits and G&A expenses. The increasea $0.3 million after-tax decrease in compensation and employee benefits expenses was due primarily to an increase in staffing and related employee health insurance costs and benefits. The increase in G&A expenses was due to higher expenses related to continued technology and business infrastructure investments and expenses related to business development efforts.guarantee fees.


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


Net Interest Income and Net Effective Spread

Net interest income was $39.6 millionfor third quarter 2017, compared to $39.7 million for second quarter 2017 and $35.6 million for third quarter 2016. The overall net interest yield was 0.92 percent for third quarter 2017, compared to 0.95 percent for second quarter 2017 and 0.89 percent for third quarter 2016.


The $0.1 million and 3 basis point sequential decreases infollowing table shows our net interest income were primarily driven by an increase in net yield adjustments related to amortization of premiums on assets consolidated at fair value.
The $4.0 million year-over-year increase in net interest income was driven by net growth in Farm & Ranch loans, USDA Securities, and on-balance sheet AgVantage securities. Another factor contributing to the increase was the effect of an increase in short-term interest rates on assets and liabilities indexed to LIBOR due to the Federal Reserve's decision to raise the target range for the federal funds rate in December 2016, March 2017, and June 2017. This effect on net interest income occurred because interest expense used to calculate net interest income does not include all the funding expenses related to these assets, specifically the expense on financial derivatives not designated in hedge accounting relationships. This increase in short-term rates on assets and liabilities indexed to LIBOR did not have a similar effect on net effective spread because net effective spread includes interest expense from all funding related to those assets, including interest expense from financial derivatives not designated in hedge accounting relationships. The increase in net interest income was offset in part by an increase in netboth dollars and percentage yield adjustments related to amortization of premiums and discounts on assets consolidated at fair value and a decrease in the amount of cash basis interest income recognized on nonaccrual Farm & Ranch loans. The 3 basis point year-over-year increase in net interest income in percentage terms was primarily attributable to a reduction in the average balance of lower-earning cash and cash equivalents and investment securities.

Net effective spread, a non-GAAP measure, was $36.2 million for third quarter 2017, compared to $35.6 million in second quarter 2017 and $32.2 million in third quarter 2016. In percentage terms, net effectiveor spread for third quarter 2017 was 0.92 percent, compared to 0.92 percent in second quarter 2017 and 0.86


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percent in third quarter 2016.the periods presented. Farmer Mac uses net effective spread, a non-GAAP measure, as an alternative measure to net interest income because management believes it is a useful metric that reflects the economics of the net spread between all the assets owned by Farmer Mac and all related funding, including any associated derivatives, some of which may not be included in net interest income.


Table 2
For the Three Months Ended
September 30, 2021June 30, 2021September 30, 2020
(in thousands)
Net interest income$55,005 $55,129 $44,661 
Net interest yield %0.94 %0.94 %0.78 %
Net effective spread55,925 56,551 51,802 
Net effective spread %0.99 %1.01 %0.96 %

Sequential net interest income, in both dollars and percentage, was approximately equivalent because there were no significant fluctuations in the composition of net interest income.

The $10.3 million year-over-year increase in net interest income was primarily due to a $4.5 million decrease in funding costs, a $2.9 million increase related to new business volume, and a $3.1 million increase in the fair value of derivatives designated in fair value hedge accounting relationships (designated

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financial derivatives). In percentage terms, the year-over-year 0.16% increase was primarily attributable to a decrease of 0.06% in funding costs, an increase of 0.05% in net fair value changes from designated financial derivatives, and an increase of 0.03% in new business volume.

The $0.6 million sequential increasedecrease in net effective spread was from a $1.3 million decrease attributable to an increase in dollarsnon-GAAP funding costs and lower cash-basis interest income, partially offset by $0.7 million in new business volume. In percentage terms, the decrease of 0.02% was primarily attributable to growth in on-balance sheet AgVantage securities, Farm & Ranch loans, and other business volume, which increased net effective spread by approximately $0.9 million. Net effective spread in percentage terms was flat sequentially, as the effectdecrease of a decrease in the average balance of lower-earning investment securities was offset by a decrease in the amount of cash basis0.01% related to lower cash-basis interest income recognized on nonaccrual Farm & Ranch loans.and the increase of 0.01% related to non-GAAP funding costs.


The $4.0$4.1 million year-over-year increase in net effective spread in dollars was primarily attributabledue to (1) growth in on-balance sheet AgVantage securities, Farm & Ranch loans, and otheran increase of $2.9 million from new business volume which increased net effective spread by approximately $4.0 million; and (2) changes in Farmer Mac's funding strategies and LIBOR-based short-term funding costs for floating rate assets indexed to LIBOR that remained favorable throughout most of third quarter 2017, which added approximately $0.8 million. The increase was offset in part by a $1.0 million decrease in non-GAAP funding costs. In percentage terms, the amount of cash basis interest income recognized on nonaccrual Farm & Ranch loans, which reduced net effective spread by $0.5 million. The 6 basis point year-over-year increase in net effective spread in percentage termsof 0.03% was primarily attributable to a significant reduction in the average balance of cash and cash equivalents and lower earning investment securities, which added approximately 6 basis points to net effective spread. Also contributing to the increase were the effects of the changes in Farmer Mac's funding strategy and a favorable LIBOR-based funding market, which added approximately 2 basis points. The increase in percentage terms was offset in part by the effect of the refinancing in second quarter 2017 of a $1.0 billion AgVantage security, $970.0 million of which was previously held by third party investors and reported as off-balance sheetnew business volume in the Institutional Credit line of business, into three new on-balance sheet AgVantage securities, which reduced net effective spread by approximately 3 basis points.volume.


For more information about Farmer Mac's use of net effective spread as a financial measure, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Use of Non-GAAP Measures." For a reconciliation of net interest income to net effective spread, see Table 611 in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Net Interest Income."


Business Volume


Farmer Mac addedOur outstanding business volume was $23.1 billion as of September 30, 2021, a net increase of $0.9 billion offrom June 30, 2021 after taking into account all new business, volume during third quarter 2017. The new business volume included purchases of $298.3 million of newly originated Farm & Ranch loans, purchases of $291.0 million of AgVantage securities, Farm & Ranch loans added under LTSPCs of $102.8 million, purchases of $90.2 million of USDA Securities, purchases of Rural Utilities loans of $70.0 million, and the issuance of $41.1 million of Farmer Mac Guaranteed USDA Securities. Taking into account maturities, and paydowns on existing assets,assets. The net increase was primarily attributable to net increases of $499.2 million in the Institutional Credit line of business, $389.2 million in the Farm & Ranch line of business, and $37.4 million in the Rural Utilities line of business, partially offset by a net decrease of $4.2 million in the USDA Guarantees line of business.

For more information about Farmer Mac's outstanding business volume, was $18.6 billion assee "Management's Discussion and Analysis of September 30, 2017, an increaseFinancial Condition and Results of $0.4 billion from June 30, 2017, and $1.2 billion from December 31, 2016.Operations—Results of Operations—Business Volume."



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Capital


As of September 30, 2017, Farmer Mac's core capital level was $653.4 million, which was $137.6 million above the minimum capital level required by Farmer Mac's statutory charter.  As of December 31, 2016, Farmer Mac's core capital level was $609.7 million, which was $143.2 million above the minimum capital requirement. Table 3
As of
September 30, 2021December 31, 2020
(in thousands)
Core capital$1,179,092 $1,006,400 
Capital in excess of minimum capital level required479,506 325,455 

The decreaseincrease in capital in excess of the minimum capital level required was primarily due primarily to an increasethe issuance of the Series G Preferred Stock in minimum capital required to support the growth of on-balance sheet assets during the first nine months of 2017, which was offset in part byMay 2021 and an increase in retained earnings. In particular, the refinancing of a $1.0 billion AgVantage security that matured in April 2017 into three new on-balance sheet AgVantage securities significantly increased Farmer Mac's on-balance sheet assets because $970.0 million of the refinanced security was previously held by third party investors and reported as off-balance sheet business volume.


In August 2017, Farmer Mac's board of directors approved the continuation of a share repurchase program on its existing terms through August 2019 and authorized Farmer Mac to repurchase up to $5.4 million of its outstanding Class C non-voting common stock. This is the amount currently remaining under the share repurchase program that Farmer Mac's board of directors originally authorized in third quarter 2015 for the repurchase of up to $25 million of outstanding Class C non-voting common stock. Farmer Mac did not repurchase shares during the first three quarters of 2017 under this program. Farmer Mac also did not repurchase any shares under this program in the last three quarters of 2016, but did repurchase 307,000 shares in first quarter 2016. As of September 30, 2017, Farmer Mac had repurchased approximately 668,000 shares of Class C non-voting common stock at a cost of approximately $19.6 million under the share repurchase program.


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Credit Quality


As of September 30, 2017, Farmer Mac's total allowance for losses were $8.5 million (0.13 percent of theThe following table presents Farm & Ranch portfolio), compared to $8.1 million (0.13 percent of the Farm & Ranch portfolio) as of June 30, 2017 and $7.4 million (0.12 percent of the Farm & Ranch portfolio) as of December 31, 2016. The $0.4 million sequential increase to the provision to the allowance for losses was primarily attributable to downgrades in risk ratings, which caused a net increase to the specific allowance for certain impaired on-balance sheet crop and permanent planting loans. Net volume growth in on-balance sheet Farm & Ranch loans also contributed to the sequential increase in the general allowance for loan losses.

As of September 30, 2017, Farmer Mac's substandard assets, were $219.6 million (3.3 percent of the Farm & Ranch portfolio), compared to $192.1 million (3.0 percent of the Farm & Ranch portfolio) as of June 30, 2017 and $165.2 million (2.7 percent of the Farm & Ranch portfolio) as of December 31, 2016. The increase in substandard assets from second quarter 2017 was primarily driven by credit downgrades in on-balance sheet loans.

As of September 30, 2017, Farmer Mac's 90-day delinquencies were $66.4 million (1.01 percent of the Farm & Ranch portfolio), compared to $41.9 million (0.65 percent of the Farm & Ranch portfolio) as of June 30, 2017 and $21.0 million (0.34 percent of the Farm & Ranch portfolio) as of December 31, 2016. The sequential increase in 90-day delinquencies is primarily attributable to an increase in delinquencies in certain crop and permanent planting loans due to factors specific to the borrower and not related to macroeconomic factors in the agricultural economy. The sequential increase in 90-day delinquencies is also consistent with the seasonal pattern of Farmer Mac's 90-day delinquencies fluctuating from quarter to quarter, both in dollars and as a percentage of the outstanding Farm & Ranch portfolio, with higher levelsfor both on- and off-balance sheet assets as of September 30, 2021, June 30, 2021, and December 31, 2020:



Table 4
Farm & Ranch Line of Business
On-Balance SheetOff-Balance Sheet
Substandard Assets% of PortfolioSubstandard Assets% of Portfolio
(dollars in thousands)
September 30, 2021$204,197 3.0 %$74,077 2.8 %
June 30, 2021205,958 3.1 %93,168 3.8 %
December 31, 2020180,823 2.9 %110,671 4.6 %
Increase/(decrease) from prior quarter-ending$(1,761)(0.1)%$(19,091)(1.0)%
Increase/(decrease) from prior year-ending$23,374 0.1 %$(36,594)(1.8)%
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generally observed atThe decrease of $1.8 million in on-balance sheet substandard assets during third quarter 2021 was primarily driven by credit upgrades during the end of the first and third quarters and lower levels generally observed at the end of the second and fourth quarters of each year as a result of the annual (January 1st) and semi-annual (January 1st and July 1st) payment terms of mostquarter, particularly livestock. The on-balance sheet Farm & Ranch loans.portfolio grew by $176.5 million, which, when coupled with credit upgrades, caused the percentage of substandard assets to decrease. The $19.1 million decrease in substandard assets in our off-balance sheet Farm & Ranch portfolio during third quarter 2021 was primarily due to credit upgrades in the livestock and crops portfolios during the quarter.

There was one substandard asset in the Rural Utilities portfolio as of both September 30, 2021 and June 30, 2021, and none as of December 31, 2020.
For an analysis of current loan-to-value ratios across substandard and other internally assigned risk ratings, see Table 26 in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk—Loans and Guarantees."

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The following table presents Farm & Ranch 90-day delinquencies, in dollars and as a percentage of the Farm & Ranch portfolio, for both on- and off-balance sheet assets as of September 30, 2021, June 30, 2021, and December 31, 2020:

Table 5
Farm & Ranch Line of Business
On-Balance SheetOff-Balance Sheet
90-Day
Delinquencies		% of Portfolio90-Day
Delinquencies		% of Portfolio
(dollars in thousands)
September 30, 2021$52,625 0.78 %$2,167 0.08 %
June 30, 202156,790 0.86 %6,286 0.26 %
December 31, 202034,799 0.56 %11,433 0.48 %
Increase/(decrease) from prior quarter-ending$(4,165)(0.08)%$(4,119)(0.18)%
Increase/(decrease) from prior year-ending$17,826 0.22 %$(9,266)(0.40)%
On-balance sheet Farm & Ranch loans 90 or more days delinquent decreased in crops. Off-balance sheet Farm & Ranch loans 90 days or more delinquent decreased in crops and livestock. The top ten borrower exposures over 90 days delinquent in either the on- or off-balance sheet portfolio represented over half of the aggregate 90-day delinquencies as of September 30, 2021.

As of both September 30, 2021 and December 31, 2020, there were no delinquencies in Farmer Mac's portfolio of Rural Utilities loans. As of June 30, 2021, there was one delinquent loan in the amount of $10.0 million in that portfolio.

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


Use of Non-GAAP Measures


In the accompanying analysis of its financial information, Farmer Mac sometimes uses "non-GAAP measures," which are measures of financial performance that are not presented in accordance with GAAP. Specifically, Farmer Mac uses the following non-GAAP measures: "core earnings," "core earnings per share," and "net effective spread." Farmer Mac uses these non-GAAP measures to measure corporate economic performance and develop financial plans because, in management's view, they are useful alternative measures in understanding Farmer Mac's economic performance, transaction economics, and business trends.


The non-GAAP financial measures that Farmer Mac uses may not be comparable to similarly labeled non-GAAP financial measures disclosed by other companies. Farmer Mac's disclosure of these non-GAAP measures is intended to be supplemental in nature and is not meant to be considered in isolation from, as a substitute for, or as more important than, the related financial information prepared in accordance with GAAP.



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Core Earnings and Core Earnings Per Share


CoreThe main difference between core earnings and core earnings per share principally differ from(non-GAAP measures) and net income attributable to common stockholders and earnings per common share respectively, by excluding(GAAP measures) is that those non-GAAP measures exclude the effects of fair value fluctuations. These fluctuations are not expected to have a cumulative net impact on Farmer Mac's financial condition or results of operations reported in accordance with GAAP if the related financial instruments are held to maturity, as is expected. Among other items,Another difference is that these fair value fluctuations have included unrealized gains or losses on financial derivatives and hedging activities. Variation margin is exchanged between Farmer Mac and its counterparties on both its cleared and non-cleared derivatives portfolios. Prior to first quarter 2017, Farmer Mac accounted for variation margin as collateral and associated unrealized gains or losses on its centrally cleared derivative contracts. However, beginning in first quarter 2017, the variation margin amounts exchanged between Farmer Mac and its counterparties on cleared derivatives are considered as settlement rather than collateral as a result of a change in variation margin rules implemented by the Chicago Mercantile Exchange ("CME"), the central clearinghouse used by Farmer Mac. Specifically, effective January 3, 2017, CME began to deem the exchange of variation margin between derivatives counterparties as a partial settlement of each respective derivative contract rather than as collateral pledged by a counterparty. Accordingly, beginning in first quarter 2017, Farmer Mac presents its cleared derivatives portfolio net of variation margin payments on its consolidated balance sheets and recognizes realized gains or losses as a result of these payments on its consolidated statements of operations. In October 2017, the U.S. Commodity Futures Trading Commission ("CFTC") issued an interpretive letter to the CME confirming that, under the Commodity Exchange Act, the exchange of variation margin payments on cleared swap positions constitutes settlement of the outstanding exposure and not collateral against it and that CME rules must reflect this interpretation. However, the CFTC acknowledged the economic equivalence between the settlement of and the pledge of collateral against


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outstanding exposure under a derivatives contract, and Farmer Mac also believes that the economic character of these transactions remains the same as they were before the CME rule change. Even though these variation margin amounts are accounted for as realized gains or losses on financial derivatives and hedging activities as a result of the CME rule change and subsequent CFTC interpretation, this is not expected to have a cumulative net impact on Farmer Mac's financial condition or results of operations reported in accordance with GAAP because the related financial instruments are expected to be held to maturity. Therefore, since the beginning of first quarter 2017, Farmer Mac has excluded the effects of realized gains or losses resulting from the exchange of variation margin on its cleared derivatives portfolio in its calculations of core earnings and core earnings per share to present them on a consistent basis with quarters prior to 2017.

Core earnings and core earnings per share also differ from net income attributable to common stockholders and earnings per common share, respectively, by excludingtwo non-GAAP measures exclude specified infrequent or unusual transactions that Farmer Mac believeswe believe are not indicative of future operating results and that may not reflect the trends and economic financial performance of Farmer Mac's core business. For example, the loss from retirement of the Farmer Mac II LLC Preferred Stock in first quarter 2015 waswe have excluded from core earnings and core earnings per share during that quarter because it was not a frequently occurring transaction and not indicativeany losses on retirement of future operating results. This is also consistent with Farmer Mac's previous treatment of these types of origination costs associated with securities underwriting that are capitalized and deferred during the life of the security.preferred stock. For a reconciliation of Farmer Mac's net income attributable to common stockholders to core earnings and of earnings per common share to core earnings per share, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations."


Net Effective Spread


Farmer Mac uses net effective spread to measure the net spread Farmer Mac earns between its interest-earning assets and the related net funding costs of these assets. NetAs further explained below, net effective spread differs from net interest income and net interest yield because it excludes: (1) the amortization of premiums and discounts on assets consolidated at fair value that are amortized as adjustments to yield in interest income over the contractual or estimated remaining lives of the underlying assets; and (2)by excluding certain items from net interest income and net interest expense related to consolidated trusts with beneficial interests owned by third parties, which are presented on Farmer Mac's consolidated balance sheets as "Loans held for investment in consolidated trusts, at amortized cost." yield and including certain other items that net interest income and net interest yield do not contain.

Farmer Mac excludes from net effective spread the premiums and discounts on assets consolidated at fair value because they either do not reflect actual cash premiums paid for the assets at acquisition or are not expected to have an economic effect on Farmer Mac's financial performance if the assets are held to maturity, as is expected. Farmer Mac also excludes from net effective spread the interest income and interest expense associated with the consolidated trusts and the average balance of the loans underlying these trusts to reflect management's view that the net interest income Farmer Mac earns on the related Farmer Mac Guaranteed Securities owned by third parties is effectively a guarantee fee. Accordingly, the excluded interest income and interest expense associated with consolidated trusts is reclassified to guarantee and commitment fees for purposes ofin determining Farmer Mac's core earnings. Farmer Mac also excludes from net effective spread the fair value changes of financial derivatives and the corresponding assets or liabilities designated in fair value hedge accounting relationships because they are not expected to have an economic effect on Farmer Mac's financial performance, as we expect to hold the financial derivatives and corresponding hedged items to maturity.


Net effective spread also principally differs from net interest income and net interest yield because it includes the accrual of income and expense related to the contractual amounts due on financial derivatives that are not designated in hedge accounting relationships ("undesignated financial derivatives").
Farmer Mac uses interest rate swaps to manage its interest rate risk exposure by synthetically modifying the interest rate reset or maturity characteristics of certain assets and liabilities. The accrual of the


65


contractual amounts due on interest rate swaps designated in hedge accounting relationships is included as an adjustment to the yield or cost of the hedged item and is included in net interest income. For undesignated financial derivatives, Farmer Mac records the income or expense related to the accrual of the contractual amounts due in "Gains/(losses)"Losses on financial derivatives and hedging activities"derivatives" on the consolidated statements of operations. However, the accrual of the contractual amounts due for undesignated financial derivatives are included in Farmer Mac's calculation of net effective spread.

66





Net effective spread also differs from net interest income and net interest yield because it includes the net effects of terminations or net settlements on financial derivatives, which consist of: (1) the net effects of cash settlements on agency forward contracts on the debt of other GSEs and U.S. Treasury security futures that we use as short-term economic hedges on the issuance of debt; and (2) the net effects of initial cash payments that Farmer Mac receives upon the inception of certain swaps. The inclusion of these items in net effective spread is intended to reflect management'sour view of the complete net spread between an asset and all of its related funding, including any associated derivatives, whether or not they are designated in a hedge accounting relationship.

For a reconciliation of net interest income and net interest yield to net effective spread, see Table 611 in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Net Interest Income."


Results of Operations


Farmer Mac's net income attributable to common stockholders for the three months ended September 30, 2017 was $18.5 million ($1.71 per diluted common share), compared to $16.4 million ($1.54 per diluted common share) for the same period in 2016. For the nine months ended September 30, 2017, Farmer Mac's net income attributable to common stockholders was $54.6 million ($5.06 per diluted common share), compared to $38.7 million ($3.60 per diluted common share) for the same period in 2016. Farmer Mac's non-GAAP core earnings for the three months ended September 30, 2017 were $17.0 million ($1.57 per diluted common share), compared to $14.4 million ($1.36 per diluted common share) for the same period in 2016. Farmer Mac's non-GAAP core earnings for the nine months ended September 30, 2017 were $48.6 million ($4.50 per diluted common share), compared to $39.9 million ($3.71 per diluted common share) for the same period in 2016. For more information about the changes in net income attributable to common stockholders and core earnings, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Overview—Net Income and Core Earnings."

A reconciliationReconciliations of Farmer Mac's net income attributable to common stockholders to core earnings and core earnings per share are presented in the following tables along with a breakdown ofinformation about the composition of core earnings:






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Table 6
Reconciliation of Net Income Attributable to Common Stockholders to Core Earnings
For the Three Months Ended
September 30, 2021September 30, 2020
(in thousands, except per share amounts)
Net income attributable to common stockholders$24,289 $18,659 
Less reconciling items:  
Losses on undesignated financial derivatives due to fair value changes (see Table 14)(1,864)(4,149)
Losses on hedging activities due to fair value changes(2,093)(5,245)
Unrealized gains/(losses) on trading securities36 (258)
Net effects of amortization of premiums/discounts and deferred gains on assets consolidated at fair value23 97 
Net effects of terminations or net settlements on financial derivatives(351)233 
Issuance costs on the retirement of preferred stock— (1,667)
Income tax effect related to reconciling items892 1,957 
Sub-total(3,357)(9,032)
Core earnings$27,646 $27,691 
Composition of Core Earnings:
Revenues:
Net effective spread(1)
$55,925 $51,802 
Guarantee and commitment fees(2)
4,322 4,659 
Other(3)
687 453 
Total revenues60,934 56,914 
Credit related expense (GAAP):
Provision for losses255 1,200 
Total credit related expense255 1,200 
Operating expenses (GAAP):
Compensation and employee benefits10,027 8,791 
General and administrative6,330 5,044 
Regulatory fees750 725 
Total operating expenses17,107 14,560 
Net earnings43,572 41,154 
Income tax expense(4)
9,152 8,297 
Preferred stock dividends (GAAP)6,774 5,166 
Core earnings$27,646 $27,691 
Core earnings per share:
  Basic$2.57 $2.58 
  Diluted2.55 2.57 
Weighted-average shares:
  Basic10,766 10,734 
  Diluted10,842 10,785 
(1)Net effective spread is a non-GAAP measure. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Use of Non-GAAP Measures—Net Effective Spread" for an explanation of net effective spread. See Table 1
11 for a reconciliation of net interest income to net effective spread.
Reconciliation of Net Income Attributable to Common Stockholders to Core Earnings
 For the Three Months Ended
 September 30, 2017 September 30, 2016
 (in thousands, except per share amounts)
Net income attributable to common stockholders$18,487
 $16,364
Less reconciling items: 
  
Gains on financial derivatives and hedging activities due to fair value changes2,737
 1,460
Unrealized gains on trading securities—
 1,182
Amortization of premiums/discounts and deferred gains on assets consolidated at fair value(954) (157)
Net effects of settlements on agency forward contracts456
 464
Income tax effect related to reconciling items(784) (1,032)
Sub-total1,455
 1,917
Core earnings$17,032
 $14,447
    
Composition of Core Earnings:   
Revenues:   
Net effective spread(1)
$36,227
 $32,199
Guarantee and commitment fees(2)
4,935
 4,533
Other(3)
429
 (32)
Total revenues41,591
 36,700
    
Credit related expense (GAAP):   
Provision for/(release of) losses384
 (31)
REO operating expenses—
 —
Gains on sale of REO(32) (15)
Total credit related (income)/expense352
 (46)
    
Operating expenses (GAAP):   
Compensation and employee benefits5,987
 5,438
General and administrative3,890
 3,474
Regulatory fees625
 613
Total operating expenses10,502
 9,525
    
Net earnings30,737
 27,221
Income tax expense(4)
10,410
 9,497
Net loss attributable to non-controlling interest (GAAP)—
 (18)
Preferred stock dividends (GAAP)3,295
 3,295
Core earnings$17,032
 $14,447
    
Core earnings per share:   
  Basic$1.61
 $1.38
  Diluted1.57
 1.36
Weighted-average shares:   
  Basic10,605
 10,473
  Diluted10,815
 10,649
(1)
Net effective spread is a non-GAAP measure. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Use of Non-GAAP Measures—Net Effective Spread" for an explanation of net effective spread. See Table 6 for a reconciliation of net interest income to net effective spread.
(2)
Includes interest income and interest expense related to consolidated trusts owned by third parties reclassified from net interest income to guarantee and commitment fees to reflect management's view that the net interest income Farmer Mac earns is effectively a guarantee fee on the consolidated Farmer Mac Guaranteed Securities.

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


6768






(3)
Reflects reconciling adjustments for the reclassification to exclude expenses related to interest rate swaps not designated as hedges and fair value adjustments on financial derivatives and trading assets and a reconciling adjustment to exclude the recognition of deferred gains over the estimated lives of certain Farmer Mac Guaranteed Securities and USDA Securities. Third quarter 2017 includes $0.4 million of fees received upon the inception of swaps and $0.2 million of hedging losses, compared to no fees received and $0.7 million of hedging losses, respectively, in third quarter 2016.
(4)
Includes the tax impact of non-GAAP reconciling items between net income attributable to common stockholders and core earnings. Third quarter 2017 includes $0.3 million of tax benefits upon the vesting of restricted stock and the exercise of SARs under new accounting guidance for stock-based awards that became effective in first quarter 2017.
(3)Reflects reconciling adjustments for the reclassification to exclude expenses related to interest rate swaps not designated as hedges and terminations or net settlements on financial derivatives, and reconciling adjustments to exclude fair value adjustments on financial derivatives and trading assets and the recognition of deferred gains over the estimated lives of certain Farmer Mac Guaranteed Securities and USDA Securities.
Reconciliation of Net Income Attributable to Common Stockholders to Core Earnings
 For the Nine Months Ended
 September 30, 2017 September 30, 2016
 (in thousands, except per share amounts)
Net income attributable to common stockholders$54,590
 $38,687
Less reconciling items: 
  
Gains/(losses) on financial derivatives and hedging activities due to fair value changes9,763
 (3,605)
Unrealized (losses)/gains on trading securities(84) 1,934
Amortization of premiums/discounts and deferred gains on assets consolidated at fair value(1,198) (809)
Net effects of settlements on agency forward contracts749
 675
Income tax effect related to reconciling items(3,231) 633
Sub-total5,999
 (1,172)
Core earnings$48,591
 $39,859
    
Composition of Core Earnings:   
Revenues:   
Net effective spread(1)
$104,703
 $93,174
Guarantee and commitment fees(2)
15,194
 14,012
Other(3)
1,293
 (674)
Total revenues121,190
 106,512
    
Credit related expense (GAAP):   
Provision for losses1,294
 490
REO operating expenses23
 39
Gains on sale of REO(784) (15)
Total credit related expense533
 514
    
Operating expenses (GAAP):   
Compensation and employee benefits18,986
 16,823
General and administrative11,611
 10,757
Regulatory fees1,875
 1,838
Total operating expenses32,472
 29,418
    
Net earnings88,185
 76,580
Income tax expense(4)
29,873
 26,897
Net loss attributable to non-controlling interest (GAAP)(165) (62)
Preferred stock dividends (GAAP)9,886
 9,886
Core earnings$48,591
 $39,859
    
Core earnings per share:   
  Basic$4.59
 $3.81
  Diluted4.50
 3.71
Weighted-average shares:   
  Basic10,586
 10,464
  Diluted10,794
 10,755

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


6869






(1)
Net effective spread is a non-GAAP measure. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Use of Non-GAAP Measures—Net Effective Spread" for an explanation of net effective spread. See Table 6 for a reconciliation of net interest income to net effective spread.
(2)
Includes interest income and interest expense related to consolidated trusts owned by third parties reclassified from net interest income to guarantee and commitment fees to reflect management's view that the net interest income Farmer Mac earns is effectively a guarantee fee on the consolidated Farmer Mac Guaranteed Securities.
(3)
Reflects reconciling adjustments for the reclassification to exclude expenses related to interest rate swaps not designated as hedges and fair value adjustments on financial derivatives and trading assets and a reconciling adjustment to exclude the recognition of deferred gains over the estimated lives of certain Farmer Mac Guaranteed Securities and USDA Securities. The first nine months of 2017 includes $1.7 million of fees received upon the inception of swaps and $1.3 million of hedging losses, compared to $0.1 million of fees received and $2.3 million of hedging losses, respectively, in the first nine months of 2016.
(4)
Includes the tax impact of non-GAAP reconciling items between net income attributable to common stockholders and core earnings. The first nine months of 2017 includes $1.2 million of tax benefits upon the vesting of restricted stock and the exercise of SARs under new accounting guidance for stock-based awards that became effective in first quarter 2017.

Reconciliation of Net Income Attributable to Common Stockholders to Core Earnings
For the Nine Months Ended
September 30, 2021September 30, 2020
(in thousands, except per share amounts)
Net income attributable to common stockholders$77,691 $59,745 
Less reconciling items:  
Losses on undesignated financial derivatives due to fair value changes (see Table 14)(3,890)(1,933)
Losses on hedging activities due to fair value changes(4,461)(13,846)
Unrealized losses on trading securities(39)(173)
Net effects of amortization of premiums/discounts and deferred gains on assets consolidated at fair value59 135 
Net effects of terminations or net settlements on financial derivatives923 (346)
Issuance costs on the retirement of preferred stock— (1,667)
Income tax effect related to reconciling items1,556 3,394 
Sub-total(5,852)(14,436)
Core earnings$83,543 $74,181 
Composition of Core Earnings:
Revenues:
Net effective spread(1)
$166,335 $142,434 
Guarantee and commitment fees(2)
12,896 14,498 
Other(3)
1,439 2,175 
Total revenues180,670 159,107 
Credit related expense (GAAP):
(Release of)/provision for losses(759)5,082 
Gains on sale of REO— (485)
Total credit related expense(759)4,597 
Operating expenses (GAAP):
Compensation and employee benefits31,601 27,005 
General and administrative19,015 15,702 
Regulatory fees2,250 2,175 
Total operating expenses52,866 44,882 
Net earnings128,563 109,628 
Income tax expense(4)
27,135 22,911 
Preferred stock dividends (GAAP)17,885 12,536 
Core earnings$83,543 $74,181 
Core earnings per share:
  Basic$7.77 $6.92 
  Diluted7.71 6.88 
Weighted-average shares:
  Basic10,756 10,725 
  Diluted10,834 10,781 
(1)Net effective spread is a non-GAAP measure. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Use of Non-GAAP Measures—Net Effective Spread" for an explanation of net effective spread. See Table 211 for a reconciliation of net interest income to net effective spread.
(2)Includes interest income and interest expense related to consolidated trusts owned by third parties reclassified from net interest income to guarantee and commitment fees to reflect management's view that the net interest income Farmer Mac earns is effectively a guarantee fee on the consolidated Farmer Mac Guaranteed Securities.

Reconciliation of GAAP Basic Earnings Per Share to Core Earnings Basic Earnings Per Share
  For the Three Months Ended For the Nine Months Ended
  September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
 (in thousands, except per share amounts)
GAAP - Basic EPS$1.74
 $1.56
 $5.16
 $3.70
Less reconciling items:       
Gains/(losses) on financial derivatives and hedging activities due to fair value changes0.26
 0.14
 0.92
 (0.33)
Unrealized (losses)/gains on trading securities—
 0.11
 (0.01) 0.18
Amortization of premiums/discounts and deferred gains on assets consolidated at fair value(0.09) (0.01) (0.11) (0.08)
Net effects of settlements on agency forward contracts0.04
 0.04
 0.07
 0.06
Income tax effect related to reconciling items(0.08) (0.10) (0.30) 0.06
Sub-total0.13
 0.18
 0.57
 (0.11)
Core Earnings - Basic EPS$1.61
 $1.38
 $4.59
 $3.81
        
Shares used in per share calculation (GAAP and Core Earnings)10,605
 10,473
 10,586
 10,464
70

Reconciliation of GAAP Diluted Earnings Per Share to Core Earnings Diluted Earnings Per Share
  For the Three Months Ended For the Nine Months Ended
  September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
 (in thousands, except per share amounts)
GAAP - Diluted EPS$1.71
 $1.54
 $5.06
 $3.60
Less reconciling items:       
Gains/(losses) on financial derivatives and hedging activities due to fair value changes0.26
 0.14
 0.91
 (0.34)
Unrealized (losses)/gains on trading securities—
 0.11
 (0.01) 0.18
Amortization of premiums/discounts and deferred gains on assets consolidated at fair value(0.09) (0.01) (0.11) (0.07)
Net effects of settlements on agency forward contracts0.04
 0.04
 0.07
 0.06
Income tax effect related to reconciling items(0.07) (0.10) (0.30) 0.06
Sub-total0.14
 0.18
 0.56
 (0.11)
Core Earnings - Diluted EPS$1.57
 $1.36
 $4.50
 $3.71
        
Shares used in per share calculation (GAAP and Core Earnings)10,815
 10,649
 10,794
 10,755



69






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

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

Table 7
Reconciliation of GAAP Basic Earnings Per Share to Core Earnings - Basic Earnings Per Share
  For the Three Months EndedFor the Nine Months Ended
  September 30, 2021September 30, 2020September 30, 2021September 30, 2020
(in thousands, except per share amounts)
GAAP - Basic EPS$2.26 $1.74 $7.22 $5.57 
Less reconciling items:
Losses on undesignated financial derivatives due to fair value changes (see Table 14)(0.17)(0.39)(0.36)(0.18)
Losses on hedging activities due to fair value changes(0.19)(0.49)(0.42)(1.29)
Unrealized losses on trading securities— (0.02)— (0.02)
Net effects of amortization of premiums/discounts and deferred gains on assets consolidated at fair value— 0.01 0.01 0.01 
Net effects of terminations or net settlements on financial derivatives(0.03)0.02 0.08 (0.03)
Issuance costs on the retirement of preferred stock— (0.15)— (0.16)
Income tax effect related to reconciling items0.08 0.18 0.14 0.32 
Sub-total(0.31)(0.84)(0.55)(1.35)
Core Earnings - Basic EPS$2.57 $2.58 $7.77 $6.92 
Shares used in per share calculation (GAAP and Core Earnings)10,766 10,734 10,756 10,725 

Reconciliation of GAAP Diluted Earnings Per Share to Core Earnings - Diluted Earnings Per Share
  For the Three Months EndedFor the Nine Months Ended
  September 30, 2021September 30, 2020September 30, 2021September 30, 2020
(in thousands, except per share amounts)
GAAP - Diluted EPS$2.24 $1.73 $7.17 $5.54 
Less reconciling items:
Losses on undesignated financial derivatives due to fair value changes (see Table 14)(0.17)(0.39)(0.36)(0.18)
Losses on hedging activities due to fair value changes(0.19)(0.49)(0.42)(1.28)
Unrealized losses on trading securities— (0.02)— (0.02)
Net effects of amortization of premiums/discounts and deferred gains on assets consolidated at fair value— 0.01 0.01 0.01 
Net effects of terminations or net settlements on financial derivatives(0.03)0.02 0.09 (0.03)
Issuance costs on the retirement of preferred stock— (0.15)— (0.15)
Income tax effect related to reconciling items0.08 0.18 0.14 0.31 
Sub-total(0.31)(0.84)(0.54)(1.34)
Core Earnings - Diluted EPS$2.55 $2.57 $7.71 $6.88 
Shares used in per share calculation (GAAP and Core Earnings)10,842 10,785 10,834 10,781 


71




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


1. Gains/(losses)Losses on financial derivatives due to fair value changes are presented by two reconciling items in Table 6 above: (a) Losses on undesignated financial derivatives due to fair value changes; and (b) Losses on hedging activities due to fair value changes. The table below calculates the non-GAAP reconciling item for gains/(losses)losses on financial derivatives and hedging activities due to fair value changes.changes:


Table 38
Non-GAAP Reconciling Items for (Losses)/Gains on Hedging Activities due to Fair Value Changes
  For the Three Months EndedFor the Nine Months Ended
  September 30, 2021September 30, 2020September 30, 2021September 30, 2020
(in thousands)
Losses due to fair value changes (see Table 4.2)$(1,920)$(5,047)$(3,299)$(13,109)
Initial cash payment (received) at inception of swap(173)(198)(1,162)(737)
Losses on hedging activities due to fair value changes$(2,093)$(5,245)$(4,461)$(13,846)
Non-GAAP Reconciling Item for Gains/(Losses) on Financial Derivatives and Hedging Activities Due to Fair Value Changes
  For the Three Months Ended For the Nine Months Ended
  September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
 (in thousands)
Fair value hedges:       
  Gains/(losses) due to fair value changes (see Table 8)$1,742
 $726
 $(716) $5,716
No hedge designation:       
Gains/(losses) due to fair value changes (see Table 8)995
 734
 10,479
 (9,321)
Gains/(losses) on financial derivatives and hedging activities due to fair value changes$2,737
 $1,460
 $9,763
 $(3,605)


2. Unrealized gains/(losses)/gains on trading securities. The unrealized gains/(losses)/gains on trading securities are reported on Farmer Mac's consolidated statements of operations, which represent changes during the period in fair values for trading assets remaining on Farmer Mac's balance sheet as of the end of the reporting period.
3. AmortizationThe net effects of amortization of premiums/discounts and deferred gains on assets consolidated at fair value. The amount of this non-GAAP reconciling item is the recorded amount of premium, discount, or deferred gain amortization during the reporting period on those assets for which the premium, discount, or deferred gain was based on the application of an accounting principle (e.g., consolidation of variable interest entities) rather than on a cash transaction (e.g., a purchase price premium or discount).
4. The net effecteffects of terminations or net settlements on agency forward contracts.financial derivatives. These agency forwardterminations or net settlements relate to:
•Forward contracts on the debt of other GSEs and futures contracts on U.S. Treasury securities. These contracts are used as a short-term economic hedge of the issuance of debt. For GAAP purposes, realized gains or losses on settlements of agency forwardthese contracts used as a short-term hedge of the issuance of debt are reported in the consolidated statements of operations in the period in which they occur. For core earnings purposes, these realized gains or losses on settlements of agency forward contracts are deferred and amortized as net yield adjustments over the term of the related debt, which generally ranges from 3 to 15 years.
•Initial cash payments received by Farmer Mac upon the inception of certain swaps. When there is no direct payment arrangement between a swap dealer counterparty and a debt dealer issuing Farmer Mac's medium-term notes for a particular transaction, Farmer Mac may receive an initial cash payment from the swap dealer at the inception of the swap to offset dollar-for-dollar the amount of the discount on the associated hedged debt. For GAAP purposes, changes in fair value of the swaps are recognized in "Gains on financial derivatives," while the economically offsetting discount on the associated hedged debt is amortized over the term of the debt as an adjustment to its yield. For purposes of core earnings, these initial cash payments are deferred and amortized as net yield adjustments over the term of the related debt, which generally ranges from 3 to 25 years.

72




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




70


Net Interest Income.  The following table provides information regardingabout interest-earning assets and funding for the nine months ended September 30, 20172021 and 2016.2020. The average balance of non-accruing loans is included in the average balance of loans, Farmer Mac Guaranteed Securities, and USDA Securities presented, though the related income is accounted for on a cash basis.  Therefore, as the average balance of non-accruing loans and the income received increases or decreases, the net interest income and yield will fluctuate accordingly.  The average balance of loans in consolidated trusts with beneficial interests owned by third parties is disclosed in the net effect of consolidated trusts and is not included in the average balances of interest-earning assets and interest-bearing liabilities.  The interest income and expense associated with these trusts are shown in the net effect of consolidated trusts. 


Table 49
  For the Nine Months Ended
 September 30, 2021September 30, 2020
Average
Balance		Income/
Expense		Average
Rate		Average
Balance		Income/
Expense		Average
Rate
 (dollars in thousands)
Interest-earning assets:     
Cash and investments$4,752,815 $14,107 0.40 %$3,965,371 $35,236 1.18 %
Loans, Farmer Mac Guaranteed Securities and USDA Securities(1)
17,614,644 274,783 2.08 %16,780,558 309,051 2.46 %
Total interest-earning assets22,367,459 288,890 1.72 %20,745,929 344,287 2.21 %
Funding:     
Notes payable due within one year3,991,539 3,235 0.11 %3,626,550 21,654 0.80 %
Notes payable due after one year(2)
17,623,610 125,983 0.95 %16,828,032 193,315 1.53 %
Total interest-bearing liabilities(3)
21,615,149 129,218 0.80 %20,454,582 214,969 1.40 %
Net non-interest-bearing funding752,310 —  291,347 —  
Total funding22,367,459 129,218 0.77 %20,745,929 214,969 1.38 %
Net interest income/yield prior to consolidation of certain trusts22,367,459 159,672 0.95 %20,745,929 129,318 0.83 %
Net effect of consolidated trusts(4)
1,083,729 3,713 0.46 %1,436,353 5,003 0.46 %
Net interest income/yield$23,451,188 $163,385 0.93 %$22,182,282 $134,321 0.81 %

  For the Nine Months Ended
 September 30, 2017 September 30, 2016
 Average
Balance		 Income/
Expense		 Average
Rate		 Average
Balance		 Income/
Expense		 Average
Rate
 (dollars in thousands)
Interest-earning assets:           
Cash and investments$2,746,902
 $24,834
 1.21% $3,726,766
 $20,235
 0.72%
Loans, Farmer Mac Guaranteed Securities and USDA Securities(1)
12,496,888
 231,852
 2.47% 11,001,241
 187,466
 2.27%
Total interest-earning assets15,243,790
 256,686
 2.25% 14,728,007
 207,701
 1.88%
Funding: 
  
    
  
  
Notes payable due within one year5,409,742
 36,526
 0.90% 7,481,541
 27,380
 0.49%
Notes payable due after one year(2)
9,205,917
 108,359
 1.57% 6,826,348
 79,693
 1.56%
Total interest-bearing liabilities(3)
14,615,659
 144,885
 1.32% 14,307,889
 107,073
 1.00%
Net non-interest-bearing funding628,131
 —
  
 420,118
 —
  
Total funding15,243,790
 144,885
 1.27% 14,728,007
 107,073
 0.97%
Net interest income/yield prior to consolidation of certain trusts15,243,790
 111,801
 0.98% 14,728,007
 100,628
 0.91%
Net effect of consolidated trusts(4)
1,211,419
 4,563
 0.50% 848,344
 2,933
 0.46%
Net interest income/yield$16,455,209
 $116,364
 0.94% $15,576,351
 $103,561
 0.89%
(1)
Excludes interest income of $32.5 million and $23.0(1)Excludes interest income of $30.1 million and $41.8 million in the first nine months of 2017 and 2016, respectively, related to consolidated trusts with beneficial interests owned by third parties.
(2)
Includes current portion of long-term notes.
(3)
Excludes interest expense of $27.9 million and $20.0 million in the first nine months of 2017 and 2016, respectively, related to consolidated trusts with beneficial interests owned by third parties.
(4)
Includes the effect of consolidated trusts with beneficial interests owned by third parties.

Net interest income was $116.4 millionfor the nine months ended September 30, 2017, compared to $103.6 million for the same period in 2016. The overall net interest yield was 0.94 percent for the nine months ended September 30, 2017, compared to 0.89 percent for the same period in 2016.

The $12.8 million increase in net interest income for the nine months ended September 30, 2017 compared to the same period in 2016 was driven by net growth in Farm & Ranch loans, AgVantage securities, and other business volume. Another factor contributing to the increase was the effect of an increase in short-term interest rates on assets and liabilities indexed to LIBOR due to the Federal Reserve's decision to raise the target range for the federal funds rate in December 2016, March 2017, and June 2017. This effect on net interest income occurred because interest expense used to calculate net interest income does not include all the funding expenses related to these assets, specifically the expense on financial derivatives not designated in hedge accounting relationships. This increase in short-term rates on assets and liabilities indexed to LIBOR did not have a similar effect on net effective spread because net effective spread includes interest expense from all funding related to those assets, including interest expense from financial derivatives not designated in hedge accounting relationships. Also contributing to the year-over-


71


year increase was an increase in the net effect of consolidated trusts resulting from an increase in securitization of Farm & Ranch loans throughout 2016 and the first nine months of 2017. Farmer Mac earns the difference between the interest income recognized on loans in2021 and 2020, respectively, related to consolidated trusts and the relatedwith beneficial interests owned by third parties.
(2)Includes current portion of long-term notes.
(3)Excludes interest expense recognized on debt securitiesof $26.4 million and $36.8 million in the first nine months of 2021 and 2020, respectively, related to consolidated trusts with beneficial interests owned by third parties.
(4)Includes the effect of consolidated trusts heldwith beneficial interests owned by third parties.

The $29.1 million year-over-year increase in net interest income was offset in part by (1) anprimarily due to a $14.1 million increase related to new business volume, a $9.8 million increase in net yield adjustments related to amortization of premiums on assets consolidated atthe fair value of derivatives designated in fair value hedge accounting relationships (designated financial derivatives), and (2) a $5.7 million decrease in funding costs.

In percentage terms, the amount of cash basis interest income recognized on nonaccrual Farm & Ranch loans. Typically, interest income from Farm & Ranch loans on nonaccrual status is recognized when cash is received.

The 5 basis point0.12% increase in net interest yield for the nine months ended September 30, 2017 compared to the same period in 2016income was primarily driven by a reductionattributable to an increase of 0.06% in the average balancenet fair value changes from designated financial derivatives and an increase of lower-earning cash and cash equivalents and investment securities.0.05% in new business volume.




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The following table sets forth information regardingabout changes in the components of Farmer Mac's net interest income prior to consolidation of certain trusts for the periods indicated.  For each category, information is provided on changes attributable to changes in volume (change in volume multiplied by old rate), and changes in rate (change in rate multiplied by old volume).  Combined rate/volume variances, the third element of the calculation, are, and then allocated based on theirthe relative size.size of rate and volume changes from the prior period.  


Table 510
  For the Nine Months Ended September 30, 2021 Compared to Same Period in 2020
 Increase/(Decrease) Due to
 RateVolumeTotal
 (in thousands)
Income from interest-earning assets:   
Cash and investments$(27,056)$5,927 $(21,129)
Loans, Farmer Mac Guaranteed Securities and USDA Securities(49,053)14,785 (34,268)
Total(76,109)20,712 (55,397)
Expense from other interest-bearing liabilities(97,336)11,585 (85,751)
Change in net interest income prior to consolidation of certain trusts(1)
$21,227 $9,127 $30,354 

(1)Excludes the effect of debt in consolidated trusts with beneficial interests owned by third parties.
  For the Nine Months Ended September 30, 2017 Compared to Same Period in 2016
 Increase/(Decrease) Due to
 Rate Volume Total
 (in thousands)
Income from interest-earning assets:     
Cash and investments$10,921
 $(6,322) $4,599
Loans, Farmer Mac Guaranteed Securities and USDA Securities17,532
 26,854
 44,386
Total28,453
 20,532
 48,985
Expense from other interest-bearing liabilities35,462
 2,350
 37,812
Change in net interest income prior to consolidation of certain trusts(1)
$(7,009) $18,182
 $11,173
(1)
Excludes the effect of debt in consolidated trusts with beneficial interests owned by third parties.


The following table presents a reconciliation of net interest income and net interest yield to net effective spread.  Net effective spread is measured byby: including (1) expenses related to undesignated financial derivatives, which consists of income or expense related to contractual amounts due on financial derivatives not designated in hedge accounting relationships (the income or expense related to financial derivatives designated in hedge accounting relationships is already included in net interest income), and (2) the amortization of losses due to terminations or net settlements of financial derivatives; and excluding (3) the amortization of premiums and discounts on assets consolidated at fair value, and(4) the net effects of consolidated trusts with beneficial interests owned by third parties.parties, and (5) the fair value changes of financial derivatives and corresponding financial assets or liabilities in fair value hedge relationships. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Use of Non-GAAP Measures—Net Effective Spread" for more information about net effective spread.


Table 11
  For the Three Months EndedFor the Nine Months Ended
 September 30, 2021September 30, 2020September 30, 2021September 30, 2020
 DollarsYieldDollarsYieldDollarsYieldDollarsYield
 (dollars in thousands)
Net interest income/yield$55,005 0.94 %$44,661 0.78 %$163,385 0.93 %$134,321 0.80 %
Net effects of consolidated trusts(1,167)0.02 %(1,500)0.02 %(3,713)0.02 %(5,003)0.03 %
Expense related to undesignated financial derivatives117 — %3,613 0.07 %3,154 0.02 %9 — %
Amortization of premiums/discounts on assets consolidated at fair value(15)— %(81)— %(36)— %(92)— %
Amortization of losses due to terminations or net settlements on financial derivatives65 — %62 — %246 — %90 — %
Fair value changes on fair value hedge relationships1,920 0.03 %5,047 0.09 %3,299 0.02 %13,109 0.09 %
Net effective spread$55,925 0.99 %$51,802 0.96 %$166,335 0.99 %$142,434 0.92 %




7274







Table 6
  For the Three Months Ended For the Nine Months Ended
 September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
 Dollars Yield Dollars Yield Dollars Yield Dollars Yield
 (dollars in thousands)
Net interest income/yield$39,562
 0.92 % $35,563
 0.89 % $116,364
 0.94 % $103,561
 0.89 %
Net effects of consolidated trusts(1,621) 0.04 % (735) 0.04 % (4,563) 0.04 % (2,933) 0.02 %
Expense related to undesignated financial derivatives(2,675) (0.07)% (2,807) (0.08)% (8,317) (0.07)% (7,985) (0.07)%
Amortization of premiums/discounts on assets consolidated at fair value961
 0.03 % 178
 0.01 % 1,219
 0.01 % 531
 — %
Net effective spread$36,227
 0.92 % $32,199
 0.86 % $104,703
 0.92 % $93,174
 0.84 %


Net effective spread was $36.2The $23.9 million and $104.7 million for the three and nine months ended September 30, 2017 compared to $32.2 million and $93.2 million for the same periods in 2016, respectively. In percentage terms, net effective spread for both the three and nine months ended September 30, 2017 was 0.92 percent, compared to 0.86 percent and 0.84 percent for the same periods in 2016, respectively.

For the first nine months of 2017 compared to the same period in 2016, the $11.5 millionyear-over-year increase in net effective spread in dollars was primarily attributabledue to (1) growth in AgVantage securities, Farm & Ranch loans, and otheran increase of $14.1 million from new business volume, which increased net effective spread by approximately $10.3 million; and (2) changes in Farmer Mac's funding strategies and favorable LIBOR-based short-term funding costs for floating rate assets indexed to LIBOR, which added approximately $2.7 million. This increase was offset in part by a $1.4$8.9 million decrease in the amount of cash basis interest income recognized on nonaccrual Farm & Ranch loans. The 8 basis point year-over-yearnon-GAAP funding costs, and a $1.2 million increase in net effective spread incash collections on non-accrual loans.

In percentage terms, the increase of 0.07% was primarily attributable to a significant reduction in the average balanceincrease of cash and cash equivalents and investment securities, which added approximately 5 basis points0.05% related to net effective spread. Also contributing tonew business volume, the decrease in non-GAAP funding costs of 0.03%, and the increase were the effects of the aforementioned changes in Farmer Mac's funding strategy and a favorable LIBOR-based funding market, which added approximately 3 basis points. This increase was offset in part by the effect of the refinancing of a $1.0 billion AgVantage security at an average spread that was less than the overall average net effective spread percentage, which reduced net effective spread by approximately 2 basis points.0.01% related to cash collections on non-accrual loans.


See Note 910 to the consolidated financial statements for more information regardingabout net interest income and net effective spread from Farmer Mac's individual business segments. See "—"Management's Discussion and Analysis of Financial Condition and Results of Operations—Supplemental Information" for quarterly net effective spread by line of business.





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Provision for and Release of Allowance for Loan Losses and Reserve for Losses. The following table summarizes the components of Farmer Mac's total allowance for losses for the three and nine months ended September 30, 20172021 and 2016:2020:


Table 712
As of September 30, 2021As of September 30, 2020
Allowance
for
Losses		Reserve
for Losses		Total
Allowance
for Losses		Allowance
for
Losses		Reserve
for Losses		Total
Allowance
for Losses
(in thousands)
For the Three Months Ended:
Beginning balance$14,450 $2,111 $16,561 $15,758 $3,020 $18,778 
Provision for/(release of) losses366 (111)255 646 548 1,194 
Ending balance$14,816 $2,000 $16,816 $16,404 $3,568 $19,972 
For the Nine Months Ended:
Beginning balance$14,298 $3,277 $17,575 $10,454 $2,164 $12,618 
Cumulative effect adjustment from adoption of current expected credit loss standard— — — 1,793 863 2,656 
Adjusted beginning balance14,298 3,277 17,575 12,247 3,027 15,274 
Provision for/(release of) losses518 (1,277)(759)4,551 541 5,092 
Charge-offs— — — (394)— (394)
Ending balance$14,816 $2,000 $16,816 $16,404 $3,568 $19,972 


 As of September 30, 2017 As of September 30, 2016
 Allowance
for Loan
Losses		 Reserve
for Losses		 Total
Allowance
for Losses		 Allowance
for Loan
Losses		 Reserve
for Losses		 Total
Allowance
for Losses
 (in thousands)
For the Three Months Ended:           
Beginning Balance$6,138
 $1,966
 $8,104
 $4,893
 $2,191
 $7,084
Provision for losses270
 114
 384
 191
 (222) (31)
Charge-offs—
 —
 —
 (130) —
 (130)
Ending Balance$6,408
 $2,080
 $8,488
 $4,954
 $1,969
 $6,923
            
For the Nine Months Ended:           
Beginning Balance$5,415
 $2,020
 $7,435
 $4,480
 $2,083
 $6,563
Provision for/(release of) losses1,234
 60
 1,294
 604
 (114) 490
Charge-offs(241) —
 (241) (130) —
 (130)
Ending Balance$6,408
 $2,080
 $8,488
 $4,954
 $1,969
 $6,923

The increase in the provision to the allowance for loan losses recorded during the threeSee Notes 5 and nine months ended September 30, 2017 as compared to the same time periods in 2016, was attributable to (1) an increase in the specific allowance for certain impaired on-balance sheet crop and permanent planting loans resulting from both an increase in the outstanding balance of such loans and downgrades in risk ratings on certain of those loans, and (2) an increase in the general allowance due to overall net volume growth in on-balance sheet Farm & Ranch loans. The increase in the provision was offset in part by a modest decline in loss rates used to estimate probable losses. The increase in the provision to the reserve for losses recorded during the three and nine months ended September 30, 2017 as compared to the same time periods in 2016, was primarily attributable to an increase in the general reserve due to downgrades in risk ratings on certain unimpaired Agricultural Storage and Processing loans underlying LTSPCs. The increase in the provision to the reserve for losses was offset in part by a net decrease in the balance of loans underlying LTSPCs and off-balance sheet Farmer Mac Guaranteed Securities. The charge-offs recorded during the first nine months of 2017 were primarily related to two impaired crop loans with one borrower that were foreclosed and transitioned to REO during first quarter 2017. Farmer Mac had previously recorded a specific allowance of $0.2 million on these impaired crop loans as of December 31, 2016. During second quarter 2017, Farmer Mac sold the related properties for $5.4 million and recognized a $0.8 million gain on sale of REO.

As of December 31, 2016, Farmer Mac's allowance for loan losses was $5.4 million and its reserve for losses was $2.0 million. See Note 56 to the consolidated financial statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk – Risk—Loans and Guarantees."


Guarantee and Commitment Fees.  GuaranteeThe following table presents guarantee and commitment fees, which compensate Farmer Mac for assuming the credit risk on loans underlying off-balance sheet Farmer Mac Guaranteed Securities and LTSPCs, for the three and nine months ended September 30, 2021 and 2020:


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Table 13
For the Three Months EndedFor the Nine Months Ended
ChangeChange
September 30, 2021September 30, 2020$%September 30, 2021September 30, 2020$%
(dollars in thousands)
Guarantee and commitment fees$3,155 $3,159 $(4)— %$9,182 $9,495 $(313)(3)%

The decrease in guarantee and commitment fees for the nine months ended September 30, 2021 compared to the same period in 2020 was primarily due to a decrease in the average outstanding balance of LTSPCs and off-balance sheet Farmer Mac Guaranteed Securities during 2021. As adjusted for the core earnings presentation, guarantee and commitment fees were $3.3$4.3 million and $10.6$12.9 million for the three and nine months ended September 30, 2017,


74


2021, respectively, compared to$3.8 $4.7 million and $11.1 million for the same periods in 2016, respectively. The decrease in guarantee and commitment fees for both the three and nine months ended September 30, 2017 compared to the same periods last year was attributable to the refinancing of a $1.0 billion AgVantage security with Metropolitan Life Insurance Company ("MetLife") in April 2017 into three new on-balance sheet AgVantage securities. Previously, $970.0 million of the $1.0 billion AgVantage security that matured in April 2017 had been sold to third parties and reported as off-balance sheet business volume in the Institutional Credit line of business on which Farmer Mac earned a guarantee fee. Also contributing to the decrease was a lower average outstanding balance of loans underlying LTSPCS. The decrease was offset in part by an increase in the average outstanding balance of off-balance sheet Farmer Mac Guaranteed USDA Securities and, for the nine months ended September 30, 2017, and an increase in the average outstanding balance of Rural Utilities loans underlying LTSPCs.

Gains/(losses) on Financial Derivatives and Hedging Activities.  The effect of unrealized and realized gains and losses on Farmer Mac's financial derivatives and hedging activities was net gains of $0.7 million and $2.5$14.5 million for the three and nine months ended September 30, 2017, respectively, compared2020, respectively. In Farmer Mac's presentation of core earnings, guarantee and commitment fees include interest income and interest expense related to consolidated trusts owned by third parties to reflect management's view that the net lossesinterest income Farmer Mac earns is effectively a guarantee fee on the consolidated Farmer Mac Guaranteed Securities.

For more information about net income attributable to common stockholders, the composition of $1.6 millioncore earnings, and $13.1 million fora reconciliation of net income attributable to common stockholders to core earnings, see Table 6 in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations." For more information about the same periods in 2016, respectively.non-GAAP measures Farmer Mac uses, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Use of Non-GAAP Measures."


Losses on financial derivatives.  The components of gains and losses on financial derivatives and hedging activities for the three and nine months ended September 30, 20172021 and 20162020 are summarized in the following table:


Table 814
 For the Three Months EndedFor the Nine Months Ended
ChangeChange
 September 30, 2021September 30, 2020$%September 30, 2021September 30, 2020$%
 (dollars in thousands)
Losses due to fair value changes$(1,864)$(4,149)$2,285 (55)%$(3,890)$(1,933)$(1,957)(101)%
Accrual of contractual payments117 3,613 (3,496)(97)%3,154 10 3,144 31440 %
Losses due to terminations or net settlements(600)(28)(572)(2043)%(384)(1,416)1,032 73 %
Losses on financial derivatives$(2,347)$(564)$(1,783)(316)%$(1,120)$(3,339)$2,219 66 %

 For the Three Months Ended For the Nine Months Ended
 September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
 (in thousands)
Fair value hedges:       
Gains/(losses) due to fair value changes:       
Financial derivatives(1)
$1,576
 $11,276
 $(5,466) $(30,062)
Hedged items166
 (10,550) 4,750
 35,778
Gains/(losses) on fair value hedging activities1,742
 726
 (716) 5,716
Cash flow hedges:       
Loss recognized (ineffective portion)(191) (68) (365) (322)
Losses on cash flow hedges(191) (68) (365) (322)
No hedge designation:       
Gains/(losses) due to fair value changes995
 734
 10,479
 (9,321)
Accrual of contractual payments(2,484) (2,739) (7,952) (7,663)
Gains/(losses) due to terminations or net settlements599
 (254) 1,084
 (1,489)
Losses/(gains) on financial derivatives not designated in hedging relationships(890) (2,259) 3,611
 (18,473)
Gains/(losses) on financial derivatives and hedging activities$661
 $(1,601) $2,530
 $(13,079)
(1)
IncludedThese changes in the assessment of hedge effectiveness as of September 30, 2017, but excluded from the amounts in the table, were losses of $1.6 million and gains of $0.7 million for the three and nine months ended September 30, 2017, attributable to the fair value of the swaps at the inception of the hedging relationship. Accordingly, the amounts recognized as hedge ineffectiveness for three and nine months ended September 30, 2017 were gains of $0.1 million and losses of zero, respectively. The comparable amounts as of September 30, 2016 were losses of $1.0 million and $4.2 million for the three and nine months ended September 30, 2016, attributable to the fair value of the swaps at the inception of the hedging relationship and, accordingly, gains of $0.2 million and $1.5 million for the three and nine months ended September 30, 2016, attributable to hedge ineffectiveness.

Changes in the fair values of Farmer Mac's open derivative positions for both designated and undesignated hedges are captured in the table above in gains/(losses) due to fair value changes and are primarily the result of fluctuations in long-term interest rates. For financial derivatives designated in fair value hedge accounting relationships, changes in the fair values of the hedged items attributable to the hedged risk are


75


also included in the table above in gains/(losses) due to fair value changes. For financial derivatives designated in cash flow hedge accounting relationships, the ineffective portion of changes in fair value are included as losses on cash flow hedges. The accrual of periodic cash settlements for interest paid or received from Farmer Mac's interest rate swaps that are not designated in hedge accounting relationshipsundesignated financial derivatives is shown as expense related to financial derivatives. Payments or receipts to terminate undesignated derivative positions or net cash settled forward sales contracts on the debt of other GSEs and undesignated U.S. Treasury security futures that are not designated in hedge accounting relationships and feesinitial cash payments received upon the inception of certain undesignated swaps are included in gains/(losses)"Losses due to terminations or net settlements. Fees that

76




settlements" in the table above. For undesignated swaps, when there is no direct payment arrangement between a swap dealer counterparty and a debt dealer issuing Farmer Mac's medium-term notes for a particular transaction, Farmer Mac receives uponmay receive an initial cash payment from the swap dealer at the inception of swaps arethe swap to offset dollar-for-dollar bythe amount of the discount on the associated hedged debt. However,Changes in the swap feesfair value of these swaps are recognized immediately in Gains/(losses)"Losses on financial derivatives, and hedging activities, whereas" while the offsetting discount on the hedged debt is amortized over the term of the debt as an adjustment to its yield. Thus, there is a timing difference between the recognitionThe amounts of the swap fees in Gains/(losses)initial cash payments received by Farmer Mac vary depending on financial derivatives and hedging activities and the recognition of the discount in interest expense. There is also a presentation difference because the swap fees are included in Gains/(losses) on financial derivatives and hedging activities, whereas the amortization of the discount is included in interest expense. Additionally, the amount of swap fees varies depending upon the number of the aforementioned type of swaps initiatedit executes during a quarter.

Gains/(losses) on Trading Securities.  During the three and nine months ended September 30, 2017, Farmer Mac recorded unrealized losses on trading securities of zero and $0.1 million, respectively, compared to unrealized gains of $1.2 million and $1.9 million during the same periods in 2016, respectively. During the three and nine months ended September 30, 2017, all of the unrealized losses were related to financial assets that had been selected to be carried at fair value with the related changes in fair value included in earnings (i.e., the "fair value option"), compared to $0.4 million of unrealized losses and $0.2 million of unrealized gains under the fair value option for the same periods last year.

Gains on Sale of Real Estate Owned. During the three and nine months ended September 30, 2017, Farmer Mac realized net gains of $32,000 and $0.8 million, respectively, on sales of real estate owned properties compared to $15,000 for the same periods last year.

Other Income. OtherThe following table presents other income totaled $0.2 million and $0.9 million for the three and nine months ended September 30, 2017, respectively, compared to $0.7 million2021 and $1.2 million2020:

Table 15
 For the Three Months EndedFor the Nine Months Ended
ChangeChange
 September 30, 2021September 30, 2020$%September 30, 2021September 30, 2020$%
 (dollars in thousands)
Late fees$266 $236 $30 13 %$805 $1,124 $(319)(28)%
Other316 358 (42)(12)%795 1,515 (720)(48)%
Total other income$582 $594 $(12)(2)%$1,600 $2,639 $(1,039)(39)%

The decrease in other income for the same periods in 2016, respectively. Other income during the three and nine months ended September 30, 2017 included the recognition of zero and $0.4 million, respectively, of appraisal fees received by Farmer Mac's consolidated appraisal company subsidiary, AgVisory,2021 compared to $0.3 million and $0.8 million for the same period last year. Asin 2020 is primarily due to a decrease in rate modification fees on Farm & Ranch loans.

Operating Expenses. The components of May 1, 2017, Farmer Mac transferred its entire 65% ownership interest in AgVisory back to the limited liability company in exchange for $5,000. Farmer Mac recognized a loss of approximately $0.1 million upon the transfer. Other income during the three and nine months ended September 30, 2017 included the recognition of $7,000 and $20,000 of losses previously deferred in accumulated other comprehensive income related to fair value changes of certain available-for-sale securities contributed to Farmer Mac II LLC in 2010 and other miscellaneous items, compared to the recognition of $0.1 million and $0.3 million, respectively, of previously deferred losses for the same periods in 2016.

Compensation and Employee Benefits. Compensation and employee benefits were $6.0 million and $19.0 million,operating expenses for the three and nine months ended September 30, 2017, respectively, compared to $5.4 million2021 and $16.8 million, for2020 are summarized in the same periods in 2016, respectively.following table:

Table 16
 For the Three Months EndedFor the Nine Months Ended
ChangeChange
 September 30, 2021September 30, 2020$%September 30, 2021September 30, 2020$%
 (dollars in thousands)
Compensation and employee benefits$10,027 $8,791 $1,236 14 %$31,601 $27,005 $4,596 17 %
General and administrative6,330 5,044 1,286 25 %19,015 15,702 3,313 21 %
Regulatory fees750 725 25 3 %2,250 2,175 75 3 %
Total Operating Expenses$17,107 $14,560 $2,547 17 %$52,866 $44,882 $7,984 18 %

a.Compensation and Employee Benefits. The year-over-year increase in compensation and employee benefits expenses for both the three and nine months ended September 30, 20172021 compared to the same periods last year2020 was due primarily to an increaseincreased headcount. We hired ten new employees in staffing and related employeeconnection with the strategic acquisition of loan servicing rights in August 2021.



76


health insurance costs and benefits. The increase for the nine months ended September 30, 2017 compared to the same period in 2016 was also due to higher payouts of variable incentive compensation resulting from actual performance exceeding certain performance target amounts during second quarter 2017.

b.General and Administrative Expenses (G&A). GeneralThe increase in G&A expenses for 2021 compared to 2020 was primarily due to increased spending on software licenses and administrative expenses were $3.9information technology consultants to support growth and strategic initiatives. We entered into a transition services agreement in connection with the strategic acquisition of loan servicing rights in August 2021.

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Under that agreement, we have agreed to pay $1.25 million to the seller of the servicing rights in installments through December 31, 2022 for continuing transition assistance.

Income Tax Expense. The following table presents income tax expense and $11.6 million,the effective income tax rate for the three and nine months ended September 30, 2017, respectively, compared to $3.5 million2021 and $10.8 million for2020:

Table 17
 For the Three Months EndedFor the Nine Months Ended
ChangeChange
 September 30, 2021September 30, 2020$%September 30, 2021September 30, 2020$%
 (dollars in thousands)
Income tax expense$8,260 $6,340 $1,920 30 %$25,579 $19,516 $6,063 31 %
Effective tax rate21.0 %19.9 %1.1 %21.1 %20.9 %0.2 %


Business Volume.  

The following table sets forth the same periodsnet growth or decrease in 2016, respectively. The increase in general and administrative expenses for both the three and nine months ended September 30, 2017 compared to the same periods last year was due primarily to higher expenses related to continued technology andFarmer Mac's four lines of business infrastructure investments and expenses related to business development efforts.

Regulatory Fees.  Regulatory fees, which consist of the fees paid to the Farm Credit Administration ("FCA"), an independent agency in the executive branch of the United States government that regulates Farmer Mac, were $0.6 million and $1.9 million for the three and nine months ended September 30, 2017, respectively, compared to $0.6 million2021 and $1.8 million for the same periods in 2016, respectively. FCA advised Farmer Mac that its estimated fees for the federal fiscal year ending September 30, 2018 would remain at $2.5 million ($0.625 million per federal fiscal quarter), the same amount as compared to the prior federal fiscal year.  After the end of a federal government fiscal year, FCA may revise its prior year estimated assessments to reflect actual costs incurred, and has issued both additional assessments and refunds in the past.2020:


Income Tax Expense.  Income tax expense totaled $11.2 million and $33.1 million for the three and nine months ended September 30, 2017, respectively, compared to $10.5 million and $26.3 million for the same periods in 2016, respectively. The increase in income tax expense in the first nine months of 2017 compared to the same period last year was due to higher pre-tax income. Income tax expense for the three and nine months ended September 30, 2017 reflected $0.3 million and $1.2 million, respectively, of tax benefits associated with stock compensation activity that was subject to ASU 2016-09 accounting guidance, “Improvements to Employee Share-Based Payment Accounting,” adopted in first quarter 2017. The adoption of this guidance was also the primary reason why Farmer Mac's effective tax rate was lower than the statutory rate in the first nine months of 2017. More information about the adoption of ASU 2016-09and the effect on Farmer Mac's financial position, results of operations, and cash flows is included in Note 1(d) to the consolidated financial statements.Table 18
Net New Business Volume – Farmer Mac Loan Purchases, Guarantees, LTSPCs, and AgVantage Securities
 For the Three Months EndedFor the Nine Months Ended
 September 30, 2021September 30, 2020September 30, 2021September 30, 2020
Net Growth/(Decrease)Net Growth/(Decrease)Net Growth/(Decrease)Net Growth/(Decrease)
 (in thousands)
Farm & Ranch:
Loans$277,164 $399,495 $910,983 $905,277 
Loans held in trusts:
Beneficial interests owned by third party investors(100,621)(159,683)(309,672)(324,509)
LTSPCs212,664 (8,313)262,868 (108,368)
USDA Guarantees:
USDA Securities6,552 76,949 (24,611)193,487 
Farmer Mac Guaranteed USDA Securities(10,759)(19,626)(39,405)(78,533)
Rural Utilities:
Loans(3,396)7,786 (17,240)438,062 
LTSPCs40,796 (14,100)17,830 (33,326)
Institutional Credit:
AgVantage securities499,230 (335,328)393,944 (120,744)
Total purchases, guarantees, LTSPCs, and AgVantage securities$921,630 $(52,820)$1,194,697 $871,346 



Business Volume.  During third quarter 2017, Farmer Mac added $0.9 billion of new business volume, compared to $1.1 billion in third quarter 2016. Specifically, Farmer Mac:


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purchased $298.3 million of newly originated Farm & Ranch loans;
purchased $291.0 million of AgVantage securities;
added $102.8 million of Farm & Ranch loans under LTSPCs;
purchased $90.2 million of USDA Securities;
purchased $70.0 million of Rural Utilities loans; and
issued $41.1 million of Farmer Mac Guaranteed USDA Securities.

Farmer Mac'sOur outstanding business volume was $18.6$23.1 billion as of September 30, 2017, an2021, a net increase of $385.4 million $0.9 billionfrom June 30, 2017.2021 after taking into account all new business, maturities, and paydowns on existing assets. The net increase was primarily attributable to a net increases of $499.2 million in Farmer Mac's outstanding business volume was driven by broad-based portfolio growth across most of Farmer Mac's products and linesthe Institutional Credit line of business, including$389.2 million in the Farm & Ranch loans, AgVantage securities, USDA Securities,line of business, and $37.4 million in the Rural Utilities loans.line of business, partially offset by a net decrease of $4.2 million in the USDA Guarantees line of business.


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The $190.4$389.2 million net increase in AgVantage securities for third quarter 2017 resulted from purchases of $225.0 million from Rabo AgriFinance LLC ("Rabo") and of $66.0 million from smaller institutional customers, including first-time transactions with two new counterparties. The purchases from Rabo resulted in net portfolio growth of $175.0 million and reflect the first time that Rabo has used Farmer Mac's AgVantage funding for its shorter-term (less than one year) funding needs. Farmer Mac grew itsour Farm & Ranch line of business reflected a $277.2 million net increase in outstanding loan portfolio by $186.4purchase volume and a $212.7 million during third quarter 2017,net increase in loans underlying LTSPCs and off-balance sheet Farmer Mac Guaranteed Securities, which was primarily drivenpartially offset by an increasea net decrease of $100.6 million in the average sizeloans held in consolidated trusts. Our net growth of loans purchased, including several large loans with large borrowers. This growth outpaced the seasonally large amount of repayments that resulted from a July 1 payment date on most loans within15.7% in the Farm & Ranch portfolio. on-balance sheet portfolio over the twelve months ended September 30, 2021 is significantly higher than the 6.6% net growth of the overall agricultural mortgage loan market over the twelve months ended June 30, 2021 (based on our analysis of call report data from commercial banks, -1.6% growth, and Farm Credit System, 12.7% growth).

The $61.9$499.2 million net increase in USDA Securities reflected anthe Institutional Credit line of business reflects $1.4 billion in gross volume, partially offset by $0.9 billion of paydowns and maturities. Within the $1.4 billion of gross volume is $1.2 billion of short-term funding that will mature in fourth quarter 2021.

The $37.4 million net increase in USDA Securities securitizedthe Rural Utilities line of business was due to $113.9 million in gross new volume, partially offset by $76.5 million in paydowns in loans and sold to lendersLTSPCs. Within the $113.9 million in gross volume is $50.0 million of unfunded telecommunications loan commitments.

The $4.2 million net decrease in the formUSDA Guarantees line of business reflected $118.3 million in paydowns, partially offset by $114.1 million in gross new volume. The net volume decrease is reflective of the low interest rate environment that has increased the competition and lowered the spreads in this line of business.

The level and composition of Farmer Mac Guaranteed USDA Securities.Mac’s outstanding business volume is based on the relationship between new business, maturities, and repayments on existing assets from quarter to quarter. This relationship in turn depends on a variety of factors both internal and external to Farmer Mac grew its Rural Utilities loan portfolio by $42.4 million, which was primarily dueMac. The external factors include general market forces, competition, and our counterparties’ liquidity needs, access to the purchasesalternative funding, desired products, and assessment of a few larger loans in competitive situations as a resultstrategic factors. The internal factors include our assessment of an improvement in Farmer Mac's pricing on these types of loans.profitability, mission fulfillment, credit risk, and customer relationships. For more information about potential growth opportunities in Farmer Mac's lines of business, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Outlook" in this report.



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The following table sets forth purchases of non-delinquent eligible loans, new loans added under LTSPCs, and new guaranteesinformation about the Farmer Mac Guaranteed Securities issued during the periods indicated in the Farm & Ranch, USDA Guarantees, and Rural Utilities lines of business, as well as purchases of AgVantage securities in the Institutional Credit line of business:indicated:


Table 919
 For the Three Months EndedFor the Nine Months Ended
 September 30, 2021September 30, 2020September 30, 2021September 30, 2020
 (in thousands)
Loans securitized and sold as Farm & Ranch Guaranteed Securities$34,998 $36,562 $84,131 $64,612 
AgVantage securities1,368,912 211,908 2,280,440 1,202,327 
Total Farmer Mac Guaranteed Securities Issuances$1,403,910 $248,470 $2,364,571 $1,266,939 

New Business Volume – Farmer Mac Loan Purchases, Guarantees, LTSPCs, and AgVantage Securities
 For the Three Months Ended For the Nine Months Ended
 September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
 (in thousands)
Farm & Ranch:       
Loans$298,274
 $282,690
 $924,628
 $722,331
LTSPCs102,774
 155,657
 271,934
 281,830
USDA Guarantees:       
USDA Securities90,229
 87,335
 298,539
 293,286
Farmer Mac Guaranteed USDA Securities41,069
 31,866
 133,121
 58,628
Rural Utilities:       
Loans70,000
 20,000
 122,341
 39,691
LTSPCs—
 —
 —
 421,404
Institutional Credit:       
AgVantage Securities290,995
 528,234
 2,149,159
 1,851,698
Total purchases, guarantees, LTSPCs, and AgVantage Securities$893,341
 $1,105,782
 $3,899,722
 $3,668,868

New business volume for loans purchased within the Farm & Ranch line of business for the first nine months of 2017 was substantially greater than the same period in 2016. This was primarily due to an increase in borrower demand for long-term real estate financing, as farmers used equity in farmland assets to increase sources of operating capital, and an increase in the average size of loans purchased, including several large loans with large borrowers. New business volume for loans added under LTSPCs within the Farm & Ranch line of business for the first nine months of 2017 compared to the same period in 2016 reflected a modest decrease in demand among Farm Credit System institutions for the LTSPC product,


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which was offset in part by an increase in the average size of loans added under LTSPCs. The increase in new business volume in the USDA Guarantees line of business for the first nine months of 2017 compared to the same period in 2016 reflected an increase in lender usage of USDA guaranteed loan programs due to available federal funding for those programs. Loan purchase volume in the Rural Utilities line of business increased for the first nine months of 2017 compared to the same period in 2016 primarily as a result of an improvement in Farmer Mac's pricing for larger, more competitive loans to rural utilities borrowers and because the National Rural Utilities Cooperative Finance Corporation ("CFC"), Farmer Mac's only current rural utilities counterparty, is increasingly partnering with Farmer Mac in these more competitive situations. Changes in AgVantage securities volume are primarily driven by the generally larger transaction sizes for that product and the fluctuating funding and liquidity needs of Farmer Mac's customer network and scheduled maturity amounts. The volume of new AgVantage securities was higher for the first nine months of 2017 compared to the same period in 2016 primarily due to the scheduled maturities for those periods and related refinancing activity, as Farmer Mac refinanced $1.4 billion of maturing AgVantage securities during the first nine months of 2017 compared to $1.2 billion in the same period in 2016.

Based on market conditions, Farmer Mac either retains the loans it purchases or securitizes them and retains or sells Farmer Mac Guaranteed Securities backed by those loans. The weighted-average age of the Farm & Ranch non-delinquent eligible loans purchased and retained (excluding the purchases of defaulted loans) during both third quarter 20172021 and 20162020 was less than one year. Of those loans, 73 percent70%and 82 percent68% had principal amortization periods longer than the maturity date, resulting in balloon payments at maturity, with a weighted-average remaining term to maturity of 19.122.9 years and 18.223.2 years for each period, respectively.


During third quarter 2017the three and 2016,nine months ended September 30, 2021 and 2020, Farmer Mac securitized somerealized no gains or losses from the sale of the Farm & Ranch loans it had purchased and sold the resulting Farmer Mac Guaranteed Securities in the amounts of $115.4 million and $147.1 million, respectively.or USDA Securities. Farmer Mac consolidates these loans and presents them as "Loans held for investment in consolidated trusts, at amortized cost" on the consolidated balance sheets. For the three andfirst nine months ended September 30, 2017, $46.0 millionof 2021 and $102.5 million of2020, no Farmer Mac Guaranteed Securities were sold to Zions First National Bank, which is a related party to Farmer Mac compared to $81.9 million and $231.4 million of sales for the three and nine months ended September 30, 2016, respectively.party.



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

Table 10
 For the Three Months Ended For the Nine Months Ended
 September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
 (in thousands)
Loans securitized and sold as Farm & Ranch Guaranteed Securities$115,427
 $147,060
 $277,307
 $402,841
Farmer Mac Guaranteed USDA Securities41,069
 31,866
 127,164
 54,528
AgVantage Securities290,995
 528,234
 2,149,159
 1,851,698
Total Farmer Mac Guaranteed Securities issuances$447,491
 $707,160
 $2,553,630
 $2,309,067



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


Table 1120
Lines of Business - Outstanding Business Volume
 As of September 30, 2021As of December 31, 2020
 (in thousands)
Farm & Ranch:
Loans$5,800,376 $4,889,393 
Loans held in trusts:
Beneficial interests owned by third party investors977,373 1,287,045 
LTSPCs2,607,261 2,325,431 
Guaranteed Securities60,349 79,312 
USDA Guarantees:
USDA Securities2,434,582 2,452,964 
Farmer Mac Guaranteed USDA Securities288,120 333,754 
Rural Utilities:
Loans2,243,172 2,260,412 
LTSPCs574,255 556,425 
Institutional Credit
AgVantage Securities8,133,303 7,739,359 
Total$23,118,791 $21,924,095 
Lines of Business - Outstanding Business Volume
 As of September 30, 2017 As of December 31, 2016
 (in thousands)
On-balance sheet:   
Farm & Ranch:   
Loans$2,739,681
 $2,381,488
Loans held in trusts:   
Beneficial interests owned by third party investors1,329,212
 1,132,966
USDA Guarantees:   
USDA Securities2,041,466
 1,954,800
Farmer Mac Guaranteed USDA Securities30,688
 35,599
Rural Utilities:   
Loans1,066,482
 999,512
Institutional Credit   
AgVantage Securities(1)
7,588,628
 6,004,472
Total on-balance sheet$14,796,157
 $12,508,837
Off-balance sheet:   
Farm & Ranch:   
LTSPCs2,133,314
 2,209,409
Guaranteed Securities354,823
 415,441
USDA Guarantees:   
Farmer Mac Guaranteed USDA Securities226,802
 103,976
Rural Utilities:   
LTSPCs(2)
819,963
 878,598
Institutional Credit:   
AgVantage Securities(1)
13,214
 983,214
AgVantage Revolving Line of Credit Facility(3)
300,000
 300,000
Total off-balance sheet$3,848,116
 $4,890,638
Total$18,644,273
 $17,399,475
(1)
In April 2017, Farmer Mac purchased and retained $1.0 billion in AgVantage securities from MetLife. MetLife used the proceeds from Farmer Mac's purchase of $1.0 billion in AgVantage securities to refinance an AgVantage security of the same amount that matured in April 2017. Previously, $970.0 million of the maturing $1.0 billion AgVantage security had been sold to third parties and reported as off-balance sheet business volume in the Institutional Credit line of business.
(2)
As of both September 30, 2017 and December 31 2016, includes $20.0 million related to one-year loan purchase commitments on which Farmer Mac receives a nominal unused commitment fee.
(3)
During the first nine months of 2017, $100.0 million of this facility was drawn and subsequently repaid. As of December 31, 2016, this facility had not been utilized. Farmer Mac receives a fixed fee based on the full dollar amount of the facility. If the counterparty draws on the facility, the amounts drawn will be in the form of AgVantage securities, and Farmer Mac will earn interest income on those securities.



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The following table summarizes by maturity date the scheduled principal amortization of loans held, loans underlying off-balance sheet Farmer Mac Guaranteed Securities (excluding AgVantage securities) and LTSPCs, USDA Securities, and Farmer Mac Guaranteed USDA Securities as of September 30, 2017:2021:


Table 1221
Schedule of Principal Amortization as of September 30, 2021
Loans HeldLoans Underlying Off-Balance Sheet Farmer Mac Guaranteed Securities and LTSPCs USDA Securities and Farmer Mac Guaranteed USDA SecuritiesTotal
(in thousands)
2021$47,300 $52,257 $28,426 $127,983 
2022381,000 273,294 116,991 771,285 
2023361,950 234,303 120,284 716,537 
2024368,914 202,772 120,577 692,263 
2025391,288 205,601 122,636 719,525 
Thereafter7,470,469 2,273,638 2,213,788 11,957,895 
Total$9,020,921 $3,241,865 $2,722,702 $14,985,488 

Schedule of Principal Amortization as of September 30, 2017
 Loans Held Loans Underlying Off-Balance Sheet Farmer Mac Guaranteed Securities and LTSPCs  USDA Securities and Farmer Mac Guaranteed USDA Securities Total
 (in thousands)
2017$52,237
 $63,989
 $24,298
 $140,524
2018227,870
 674,722
 102,322
 1,004,914
2019230,639
 213,292
 101,850
 545,781
2020221,131
 201,904
 102,904
 525,939
2021241,821
 213,623
 106,844
 562,288
Thereafter4,161,677
 1,940,570
 1,860,738
 7,962,985
Total$5,135,375
 $3,308,100
 $2,298,956
 $10,742,431

Of the $18.6$23.1 billion outstanding principal balance of volume included in Farmer Mac's four lines of business as of September 30, 2017, $7.92021, $8.1 billion were AgVantage securities included in the Institutional Credit line of business. Unlike business volume in the form of purchased loans, USDA Securities, and loans underlying LTSPCs and non-AgVantage Farmer Mac Guaranteed Securities, most AgVantage

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securities do not require periodic payments of principal based on amortization schedules and instead have fixed maturity dates when the secured general obligation is due. The following table summarizes by maturity date the outstanding principal amount of both on- and off-balance sheet AgVantage securities as of September 30, 2017:2021:


Table 1322
AgVantage Balances by Year of Maturity
 As of
 September 30, 2021
 (in thousands)
2021$1,563,373 
20221,711,474 
20231,006,807 
2024802,321 
2025361,025 
Thereafter(1)
2,688,303 
Total$8,133,303 
(1)Includes various maturities ranging from 2026 to 2044.
AgVantage Balances by Year of Maturity
 As of
 September 30, 2017
 (in thousands)
2017$220,337
2018(1)
2,309,582
20191,113,211
20201,147,851
20211,063,740
Thereafter(2)
2,047,121
Total$7,901,842
(1)
Includes the expiration of the $300.0 million revolving floating rate AgVantage facility.
(2)
Includes various maturities ranging from 2022 to 2044.


The weighted-average remaining maturity of the outstanding AgVantage securities shown in the table above was 4.04.4 years as of September 30, 2017.  2021.  




Outlook
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As part of fulfilling its guarantee obligations for Farm & Ranch Guaranteed Securities and commitments to purchase eligible loans underlying LTSPCs, Farmer Mac purchases defaulted loans, all of which are at least 90 days delinquent or in material non-monetary default at the time of purchase, out of the loan pools underlying those securities and LTSPCs, and records the purchased loans as such on its balance sheet.  The purchase price for a defaulted loan purchased out of a pool of loans backing Farm & Ranch Guaranteed Securities is the then-current outstanding principal balance of the loan plus accrued and unpaid interest.  The purchase price for a defaulted loan purchased under an LTSPC is the then-current outstanding principal balance of the loan, with accrued and unpaid interest on the defaulted loan payable out of any future loan payments or liquidation proceeds as received.  The purchase price of a defaulted loan is not an indicator of the expected loss on that loan; many other factors affect expected loss, if any, on any loan so purchased. The delinquent loans purchased out of securitized pools during third quarter 2017 had a weighted-average age of 5 years. The delinquent loans purchased out of securitized pools and LTSPCs during third quarter 2016 had a weighted-average age of 9 years. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk – Loans and Guarantees."

The following table presents Farmer Mac's purchases of defaulted loans underlying Farm & Ranch Guaranteed Securities and LTSPCs for the periods indicated:

Table 14
 For the Three Months Ended For the Nine Months Ended
 September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
 (in thousands)
Defaulted loans purchased underlying Farm & Ranch Guaranteed Securities owned by third party investors$3,043
 $250
 $3,147
 $398
Defaulted loans purchased underlying LTSPCs—
 852
 311
 2,118
Total loan purchases$3,043
 $1,102
 $3,458
 $2,516

Outlook


Farmer Mac continues to provide a stable source of liquidity, capital, and risk management tools as the secondary market that helps meet the financing needs of rural America. While theThe pace of Farmer Mac'sMac’s growth will depend on the capital and liquidity needs of the participantslending institutions in the agricultural and rural financingutilities business as well as the overall health of borrowers in the sectors we serve. Farmer Mac foresees opportunities for continuedprofitable growth across all four of itsour lines of business driven by several key factors:


•As agricultural and rural utilities lenders face increasedseek to manage equity capital requirements under regulatory frameworks or rating agencyand return on equity capital requirements or seek to reduce exposure due to lending limits or concentration limits, Farmer Mac can provide relief for those institutions through loan and portfolio purchases, participations, guarantees, LTSPCs, or LTSPCs.wholesale funding.
While lending
•Future growth opportunities in the rural utilities industry generally remain moderate, Farmer Mac believes there is opportunity for growth among larger rural utilities borrowers because CFC, the only lender that currently participates in Farmer Mac'sMac’s Rural Utilities line of business increasingly partnersmay evolve by deepening business relationships with eligible counterparties, financing broadband-related capital expenditures and rural telecommunications facilities, growing opportunities for renewable energy project finance, and exploring new types of loan products. These opportunities may be limited by sector growth, credit quality, and the competitiveness of Farmer Mac to provide competitive pricing for transactions with these borrowers. Farmer Mac also believes that there are growth opportunities within its Institutional Credit line of business because it provides a competitive source of debt funding for CFC.Mac’s products.



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•As a result of targeted marketingbusiness and product development efforts and continued interest of institutional investors in agricultural assets, Farmer Mac's lender network and Institutional CreditMac’s customer base continuesand product set continue to expand, which may generate additionalmore demand for Farmer Mac'sMac’s products from new sources.
Consolidation, expansion, and vertical integration occurring across virtually all sectors of the agricultural industry and similar consolidation trends occurring in agricultural banking, coupled with
•Farmer Mac's new and expanded businessMac’s growing relationships with larger regional and national lenders has ledcontinue to anprovide opportunities that could influence Farmer Mac’s loan demand and increase in Farmer Mac's loan purchase volume and the average transaction size within Farmer Mac'sMac’s lines of business.


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•Expansion and refinancing opportunities for agricultural producers and agribusinesses resulting from competitive interest rates have increased financing needs to support mergers and acquisitions, and vertical integration across many sectors of the agricultural industry, which may also generate demand for Farmer Mac’s loan products.
•As we grow our outstanding business volume through the purchases and commitments described above, we are also developing new ways to obtain funding and manage our overall credit risk. In October 2021, we completed a structured and syndicated agricultural mortgage-backed securitization (AMBS) that included a $280.0 million senior tranche guaranteed by Farmer Mac and a $22.7 million unguaranteed subordinate tranche sold to investors, resulting in off-balance sheet treatment for Farm & Ranch line of business.

loans formerly held on Farmer Mac's balance sheet. During fourth quarter 2021, Farmer Mac believes that these growth opportunitiesexpects to record a gain on this transaction of approximately $4 million after-tax. Farmer Mac will be important in replacing income earned onserve as the loansmaster servicer of the securitization and other assets as they mature, pay down, or are reinvested at potentially lower spreads.central servicer for a portion of the underlying loan pool. This new source of funding provides us with another tool to help manage capital and credit risk and also provides an investment opportunity for leading institutional investors.


Agricultural Industry. The agricultural industry includes many diverse sectors that respond in different ways to changes in economic conditions. Those individual sectors often are affected differently, sometimes positively and sometimes negatively, by prevailing domestic and global economic factors and regional weather conditions. This results in cycles where one or more sectors may be under stress atdisruptions from the same time that others are not. The profitability of agricultural sectors is also affected by commodity inventories and their associated market prices, which can vary largely as a result of global production trends, weather patterns, access to water supply, and harvest conditions that may affect both domestic and global supplies.

Agricultural export demand also depends significantly on exchange rates. A strengthening U.S. dollar relative to other worldwide currencies causes American agricultural commoditiesCOVID-19 pandemic experienced during 2020 continued to be less competitive globally, thereby diminishing their global demand and driving down producer profits. Conversely, a weakening U.S. dollar reduces the cost of American agricultural commodities worldwide, causing them to be more competitive in global markets. The U.S. dollar has weakened by more than 8 percentsignificantly moderated during the first three quarters of 2017 as measured by2021. However, the U.S. Dollar Index, which has recently enhancedpotential increase of COVID-19 resulting from certain variants of coronavirus and the competitivenessutilization of U.S. agricultural exports. However, a slowdown in global economic growth or changes in trade policies could adversely affect the demand for certain U.S. agricultural exports,vaccines both domestically and globally continue to evolve and create uncertainty, which may result in some producers receiving lower commodity prices.increased market volatility such as the supply chain disruptions currently impacting global trade. Farmer Mac’s mission is to support rural America, and the disruptions caused by COVID-19 may continue to present new and expanded opportunities for Farmer Mac to help meet the financing needs of rural America while also presenting uncertainties and risks. See "Risk Factors" in Part I, Item 1A of the 2020 Annual Report for more information about the uncertainties and risks associated with the COVID-19 pandemic on Farmer Mac and its business.


Net cashOperating Expense. Farmer Mac continues to expand its investments in human capital, technology, and business infrastructure to increase capacity and efficiency as it seeks to accommodate its growth opportunities and achieve its long-term strategic objectives. Farmer Mac expects continued increases in its operating expenses over the next several years corresponding to business and revenue growth. We expect these efforts to continue and increase over the next 12 - 18 months as we innovate and grow our business while monitoring the growth in operating expenses commensurate with the growth in our revenue.

During the third quarter, we closed on a strategic acquisition that enhanced our operations by expanding our internal loan servicing function and acquiring the loan servicing rights for a sizeable portion of our Farm & Ranch loan and USDA Guaranteed Securities portfolios. This acquisition will increase our interest income as reportedon our Farm & Ranch loans and USDA Guaranteed Securities that we service because there will not be any third-party central servicer retaining a central servicer fee on those assets. That increased interest income is expected to be partially offset by the increase in our operating expenses relating to our enhanced internal loan servicing operations. In the short-term, we do not expect the effect on core earnings to be significant. In the medium to long-term, the effect will depend on the size of our portfolio that we service and the long-run costs of our servicing operations.

Agricultural Industry. Economic conditions throughout the agricultural, food, fuel, and fiber sectors remained largely positive throughout the first three quarters of 2021. Although grain commodity prices abated during the third quarter, corn, soybean, and wheat prices held between 20% and 40% above their 10-year averages. Consumer mobility and demand held up during the third quarter, helping to restore fuel

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demand and bring ethanol production back to 2019 levels by July 2021, according to U.S. Energy Information Administration data. Cattle and dairy prices remain the only major agricultural commodities with continued pressure on prices, but both sectors held at-or-above pre-pandemic price levels during third quarter 2021.

The U.S. agricultural sector has become increasingly dependent on foreign markets as a source of demand. Agriculture exports were strong in 2020, aided by a weaker U.S. dollar, a recovery in Chinese demand for grains and oilseeds, and better overall trade relations. These conditions continued to be favorable in the first three quarters of 2021, but sales to China slowed in the third quarter due to higher prices, rising grain supplies, and supply chain disruptions that challenged shipping lanes. Exports have been boosted in 2021 by increases in sales of beef, dairy, pork, and tree nuts, according to data from the USDA's Foreign Agricultural Service (FAS), but global supply chain disruptions and high shipping costs are currently providing a major headwind for agricultural exports. Through August 2021, USDA FAS trade data shows modest slowing of U.S. agricultural export volumes to Asia, which could continue into 2022.

Farm incomes have been boosted in recent years by additional sources of liquidity and onecash flow. During 2020, Congress provided a significant amount of its benchmarkemergency assistance through direct payments to producers, food support funding, and other measures to support the food supply chain. The USDA estimates that $9.3 billion of that funding has been disbursed to farmers and ranchers in 2021 through the Coronavirus Food Assistance Program (CFAP), with another $8.7 billion in forgivable loans distributed during the year through the Paycheck Protection Program (PPP) by the Small Business Administration. The rebound in commodity prices combined with extensive government support payments led to a large increase in sector-wide profitability at the end of 2020 and into 2021. USDA estimates for net farm income and net cash farm income in 2021 are the highest levels since 2013 at $113.0 billion and $134.7 billion, respectively. An average year generates approximately $100 billion in net farm income, so both 2021 metrics are well above historical averages. Higher commodity prices are estimated to offset lower projected government payments in 2021. Animal protein and specialty crop producers did not fully participate in the increased profitability, as higher labor, feed, and other input costs partially offset any gains in cash receipts. Although farm incomes and profitability remain strong in 2021, a potential challenge for producers heading into 2022 will be rising input prices, including the cost of fertilizer, transportation and shipping, and the cost and availability of labor.

Farmland values increased steadily on average in 2021 after rising at approximately the rate of inflation for the last two years. Though the COVID-19 pandemic slowed public auctions and sales during 2020, transactions picked up and values began to trend higher in fourth quarter 2020. An improved profitability outlook combined with low market interest rates provided support for land values throughout 2021. Land value survey data from the USDA show a 7.0% increase in average farm real estate values from June 2020 to June 2021. Annual farm real estate value gains were highest in the Northern Plains (9.4%) and the Southern Plains (9.0%), but also strong in Pacific states (8.6%) and the Corn Belt (7.7%). The Federal Reserve Bank of Chicago AgLetter reported a 14% gain in farmland values in the Seventh District (primarily Iowa, Indiana, Illinois, and Wisconsin) between June 2020 and June 2021. Data from the Federal Reserve Bank of Kansas City show a similar rise in land values in the Tenth District (primarily Kansas, Missouri, Nebraska, and Oklahoma). Historically, rising farm real estate values have paired with an increase in real estate-secured debt. While regional averages for farmland values provide a good barometer for the overall movement in U.S. farmland values, economic activityforces affecting land markets are highly localized, and some markets may experience greater volatility than state or national averages indicate.


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The U.S. experienced $22 billion in severe weather disasters in 2020, the highest level in the 40 years tracked by the National Oceanic and Atmospheric Administration. Many of those events affected agriculture, including a midwestern derecho, western wildfires, and western drought. Federal crop insurance provides a strong mitigator against this risk, but farmers and ranchers face increasingly-severe weather incidents. Weather conditions have also presented a challenge to many producers in 2021. Long and persistent drought conditions have impacted western agriculture in the first three quarters of 2021. As of October 19, 2021, 98% of the National Weather Service Western Region was designated as experiencing some level of drought or dryness, and 20% of the region was designated as experiencing exceptional drought, according to data from the National Drought Mitigation Center. Due to drought conditions along the Colorado River Basin, the U.S. Bureau of Reclamation mandated limits on water use along the river in August 2021 that will be effective for the 2022 water year. Farmer Mac estimates that less than 2.5% of our Farm & Ranch portfolio is exposed to this water source. Extended periods of drought and dryness can reduce agricultural productivity, cause lasting damage to permanent crops like fruit and tree nuts, and result in producers leaving some fields fallow due to lack of water. States also regulate water use, and state laws like California's Sustainable Groundwater Management Act (SGMA) will continue to shape state-led efforts to manage water infrastructure and use. Agricultural production in California, Oregon, Washington, Arizona, and Utah is likely to experience the greatest impact from the 2021 drought and future water management efforts. For loans in areas that commonly experience exceptional drought (primarily in California), Farmer Mac’s underwriting process includes an assessment of anticipated long-term water availability for the related property and how that impacts the collateral value and borrower’s cash flow position to mitigate that risk.

Due to improvements in sector profitability and despite weather challenges in the west, Farmer Mac's 90-day delinquencies and substandard assets levels improved in third quarter 2021 relative to third quarter 2020. Forty percent of the loans past due 90-days or more in second quarter 2021 cured or paid off by September 30, 2021. The overall delinquency rate fell from 0.70% of the Farm & Ranch portfolio as of June 30, 2021 to 0.58% of the Farm & Ranch portfolio by September 30, 2021, a significant improvement that defies the seasonal pattern historically observed during the third quarter of each year. Year-over-year, the delinquency rate fell by 48 basis points from 1.07% in third quarter 2020. However, the ongoing COVID-19 pandemic and the potential for continued economic and weather-related stress increase the level of uncertainty inherent in the agricultural industry, has declined significantly since reaching a cyclical peak in 2013. However, changes in farm income levels are largely localizedcredit sector and depend on producer region and commodity production type. The USDA projects that net cash income levels incould alter the aggregate will rise in 2017 due to higher commodity quantities sold and stabilizing commodity prices. Farmland values have weakened slightly in the Midwest region, where producers are most exposed to changes in the grain markets. In this region, data released by the USDA indicates a decline in farmland valuestrajectory of between 0.5 percent and 1.8 percent in 2017. In all other regions, farmland values appear to be flat to increasing. For example, data released by the USDA indicates that Pacific state land values increased an average of 8.7 percent in 2017.

In recent years, the 90-day delinquencies and credit losses in Farmer Mac's portfolio have remained low compared to their historical averages. However, some indications of stress have emerged, as the volume of Farmer Mac's substandard assets have sequentially increased since second quarter 2016 and 90-day delinquencies have generally increased since third quarter 2016. Both of these measures have increased compared to the historically favorable levels observed in recent years. To date, the increases in these two measures have not yet translated into rising credit losses. Farmer Mac believes that any losses associated with the current agricultural credit cycle will be moderated by the strengthcycle. A virus resurgence, another economic disruption, continued or worsening supply chain disruptions, or long-term damage to secured collateral from drought or wildfires could result in elevated loan delinquencies and diversitya higher percentage of its portfolio,


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which Farmer Mac believes is adequately collateralized.loans rated substandard. Farmer Mac believes that its portfolio remains sufficientlycontinues to be highly diversified, both geographically and by commodity, and that its portfolio has been underwritten to high credit quality standards. Accordingly,Therefore, Farmer Mac believes that its portfolio is well-positioned to endure reasonably foreseeable volatility in farmland valuesfrom cyclical and commodity prices. Farmer Mac also continues to closely monitor sector profitability, economic and weather conditions, and agricultural land value and geographic trends to tailor underwriting practices to changing conditions. Although severe weather events and natural disasters may damage a borrower’s property used in agricultural production, that damage may not negatively affect a borrower’s ability to repay its obligations due to risk mitigating payments available in many cases from property and casualty insurance, crop insurance, and government disaster relief. Based on an analysis of Farmer Mac’s portfolio in relation to the Hurricane Harvey disaster area in Texas, the path of Hurricane Irma in Florida, and the area of the recent California wild fires, Farmer Mac has determined that its potential exposure to these events is not material. Farmer Mac is not aware of any loans in its portfolio that are currently experiencing distress due to these events and believes that these events are not likely to have a material impact on the quality or performance of Farmer Mac’s loan portfolio.external factors. For more information about the loan balances, loan-to-value ratios, 90-day delinquencies, and substandard asset rate for the Farm & Ranch loans in Farmer Mac'sMac’s portfolio as of September 30, 2017,2021, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk – Risk—Loans and Guarantees."


Rural Utilities Industry. Economic conditions affecting the rural utilities industry tend to follow those in the general economy. According to data from the U.S. Energy Information Administration, sales and the revenue from the sale of electricity to customers is up by 3.7% and 8.2%, respectively, in 2021 through July compared to 2020. This increase was driven by higher sales to residential markets, a rebound in sales to the industrial sector, and an increase in the retail price of electricity. Overall economic conditions continued to improve during the first three quarters of 2021, with improved employment, credit, and retail sales activity, but COVID-19 variants and higher inflation continue to threaten the depth and speed of the

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economic recovery. Through September 30, 2021, Farmer Mac had not observed material degradation in the financial performance of its Rural Utilities portfolio.

Prospects for loan growth within the rural utilities industry overall appear to be moderate in the near term, as ongoing normal-course capital expenditures related to maintaining and upgrading utility infrastructure continue at typical levels. Farmer Mac's future growth opportunities for financing the electric cooperative industry may be affected by the demand for electric power in rural areas, capital expenditures by electric cooperatives driven by regulatory or technological changes, the continuation of a low interest rate environment, and competitive dynamics within the rural utilities cooperative finance industry. In December 2020, the Federal Communications Commission’s Rural Digital Opportunity Fund (RDOF) auction awarded $9.2 billion in broadband-related operating cost subsidies to winning bidders. This may provide a catalyst for capital demands from rural electric cooperatives and other telecommunications companies providing communication services to rural America who seek to develop and deploy broadband services. Over $1.5 billion in subsidies were awarded to various rural electric cooperatives, and a significant number of final allocations were made to other carriers investing in rural broadband and other communications services. The cooperatives and other companies that were unsuccessful RDOF bidders also gained knowledge about the processes and technologies involved in broadband projects, which may enable them to develop broadband infrastructure. In particular, these capital needs may provide Farmer Mac with new financing opportunities with existing and new customers.

The growth in renewable energy generation and deployment of energy storage technologies may help deepen Farmer Mac's relationships with existing customers through new business opportunities. This growth may also broaden Farmer Mac's customer base with cooperative lenders focused on lending to renewable energy customers. In response to this growth, Farmer Mac has deployed new financing products tailored to the renewable energy sector, which represents a new market opportunity for Farmer Mac. Under this new initiative, Farmer Mac's total outstanding loan purchase balance of renewable energy financing transactions including undisbursed commitments as of September 30, 2021 was $92.7 million.

Weather is an ongoing source of uncertainty for the utilities sector. Drought, fires, and extreme storms can drive demand, outages, and damage to power and telecommunications facilities. The recent drought and wildfires in California have not materially impacted Farmer Mac’s portfolio as of September 30, 2021, nor has damage from Hurricane Ida. Farmer Mac continues to monitor the establishmentongoing effects of the extremely cold weather event that occurred during mid-February 2021 in the mid-south region, particularly in Texas, on our rural infrastructure portfolio. As of September 30, 2021, our rural infrastructure portfolio exposure in Texas was approximately $405 million and evolutionsplit between distribution and generation and transmission cooperatives. Many of legislationthese cooperatives were affected in some way by the arctic freeze, including obstacles in receiving fuel for power plants or the inability to obtain contracted electricity, which resulted in rolling blackouts across the state. In June 2021, the governor of Texas signed Texas Senate Bill 1580 into law allowing electric cooperatives impacted by the severe weather event to use securitization financing to recover the extraordinary costs and regulations, as well asexpenses incurred during the status of various international trade agreementsevent. We believe that the current internal risk ratings applied to our rural infrastructure portfolio reflect the elevated financial stress resulting from the Texas freeze and partnerships,elevated energy costs.

Legislative and Regulatory Outlook. Farmer Mac continues to monitor potential legislative and regulatory changes that could affect farmers, ranchers, rural lenders, and rural America in general.  As the Trump administration and the U.S. Congress begin their review of existing regulations and the promotion of new legislative or regulatory proposals and policies, Farmer Mac will monitor the effects that any changes in legislation or regulation could have on Farmer Mac or its customers.stakeholders, including:


•Section 1005 of the American Rescue Plan Act of 2021 authorized the USDA to provide debt relief to socially disadvantaged producers who had outstanding principal balances on Farm Service Agency (FSA) loans as of January 1, 2021. In July, a federal judge issued a preliminary injunction

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that ordered USDA to halt all payments under that debt relief program pending resolution of the constitutional objections raised against the program in ongoing litigation. Congress has proposed replacing Section 1005 of the American Rescue Plan with a new program that provides debt relief to “economically distressed” and “at-risk” farmers in the Build Back Better reconciliation package pending in Congress.If enacted, this provision could lead to a short-term acceleration in the prepayment of the FSA guaranteed loans in Farmer Mac's marketing efforts directed towardsMac’s USDA Securities portfolio.

•The Build Back Better reconciliation package pending in Congress contains several proposed changes to the Farm & Ranch line of business focusU.S. tax code. As negotiations on lenders that have demonstrated a commitment to agricultural lending based on their lending history.the package move forward, Farmer Mac directswill continue to monitor the effect of any change to the tax code that may affect its outreach effortsbusiness. The proposed corporate alternative minimum tax in the package is not expected to these lenders through direct personal contact, whichchange Farmer Mac’s tax liability in the near future. The package does not include any proposed increases to the current U.S. corporate tax rate of 21%. The package includes a proposed 1% excise tax on the fair market value of a corporation’s stock repurchased in a taxable year. That excise tax would apply to future repurchases of common stock under Farmer Mac’s existing stock buyback program that authorizes up to $9.8 million in repurchases of common stock and expires in March 2023. Under that program, Farmer Mac has repurchased approximately $200,000 of common stock since January 1, 2017.
•Agricultural exports from the United States were valued at $145.7 billion in 2020. The ability to produce food and fiber and transport it efficiently across the globe is facilitated through Farmer Mac's frequent participation in statecritical for the U.S. food and national banking conferences, its alliances with the American Bankers Associationagricultural sectors’ competitiveness internationally. Congress recently passed a bipartisan infrastructure bill that contains several important investments to improve roads, bridges, freight rail, electric, broadband, ports, and the Independent Community Bankers of America,waterways that are expected to support farmers and its business relationships with membersranchers’ profitability, competitiveness, and access to global markets.

•The three-member board of the Farm Credit System. InAdministration (FCA) currently has a vacancy as well as a sitting member whose term expired in 2018. The Biden Administration is expected to nominate individuals to fill these seats in the Farm & Ranch linefuture. Changes to the composition of business,the FCA board may affect Farmer Mac is experiencing stronger demand for its loan products. Demand for Farmer Mac's secondary market tools could also increase as rural lenders adapt to new and changing regulations, which may require lenders to obtain more liquidity and capital to continue their lending practices.Mac’s regulatory environment.


Farmer Mac also directs marketing efforts towards the agricultural industry by trying to identify and develop relationships with potential issuers of AgVantage securities, including insurance company agricultural lenders, agricultural finance companies, and bank and non-bank agricultural lenders such as agricultural mortgage funds, who can pledge loans as collateral to obtain financing as part of Farmer Mac's Institutional Credit line of business. As part of these efforts, Farmer Mac has increased its focus on wholesale financing for institutional investors in agricultural assets that qualify as eligible collateral under Farmer Mac's charter. Farmer Mac has tailored a version of its AgVantage product to this type of issuer, which is referred to as the Farm Equity AgVantage product. Farmer Mac also offers other AgVantage products tailored to fund investors in agricultural mortgages. Farmer Mac directs its outreach efforts to these potential issuers through its business relationships within the agricultural community and through executive outreach to institutions whose profile presents opportunity to benefit from wholesale financing. As institutional investment in agricultural assets continues to grow, Farmer Mac believes that it is in a unique position to help increase access to capital for these types of counterparties and thereby provide a




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new source of capital to benefit rural America. Farmer Mac designed the Farm Equity AgVantage product to provide an efficient, low-cost source of financing tailored to meet the needs of institutional investors that can be adapted to many different types of organizational structures and for both public and private institutional investors. Farmer Mac believes there is opportunity to expand this type of business as both the trend toward institutional investment in agricultural assets and awareness of the Farm Equity AgVantage and other AgVantage product offerings continue to grow.For more information about the Farm Equity AgVantage product, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk – Institutional" in this report.

Rural Utilities Industry. Demand for capital within the rural utilities industry generally remains moderate, which has resulted in an ongoing high level of competition between rural utilities cooperative lenders that could suppress loan growth opportunities for those lenders, including lenders that participate in Farmer Mac's Rural Utilities line of business. Although competitive pressures remain within the rural utilities lending industry, Farmer Mac believes there is opportunity for growth among larger rural utilities borrowers because CFC increasingly partners with Farmer Mac to provide competitive pricing for transactions with these borrowers. Farmer Mac also believes there are growth opportunities within its Institutional Credit line of business because the wholesale funding rates that Farmer Mac provides may be highly competitive compared to other available sources of debt funding for rural utilities cooperative lenders.

Balance Sheet Review


Assets.  Farmer Mac's total assetsThe following table summarizes the balance sheet as of September 30, 2017 were $17.7 billion, compared to $15.6 billion as of December 31, 2016.the periods indicated:

Table 23
As ofChange
September 30, 2021December 31, 2020$%
(in thousands)
Assets
Cash and cash equivalents$899,052 $1,033,941 $(134,889)(13)%
Investment securities, net of allowance3,741,639 3,898,724 (157,085)(4)%
Farmer Mac Guaranteed Securities, net of allowance8,387,062 8,123,493 263,569 3 %
USDA Securities2,462,010 2,480,321 (18,311)(1)%
Loans, net of allowance8,046,215 7,248,990 797,225 11 %
Loans held in trusts, net of allowance976,700 1,286,156 (309,456)(24)%
Other231,690 283,876 (52,186)(18)%
Total assets$24,744,368 24,744,368 $24,355,501 $388,867 2 %
Liabilities
Notes Payable22,365,121 21,848,917 516,204 2 %
Debt securities of consolidated trusts held by third parties990,961 1,323,786 (332,825)(25)%
Other190,988 190,321 667 — %
Total liabilities$23,547,070 $23,363,024 $184,046 1 %
Total equity1,197,298 992,477 204,821 21 %
Total liabilities and equity$24,744,368 $24,355,501 $388,867 2 %

Assets. The increase in total assets was primarily attributable to an increase in total Farmer Mac Guaranteed Securities and total loans, net of allowance.new loan volume.


As of September 30, 2017, Farmer Mac had $0.4 billion of cash and cash equivalents and $2.2 billion of investment securities compared to $0.3 billion of cash and cash equivalents and $2.5 billion of investment securities. As of September 30, 2017, Farmer Mac had $7.6 billion of Farmer Mac Guaranteed Securities, $5.1 billion of loans, net of allowance, and $2.1 billion of USDA Securities. This compares to $6.0 billion of Farmer Mac Guaranteed Securities, $4.5 billion of loans, net of allowance, and $2.0 billion of USDA Securities as of December 31, 2016.

Liabilities.  Farmer Mac's total liabilities were $17.0 billion as of September 30, 2017, compared to $15.0 billion as of December 31, 2016. The increase in total liabilities was primarily attributabledue to an increase in total notes payable.payable, to fund the acquisition of loan volume.


Equity.  As of September 30, 2017, Farmer Mac had total equity of $694.2 million, which is comprised entirely of stockholders' equity.  As of December 31, 2016, Farmer Mac had total equity of $643.6 million, comprised of stockholders' equity of $643.4 million and non-controlling interest of $0.2 million. As of May 1, 2017, Farmer Mac transferred its entire 65% ownership interest in AgVisory back to the limited liability company as a company redemption in exchange for $5,000. Farmer Mac recognized a loss of approximately $0.1 million, after-tax, upon the transfer. The increase in total equity duringwas primarily due to the first nine monthsissuance of 2017 was a result ofthe Series G Preferred Stock, an increase in retained earnings and accumulated other comprehensive income. The increase in accumulated other comprehensive income, was due to increasesand an increase in fair value on certain floating-rate AgVantage securities.retained earnings.


Off-Balance Sheet Arrangements 

Farmer Mac offers approved lenders two credit enhancement alternatives to increase their liquidity or lending capacity while retaining the cash flow benefits of their loans: (1) Farmer Mac Guaranteed Securities, which are available through each of the Farm & Ranch, USDA Guarantees, Rural Utilities, and Institutional Credit lines of business; and (2) LTSPCs, which are available through the Farm & Ranch and Rural Utilities lines of business. For securitization trusts in which Farmer Mac is the primary beneficiary, the trust assets and liabilities are included on Farmer Mac's consolidated balance sheet. For the remainder of these transactions, and in the event of de-consolidation, both of these alternatives result in the creation


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of off-balance sheet obligations for Farmer Mac. See Note 6 to the consolidated financial statements for more information about consolidation and Farmer Mac's off-balance sheet business activities.




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Risk Management


Credit Risk – Loans and Guarantees.  Farmer Mac is exposed to credit risk resulting from the inability of borrowers to repay their loans in conjunction with a deficiency in the value of the collateral relative to the outstanding balance of the loan and the costs of liquidation.  Farmer Mac is exposed to credit risk on:
loans held;
loans underlying Farmer Mac Guaranteed Securities; and
loans underlying LTSPCs.

Farmer Mac generally assumes 100 percent of the credit risk on loans held and loans underlying LTSPCs in the Farm & Ranch and Rural Utilities lines of business and loans underlying Farm & Ranch Guaranteed Securities. Farmer Mac has direct credit exposure to the loans in non-AgVantage transactions but only indirect credit exposure to loans that secure AgVantage transactions because AgVantage securities represent a general obligation of an issuer that is, in turn, secured by eligible loans. Non-AgVantage transactions like loan purchases, LTSPCs, and "pass-through" guaranteed securities that represent beneficial interests in the underlying loans do not include a general obligation of a counterparty as a separate source of repayment. For the reasons described in more detail below, Farmer Mac excludes its assets in the USDA Guarantees line of business, the loans in the Rural Utilities line of business, and AgVantage securities in the Institutional Credit line of business from the loan-level credit risk metrics it discloses.


Farmer Mac's direct credit exposure to Farm & Ranch loans held and loans underlying Farm & Ranch Guaranteed Securities and LTSPCs as of September 30, 20172021 was $6.6$9.4 billion across 48 states. Farmer Mac has establishedapplies credit underwriting standards and methodologies to help assess exposures to Farm & Ranch loans, which may include collateral valuation, financial metrics, and documentation standards for agricultural real estate mortgage loansother appropriate borrower financial and believescredit information. For larger loan exposures to agriculture production and agribusinesses that these standards mitigate thesupport agriculture production, food and fiber processing, and other supply chain production, which may have different risk of loss from borrower defaultsprofiles, Farmer Mac has implemented methodologies and provide guidance about the management, administration, and conduct of underwriting and appraisals to all participating and potential lenders.  These standards were developedparameters that help assess credit risk based on industry practices for agricultural real estate mortgage loansthe appropriate sector, borrower construct, and are designed to assess the creditworthiness of the borrower, as well as the value of the collateral securing the loan.  Farmer Mac evaluates and adjusts these standards on an ongoing basis based on current and anticipated market conditions.transaction complexity. For more information about Farmer Mac's underwriting and collateral valuation standards for Farm & Ranch loans, see "Business—

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"Business—Farmer Mac's Lines of Business—Farm & Ranch—Underwriting and Collateral Valuation (Appraisal) Standards" in Farmer Mac'sMac’s 2020 Annual Report on Form 10-K for the fiscal year ended December 31, 2016 filed with the SEC on March 9, 2017.Report.

Farmer Mac's direct credit exposure to Rural Utilities loans held and loans underlying LTSPCs as of September 30, 2017 was $1.9 billion across 39 states, of which $1.5 billion were loans to electric distribution cooperatives and $0.4 billion were loans to generation and transmission ("G&T") cooperatives. Farmer Mac has developed different underwriting standards for rural utilities loans that depend on whether direct or indirect credit exposure is assumed on a loan and whether the borrower is an electric distribution cooperative or a G&T cooperative. See "Business—Farmer Mac's Lines of Business—Rural Utilities—Underwriting" in Farmer Mac's Annual Report on Form 10-K for the fiscal year ended December 31, 2016 filed with the SEC on March 9, 2017. As of September 30, 2017, there were no delinquencies in Farmer Mac's portfolio of Rural Utilities loans, and Farmer Mac has not experienced any credit losses on Rural Utilities loans since Congress authorized Farmer Mac's Rural Utilities line of business in 2008. Based on this performance, Farmer Mac excludes the loans in the Rural Utilities line of business from the credit risk metrics it discloses.


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Farmer Mac has indirect credit exposure to the Farm & Ranch loans and Rural Utilities loans that secure AgVantage securities included in the Institutional Credit line of business. Farmer Mac's AgVantage securities are general obligations of institutions approved by Farmer Mac and are secured by current loans in an amount at least equal to the outstanding principal amount of the related security. Accordingly, Farmer Mac excludes the loans that secure AgVantage securities from the credit risk metrics it discloses because Farmer Mac has only indirect credit risk on those loans and because of the other characteristics of AgVantage securities that mitigate credit risk. Those characteristics include a general obligation of an issuing institution approved by Farmer Mac, the required collateralization level for the securities, the requirement for delinquent loans to be removed from the pool of pledged loans and replaced with current eligible loans, and in some cases, the requirement for the counterparty to comply with specified financial covenants for the life of the related AgVantage security. As of September 30, 2017,2021, Farmer Mac had not experienced any credit losses on any AgVantage securities and does not expect to incur any such losses in the future.securities. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk – Risk—Institutional" for more information about Farmer Mac's credit risk on AgVantage securities.


The credit exposure of Farmer Mac and Farmer Mac II LLC on USDA Securities, including those underlying Farmer Mac Guaranteed USDA Securities, is covered by the full faith and credit of the United States.  Therefore, Farmer Mac believes that Farmer Mac and Farmer Mac II LLC have little or no credit risk exposure in the USDA Guarantees line of business because of the USDA guarantee.  As of September 30, 2017, neither Farmer Mac nor Farmer Mac II LLC had experienced any credit losses on any business under the USDA Guarantees line of business, and neither expects to incur any such losses in the future.

Loans in the Farm & Ranch line of business are all secured by first liens on agricultural real estate. Accordingly, Farmer Mac's exposure on a loan is limited to the difference between (1) the total of the accrued interest, advances, and the principal balance of a loan and (2) the value of the property less the cost to sell. Measurement of that excess or shortfall is the best predictor and determinant of loss, compared to other measures that evaluate the efficiency of a particular farm operator.  For example, debt service ratios depend upon farm operator efficiency and leverage, which can vary widely within a geographic region, commodity type, or an operator's business and farming skills. Thus, Farmer Mac considers a loan's original loan-to-value ratio as one of many factors in evaluating loss severity. This ratio is calculated by dividing the loan principal balance at the time of guarantee, purchase, or commitment by the appraised value at the date of loan origination or, when available, updated appraised value at the time of guarantee, purchase, or commitment.  Other factors Farmer Mac considers include, but are not limited to, other underwriting standards, commodity and farming forecasts, and regional economic and agricultural conditions.

Loan-to-value ratios depend uponon the market value of a property, as determined in accordance with Farmer Mac's collateral valuation standards.  As of September 30, 20172021 and December 31, 2016,2020, the average unpaid loan balanceprincipal balances for loans outstanding in the Farm & Ranch line of business was $642,000$780,000 and $611,000,$742,000, respectively. TheFarmer Mac calculates the "original loan-to-value" ratio of a loan by dividing the original loan-to-value ratio is based onloan principal balance by the original appraised value that hasproperty value. This calculation does not been indexedreflect any amortization of the original loan balance or any adjustment to the original appraised value to provide a current market value or reflect amortization of loans. As of second quarter 2017, Farmer Mac revised its calculation of thevalue. The original loan-to-value ratio of a loan to combine for any cross-collateralized loans: (1) the original loan principal balance amounts in the numerator; and (2) the original appraised property values in the denominator. In previous periods, the ratio wasloans is calculated on a combined basis rather than on a loan-by-loan basis without considering the effects of any cross-collateralization. Prior period ratios of original loan-to-value have been recalculated to conform to this revised calculation.basis. The


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weighted-average original loan-to-value ratio for Farm & Ranch loans purchased during third quarter 20172021 was 52 percent,51%, compared to 46 percent55% for loans purchased during third quarter 2016.2020. The weighted-average original loan-to-value ratio for all Farm & Ranch loans held and all loans underlying off-balance sheet Farm & Ranch Guaranteed Securities and LTSPCs was approximately 51 percent53% and 52% as of both September 30, 20172021 and December 31, 2016.2020. The weighted-average original loan-to-value ratio for all 90-day delinquencies was 50 percent49% and 55 percent, respectively,50% as of September 30, 20172021 and December 31, 2016.2020, respectively.


The weighted-average current loan-to-value ratio which is the loan-to-value(the loan to-value ratio based on original appraised value but which reflectsand current outstanding loan amortization since purchase,amount adjusted to reflect amortization) for Farm & Ranch loans held and loans underlying off-balance sheet Farm & Ranch Guaranteed Securities and LTSPCs was approximately 44 percent48% and 46% as of both September 30, 20172021 and December 31, 2016.2020, respectively.


For more information about the credit quality of Farmer Mac maintains an allowance for loan losses to cover estimated probable losses on loans held and a reserve for losses to cover estimated probable losses on loans underlying LTSPCs and off-balance sheetMac's Farm & Ranch Guaranteed Securities.  The methodology that Farmer Mac uses to determineportfolio and the level of itsassociated allowance for losses is described inplease refer to Note 2(j)5 to the consolidated financial statements included in Farmer Mac's Annual Report on Form 10-K for the fiscal year ended December 31, 2016 filed with the SEC on March 9, 2017. Management believes that this methodology produces a reasonable estimate of probable losses, as of the balance sheet date, for all loans held and loans underlying off-balance sheet Farm & Ranch Guaranteed Securities and LTSPCs.

The following table summarizes the changes in the components of Farmer Mac's total allowance for losses for the three and nine months ended September 30, 2017 and 2016:

Table 15
 As of September 30, 2017 As of September 30, 2016
 Allowance
for Loan
Losses		 Reserve
for Losses		 Total
Allowance
for Losses		 Allowance
for Loan
Losses		 Reserve
for Losses		 Total
Allowance
for Losses
 (in thousands)
For the Three Months Ended:           
Beginning Balance$6,138
 $1,966
 $8,104
 $4,893
 $2,191
 $7,084
Provision for/(release of) losses270
 114
 384
 191
 (222) (31)
Charge-offs—
 —
 —
 (130) —
 (130)
Ending Balance$6,408
 $2,080
 $8,488
 $4,954
 $1,969
 $6,923
            
For the Nine Months Ended:           
Beginning Balance$5,415
 $2,020
 $7,435
 $4,480
 $2,083
 $6,563
Provision for/(release of) losses1,234
 60
 1,294
 604
 (114) 490
Charge-offs(241) —
 (241) (130) —
 (130)
Ending Balance$6,408
 $2,080
 $8,488
 $4,954
 $1,969
 $6,923

statements. Activity affecting the allowance for loan losses and reserve for losses is discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Provision for and Release of Allowance for Loan Losses and Reserve for Losses." As of September 30, 2017, Farmer Mac's total allowance for losses totaled $8.5 million, or 0.13 percent of the outstanding principal balance of Farm & Ranch loans held for investment and loans underlying LTSPCs and off-



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balance sheet Farm & Ranch Guaranteed Securities, compared to $7.4 million, or 0.12 percent, as of December 31, 2016.

As of September 30, 2017, Farmer Mac individually evaluated $24.3 million of the $147.6 million of recorded investment in impaired assets for collateral shortfalls against updated appraised values, other updated collateral valuations, or discounted values. For the remaining $123.3 million of impaired assets for which updated valuations were not available, Farmer Mac evaluated them in the aggregate in consideration of their similar risk characteristics and historical statistics. Farmer Mac recorded specific allowances of $2.9 million for undercollateralized assets as of September 30, 2017. Farmer Mac's general allowances were $5.6 million as of September 30, 2017.

The charge-offs recorded during the first nine months of 2017 were primarily related to two impaired crop loans, with one borrower, that were foreclosed and transitioned to REO during first quarter 2017. Farmer Mac had previously recorded a specific allowance of $0.2 million on these impaired crop loans as of December 31, 2016. In second quarter 2017, Farmer Mac sold the related properties for $5.4 million and recognized a $0.8 million gain on the sale of the REO.

Farmer Mac's 90-day delinquency measure includes loans 90 days or more past due, as well as loans in foreclosure and non-performing loans where the borrower is in bankruptcy. As of September 30, 2017,2021, Farmer Mac's 90-day delinquencies were $66.4$54.8 million (1.01 percent(0.58% of the Farm & Ranch portfolio), compared to $21.0$63.1 million (0.34 percent(0.70% of the Farm & Ranch portfolio) as of December 31, 2016June 30, 2021 and $18.4$46.2 million (0.31 percent(0.54% of the Farm & Ranch portfolio) as of September 30, 2016.December 31, 2020. Those 90-day delinquencies were comprised of 6838 delinquent loans as of September 30, 2017,2021, compared withto 42 delinquent loans as of June 30, 2021 and 38 delinquent loans as of December 31, 20162020. The decrease in 90-day delinquencies from second quarter was primarily driven by two commodity groups – crops and 50livestock. The top ten borrower exposures over 90 days delinquent loansrepresented over half of the 90-day delinquencies as of September 30, 2016. As of September 30, 2017, the increase in 90-day delinquencies, as compared to as of December 31, 2016, is primarily attributable to several larger loans and certain crop and permanent planting loans mostly due to factors specific to the borrower and not related to macroeconomic factors in the agricultural economy. In particular, $15.3 million in permanent planting loans to a single borrower became delinquent in first quarter 2017 and accounts for one-third of the year-to-date increase in 90-day delinquencies. Farmer Mac believes it is adequately collateralized on this exposure. The increase is also consistent with the seasonal pattern of Farmer Mac's 90-day delinquencies fluctuating from quarter to quarter, both in dollars and as a percentage of the outstanding Farm & Ranch portfolio, with higher levels generally observed at the end of the first and third quarters and lower levels generally observed at the end of the second and fourth quarters of each year as a result of the annual (January 1st) and semi-annual (January 1st and July 1st) payment terms of most Farm & Ranch loans.2021. Farmer Mac believes that it remains adequately collateralized on theseits delinquent loans. As Farmer Mac has expected, its


89




Our 90-day delinquency rate has reverted to, and is in line with, its fifteen-yearas of September 30, 2021 was below Farmer Mac's historical average. In the near-term, our delinquency rate may exceed our historical average due to the impact of adverse weather events and/or supply chain disruptions on the agricultural economy. Farmer Mac's average 90-day delinquency rate as a percentage of approximately one percent of theits Farm & Ranch portfolio. Althoughportfolio over the vast majority of the year-to-date increase in 90-day delinquencieslast 15 years is due to borrower-specific factors, other factors such as macroeconomic trends and the cyclical nature of the agricultural economy could contribute to an increase in 90-day delinquencies in the future.approximately 1%. The highest 90-day delinquency rate observed in the Farm & Ranch portfolio during the preceding fifteen-yearthat period occurred in 2009 at approximately two percent,2%, which coincided with increased delinquencies in loans within Farmer Mac's then-held ethanol portfolio that Farmer Mac no longer holds.loan portfolio.



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The following table presents historical information regardingabout Farmer Mac's 90-day delinquencies in the Farm & Ranch line of business compared to the unpaid principal balance of all Farm & Ranch loans held and loans underlying off-balance sheet Farm & Ranch Guaranteed Securities and LTSPCs:


Table 1624
Farm & Ranch Line of Business90-Day
Delinquencies		Percentage
 (dollars in thousands)
As of:   
September 30, 2021$9,445,359 $54,792 0.58 %
June 30, 20219,056,152 63,076 0.70 %
March 31, 20218,629,352 72,346 0.84 %
December 31, 20208,581,181 46,232 0.54 %
September 30, 20208,249,349 88,041 1.07 %
June 30, 20208,017,850 68,682 0.86 %
March 31, 20207,811,594 79,722 1.02 %
December 31, 20197,776,950 60,954 0.78 %
September 30, 20197,393,728 59,691 0.81 %

 Farm & Ranch Line of Business 90-Day
Delinquencies		 Percentage
 (dollars in thousands)
As of:     
September 30, 2017$6,557,030
 $66,381
 1.01%
June 30, 20176,426,518
 41,901
 0.65%
March 31, 20176,240,467
 50,807
 0.81%
December 31, 20166,139,304
 21,038
 0.34%
September 30, 20166,004,728
 18,377
 0.31%
June 30, 20165,830,533
 22,093
 0.38%
March 31, 20165,713,789
 34,680
 0.61%
December 31, 20155,725,299
 32,136
 0.56%
September 30, 20155,504,030
 36,669
 0.67%

When analyzing the overall risk profile of its lines of business, Farmer Mac takes into account more than the Farm & Ranch loan delinquency percentages provided above. The lines of business also include AgVantage securities and Rural Utilities loans held and underlying LTSPCs, neither of which have any delinquencies, and USDA Securities, which are backed by the full faith and credit of the United States. Across all of Farmer Mac's lines of business, 90-day delinquencies represented 0.36 percent0.24% of total outstanding business volume as of September 30, 2017,2021, compared to 0.12 percent0.21% as of December 31, 20162020 and 0.11 percent0.40% as of September 30, 2016.2020.




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The following table presents outstanding Farm & Ranch loans held and loans underlying LTSPCs and off-balance sheet Farm & Ranch Guaranteed Securities and 90-day delinquencies as of September 30, 20172021 by year of origination, geographic region, commodity/collateral type, original loan-to-value ratio, and range in the size of borrower exposure:

Table 17

Farm & Ranch 90-Day Delinquencies as of September 30, 2017
 Distribution of Farm & Ranch Line of Business Farm & Ranch Line of Business 
90-Day Delinquencies(1)
 Percentage
 (dollars in thousands)
By year of origination:       
2007 and prior12% $789,189
 $8,810
 1.12%
20082% 171,541
 552
 0.32%
20092% 108,320
 864
 0.80%
20103% 181,434
 3,485
 1.92%
20114% 251,269
 1,226
 0.49%
20129% 582,502
 1,573
 0.27%
201313% 847,661
 2,011
 0.24%
201410% 653,536
 22,561
(2) 
3.45%
201513% 839,215
 13,938
(3) 
1.66%
201617% 1,151,290
 9,869
 0.86%
201715% 981,073
 1,492
 0.15%
Total100% $6,557,030
 $66,381
 1.01%
By geographic region(4):
 
  
  
  
Northwest11% $723,616
 $7,802
 1.08%
Southwest29% 1,917,692
 9,284
 0.48%
Mid-North34% 2,205,750
 10,462
 0.47%
Mid-South14% 899,293
 16,075
 1.79%
Northeast4% 290,655
 1,522
 0.52%
Southeast8% 520,024
 21,236
 4.08%
Total100% $6,557,030
 $66,381
 1.01%
By commodity/collateral type:   
  
  
Crops55% $3,593,716
 $32,275
 0.90%
Permanent plantings18% 1,184,221
 22,330
 1.89%
Livestock20% 1,309,743
 7,367
 0.56%
Part-time farm6% 407,708
 3,766
 0.92%
Ag. Storage and Processing1% 48,068
 —
 —%
Other—
 13,574
 643
 4.74%
Total100% $6,557,030
 $66,381
 1.01%
By original loan-to-value ratio(5):
       
0.00% to 40.00%19% $1,274,050
 $9,762
 0.77%
40.01% to 50.00%25% 1,622,767
 19,037
 1.17%
50.01% to 60.00%35% 2,268,852
 31,627
 1.39%
60.01% to 70.00%17% 1,130,748
 5,236
 0.46%
70.01% to 80.00%(6)
4% 233,963
 719
 0.31%
80.01% to 90.00%(6)
—% 26,650
 —
 —%
Total100% $6,557,030
 $66,381
 1.01%
By size of borrower exposure(7):
       
Less than $1,000,00035% $2,297,648
 $13,282
 0.58%
$1,000,000 to $4,999,99938% 2,500,101
 27,999
 1.12%
$5,000,000 to $9,999,99912% 815,411
 9,815
(3) 
1.20%
$10,000,000 to $24,999,9999% 568,471
 15,285
(2) 
2.69%
$25,000,000 to $50,000,0006% 375,399
 —
 —%
Total100% $6,557,030
 $66,381
 1.01%
90
(1)
Includes loans held and loans underlying off-balance sheet Farm & Ranch Guaranteed Securities and LTSPCs that are 90 days or more past due, in foreclosure, or in bankruptcy with at least one missed payment, excluding loans performing under either their original loan terms or a court-approved bankruptcy plan.


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(2)
Includes $15.3 million of permanent planting loans with one borrower located in the Southeast who became 90-days delinquent during first quarter 2017. The original combined loan-to-value ratio of these two permanent planting loans was between 50.01% to 60.00%.
(3)
Includes $9.8 million related to two crop loans located in the Mid-South that became 90-days delinquent as a result of a bankruptcy filed by one borrower. These two loans with the same borrower had separate underlying collateral with original loan-to-value ratios between 40.01% to 50.00% and 50.01% to 60.00%, respectively.
(4)
Geographic regions:  Northwest (AK, ID, MT, OR, WA, WY); Southwest (AZ, CA, CO, HI, NM, NV, UT); Mid-North (IA, IL, IN, MI, MN, NE, ND, SD, WI); Mid-South (AR, KS, LA, MO, OK, TX); Northeast (CT, DE, KY, MA, MD, ME, NH, NJ, NY, OH, PA, RI, VA, VT, WV); Southeast (AL, FL, GA, MS, NC, SC, TN).
(5)
As of second quarter 2017, Farmer Mac revised its calculation of the original loan-to-value ratio of a loan to combine for any cross-collateralized loans: (i) the original loan principal balance amounts in the numerator; and (ii) the original appraised property values in the denominator. In previous periods, the ratio was calculated on a loan-by-loan basis without considering the effects of any cross-collateralization. Prior period information has been reclassified to conform to the current period calculation and presentation.
(6)
Primarily part-time farm loans. Loans with an original loan-to-value ratio of greater than 80% are required to have private mortgage insurance.
(7)
Includes multiple loans to the same borrower or borrower-related entities.

Table 25
Farm & Ranch 90-Day Delinquencies as of September 30, 2021
 Distribution of Farm & Ranch Line of BusinessFarm & Ranch Line of Business
90-Day Delinquencies(1)
Percentage
 (dollars in thousands)
By year of origination:    
2011 and prior6 %$567,596 $3,181 0.56 %
20123 %250,167 — — %
20134 %343,964 724 0.21 %
20143 %294,207 3,641 1.24 %
20155 %439,266 4,607 1.05 %
20167 %695,379 17,706 2.55 %
20177 %695,045 12,821 1.84 %
20187 %696,031 610 0.09 %
201911 %1,037,240 10,858 1.05 %
202025 %2,358,286 644 0.03 %
202122 %2,068,178 — 0.03 %
Total100 %$9,445,359 $54,792 0.58 %
By geographic region(2):
    
Northwest12 %$1,171,940 $7,169 0.61 %
Southwest33 %3,109,426 15,305 0.49 %
Mid-North27 %2,537,817 9,900 0.39 %
Mid-South16 %1,459,683 3,820 0.26 %
Northeast4 %376,707 9,060 2.41 %
Southeast8 %789,786 9,538 1.21 %
Total100 %$9,445,359 $54,792 0.58 %
By commodity/collateral type:   
Crops50 %$4,697,771 $28,534 0.61 %
Permanent plantings23 %2,111,933 10,069 0.48 %
Livestock19 %1,812,493 8,096 0.45 %
Part-time farm5 %486,965 593 0.12 %
Ag. Storage and Processing3 %322,654 7,500 2.32 %
Other— 13,543 — — %
Total100 %$9,445,359 $54,792 0.58 %
By original loan-to-value ratio:
0.00% to 40.00%16 %$1,538,800 $3,444 0.22 %
40.01% to 50.00%24 %2,247,209 27,520 1.22 %
50.01% to 60.00%35 %3,343,152 21,048 0.63 %
60.01% to 70.00%21 %2,008,487 2,780 0.14 %
70.01% to 80.00%(3)
3 %268,458 — — %
80.01% to 90.00%(3)
1 %39,253 — — %
Total100 %$9,445,359 $54,792 0.58 %
By size of borrower exposure(4):
Less than $1,000,00027 %$2,523,934 $7,172 0.28 %
$1,000,000 to $4,999,99935 %3,334,715 27,661 0.83 %
$5,000,000 to $9,999,99916 %1,506,924 16,213 1.08 %
$10,000,000 to $24,999,99913 %1,270,026 3,746 0.29 %
$25,000,000 and greater9 %809,760 — — %
Total100 %$9,445,359 $54,792 0.58 %
(1)Includes loans held and loans underlying off-balance sheet Farm & Ranch Guaranteed Securities and LTSPCs that are 90 days or more past due, in foreclosure, or in bankruptcy with at least one missed payment, excluding loans performing under either their original loan terms or a court-approved bankruptcy plan.
(2)Geographic regions:  Northwest (AK, ID, MT, OR, WA, WY); Southwest (AZ, CA, CO, HI, NM, NV, UT); Mid-North (IA, IL, IN, MI, MN, NE, ND, SD, WI); Mid-South (AR, KS, LA, MO, OK, TX); Northeast (CT, DE, KY, MA, MD, ME, NH, NJ, NY, OH, PA, RI, VA, VT, WV); Southeast (AL, FL, GA, MS, NC, SC, TN).
(3)Primarily part-time farm loans. Loans with an original loan-to-value ratio of greater than 80% are required to have private mortgage insurance.
(4)Includes aggregated loans to single borrowers or borrower-related entities.

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Another indicator that Farmer Mac considers in analyzing the credit quality of its Farm & Ranch portfolio is the level of internally-rated "substandard" assets, both in dollars and as a percentage of the outstanding Farm & Ranch portfolio. Assets categorized as "substandard" have a well-defined weakness or weaknesses, and there is a distinct possibility that some loss will be sustained if deficiencies are not corrected. As of September 30, 2017,2021, Farmer Mac's substandard assets were $219.6$278.3 million (3.3 percent(2.9% of the Farm & Ranch portfolio), compared to $165.2$299.1 (3.3% of the Farm & Ranch portfolio) as of June 30, 2021 and $291.5 million (2.7 percent(3.4% of the Farm & Ranch portfolio) as of December 31, 2016.2020. Those substandard assets were comprised of 298291 loans as of September 30, 20172021, 323 loans as of June 30, 2021, and 287343 loans as of December 31, 2016. 2020.

The $54.4decrease of $20.8 million increase from year-end 2016in substandard assets during third quarter 2021 was primarily driven by credit downgradesupgrades in both our on- and off-balance sheet portfolios during the quarter. Substandard assets decreased as a percentage of the total on-balance sheet loans. and off-balance sheet portfolios primarily due to these credit upgrades.

The newpercentage of substandard asset volume from year-end 2016 includes several large exposures and also represents a relatively diverse setassets within the portfolio as of commodities. Subsequent to September 30, 2017, $8.2 million in on-balance sheet loans considered to be substandard were paid off in full at par. Farmer Mac expects that over time its substandard asset rate will eventually revert closer to, and possibly exceed, Farmer Mac's2021 was below the historical average due to macroeconomic factors and the cyclical nature of the agricultural economy.average. Farmer Mac's average substandard assets as a percentage of its Farm & Ranch portfolio over the last 15 years is approximately 4 percent.4%. The highest substandard asset rate observed during that periodthe last 15 years occurred in 2010 at approximately 8 percent,8%, which coincided with an increase in substandard loans within Farmer Mac's then-held ethanol portfolio that Farmer Mac no longer holds.portfolio. If Farmer Mac's substandard asset rate continues to increaseincreases from current levels, it is likely that Farmer Mac's provision to the allowance for loan losses and the reserve for losses will also increase.


Although some credit losses are inherent to the business of agricultural lending, Farmer Mac believes that any losses associated with the current agricultural credit cycle will be moderated by the strength and diversity of its portfolio, which Farmer Mac believes is adequately collateralized. See Note 5 to

The following table presents the consolidated financial statementscurrent loan-to-value ratios for more information regarding credit quality indicators related tothe Farm & Ranch loans heldportfolio, as disaggregated by internally assigned risk ratings:

Table 26
Farm & Ranch current loan-to-value ratio by internally assigned risk rating as of September 30, 2021
AcceptableSpecial MentionSubstandardTotal
(in thousands)
Current loan-to-value ratio(1):
0.00% to 40.00%$2,626,070 $60,117 $98,922 $2,785,109 
40.01% to 50.00%2,201,583 88,954 66,735 2,357,272 
50.01% to 60.00%2,335,126 91,361 60,910 2,487,397 
60.01% to 70.00%1,457,866 53,785 22,008 1,533,659 
70.01% to 80.00%171,374 35,780 8,213 215,367 
80.01% and greater43,968 1,101 21,486 66,555 
Total$8,835,987 $331,098 $278,274 $9,445,359 
(1)The current loan-to-value ratio is based on original appraised value (or most recently obtained appraisal, if available) and loans underlying LTSPCs and off-balance sheet Farm & Ranch Guaranteed Securities.current outstanding loan amount adjusted to reflect loan amortization.




9392






The following table presents Farmer Mac's cumulative net credit losses relative to the cumulative original balance for all Farm & Ranch loans purchased and loans underlying LTSPCs and off-balance sheet Farm & Ranch Guaranteed Securities as of September 30, 20172021 by year of origination, geographic region, and commodity/collateral type.  The purpose of this information is to present information regardingabout realized losses relative to original Farm & Ranch purchases, guarantees, and commitments.


Table 1827
Farm & Ranch Credit Losses Relative to Cumulative
Original Loans, Guarantees, and LTSPCs as of September 30, 2021
Cumulative Original Loans, Guarantees and LTSPCs Cumulative Net Credit Losses/(Recoveries) Cumulative Loss Rate
 (dollars in thousands)
By year of origination:   
2011 and prior$16,099,523 $33,785 0.21 %
20121,159,170 — — %
20131,463,970 — — %
20141,047,800 — — %
20151,223,646 (516)(0.04)%
20161,540,809 — — %
20171,622,277 5,365 0.33 %
20181,323,055 — — %
20191,518,736 — — %
20202,823,275 — — %
20212,279,534 — — %
Total$32,101,795 $38,634 0.12 %
By geographic region(1):
   
Northwest$4,173,255 $11,191 0.27 %
Southwest11,038,665 8,542 0.08 %
Mid-North8,060,301 18,219 0.23 %
Mid-South4,312,637 (613)(0.01)%
Northeast1,708,199 323 0.02 %
Southeast2,808,738 972 0.03 %
Total$32,101,795 $38,634 0.12 %
By commodity/collateral type:   
Crops$14,829,309 $2,887 0.02 %
Permanent plantings6,997,733 9,783 0.14 %
Livestock7,211,088 3,836 0.05 %
Part-time farm1,802,009 1,090 0.06 %
Ag. Storage and Processing1,099,159 21,038 1.91 %
Other162,497 — — %
Total$32,101,795 $38,634 0.12 %
(1)Geographic regions:  Northwest (AK, ID, MT, OR, WA, WY); Southwest (AZ, CA, CO, HI, NM, NV, UT); Mid-North (IA, IL, IN, MI, MN, NE, ND, SD, WI); Mid-South (AR, KS, LA, MO, OK, TX); Northeast (CT, DE, KY, MA, MD, ME, NH, NJ, NY, OH, PA, RI, VA, VT, WV); Southeast (AL, FL, GA, MS, NC, SC, TN).



93
Farm & Ranch Credit Losses Relative to Cumulative
Original Loans, Guarantees, and LTSPCs as of September 30, 2017
 Cumulative Original Loans, Guarantees and LTSPCs  Cumulative Net Credit Losses/(Recoveries)  Cumulative Loss Rate
 (dollars in thousands)
By year of origination:     
2007 and prior$13,305,693
 $26,012
 0.20 %
2008813,551
 3,400
 0.42 %
2009548,060
 1,508
 0.28 %
2010654,343
 5
 — %
2011762,881
 3,661
 0.48 %
20121,127,622
 —
 — %
20131,392,208
 —
 — %
2014927,856
 —
 — %
20151,033,860
 (540) (0.05)%
20161,307,740
 —
 — %
20171,042,619
 —
 — %
Total$22,916,433
 $34,046
 0.15 %
By geographic region(1):
 
  
  
Northwest$3,053,678
 $11,221
 0.37 %
Southwest7,872,878
 9,101
 0.12 %
Mid-North5,868,873
 12,830
 0.22 %
Mid-South2,754,813
 (211) (0.01)%
Northeast1,374,499
 169
 0.01 %
Southeast1,991,692
 936
 0.05 %
Total$22,916,433
 $34,046
 0.15 %
By commodity/collateral type: 
  
  
Crops$10,570,840
 $3,822
 0.04 %
Permanent plantings4,692,278
 9,332
 0.20 %
Livestock5,521,760
 3,877
 0.07 %
Part-time farm1,304,350
 1,342
 0.10 %
Ag. Storage and Processing671,873
 15,673
 2.33 %
Other155,332
 —
 — %
Total$22,916,433
 $34,046
 0.15 %
(1)
Geographic regions:  Northwest (AK, ID, MT, OR, WA, WY); Southwest (AZ, CA, CO, HI, NM, NV, UT); Mid-North (IA, IL, IN, MI, MN, NE, ND, SD, WI); Mid-South (AR, KS, LA, MO, OK, TX); Northeast (CT, DE, KY, MA, MD, ME, NH, NJ, NY, OH, PA, RI, VA, VT, WV); Southeast (AL, FL, GA, MS, NC, SC, TN).






Analysis of portfolio performance indicates that commodity type is the primary determinant of Farmer Mac's exposure to loss on a given loan. Within most commodity groups, certain geographic areas allow greater economies of scale or proximity to markets than others and, consequently, may result in more successful operations within the commodity group. Certain geographic areas also offer better growing conditions and market access than others and, consequently, may result in more versatile and more successful operators within a given commodity group.  Farmer Mac's board of directors has established policies regarding geographic and commodity concentration to maintain adequate diversification and measure concentration risk.


94



In Farmer Mac's experience, the degree to which the collateral for a commodity group is single-use or highly improved is a more significant determinant of the probability of ultimate losses on a given loan than diversity of geographic location within a commodity group. Commodity groups that tend to be single-use or highly improved include permanent plantings (for example, nut crops), agricultural storage and processing facilities (for example, canola plants and grain processing facilities), and certain livestock facilities (for example, dairy facilities). The versatility of a borrower's operation (and in the case of persisting adverse economic conditions, the borrower's ability to switch commodity groups) will more likely result in profitability for the borrower and, consequently, a lower risk of decreased value for the underlying collateral. Producers of agricultural commodities that require highly improved property are generally less able to adapt their operations when faced with adverse economic conditions. In addition, in the event of a borrower's default, the prospective sale value of the collateral is more likely to decrease and the related loan may become undercollateralized. This analysis is consistent with corresponding commodity analyses, which indicate that Farmer Mac has experienced higher loss and collateral deficiency rates in permanent planting loans and agricultural storage and processing loans, for which the collateral is typically highly improved and specialized.


95


The following tables present concentrations of Farm & Ranch loans held and loans underlying LTSPCs and off-balance sheet Farm & Ranch Guaranteed Securities by commodity type within geographic region and cumulative credit losses by origination year and commodity type:


Table 1928
As of September 30, 2021
Farm & Ranch Concentrations by Commodity Type within Geographic Region
CropsPermanent
Plantings		LivestockPart-time
Farm		Ag. Storage and
Processing		OtherTotal
(dollars in thousands)
By geographic region(1):
Northwest$569,356 $185,593 $292,232 $98,517 $26,161 $81 $1,171,940 
6.0 %2.0 %3.1 %1.0 %0.3 %— %12.4 %
Southwest678,984 1,586,428 554,846 95,456 182,225 11,487 3,109,426 
7.2 %16.8 %5.9 %1.0 %1.9 %0.1 %32.9 %
Mid-North2,168,698 10,608 208,413 101,204 47,182 1,712 2,537,817 
23.0 %0.1 %2.2 %1.1 %0.5 %— %26.9 %
Mid-South822,385 66,990 485,122 65,683 19,469 34 1,459,683 
8.7 %0.7 %5.1 %0.8 %0.2 %— %15.5 %
Northeast189,889 45,354 79,398 58,891 3,175 — 376,707 
2.0 %0.5 %0.9 %0.6 %— %— %4.0 %
Southeast268,459 216,960 192,482 67,214 44,442 229 789,786 
2.8 %2.3 %2.0 %0.7 %0.5 %— %8.3 %
Total$4,697,771$2,111,933$1,812,493$486,965$322,654$13,543$9,445,359
49.7 %22.4 %19.2 %5.2 %3.4 %0.1 %100.0 %
(1)Geographic regions:  Northwest (AK, ID, MT, OR, WA, WY); Southwest (AZ, CA, CO, HI, NM, NV, UT); Mid-North (IA, IL, IN, MI, MN, NE, ND, SD, WI); Mid-South (AR, KS, LA, MO, OK, TX); Northeast (CT, DE, KY, MA, MD, ME, NH, NJ, NY, OH, PA, RI, VA, VT, WV); Southeast (AL, FL, GA, MS, NC, SC, TN).


 As of September 30, 2017
 Farm & Ranch Concentrations by Commodity Type within Geographic Region
 Crops Permanent
Plantings		 Livestock Part-time
Farm		 Ag. Storage and
Processing		 Other Total
 (dollars in thousands)
By geographic region(1):
             
Northwest$344,689
 $104,660
 $218,667
 $55,349
 $—
 $251
 $723,616
 5.3% 1.6% 3.3% 0.8% —% —% 11.0%
Southwest507,839
 890,994
 426,043
 71,247
 12,515
 9,054
 1,917,692
 7.7% 13.6% 6.5% 1.1% 0.2% 0.1% 29.2%
Mid-North1,874,780
 17,538
 191,418
 104,076
 14,481
 3,457
 2,205,750
 28.6% 0.3% 2.9% 1.7% 0.2% 0.1% 33.8%
Mid-South556,227
 20,110
 266,986
 49,001
 6,442
 527
 899,293
 8.5% 0.3% 4.1% 0.7% 0.1% —% 13.7%
Northeast131,277
 28,681
 51,190
 74,332
 5,175
 —
 290,655
 2.0% 0.4% 0.8% 1.1% 0.1% —% 4.4%
Southeast178,904
 122,238
 155,439
 53,703
 9,455
 285
 520,024
 2.7% 1.9% 2.4% 0.8% 0.1% —% 7.9%
Total$3,593,716
 $1,184,221
 $1,309,743
 $407,708
 $48,068
 $13,574
 $6,557,030
 54.8% 18.1% 20.0% 6.2% 0.7% 0.2% 100.0%
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(1)
Geographic regions:  Northwest (AK, ID, MT, OR, WA, WY); Southwest (AZ, CA, CO, HI, NM, NV, UT); Mid-North (IA, IL, IN, MI, MN, NE, ND, SD, WI); Mid-South (AR, KS, LA, MO, OK, TX); Northeast (CT, DE, KY, MA, MD, ME, NH, NJ, NY, OH, PA, RI, VA, VT, WV); Southeast (AL, FL, GA, MS, NC, SC, TN).

Table 20
 As of September 30, 2017

Farm & Ranch Cumulative Credit Losses by Origination Year and Commodity Type
 Crops Permanent
Plantings		 Livestock Part-time
Farm		 Ag. Storage and
Processing		 Total
 (in thousands)
By year of origination:           
2007 and Prior$1,638
 $9,184
 $3,803
 $1,189
 $10,198
 $26,012
20082,626
 —
 —
 153
 621
 3,400
200998
 148
 69
 —
 1,193
 1,508
2010—
 —
 5
 —
 —
 5
2011—
 —
 —
 —
 3,661
 3,661
2012—
 —
 —
 —
 —
 —
2013—
 —
 —
 —
 —
 —
2014—
 —
 —
 —
 —
 —
2015(540) —
 —
 —
 —
 (540)
2016—
 —
 —
 —
 —
 —
2017—
 —
 —
 —
 —
 —
Total$3,822
 $9,332
 $3,877
 $1,342
 $15,673
 $34,046



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Table 29
As of September 30, 2021
Farm & Ranch Cumulative Credit Losses by Origination Year and Commodity Type
CropsPermanent
Plantings		LivestockPart-time
Farm		Ag. Storage and
Processing		Total
(in thousands)
By year of origination:
2011 and prior$3,427 $9,783 $3,836 $1,066 $15,673 $33,785 
2012— — — — — — 
2013— — — — — — 
2014— — — — — — 
2015(540)— — 24 — (516)
2016— — — — — — 
2017— — — — 5,365 5,365 
2018— — — — — — 
2019— — — — — — 
2020— — — — — — 
2021— — — — — — 
Total$2,887 $9,783 $3,836 $1,090 $21,038 $38,634 


Rural Utilities

Farmer Mac's direct credit exposure to Rural Utilities loans held and loans underlying LTSPCs as of September 30, 2021 was $2.8 billion across 45 states. For more information about Farmer Mac's underwriting and collateral valuation standards for Rural Utilities loans, see "Business—Farmer Mac's Lines of Business—Rural Utilities—Underwriting" in Farmer Mac’s 2020 Annual Report. As of September 30, 2021, there were no delinquencies in Farmer Mac's portfolio of Rural Utilities loans.

Farmer Mac regularly conducts detailed, statistical stress testshas indirect credit exposure to Rural Utilities loans that secure AgVantage securities included in the Institutional Credit line of business. As of September 30, 2021, Farmer Mac had not experienced any credit losses on any AgVantage securities. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk—Institutional" for more information about Farmer Mac's credit risk on AgVantage securities.

Farmer Mac evaluates credit risk for these assets by reviewing a variety of borrower credit risk characteristics. These characteristics can include (but is not limited to) financial metrics, internal risk ratings, ratings assigned by ratings agencies, types of customers served, sources of power supply, and the regulatory environment.

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


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Table 30
Rural Utilities portfolio by internally assigned risk rating as of September 30, 2021
AcceptableSpecial MentionSubstandardTotal
(in thousands)
Distribution Cooperative$2,112,176 $— $— $2,112,176 
G&T Cooperative589,357 — 23,200 612,557 
Renewable Energy92,694 — — 92,694 
Rural Utilities Total$2,794,227 $— $23,200 $2,817,427 

For more information about the credit quality of Farmer Mac's Rural Utilities portfolio and the associated allowance for losses please refer to Notes 5 and 6 of the consolidated financial statements.

Other Considerations Regarding Credit Risk Related to Loans and Guarantees

The credit exposure on USDA Securities, including those underlying Farmer Mac Guaranteed USDA Securities, is guaranteed by the full faith and credit of the United States. Therefore, Farmer Mac believes that we have little or no credit risk exposure in the USDA Guarantees line of business because of the USDA guarantee. As of September 30, 2021, Farmer Mac had not experienced any credit losses on any securities under the USDA Guarantees line of business and does not expect to incur any such losses in the future. Because we do not expect credit losses on this portfolio, Farmer Mac does not provide an allowance for losses on its portfolio for credit risk and compares those results to current and historical credit quality metrics and to the various statutory, regulatory, and Farmer Mac's board of directors' capital policy metrics. Farmer Mac's methodologies for pricing its guarantee and commitment fees, managing credit risk, and providing adequate allowances for losses consider all of the foregoing factors and information.USDA Securities.


Farmer Mac requires most approved lenders to make representations and warranties regardingabout the conformity of eligible agricultural mortgage and rural utilitiesRural Utilities loans to Farmer Mac's standards, the accuracy of loan data provided to Farmer Mac, and other requirements related to the loans. Sellers who make these representations and warranties are responsible to Farmer Mac for breaches of those representations and warranties, andwarranties. Farmer Mac has the ability to require a seller to cure, replace, or repurchase a loan sold or transferred to Farmer Mac if any breach of a representation or warranty is discovered that was material to Farmer Mac's decision to purchase the loan or that directly or indirectly causes a default or potential loss on a loan sold or transferred by the seller to Farmer Mac. During third quarter 2017, Farmer Mac did not require any seller to cure or repurchase a loan purchased by Farmer Mac for breach of a representation or warranty. During the previous three years ended September 30, 2017, Farmer Mac had required one seller to repurchase a total of two loans aggregating $0.8 million for2021, there have been no breaches of representations and warranties made about those two loans, both of which repurchases occurred during first quarter 2016.by sellers that resulted in Farmer Mac requiring a seller to cure, replace, or repurchase a loan. In addition to relying on the representations and warranties of lenders,sellers, Farmer Mac also underwrites all of the agricultural real estate mortgage loans (other than rural housing and part-time farm mortgage loans) and rural utilitiesRural Utilities loans thaton which it holds in its portfolio.has direct credit exposure. For rural housing and part-time farm mortgage loans, Farmer Mac relies on representations and warranties from the seller that those loans conform to Farmer Mac's specified underwriting criteria without exception.criteria. For more information about Farmer Mac's loan eligibility requirements and underwriting standards, see "Business—Farmer Mac's Lines of Business—Farm & Ranch—Loan Eligibility"Eligibility," "Business—Farmer Mac's Lines of Business—Farm & Ranch—Underwriting and Collateral Standards," "Business—Farmer Mac's Lines of Business—Rural Utilities—Loan Eligibility," and "Business—Farmer Mac's Lines of Business—Rural Utilities—Loan Eligibility"Underwriting and Collateral Standards" in Farmer Mac'sMac’s 2020 Annual Report on Form 10-K for the fiscal year ended December 31, 2016 filed with the SEC on March 9, 2017.Report.


Under contracts with Farmer Mac and in consideration for servicing fees, Farmer Mac-approved central servicers service loans in accordance with Farmer Mac's requirements. Central servicersServicers are responsible to Farmer Mac for serious errors in the servicing of those loans. If a central servicer materially breaches the terms of its servicing agreement with Farmer Mac, such as failing to forward payments received or releasing collateral without Farmer Mac's consent, or experiences insolvency or bankruptcy, the servicer is responsible for any

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corresponding damages to Farmer Mac and, in most cases, Farmer Mac has the right to terminate the servicing relationship for a particular loan or the entire portfolio serviced by the central servicer. In addition, Farmer Mac also can proceed against the central servicer in arbitration or exercise any remedies available to it under law. During the previous three years ended September 30, 2017,2021, Farmer Mac had not exercised any remedies or taken any formal action against any central servicers. For more information about Farmer Mac's servicing requirements, see "Business—Farmer Mac's Lines of Business—Farm & Ranch—Servicing" and "Business—Farmer Mac's Lines of Business—Rural Utilities—Servicing" in Farmer Mac'sMac’s 2020 Annual Report on Form 10-K for the fiscal year ended December 31, 2016 filed with the SEC on March 9, 2017.Report.


Credit Risk – Institutional.  Farmer Mac is exposed to credit risk arising from its business relationships with other institutions, including:which include:
 
•issuers of AgVantage securities;
•approved lenders and servicers; and
•interest rate swap counterparties.



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Farmer Mac approves AgVantage counterparties and manages institutional credit risk related to those AgVantage counterparties by requiring them to meet Farmer Mac's standards for creditworthiness for the particular counterparty type and transaction. The required collateralization level is established at the timewhen the AgVantage facility is entered into with the counterparty and does not change during the life of the AgVantage securities issued under the facility.facility without Farmer Mac's consent. In AgVantage transactions, the corporate obligor is typically required to remove from the pool of pledged collateral any loanloans that becomes more than 30 daysbecome and remain (within specified parameters) delinquent in the payment of principal or interest and to substitute an eligible loanloans that isare current in payment or pay down the AgVantage securities to maintain the minimum required collateralization level. 

In the event of a default on the general obligation,an AgVantage security, Farmer Mac would have recourse to the pledged collateral and have rights to the ongoing borrower payments of principal and interest. For Farm Equity AgVantage counterparties and smaller financial funds or entities, Farmer Mac also requires that the counterparty generally (1) maintain a higher collateralization level either through a higher overcollateralization percentage or through lower loan-to-value ratio thresholds and higher overcollateralization than required for traditional AgVantage securities and (2) comply with specified financial covenants for the life of the related Farm Equity AgVantage security to avoid default. For a more detailed description of AgVantage securities, see "Business—Farmer Mac's Lines of Business—Institutional Credit—AgVantage Securities"Credit" in Farmer Mac's 2020 Annual Report on Form 10-K for the year ended December 31, 2016 filed with the SEC on March 9, 2017.Report.


The unpaid principal balance of outstanding on-balance sheet AgVantage securities secured by loans eligible for the Farm & Ranch line of business totaled $5.1$4.8 billion as of September 30, 20172021 and $3.7$5.2 billion as of December 31, 2016.2020. The unpaid principal balance of on-balance sheet AgVantage securities secured by loans eligible for the Rural Utilities line of business totaled $2.5$3.4 billion as of September 30, 20172021 and $2.3$2.6 billion as of December 31, 2016.2020. The unpaid principal balance of outstanding off-balance sheet AgVantage securities totaled $0.3 billion$4.4 million as of both September 30, 20172021 and $1.3 billion as of December 31, 2016. The decrease in the unpaid principal balance of outstanding off-balance sheet AgVantage securities from year-end 2016 was attributable to the refinancing of a $1.0 billion AgVantage security that matured in April 2017 into three new on-balance sheet AgVantage securities. Previously, $970.0 million of this $1.0 billion maturing AgVantage security was reported as off-balance sheet business volume because it was owned by third party investors. For more information about this AgVantage transaction, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Business Volume."2020.



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The following table provides information about the issuers of AgVantage securities as well asand the required collateralization levels for those transactions as of September 30, 20172021 and December 31, 2016:2020:



Table 31
 As of September 30, 2021As of December 31, 2020
CounterpartyBalanceRequired CollateralizationBalanceRequired Collateralization
 (dollars in thousands)
AgVantage:
CFC$3,355,959 100%$2,570,249 100%
MetLife2,050,000 103%2,375,000 103%
Rabo AgriFinance2,330,000 110%2,050,000 110%
Other(1)
210,008 106% to 125%551,654 106% to 125%
Farm Equity AgVantage(2)
187,336 110%192,456 110%
Total outstanding$8,133,303  $7,739,359  

(1)Consists of AgVantage securities issued by 9 and 6 different issuers as of September 30, 2021 and December 31, 2020, respectively.
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(2)Consists of AgVantage securities issued by 4 and 4 different issuers as of September 30, 2021 and December 31, 2020, respectively.

Table 21
  As of September 30, 2017 As of December 31, 2016
Counterparty Balance Credit Rating Required Collateralization Balance Credit Rating Required Collateralization
  (dollars in thousands)
AgVantage:            
MetLife $2,550,000
 AA- 103% $2,550,000
 AA- 103%
CFC(1)
 2,812,873
 A 100% 2,594,402
 A 100%
Rabo Agrifinance, Inc. 2,075,000
 None 106% 1,800,000
 None 106%
Other(2)
 126,088
 
(3) 
 106% to 125% 86,373
 
(3) 
 106% to 125%
Farm Equity AgVantage(4)
 337,881
 None 110% 256,911
 None 110%
Total outstanding $7,901,842
     $7,287,686
    
(1)
Includes $300.0 million related to a revolving floating rate AgVantage facility. Farmer Mac receives a fixed fee based on the full dollar amount of the facility.
(2)
Consists of AgVantage securities issued by 6 different issuers as of both September 30, 2017 and December 31, 2016.
(3)
Consists of AgVantage securities from 6 different issuers without a credit rating as of both September 30, 2017 and December 31, 2016.
(4)
Consists of AgVantage securities from 5 different issuers as of September 30, 2017 and 3 different issuers as of December 31, 2016.


Farmer Mac manages institutional credit risk related to lenders and servicers by requiring those institutions to meet Farmer Mac's standards for creditworthiness. Farmer Mac monitors the financial condition of those institutions by evaluating financial statements and bank credit rating agency reports.  For more information about Farmer Mac's lender eligibility requirements, see "Business—Farmer Mac's Lines of Business—Farm & Ranch—Approved Lenders" and "Business—Farmer Mac's Lines of Business—Rural Utilities—Approved Lenders" in Farmer Mac's 2020 Annual Report on Form 10-K for the year ended December 31, 2016 filed with the SEC on March 9, 2017.Report.


Farmer Mac manages institutional credit risk related to its interest rate swap counterparties through collateralization provisions contained in each of its swap agreements that variesvary based on the market value of its swapsswap portfolio with each counterparty. Furthermore, rules jointly issued by various prudential regulators, including FCA, establish minimum requirements for the exchange of initial and variation margin between Farmer Mac and its interest rate swap dealer counterparties in non-cleared swaps transactions. Effective March 1, 2017, Farmer Mac wasare required to exchange variation margin with itsfully collateralize their derivatives positions without any minimum threshold for cleared swap dealer counterparties intransactions, as well as for non-cleared swapsswap transactions entered into following the effective date at a zero threshold level pursuant to these new rules.after March 1, 2017. Farmer Mac transacts interest rate swaps with multiple counterparties to ensure a more even distributionreduce counterparty credit exposure concentration. Farmer Mac's usage of institutional credit risk relatedcleared derivatives has increased over time as has its exposure to its swap transactions. As a resultclearinghouses. The usage of mandatory clearing rules for certain interest rate derivative transactions enacted under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"), Farmer Mac uses the clearing process for cleared swap transactions as another mechanism for managing its derivative counterparty risk.reduces Farmer Mac's exposure to individual counterparties with the central clearinghouse acting to settle the change in value of contracts on a daily basis. Credit risk related to interest rate swap contracts is discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Interest Rate Risk" and Note 4 to the consolidated financial statements.


Credit Risk–Other Investments. As of September 30, 2017,2021, Farmer Mac had $0.4$0.9 billion of cash and cash equivalents and $2.2$3.7 billion of investment securities. The management of the credit risk inherent in these investments is governed by Farmer Mac's internal policies as well as FCA regulations whichthat establish criteria for investments eligible for Farmer Mac's investment portfolio, including limitations on asset class, dollar amount, issuer concentration, and credit quality. Those regulations can be found at 12 C.F.R. §§ 652.1-652.45quality (the "Liquidity and Investment Regulations"). In addition to establishing a portfolio of highly liquid investments as an available source of cash, the goals of Farmer Mac's investment policies are designed to minimize Farmer Mac's exposure to financial market volatility, preserve capital, and support Farmer Mac's access to the debt markets.


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The Liquidity and Investment Regulations and Farmer Mac's internal policies generally require eachthat investments held in Farmer Mac's investment or issuerportfolio meet the following creditworthiness standards: (1) at a

98




minimum, at least one obligor of anthe investment to be highly rated by a nationally recognized statistical rating organization ("NRSRO").  Investments in mortgage securities and asset-backed securities are required tomust have a rating invery strong capacity to meet financial commitments for the highest NRSRO category. Corporate debt securities with maturities of no more than five years but more than three years are required to be rated in onelife of the two highest categories; corporate debt securities with maturitiesinvestment, even under severely adverse or stressful conditions, and generally present a very low risk of three years or less are requireddefault; (2) if the obligor whose capacity to be ratedmeet financial commitments is being relied upon to meet the standard set forth in onesubparagraph (1) is located outside of the three highest categories.  Some investments do not require a rating, such as U.S. Treasury securities and other obligations fully insured by the United States, the investment must also be fully guaranteed by a U.S. government agency; and (3) the investment must exhibit low credit risk and other risk characteristics consistent with the purpose or a government agency or diversified investment funds regulated under the Investment Company Act of 1940.  Investments in diversified investment funds are further limited to those funds that are holding only instruments approvedpurposes for direct investment by Farmer Mac.which it is held.


The Liquidity and Investment Regulations and Farmer Mac's internal policies also establish concentration limits, which are intended to limit exposure to any one counterparty. Although thesingle entity, issuer, or obligor. The Liquidity and Investment Regulations limit Farmer Mac's total credit exposure to any single entity, issuer, or obligor of securities and uncollateralized financial derivatives to 25 percent10% of Farmer Mac's regulatory capital (as($119.6 million as of September 30, 2017, 25 percent of Farmer Mac's regulatory capital was $165.5 million),2021). However, Farmer Mac's current policy limits this total credit exposure to 5 percent5% of its regulatory capital (as($59.8 million as of September 30, 2017, 5 percent of Farmer Mac's regulatory capital was $33.1 million)2021). These exposure limits do not apply to obligations of the United StatesU.S. government agencies or GSEs, thoughalthough Farmer Mac is restricted byMac's current policy restricts investing more than 100% of regulatory capital in the senior non-convertible debt securities of any one GSE.

Although the Liquidity and InvestmentInvestments Regulations and its own policy from investing more than 100 percentdo not establish limits on the maximum amount, expressed as a percentage of its regulatory capitalFarmer Mac's investment portfolio, that can be invested in any one GSE.each eligible asset class, Farmer Mac's internal policies set forth asset class limits as part of Farmer Mac's overall risk management framework.


On February 23, 2016, FCA published a proposed rule in the Federal Register to amend the Liquidity and Investment Regulations to comply with Section 939A of the Dodd-Frank Act by removing references and requirements relating to credit ratings and replacing them with other standards of creditworthiness, as well as to revise the eligibility criteria and exposure limits for certain types of investments. Farmer Mac submitted comments on this proposed rule to FCA on April 25, 2016 and expects a final rule to be issued during 2017 or 2018. Farmer Mac expects that it will be able to successfully adapt to FCA's proposed amendments of the Liquidity and Investment Regulations.

Interest Rate Risk.  Farmer Mac is subject to interest rate risk on all funded financial assets retained on its balance sheet because of possible timing differences in the cash flows due to maturity, paydown, or repricing of the assets and related liabilities.  This risk is primarily related to loans held, Farmer Mac Guaranteed Securities (excluding AgVantage securities), and USDA Securities due to the ability of borrowers to prepay their loans before the scheduled maturities, thereby increasing the risk of asset and liability cash flow mismatches.debt together with financial derivatives. Cash flow mismatches in adue to changing interest rate environmentrates can reduce the earnings of Farmer Mac if assets repayprepay sooner than expected and the resulting cash flows must be reinvested in lower-yielding investments when Farmer Mac's funding costs cannot be correspondingly reduced, orreduced. Alternatively, Farmer Mac could realize a decline in income if assets repay more slowly than expectedoriginally forecasted and the associated maturing debt must be replaced by higher-cost debt. As discussed below, Farmer Mac manages thisdebt issuances at higher interest rate risk by funding assets purchased with liabilities matching the duration and cash flow characteristics of the assets purchased.rates.


Interest Rate Risk Management


The goal of interest rate risk management at Farmer Mac is to create and maintainmanage the balance sheet in a portfoliomanner that generates stable earnings and value across a variety of interest rate environments. Recognizing that interest rate sensitivitysensitivities may change with the passage of time and as interest rates change, Farmer Mac


100


regularly assesses this exposure on a regular basis and, if necessary, readjustsadjusts its portfolio of funded financial assets, debt, and liabilities by:financial derivatives.

purchasing assets inFarmer Mac's objective is to maintain its exposure to interest rate risk within appropriate limits, as approved by Farmer Mac's board of directors. Farmer Mac's management-level Asset and Liability Committee ("ALCO") provides oversight, establishes guidelines, and approves strategies to maintain interest rate risk within the ordinary course of business;board-established limits.
refinancing existing liabilities; or
using financial derivatives to alter the characteristics of existing assets or liabilities.


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

99




Mac seeks to issue debt securities across a variety of maturities that together with financial derivatives closely align the forecasted debt and financial derivative cash flow characteristics so that they will perform similarly as interest rates change. To match these characteristics, flows with forecasted asset cash flows.

Farmer Mac issues discount notes and both callable and non-callable medium-term notes across a spectrum of maturities. Farmer Mac issues callablematurities to execute its debt issuance strategy. Callable debt is issued to offset themitigate prepayment risk associated with some loans. By using a blend of liabilities that includes callable debt, the interest rate sensitivities of the liabilities tend to increase or decreasecertain funded financial assets held on balance sheet. In general, as interest rates change in a manner similardecline, prepayments typically increase, and Farmer Mac is able to changes in theeconomically extinguish certain callable debt issuances. In addition, Farmer Mac enters into financial derivatives, primarily interest rate sensitivities of the assets. Farmer Mac also uses financial derivativesswaps, to better match the durations of Farmer Mac's assets and liabilities, thereby reducing overall sensitivity to changing interest rate sensitivity.rates.


Taking into consideration the prepayment provisions and the default probabilities associated with its loanportfolio of funded financial assets, Farmer Mac usesincorporates behavioral prepayment models to projectwhen projecting and valuevaluing cash flows associated with these assets. BecauseIn recognition that borrowers' behaviors in various interest rate environments may change over time, Farmer Mac periodically evaluates the effectiveness of these models compared to actual prepayment experience and adjusts and refines the models as necessary to improve the precision of subsequentfuture prepayment forecasts.


In certain cases, yield maintenance provisions and other prepayment penalties contained in agricultural real estate mortgage loans and rural utilities loans reduce, but do not eliminate, prepayment risk.  Those provisions require borrowers to make an additional payment when they prepay their loans, thus compensating Farmer Mac for the shortened duration of the prepaid loan.  As of September 30, 2017, approximately 2 percent of the total outstanding balance of loans in the Farm & Ranch line of business where Farmer Mac either owned the loan or the beneficial interest in the underlying loan had yield maintenance provisions or other forms of prepayment protection (together covering 5 percent of all loans with fixed interest rates).  Of the Farm & Ranch loans purchased in third quarter 2017, none had yield maintenance or another form of prepayment protection. As of September 30, 2017, none of Farmer Mac's USDA Securities had yield maintenance provisions; however, 5 percent contained other prepayment penalties.  Of the USDA Securities purchased in third quarter 2017, 3 percent contained various forms of prepayment penalties.  As of September 30, 2017, 64 percent of the Rural Utilities loans owned by Farmer Mac had yield maintenance provisions. Of the Rural Utilities loans purchased in third quarter 2017, 100 percent contained prepayment penalties.

Farmer Mac's purchases of eligible loan assets expose Farmer Mac to interest rate risk arising primarily from uncertainty as to when the borrowers will repay the outstanding principal balance on the related loans. Generally, the values of Farmer Mac's eligible loan assets, and the debt issued to fund these assets, increase when interest rates decline, and their values decrease as interest rates rise. Furthermore, changesChanges in interest rates may affect loan prepayment ratesthe timing of asset prepayments which may, in turn, affectimpact durations and values of the loans.assets. Declining interest rates generally increase prepayment rates,results in increased prepayments, which shortens the duration of these assets, while rising interest rates tend to slow loangenerally results in lower prepayments, thereby extending the duration of the loans.assets.



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Farmer Mac is also subject to interest rate risk on loans that Farmer Macand securities it has committed to acquire but not yet purchased (other than delinquent loans purchased through LTSPCs) but has not yet purchased.LTSPCs or loans designated for securitization under a forward purchase agreement). When Farmer Mac commits to purchase those loans,these assets, it is exposed to interest rate risk between the time it commits to purchase the loans and the time it either:
sells Farmer Mac Guaranteed Securities backed by the loans; or
issues debt to retainfund the loans in its portfolio.

purchase of these loans. Farmer Mac manages the interest rate risk exposure related to these loans and any related Farmer Mac Guaranteed Securities or debt issuance, through the use of forward sale contracts on the debt securities of other GSEs andby entering into exchange-traded futures contracts involving U.S. Treasury securities.securities and other financial derivatives. Similarly, when Farmer Mac uses forward sale contracts on GSE securitiescommits to reduce itssell certain assets, the associated interest rate exposure to changes in bothis primarily managed with exchange-traded futures contracts involving U.S. Treasury ratessecurities and spreads on Farmer Mac debt and certain Farmer Mac Guaranteed Securities. Issuing debt to fund the loans as investments does not fully eliminate interest rate risk due to the possible timing differences in the cash flows of the assets and related liabilities, as discussed above.other financial derivatives.


Farmer Mac's $0.4$0.9 billion of cash and cash equivalents mature within three months and are generally funded with discount notesdebt having similar maturities. As of September 30, 2017, $2.152021, $3.0 billion of the $2.23$3.7 billion of investment securities (96 percent(80%) were floating rate securities with rates that adjust within one year or fixed rate securities with original maturities between three months and one year. ThoseFarmer Mac's floating rate investment securities are funded with effectively floating rate debt that closely matches the rate adjustment datesfrequency of the associated investments. As of September 30, 2017,The fixed rate investment securities are generally funded in a manner consistent with Farmer Mac had outstanding discount notes of $1.9 billion, medium-term notesMac's overall funding strategy that mature within one year of $6.2 billion,approximates a duration and medium-term notes that mature after one year of $7.4 billion.convexity match.


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Interest Rate Risk Metrics


Farmer Mac regularly stress testsevaluates and conducts interest rate shock simulations on its portfolio for interest rate riskof financial assets, debt, and usesfinancial derivatives and examines a variety of metrics to quantify and manage its exposure to interest rate risk. These metrics include sensitivity to interest rate movements ofon the market value of equity ("MVE") and projectedforecasted net effective spread ("NES") as well as duration gap analysis.

MVE represents management's estimate of the present value of all future cash flows from its current portfolio of on- and off-balance sheet assets, liabilities, and financial derivatives, discounted at current interest rates and appropriate spreads. However, MVE is not indicative of the market value of Farmer Mac as a going concern because these market values are theoretical and do not reflect future business activities. The MVE sensitivity analysis is used to measuremeasures the degree to which the market values of Farmer Mac's assets, liabilities, and liabilitiesfinancial derivatives are estimated to change for a given change in interest rates. Because this analysis evaluates the impact of interest rate movements on the value of all future cash flows, this measure provides an evaluation of Farmer Mac's long-term interest rate risk.


Farmer Mac's NES simulation represents the difference between projected income over the next twelve months from the current portfolio of interest-earning assets and interest expense associated withproduced by the related funding, including associated financial derivatives. Farmer Mac's NES simulation may be affectedimpacted by changes in market interest rates resulting from timing differences between maturities and re-pricing characteristics of funded assets and liabilities.debt together with the associated financial derivatives. The direction and magnitude of any such effect depends on the direction and magnitude of the change in interest rates across the yield curve as well as the composition of Farmer Mac's portfolio. The NES forecastsimulation represents an estimate of the net effective spread income that Farmer Mac's current portfolio is expected to produce over a twelve-month horizon. As a result, the NES simulation sensitivity statistics provide a short-term view of Farmer Mac's NES income sensitivity to interest rate sensitivity.shocks.


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Duration is a measure of a financial instrument's fair value sensitivity to small changes in interest rates. Duration gap is calculated using the difference between thenet estimated durations of Farmer Mac's funded financial assets, debt, and liabilities. Because duration is a measure of market value sensitivity, durationfinancial derivatives. Duration gap summarizesquantifies the extent to which estimated marketfair value sensitivities are matched for funded financial assets, debt and liabilities are matched.financial derivatives.. Duration gap provides a relatively concise measure of the interest rate risk inherent in Farmer Mac's outstanding book of business.portfolio.


A positive duration gap denotes that the duration of Farmer Mac's funded financial assets is greater than the duration of its liabilities.debt and financial derivatives. A positive duration gap indicates that with small changes in interest rate movements the marketfair value change of Farmer Mac's funded financial assets is more sensitive to small interest rate movements than is the marketfair value change of its liabilities.debt and financial derivatives. Conversely, a negative duration gap indicates that with small changes in interest rate movements the fair value change of Farmer Mac's funded financial assets are less sensitive tothan the fair value change of its debt and financial derivatives. A duration gap of zero indicates that with small changes in interest rate movements than arethe fair value change of Farmer Mac's funded financial assets is effectively offset by the fair value change of its liabilities.debt and financial derivatives.


Each of the interest rate risk metrics is producedquantified using asset/liability models and is derived based on management's best estimates of factors such as projectedforward interest rates across the yield curve, interest rate volatility, and prepayment speeds.timing of asset prepayments and callable debt redemptions. Accordingly, these metrics should be understood asare estimates rather than precise measurements. In addition, actualActual results may differ to the extent there are material changes to Farmer Mac's financial asset portfolio or changes in funding or hedging strategies undertaken to mitigate unfavorable sensitivities to interest rate changes.



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The following schedule summarizes the results of Farmer Mac's MVE and NES sensitivity analysis as of September 30, 20172021 and December 31, 20162020 to an immediate and instantaneous uniform or "parallel" shift in the yield curve:


Table 2232
 Percentage Change in MVE from Base Case
Interest Rate Scenario(1)
As of September 30, 2021
As of December 31, 2020(1)
+100 basis points4.1 %4.9 %
-100 basis points(0.1)%(0.2)%
 Percentage Change in NES from Base Case
Interest Rate ScenarioAs of September 30, 2021
As of December 31, 2020(1)
+100 basis points7.5 %3.9 %
-100 basis points(0.1)%— %
  Percentage Change in MVE from Base Case
Interest Rate Scenario As of September 30, 2017 As of December 31, 2016
+100 basis points (1.4)% (2.5)%
-50 basis points (1.7)% (0.8)%

  Percentage Change in NES from Base Case
Interest Rate Scenario As of September 30, 2017 As of December 31, 2016
+100 basis points 3.0 % 3.0 %
-50 basis points (2.2)% (2.1)%


Farmer Mac's board(1)The down 100 basis points shock scenario was replaced in 2020 with a proportional shock relative to 50% of directors has established policies and procedures regarding MVE and NES sensitivity. These policies include the measurement of MVE and NES sensitivity to more severe decreasing interest3-month Treasury bill rate, scenarios that are consistent in magnitude with the increasing interest rate scenarios. However, givenapproval of the current low interest rate environment, those rate scenarios produceFinancial Risk Committee of the Board of Directors. The replacement down shock scenario was negative interest rates, and, as a result, do not produce results that are meaningful. Consequently, Farmer Mac currently measures and reports MVE and NES sensitivity to a down 502 basis point interest rate shock.as of September 30, 2021 and negative 4 basis points as of December 31, 2020.



As of September 30, 2017,2021, Farmer Mac's effective duration gap was negative 0.71.3 months, compared to positive 0.1negative 1.6 months as of December 31, 2016.  During the first nine months2020. Farmer Mac updated its duration gap measure to funded assets, debt, and financial derivatives as of 2017, short-term interestDecember 31, 2020. Interest rates increased materially andwithin the yield curve flattened. This rate movement reduced the duration of Farmer Mac's assets relative to its liabilities, thereby slightly widening Farmer Mac's duration gap. Despite this rate movement, Farmer Mac's overall interest rate sensitivity remained relatively stable and at relatively low levelssteepened significantly during the first nine months of 2017.2021 with the 2-year and 10-year U.S. Treasury Note yield-to-maturity increasing by approximately 16 basis points and 56 basis points, respectively, versus year-end 2020. This rate movement contributed to extending the duration of Farmer Mac's funded assets compared to its debt and financial derivatives, thereby narrowing Farmer Mac's duration gap.



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Financial Derivatives Transactions


The economic effects of financial derivatives are included in Farmer Mac's MVE, NES, and duration gap analyses. Farmer Mac enters into the following types of financial derivative transactions principally to protect against risk from the effects of market price or interest rate movements on the value of funded financial assets, future cash flows, credit exposure, and debt issuance, and not for trading or speculative purposes:

•"pay-fixed" interest rate swaps, in which Farmer Mac pays fixed rates of interest to, and receives floating rates of interest from, counterparties;
•"receive-fixed" interest rate swaps, in which Farmer Mac receives fixed rates of interest from, and pays floating rates of interest to, counterparties; and
•"basis swaps," in which Farmer Mac pays variablefloating rates of interest based on one index to, and receives variablefloating rates of interest based on anothera different index from, counterparties.counterparties; and

•exchange-traded futures contracts involving U.S. Treasury securities.

As of September 30, 2017,2021, Farmer Mac had $8.8$15.8 billion combined notional amount of interest rate swaps, with terms ranging from less than one year to twenty-fivethirty years, of which $2.7$6.1 billion were pay-fixed interest rate swaps, $4.8$7.6 billion were receive-fixed interest rate swaps, and $1.2$2.1 billion were basis swaps.


Farmer Mac enters into interest rate swap contractsswaps to synthetically adjust the characteristics of its debt to match more closely match the cash flow and duration characteristics of its loans and otherfunded financial assets thereby reducing interest rate risk and often times deriving an overall lower effective costwith those of borrowing than would otherwise be available toits debt. For example, Farmer Mac in the conventional debt market.  Specifically,transacts pay-fixed interest rate swaps synthetically convert the variable cash flows relatedand issues floating rate debt to the forecasted issuance of short-term debt into effectively create fixed rate medium-term notesfunding that matchapproximately matches the anticipated duration and interest rate characteristics of the corresponding assets.fixed rate assets being funded. Farmer Mac

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

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

Farmer Mac has used callable Also, certain financial derivatives are designated as cash flow hedges to mitigate the volatility of future interest rate swaps (in conjunction with the issuance of short-term debt) as an alternative to callable medium-term notes with equivalently structured maturities and call options.  The call optionspayments on the swaps are designed to match the prepayment options on those assets without prepayment protection.  The blended durations of the swaps are also designed to match the duration of the related assets over their estimated lives.  If the assets prepay, the swaps can be called and the short-term debt repaid; if the assets do not prepay, the swaps remain outstanding and the short-term debt is rolled over, effectively providing fixedfloating rate callable funding over the lives of the related assets.  Thus, the economics of the assets are closely matched to the economics of the interest rate swap and funding combination.debt.


As discussed in Note 4 to the consolidated financial statements, all financial derivatives are recorded on the balance sheet at fair value as derivative assets or as derivative liabilities. Changes in the fair values of undesignated financial derivatives are reported in "Gains/(losses)"Losses on financial derivatives and hedging activities"derivatives" in the consolidated statements of operations. For financial derivatives designated in fair value hedge accounting relationships, changes in the fair values of the hedged items related to the risk being hedged are also reported in "Gains/(losses) on financial derivatives and hedging activities""Net interest income" in the consolidated statements of operations. The accrualInterest accruals on derivatives designated in fair value hedge accounting relationships are also recorded in "Net interest income" in the consolidated statements of the contractual amounts due on the financial derivative is included as an


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adjustment to the yield of the hedged item and is reported in net interest income.operations. For financial derivatives designated in cash flow hedge accounting relationships, the effective portion ofunrealized gain or loss on the derivative gain/loss is recorded in other comprehensive income. AmountsBecause the hedging instrument is an interest rate swap and the hedged forecasted transactions are disclosed as a reclassification out offuture interest payments on floating rate debt, amounts recorded in accumulated other comprehensive income and affecting netare reclassified to "Total interest income whenexpense" in conjunction with the hedged transaction occurs and affects earnings. Any ineffective portionrecognition of designated hedge transactions is recognized immediately in "Gains/(losses)interest expense on financial derivatives and hedging activities."the debt. All of Farmer Mac's financial derivativesinterest rate swap transactions are conducted under standard collateralized agreements that limit Farmer Mac's potential credit exposure to any counterparty. As of both September 30, 2017,2021 and December 31, 2020, Farmer Mac had $0.1 millionno uncollateralized net exposures to two counterparties. As of December 31, 2016, exposures.

Re-funding and repricing risk

Farmer Mac had uncollateralizedis subject to re-funding and repricing risk on any floating rate assets that are not funded to contractual maturity. Re-funding and repricing risk arises from potential changes in funding costs when Farmer Mac funds floating rate, or synthetic floating rate, assets with floating rate debt with shorter maturities. Changes in Farmer Mac's funding costs relative to the benchmark market index rate to which the assets are indexed can cause changes to net exposures of $0.2 millioninterest income when debt matures and is reissued at then current interest rates to two counterparties.continue funding those assets.

Basis Risk


In addition, to being exposed to the risk of asset and liability cash flow mismatches, Farmer Mac is exposed to the risk related to changes in its cost of funds relative to floating rate market indexes (such as LIBOR) on some of the floating rate assets it holds. This exposure is referred to as "basis risk." Somemany of Farmer Mac's floating rate assets reset on rate adjustment dates onmay prepay before the basis of a floating rate market index, whereas the related debt thatcontractual maturity date. Farmer Mac issuedis subject to fund thosere-funding and repricing risk on a portion of its fixed rate assets until their maturities may be refinanced onas a result of its use of pay-fixed receive-floating interest rate swaps that effectively convert the basis of Farmer Mac’s cost of funds at a particular time. Basis risk arisesrequired funding needed from the potential variability between the rates at which thosefixed rate to floating rate. These fixed rate assets are then effectively synthetically floating rate assets reset and the rates at which that require floating rate funding.

Farmer Mac can issue debt to fund those assets. Farmer Mac can fund thesemeet floating rate assetsfunding needs in several ways, including:


•issuing short-term fixed rate discount notes with maturities that match the reset period of the assets;
•issuing floating rate medium-term notes with maturities and reset frequencies that match the maturities of the assets;assets being funded;

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•issuing non-maturity matched, floating rate medium-term notes;notes with reset frequencies that match the assets being funded; or
•issuing non-maturity matched, fixed-ratefixed rate discount notes or medium-term notes swapped to floating rate to match the interest rate reset dates of the assets as an alternative source of effectivelyassets.

To meet certain floating rate funding.

funding needs, Farmer Mac primarily uses the last two options identified in the list above to fund these floatingfrequently issues shorter-term floating-rate medium-term notes or fixed rate assets because this funding strategy is usually the most effective way to provide anmedium-term notes paired with a received-fixed interest rate match, maintainswap because these funding alternatives generally provide a suitable liquidity profile, and lower Farmer Mac’s cost of funds.funding while generating an effective interest rate match. As funding for these floating rate assets matures, Farmer Mac seeks to refinance the debt associated with these assets in a similar fashion to achieve an appropriate interest rate risk sensitivity match forin the remaining lifecontext of the assets. Farmer Mac's overall debt issuance and liquidity management strategies.

However, if the rates onfunding cost of Farmer Mac’s discount notes or medium-term notes deteriorateincreased relative to LIBORthe benchmark market index of the associated assets during the time between when these floating rate assets were first funded and when Farmer Mac refinancesrefinanced the associated debt, Farmer Mac iswould be exposed to a commensurate reduction in itsof net effective spread on the associated assets.spread. Conversely, if the ratesfunding cost on Farmer Mac’s discount notes or medium-term notes improvedecreased relative to LIBORthe benchmark market index during that time, Farmer Mac would benefit from a commensurate increase in its net effective spread on those assets.

Farmer Mac is also subject to basis risk on some of its fixed rate assets as a result of its use of pay-fixed interest rate swaps, combined with a series of discount note or medium-term note issuances, as an alternative source of effectively fixed rate funding. This risk arises because the rates at which Farmer Mac refinances its funding for some fixed rate assets through the issuance of discount notes or medium-term notes may vary from the agreed-upon rates based on the floating rate market index received by Farmer Mac on the associated swaps. In these cases, if the rates on Farmer Mac's discount notes or medium-term notes were to deteriorate relative to LIBOR, Farmer Mac would be exposed to a commensurate reduction


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in its net interest income and net effective spread. Conversely, if the rates on Farmer Mac's discount notes or medium-term notes were to improve relative to LIBOR, Farmer Mac would benefit from a commensurate increase in its net interest income and net effective spread.


To mitigate this basisFarmer Mac's debt issuance strategy targets balancing liquidity risk and re-funding and repricing risk while maintaining an appropriate liability management profile that is consistent with Farmer Mac's risk tolerance. Farmer Mac regularly adjusts its funding strategies to mitigate the effects of interest rate variability and seeks to issue debtmaintain an effective mixture of sufficient maturity to reducefunding structures in the frequencycontext of required refinancing of that debt over the life of the associated asset. its overall liability management and liquidity management strategies.

As of September 30, 2017,2021, Farmer Mac held $6.6$5.5 billion of floating-ratefloating rate assets in its lines of business and its liquidity investment portfolio that reset based on the basis of floating rate market indexes, primarily one-month and three-month LIBOR.indices, such as LIBOR or SOFR. As of the same date, Farmer Mac also had $2.7$6.1 billion of interest rate swaps outstanding where Farmer Mac pays a fixed rate of interest and receives a floating rate of interest.interest, primarily LIBOR.


Adjustments to Farmer Mac's funding strategies to take advantageDiscontinuation of lower cost LIBOR-based funding opportunities, as well as a generally favorable LIBOR-based funding market, has enabledLIBOR

As described in "Risk Factors—Market Risk" in Part I, Item 1A of the 2020 Annual Report, Farmer Mac faces risks associated with the reform, replacement, or discontinuation of the LIBOR benchmark interest rate and the transition to reduce its funding costs through the first nine months of 2017. LIBOR-based funding markets have recently returned to levels that are consistent with Farmer Mac's historical experience, andan alternative benchmark interest rate. Farmer Mac believesis evaluating the potential effect on our business of the replacement of the LIBOR benchmark interest rate, including the possibility of replacement benchmark interest rates.

As of September 30, 2021, Farmer Mac held $3.9 billion of floating rate assets in its lines of business and its investment portfolio, had issued $2.2 billion of floating rate debt, and had entered into $14.3 billion notional amount of interest rate swaps, each of which reset based on LIBOR. In addition, our Non-Cumulative Series C Preferred Stock currently pays a fixed rate of interest until July 17, 2024. It becomes redeemable at our option on July 18, 2024 and thereafter pays interest at a floating rate equal to three-month LIBOR plus 3.260%.

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

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may also result in the near-term are less likely.different financial performance for existing transactions, require different hedging strategies, or require renegotiation of existing transactions. As of September 30, 2021, we had $0.8 billion outstanding in medium-term notes based on SOFR, a potential alternative benchmark interest rate index.



Liquidity and Capital Resources


Farmer Mac's primary sources of funds to meet its liquidity and funding needs are the proceeds of its debt issuances, guarantee and commitment fees, net effective spread, loan repayments, and maturities of AgVantage securities. Farmer Mac regularly accesses the capital markets for funding, and Farmer Mac has maintained access to the capital markets at favorable interest rates throughout 2016 and the first nine monthsthree quarters of 2017. 2021. Farmer Mac funds its purchases of eligible loan assets, USDA Securities, Farmer Mac Guaranteed Securities, and investment assets and finances its operations primarily by issuing debt obligations of various maturities in the public capital markets. As of September 30, 2021, Farmer Mac had outstanding discount notes of $2.4 billion, medium-term notes that mature within one year of $5.7 billion, and medium-term notes that mature after one year of $14.3 billion.

Assuming continued access to the capital markets, Farmer Mac believes it has sufficient liquidity and capital resources to support its operations for the next 12 months and for the foreseeable future. Farmer Mac also has a liquidity contingency funding plan to manage unanticipated disruptions in its access to the capital markets. That plan involves borrowing through repurchase agreement arrangements and the sale of liquid assets. Farmer Mac is required tomust maintain a minimum of 90 days of liquidity under the Liquidity and Investment Regulations.Regulations prescribed for Farmer Mac by FCA. In accordance with the methodology for calculating available days of liquidity prescribed byunder those regulations, Farmer Mac maintained ana monthly average of 209279 days of liquidity during third quarter 20172021 and had 200266 days of liquidity as of September 30, 2017.
Debt Issuance.  Farmer Mac funds its purchases of eligible loan assets and investment assets and finances its operations primarily by issuing debt obligations of various maturities through a network of dealers in the public capital markets.  Farmer Mac works to enhance its funding operations by undertaking extensive debt investor relations initiatives, including conducting non-deal roadshows with institutional investors, making periodic dealer sales force presentations, and speaking at fixed income investor conferences throughout the United States. Debt obligations issued by Farmer Mac include discount notes and fixed and floating rate medium-term notes, including callable notes.

Farmer Mac's board of directors has authorized the issuance of up to $18.0 billion of discount notes and medium-term notes (of which $15.5 billion was outstanding as of September 30, 2017), subject to periodic review of the adequacy of that level relative to Farmer Mac's borrowing requirements. Farmer Mac invests the proceeds of its debt issuances in purchases of loans, USDA Securities, Farmer Mac Guaranteed Securities, and investment assets in accordance with policies established by its board of directors and subject to regulations established by FCA.

Liquidity.  The funding and liquidity needs of Farmer Mac's lines of business are driven by the purchase and retention of eligible loans, USDA Securities, and Farmer Mac Guaranteed Securities (including


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AgVantage securities); the maturities of Farmer Mac's discount notes and medium-term notes; and payment of principal and interest on Farmer Mac Guaranteed Securities.  Farmer Mac's primary sources of funds to meet these needs are the proceeds of its debt issuances, fees for its guarantees and commitments, net effective spread, loan repayments, and maturities of AgVantage securities.2021.
 
Farmer Mac maintains cash, cash equivalents (including U.S. Treasury securities and other short-term money market instruments), and other investment securities that can be drawn upon for liquidity needs. Farmer Mac's current policies authorize liquidity investments in:

•obligations of or fully guaranteed by the United States or a U.S. government agency;
•obligations of or fully guaranteed by GSEs;
•municipal securities;
•international and multilateral development bank obligations;
•money market instruments;
•diversified investment funds;
•asset-backed securities;
•corporate debt securities; and
•mortgage-backed securities.



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The following table presents these assets as of September 30, 20172021 and December 31, 2016:2020:


Table 2333
 As of September 30, 2021As of December 31, 2020
 (in thousands)
Cash and cash equivalents$899,052 $1,033,941 
Investment securities:  
Guaranteed by U.S. Government and its agencies1,666,505 1,935,056 
Guaranteed by GSEs2,055,231 1,944,497 
Asset-backed securities19,500 19,171 
Total$4,640,288 $4,932,665 

The objective of the investment portfolio as of September 30, 2021 and December 31, 2020 was to provide a level of liquidity that mitigates enterprise risk, provides a reliable source of short-term and long-term liquidity, to prepare for the possibility of future volatility in the debt capital markets, and to support program asset growth.
 As of September 30, 2017 As of December 31, 2016
 (in thousands)
Cash and cash equivalents$366,764
 $265,229
Investment securities: 
  
Guaranteed by U.S. Government and its agencies1,351,430
 1,423,850
Guaranteed by GSEs848,151
 1,044,261
Corporate debt securities—
 10,041
Asset-backed securities35,385
 37,699
Total$2,601,730
 $2,781,080

Capital Requirements. Farmer Mac is subject to the following statutory capital requirements – minimum, critical, and risk-based. Farmer Mac is required tomust comply with the higher of the minimum capital requirement and the risk-based capital requirement. The minimum capital requirement is expressed as a percentage of on-balance sheet assets and off-balance sheet obligations. The critical capital requirement is equal to one-half of the minimum capital amount. Farmer Mac's statutory charter does not specify the required level of risk-based capital but directs FCA to establish a risk-based capital stress test for Farmer Mac, using specified stress test parameters. Certain enforcement powers are given to FCA depending on Farmer Mac's compliance with these capital standards. As of September 30, 2017,2021, Farmer Mac was in compliance with its statutory capital requirements and was classified as within "level I"1" (the highest compliance level). See Note 7 to the consolidated financial statements for more information about Farmer Mac's capital position and see "Business—Government Regulation of Farmer Mac—Capital Standards" in Farmer Mac's Annual Report on Form 10-K for the fiscal year ended December 31, 2016 filed with the SEC on March 9, 2017 for more information on the capital requirements applicable to Farmer Mac.


In accordance with FCA's rule on capital planning, Farmer Mac's board of directors has adopted a policy for maintaining a sufficient level of "Tier 1" capital (consisting of retained earnings, paid-in capital, common stock, and qualifying preferred stock). That policy imposes restrictions onrestricts Tier 1-eligible dividends and any discretionary bonus payments in the event thatif Tier 1 capital falls below specified thresholds. As of September 30, 2017,2021 and December 31, 2020, Farmer Mac's Tier 1 capital ratio was 13.1%15.1% and 14.1%, comparedrespectively. The increase in our Tier 1 capital ratio was due to 12.7% as of December 31, 2016, as the marginal impact ofthat fact that capital growth, which reflects the issuance of the Series G Preferred Stock, outpaced the marginal impact of growth in risk weightedrisk-weighted assets during the first nine monthshalf of 2017. 2021. As of September 30, 2021, Farmer Mac was in compliance with its capital adequacy policy. Farmer Mac does not expect its compliance on an ongoing basis with FCA's rule on capital planning, including Farmer Mac's policy on Tier 1 capital, to materially affect Farmer Mac's operations or financial condition.

For more information about the capital requirements applicable to Farmer Mac'sMac, its capital adequacy policy, and FCA's rule on capital planning, see "Business—Government Regulation of Farmer Mac—Capital Standards"Standard" in Farmer Mac's 2020 Annual Report on Form 10-KReport. See Note 8 to the consolidated financial statements for the fiscal year ended December 31, 2016 filed with the SEC on March 9, 2017. As of September 30, 2017, Farmer Mac was in compliance with its capital adequacy policy.




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Regulatory Matters

The Dodd-Frank Act contains a variety of provisions designed to regulate financial markets. Certain provisions of the Dodd-Frank Act, including those regarding derivatives, corporate governance, and executive compensation, apply to Farmer Mac. Farmer Mac does not expect that any of the final rules that have been adopted under the Dodd-Frank Act or that may be adopted will have a material effect onmore information about Farmer Mac's business activities and operations or financial condition. Farmer Mac will continue to monitor all applicable developments in the implementation of the Dodd-Frank Act and expects to be able to adapt successfully to any new applicable legislative and regulatory requirements.capital position.



Other Matters


Common Stock Dividends. For each of the first, second, and third quarters in 2017, Farmer Mac paid a quarterly dividend of $0.36 per share on all classes of its common stock. For each quarter in 2016, Farmer Mac paid a quarterly dividend of $0.26 per share on all classes of its common stock. Farmer Mac's ability to declare and pay dividends on common stock could be restricted if it fails to comply with applicable capital requirements. See "Business—Government Regulation of Farmer Mac—Capital Standards—Enforcement Levels" in Farmer Mac's Annual Report on Form 10-K for the fiscal year ended December 31, 2016 filed with the SEC on March 9, 2017 for more information on FCA's enforcement powers.None.

Preferred Stock Dividends. For each of the first, second, and third quarters in 2017 and for each quarter in 2016, Farmer Mac paid the following quarterly dividends on its outstanding preferred stock:
$0.3672 per share on its 5.875% Non-Cumulative Preferred Stock, Series A;
$0.4297 per share on its 6.875% Non-Cumulative Preferred Stock, Series B; and
$0.3750 per share on its 6.000% Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series C.






108106






Supplemental Information


The following tables present quarterly and annual information regardingabout new business volume, repayments, and outstanding business volume:


Table 2434
New Business Volume
Farm & RanchUSDA GuaranteesRural UtilitiesInstitutional Credit
LoansLTSPCsUSDA SecuritiesLoansLTSPCsAgVantageTotal
(in thousands)
For the quarter ended:
September 30, 2021$617,557 $313,116 $114,120 $63,897 $50,000 $1,368,912 $2,527,602 
June 30, 2021650,436 241,387 100,469 39,107 — 468,616 1,500,015 
March 31, 2021681,412 117,693 157,273 48,030 22,000 442,912 1,469,320 
December 31, 2020731,434 141,332 180,520 189,729 — 96,424 1,339,439 
September 30, 2020740,823 94,495 225,494 62,300 — 211,908 1,335,020 
June 30, 2020609,284 85,390 224,016 339,366 19,500 430,024 1,707,580 
March 31, 2020401,853 73,674 147,906 152,668 — 560,395 1,336,496 
December 31, 2019602,750 65,614 143,565 102,900 — 371,075 1,285,904 
September 30, 2019309,805 125,022 113,664 117,279 — 402,611 1,068,381 
For the year ended:
December 31, 2020$2,483,394 $394,891 $777,936 $744,063 $19,500 $1,298,751 $5,718,535 
December 31, 20191,363,863 339,172 432,787 871,377 — 2,258,550 5,265,749 



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New Business Volume
 Farm & Ranch USDA Guarantees Rural Utilities Institutional Credit  
 Loans LTSPCs USDA Securities Loans LTSPCs AgVantage Total
 (in thousands)
For the quarter ended:             
September 30, 2017$298,274
 $102,774
 $131,298
 $70,000
 $—
 $290,995
 $893,341
June 30, 2017312,217
 55,899
 169,261
 25,000
 —
 1,296,757
 1,859,134
March 31, 2017314,137
 113,261
 131,101
 27,341
 —
 561,407
 1,147,247
December 31, 2016243,692
 117,265
 129,343
 10,800
 20,000
 247,154
 768,254
September 30, 2016282,690
 155,657
 119,201
 20,000
 —
 528,234
 1,105,782
June 30, 2016241,093
 58,156
 133,745
 10,000
 421,404
 396,245
 1,260,643
March 31, 2016198,548
 68,017
 98,968
 9,691
 —
 927,219
 1,302,443
December 31, 2015245,252
 185,919
 72,442
 46,082
 —
 14,391
 564,086
September 30, 2015175,965
 79,621
 91,374
 53,552
 522,262
 506,602
 1,429,376
              
For the year ended:             
December 31, 2016966,023
 399,095
 481,257
 50,491
 441,404
 2,098,852
 4,437,122
December 31, 2015748,368
 427,795
 376,935
 108,337
 522,262
 1,043,158
 3,226,855
Table 35
Repayments of Assets by Line of Business
Farm & RanchUSDA GuaranteesRural UtilitiesInstitutional Credit
LoansGuaranteed SecuritiesLTSPCsUSDA SecuritiesLoansLTSPCsAgVantageTotal
(in thousands)
For the quarter ended:
Scheduled$218,352 $1,726 $32,992 $32,436 $67,092 $9,204 $869,682 $1,231,484 
Unscheduled222,661 3,933 61,802 85,891 201 — — 374,488 
September 30, 2021$441,013 $5,659 $94,794 $118,327 $67,293 $9,204 $869,682 $1,605,972 
Scheduled$128,126 $2,778 $39,950 $41,480 $37,991 $23,874 $476,220 $750,419 
Unscheduled224,072 3,417 66,680 119,145 1,652 — — 414,966 
June 30, 2021$352,198 $6,195 $106,630 $160,625 $39,643 $23,874 $476,220 $1,165,385 
Scheduled$214,978 $4,362 $56,642 $48,137 $59,059 $21,092 $540,594 $944,864 
Unscheduled339,905 2,747 132,300 108,789 2,279 — — 586,020 
March 31, 2021$554,883 $7,109 $188,942 $156,926 $61,338 $21,092 $540,594 $1,530,884 
Scheduled$175,613 $4,213 $26,895 $29,120 $37,062 $19,528 $676,567 $968,998 
Unscheduled231,342 2,242 95,264 99,811 1,610 — — 430,269 
December 31, 2020$406,955 $6,455 $122,159 $128,931 $38,672 $19,528 $676,567 $1,399,267 
Scheduled$174,986 $2,524 $32,276 $29,654 $54,513 $14,100 $547,236 $855,289 
Unscheduled326,025 1,934 66,074 138,518 — — — 532,551 
September 30, 2020$501,011 $4,458 $98,350 $168,172 $54,513 $14,100 $547,236 $1,387,840 
Scheduled$101,264 $3,043 $39,010 $37,879 $23,589 $25,132 $471,295 $701,212 
Unscheduled248,890 4,034 92,177 154,536 3,935 — — 503,572 
June 30, 2020$350,154 $7,077 $131,187 $192,415 $27,524 $25,132 $471,295 $1,204,784 
Scheduled$128,768 $6,132 $50,393 $43,069 $34,235 $13,593 $304,540 $580,730 
Unscheduled191,260 3,888 60,442 78,806 — — — 334,396 
March 31, 2020$320,028 $10,020 $110,835 $121,875 $34,235 $13,593 $304,540 $915,126 
Scheduled$57,488 $4,737 $39,878 $25,142 $10,317 $10,551 $656,095 $804,208 
Unscheduled105,671 3,247 74,121 66,011 34,063 — 13,000 296,113 
December 31, 2019$163,159 $7,984 $113,999 $91,153 $44,380 $10,551 $669,095 $1,100,321 
Scheduled$97,421 $3,095 $22,713 $27,853 $31,656 $8,692 $441,575 $633,005 
Unscheduled129,676 2,663 76,883 39,442 — — 1,088 249,752 
September 30, 2019$227,097 $5,758 $99,596 $67,295 $31,656 $8,692 $442,663 $882,757 
For the year ended:
Scheduled$580,631 $15,912 $148,574 $139,722 $149,399 $72,353 $1,999,638 $3,106,229 
Unscheduled997,517 12,098 313,957 471,671 5,545 — — 1,800,788 
December 31, 2020$1,578,148 $28,010 $462,531 $611,393 $154,944 $72,353 $1,999,638 $4,907,017 
Scheduled$307,761 $17,433 $195,424 $132,937 $80,416 $43,995 $2,181,446 $2,959,412 
Unscheduled367,867 11,107 260,465 195,295 58,511 — 19,675 912,920 
December 31, 2019$675,628 $28,540 $455,889 $328,232 $138,927 $43,995 $2,201,121 $3,872,332 







108




Table 36
Lines of Business - Outstanding Business Volume
Farm & RanchUSDA GuaranteesRural UtilitiesInstitutional Credit
LoansGuaranteed SecuritiesLTSPCsUSDA SecuritiesLoansLTSPCsAgVantageTotal
(in thousands)
As of:
September 30, 2021$6,777,749 $60,349 $2,607,261 $2,722,702 $2,243,172 $574,255 $8,133,303 $23,118,791 
June 30, 20216,601,205 66,008 2,388,939 2,726,909 2,246,568 533,459 7,634,073 22,197,161 
March 31, 20216,302,967 72,203 2,254,182 2,787,065 2,247,104 557,333 7,641,677 21,862,531 
December 31, 20206,176,438 79,312 2,325,431 2,786,718 2,260,412 556,425 7,739,359 21,924,095 
September 30, 20205,857,324 85,767 2,306,258 2,735,129 2,109,355 575,953 8,319,502 21,989,288 
June 30, 20205,617,512 90,225 2,310,113 2,677,807 2,101,568 590,053 8,654,830 22,042,108 
March 31, 20205,358,382 97,302 2,355,910 2,646,206 1,789,726 595,685 8,696,101 21,539,312 
December 31, 20195,276,557 107,322 2,393,071 2,620,175 1,671,293 609,278 8,440,246 21,117,942 
September 30, 20194,836,966 115,306 2,441,456 2,567,763 1,612,773 619,829 8,738,266 20,932,359 


Table 37
On-Balance Sheet Outstanding Business Volume
Fixed Rate5- to 10-Year ARMs & Resets1-Month to 3-Year ARMsTotal Held in Portfolio
(in thousands)
As of:
September 30, 2021$12,921,572 $2,872,499 $3,818,550 $19,612,621 
June 30, 202111,800,429 2,878,637 4,254,625 18,933,691 
March 31, 202111,454,321 2,824,551 4,410,661 18,689,533 
December 31, 202011,330,414 2,816,840 4,511,964 18,659,218 
September 30, 202010,879,372 2,811,547 5,013,640 18,704,559 
June 30, 202010,793,629 2,845,266 5,076,445 18,715,340 
March 31, 202010,296,598 2,818,869 4,996,478 18,111,945 
December 31, 201910,045,712 2,863,199 4,702,577 17,611,488 
September 30, 20199,642,802 2,850,000 4,549,689 17,042,491 



109


Table 25
Repayments of Assets by Line of Business
 Farm & Ranch USDA Guarantees Rural Utilities Institutional Credit  
 Loans Guaranteed Securities LTSPCs USDA Securities Loans LTSPCs AgVantage Total
 (in thousands)
For the quarter ended:               
Scheduled$61,961
 $6,735
 $21,409
—
$24,163
—
$27,191
—
$39,816
—
$100,571
 $281,846
Unscheduled49,894
 5,861
 124,676
—
45,192
—
457
—
—
—
—
 226,080
September 30, 2017$111,855
 $12,596
 $146,085
 $69,355
 $27,648
 $39,816
 $100,571
 $507,926
                
Scheduled$21,687
 $9,116
 $41,821
 $35,169
 $—
 $9,885
 $1,166,922
 $1,284,600
Unscheduled51,442
 10,737
 47,262
 46,776
 —
 —
 4,000
 160,217
June 30, 2017$73,129
 $19,853
 $89,083
 $81,945
 $—
 $9,885
 $1,170,922
 $1,444,817
                
Scheduled$70,394
 $16,184
 $48,375
 $36,322
 $26,909
 $8,934
 $161,451
 $368,569
Unscheduled114,811
 11,985
 64,486
 39,457
 814
 —
 102,059
 333,612
March 31, 2017$185,205
 $28,169
 $112,861
 $75,779
 $27,723
 $8,934
 $263,510
 $702,181
                
Scheduled$20,566
 $15,209
 $21,546
 $21,325
 $—
 $15,929
 $311,739
 $406,314
Unscheduled47,156
 10,767
 111,137
 34,477
 4,427
 —
 2,240
 210,204
December 31, 2016$67,722
 $25,976
 $132,683
 $55,802
 $4,427
 $15,929
 $313,979
 $616,518
                
Scheduled$47,221
 $7,954
 $39,192
 $22,626
 $26,522
 $58,177
 $559,895
 $761,587
Unscheduled85,583
 17,108
 67,094
 36,099
 2,108
 —
 5,000
 212,992
September 30, 2016$132,804
 $25,062
 $106,286
 $58,725
 $28,630
 $58,177
 $564,895
 $974,579
                
Scheduled$10,769
 $9,876
 $34,610
 $34,434
 $82
 $7,424
 $66,699
 $163,894
Unscheduled64,184
 8,947
 54,119
 68,535
 —
 —
 —
 195,785
June 30, 2016$74,953
 $18,823
 $88,729
 $102,969
 $82
 $7,424
 $66,699
 $359,679
                
Scheduled$42,555
 $17,866
 $42,619
 $42,969
 $25,966
 $4,140
 $589,847
 $765,962
Unscheduled91,510
 10,883
 72,642
 44,694
 —
 —
 —
 219,729
March 31, 2016$134,065
 $28,749
 $115,261
 $87,663
 $25,966
 $4,140
 $589,847
 $985,691
                
Scheduled$6,689
 $16,884
 $26,265
 $18,981
 $11,234
 $4,165
 $15,154
 $99,372
Unscheduled59,280
 22,534
 78,250
 33,809
 —
 —
 —
 193,873
December 31, 2015$65,969
 $39,418
 $104,515
 $52,790
 $11,234
 $4,165
 $15,154
 $293,245
                
Scheduled$37,524
 $11,178
 $45,943
 $19,785
 $25,662
 $4,033
 $609,524
 $753,649
Unscheduled70,242
 11,164
 61,075
 35,394
 —
 —
 —
 177,875
September 30, 2015$107,766
 $22,342
 $107,018
 $55,179
 $25,662
 $4,033
 $609,524
 $931,524
                
For the year ended:               
Scheduled$121,111
 $50,905
 $137,967
 $121,354
 $52,570
 $85,670
 $1,528,180
 $2,097,757
Unscheduled288,433
 47,705
 304,992
 183,805
 6,535
 —
 7,240
 838,710
December 31, 2016$409,544
 $98,610
 $442,959
 $305,159
 $59,105
 $85,670
 $1,535,420
 $2,936,467
                
Scheduled$92,703
 $60,351
 $160,019
 $103,218
 $62,720
 $8,198
 $715,845
 $1,203,054
Unscheduled237,912
 61,684
 255,369
 153,474
 14,300
 —
 —
 722,739
December 31, 2015$330,615
 $122,035
 $415,388
 $256,692
 $77,020
 $8,198
 $715,845
 $1,925,793




110



Table 26

Lines of Business - Outstanding Business Volume
 Farm & Ranch USDA Guarantees Rural Utilities Institutional Credit  
 Loans Guaranteed Securities LTSPCs USDA Securities Loans LTSPCs AgVantage Total
 (in thousands)
As of:               
September 30, 2017$4,068,893
 $354,823
 $2,133,314
 $2,298,956
 $1,066,482
 $819,963
 $7,901,842
 $18,644,273
June 30, 20173,882,474
 367,419
 2,176,625
 2,237,013
 1,024,130
 859,779
 7,711,418
 18,258,858
March 31, 20173,643,386
 387,272
 2,209,809
 2,149,697
 999,130
 869,664
 7,585,583
 17,844,541
December 31, 20163,514,454
 415,441
 2,209,409
 2,094,375
 999,512
 878,598
 7,287,686
 17,399,475
September 30, 20163,338,484
 441,417
 2,224,827
 2,020,834
 993,139
 874,527
 7,354,511
 17,247,739
June 30, 20163,188,598
 466,479
 2,175,456
 1,960,358
 1,001,769
 932,704
 7,391,172
 17,116,536
March 31, 20163,022,458
 485,302
 2,206,029
 1,929,582
 991,851
 518,724
 7,061,626
 16,215,572
December 31, 20152,957,975
 514,051
 2,253,273
 1,918,277
 1,008,126
 522,864
 6,724,254
 15,898,820
September 30, 20152,778,692
 553,469
 2,171,869
 1,898,625
 982,078
 518,229
 6,725,017
 15,627,979



Table 27
On-Balance Sheet Outstanding Business Volume
 Fixed Rate 5- to 10-Year ARMs & Resets 1-Month to 3-Year ARMs Total Held in Portfolio
 (in thousands)
As of:       
September 30, 2017$6,921,477
 $2,447,923
 $5,426,757
 $14,796,157
June 30, 20176,722,463
 2,406,120
 5,226,982
 14,355,565
March 31, 20175,373,283
 2,330,819
 5,255,146
 12,959,248
December 31, 20165,346,011
 2,274,535
 4,888,291
 12,508,837
September 30, 20165,278,332
 2,212,946
 4,869,765
 12,361,043
June 30, 20165,201,386
 2,157,342
 4,867,336
 12,226,064
March 31, 20164,942,566
 2,296,767
 4,468,045
 11,707,378
December 31, 20154,923,163
 2,271,960
 4,118,366
 11,313,489
September 30, 20154,889,894
 2,147,916
 4,049,361
 11,087,171




111


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


Table 2838
Net Effective Spread by Line of Business
Farm & RanchUSDA GuaranteesRural UtilitiesInstitutional CreditCorporateNet Effective Spread
DollarsYieldDollarsYieldDollarsYieldDollarsYieldDollarsYieldDollarsYield
(dollars in thousands)
For the quarter ended:
September 30, 2021(1)
$24,367 1.74 %$6,847 1.11 %$6,464 1.15 %$15,359 0.81 %$2,888 0.25 %$55,925 0.99 %
June 30, 202123,978 1.82 %6,982 1.12 %6,615 1.18 %16,131 0.85 %2,845 0.24 %56,551 1.01 %
March 31, 202121,454 1.74 %6,367 1.02 %6,674 1.19 %16,673 0.87 %2,691 0.22 %53,859 0.97 %
December 31, 202020,313 1.75 %6,786 1.10 %7,322 1.35 %17,401 0.85 %2,700 0.22 %54,522 0.98 %
September 30, 2020(1)
18,025 1.67 %5,865 0.97 %6,939 1.32 %18,601 0.87 %2,372 0.23 %51,802 0.96 %
June 30, 202016,733 1.71 %4,689 0.81 %5,516 1.15 %18,782 0.86 %749 0.08 %46,469 0.89 %
March 31, 202014,938 1.64 %4,625 0.81 %4,920 1.14 %17,702 0.84 %1,978 0.21 %44,163 0.89 %
December 31, 201916,374 1.90 %4,363 0.78 %4,871 1.17 %18,008 0.85 %2,375 0.27 %45,991 0.95 %
September 30, 201913,181 1.66 %4,314 0.79 %4,502 1.16 %17,807 0.84 %2,657 0.30 %42,461 0.90 %
(1)See Note 10 to the consolidated financial statements for a reconciliation of GAAP net interest income by line of business to net effective spread by line of business for the three months ended September 30, 2021 and 2020.





























 Net Effective Spread by Line of Business  
 Farm & Ranch USDA Guarantees Rural Utilities Institutional Credit Corporate Net Effective Spread
 Dollars Yield Dollars Yield Dollars Yield Dollars Yield Dollars Yield Dollars Yield
 (dollars in thousands)
For the quarter ended:                       
September 30, 2017(1)
$11,478
 1.75% $4,855
 0.92% $2,832
 1.09% $14,363
 0.78% $2,699
 0.41% $36,227
 0.92%
June 30, 201711,331
 1.80% 4,681
 0.90% 2,736
 1.09% 14,395
 0.81% 2,467
 0.35% 35,610
 0.92%
March 31, 201710,684
 1.80% 4,703
 0.91% 2,639
 1.06% 12,581
 0.82% 2,259
 0.32% 32,866
 0.91%
December 31, 201610,349
 1.78% 5,334
 1.08% 2,623
 1.05% 11,627
 0.78% 1,995
 0.26% 31,928
 0.89%
September 30, 2016(1)
10,703
 1.90% 5,189
 1.07% 2,643
 1.05% 11,427
 0.75% 2,237
 0.24% 32,199
 0.86%
June 30, 20169,875
 1.78% 4,588
 0.96% 2,562
 1.03% 11,407
 0.77% 2,594
 0.29% 31,026
 0.84%
March 31, 20169,461
 1.71% 4,308
 0.91% 2,538
 1.02% 11,090
 0.80% 2,552
 0.26% 29,949
 0.82%
December 31, 20159,381
 1.72% 4,518
 0.96% 2,845
 1.14% 10,899
 0.80% 2,306
 0.26% 29,949
 0.85%
September 30, 20159,628
 1.80% 4,630
 0.99% 2,907
 1.18% 11,271
 0.81% 1,951
 0.25% 30,387
 0.88%
110
(1)
Net effective spread is a non-GAAP measure. See Note 9 to the consolidated financial statements for a reconciliation of GAAP net interest income by line of business to net effective spread by line of business for the three months ended September 30, 2017 and 2016.






























112






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


Table 2939
Core Earnings by Quarter End
September 2021June 2021March 2021December 2020September 2020June 2020March 2020December 2019September 2019
(in thousands)
Revenues:
Net effective spread$55,925 $56,551 $53,859 $54,522 $51,802 $46,469 $44,163 $45,991 $42,461 
Guarantee and commitment fees4,322 4,334 4,240 4,652 4,659 4,943 4,896 5,432 5,208 
Other687 301 451 512 453 1,048 674 100 389 
Total revenues60,934 61,186 58,550 59,686 56,914 52,460 49,733 51,523 48,058 
Credit related expense/(income):
Provision for/(release of) losses255 (983)(31)2,973 1,200 51 3,831 2,851 623 
REO operating expenses— — — — — — — — — 
Losses/(gains) on sale of REO— — — 22 — — (485)— — 
Total credit related expense/(income)255 (983)(31)2,995 1,200 51 3,346 2,851 623 
Operating expenses:
Compensation and employee benefits10,027 9,779 11,795 9,497 8,791 8,087 10,127 6,732 7,654 
General and administrative6,330 6,349 6,336 6,274 5,044 5,295 5,363 5,773 5,253 
Regulatory fees750 750 750 750 725 725 725 725 688 
Total operating expenses17,107 16,878 18,881 16,521 14,560 14,107 16,215 13,230 13,595 
Net earnings43,572 45,291 39,700 40,170 41,154 38,302 30,172 35,442 33,840 
Income tax expense9,152 9,463 8,520 8,470 8,297 8,016 6,598 7,526 7,018 
Preferred stock dividends6,774 5,842 5,269 5,269 5,166 3,939 3,431 3,432 3,427 
Core earnings$27,646 $29,986 $25,911 $26,431 $27,691 $26,347 $20,143 $24,484 $23,395 
Reconciling items:
(Losses)/gains on undesignated financial derivatives due to fair value changes$(1,864)$(3,721)$1,695 $(1,758)$(4,149)$8,700 $(6,484)$4,469 $(7,117)
(Losses)/gains on hedging activities due to fair value changes(2,093)(2,097)(271)3,827 (5,245)(2,676)(5,925)(220)(4,535)
Unrealized gains/(losses) on trading assets36 (61)(14)223 (258)(20)106 172 49 
Net effects of amortization of premiums/discounts and deferred gains on assets consolidated at fair value23 20 16 (77)97 35 3 40 (7)
Net effects of terminations or net settlements on financial derivatives(351)109 1,165 1,583 233 720 (1,300)1,339 232 
Issuance costs on the retirement of preferred stock— — — — (1,667)— — — — 
Income tax effect related to reconciling items892 1,208 (544)(798)1,957 (1,419)2,856 (1,218)2,389 
Net income attributable to common stockholders$24,289 $25,444 $27,958 $29,431 $18,659 $31,687 $9,399 $29,066 $14,406 

Item 3Quantitative and Qualitative Disclosures About Market Risk
Core Earnings by Quarter Ended
 September 2017 June 2017 March 2017 December 2016 September 2016 June 2016 March 2016 December 2015 September 2015
 (in thousands)
Revenues:                 
Net effective spread$36,227
 $35,610
 $32,866
 $31,928
 $32,199
 $31,026
 $29,949
 $29,949
 $30,387
Guarantee and commitment fees4,935
 4,942
 5,317
 5,158
 4,533
 4,810
 4,669
 4,730
 4,328
Other429
 (197) 1,061
 1,189
 (32) (125) (517) (284) (93)
Total revenues41,591
 40,355
 39,244
 38,275
 36,700
 35,711
 34,101
 34,395
 34,622
                  
Credit related expense/(income):                 
Provision for/(release of) losses384
 466
 444
 512
 (31) 458
 63
 (49) (303)
REO operating expenses—
 23
 —
 —
 —
 —
 39
 44
 48
(Gains)/losses on sale of REO(32) (757) 5
 —
 (15) —
 —
 —
 —
Total credit related expense/(income)352
 (268) 449
 512
 (46) 458
 102
 (5) (255)
                  
Operating expenses:                 
Compensation and employee benefits5,987
 6,682
 6,317
 5,949
 5,438
 5,611
 5,774
 5,385
 5,236
General and administrative3,890
 3,921
 3,800
 4,352
 3,474
 3,757
 3,526
 3,238
 3,676
Regulatory fees625
 625
 625
 625
 613
 612
 613
 613
 600
Total operating expenses10,502
 11,228
 10,742
 10,926
 9,525
 9,980
 9,913
 9,236
 9,512
                  
Net earnings30,737
 29,395
 28,053
 26,837
 27,221
 25,273
 24,086
 25,164
 25,365
Income tax expense10,410
 10,297
 9,166
 9,581
 9,497
 8,956
 8,444
 8,855
 8,924
Net (loss)/income attributable to non-controlling interest(1)
—
 (150) (15) 28
 (18) (16) (28) (60) (36)
Preferred stock dividends3,295
 3,296
 3,295
 3,296
 3,295
 3,296
 3,295
 3,296
 3,295
Core earnings$17,032
 $15,952
 $15,607
 $13,932
 $14,447
 $13,037
 $12,375
 $13,073
 $13,182
                  
Reconciling items:                 
Gains/(losses) on financial derivatives and hedging activities due to fair value changes2,737
 2,221
 4,805
 17,233
 1,460
 (2,076) (2,989) 2,743
 (6,906)
Unrealized (losses)/gains on trading assets—
 (2) (82) (474) 1,182
 394
 358
 696
 (8)
Amortization of premiums/discounts and deferred gains on assets consolidated at fair value(954) (117) (127) (40) (157) (371) (281) (263) (117)
Net effects of settlements on agency forward contracts456
 261
 32
 1,024
 464
 466
 (255) (162) (390)
Income tax effect related to reconciling items(784) (827) (1,620) (6,210) (1,032) 556
 1,109
 (1,055) 2,598
Net income attributable to common stockholders$18,487
 $17,488
 $18,615
 $25,465
 $16,364
 $12,006
 $10,317
 $15,032
 $8,359
(1)
As of May 1, 2017, Farmer Mac transferred its entire 65% ownership interest in AgVisory back to the limited liability company.



113


Item 3.Quantitative and Qualitative Disclosures About Market Risk


Farmer Mac is exposed to market risk from changes in interest rates.  Farmer Mac manages this market risk by entering into various financial transactions, including financial derivatives, and by monitoring and measuring its exposure to changes in interest rates.  See "Management's Discussion and Analysis of

111




Financial Condition and Results of Operations—Risk Management—Interest Rate Risk" for more information about Farmer Mac's exposure to interest rate risk and its strategies to manage that risk.  For information regardingabout Farmer Mac's use of financial derivatives and related accounting policies, see Note 4 to the consolidated financial statements.


Item 4.Controls and Procedures

Item 4Controls and Procedures

Management's Evaluation of Disclosure Controls and Procedures. Farmer Mac maintains disclosure controls and procedures designed to ensure that information required to be disclosed in its periodic filings under the Securities Exchange Act of 1934 as amended (the “Exchange(“Exchange Act”), including this Quarterly Report on Form 10-Q, is recorded, processed, summarized, and reported on a timely basis. These disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed under the Exchange Act is accumulated and communicated to Farmer Mac's management on a timely basis to allow decisions regardingabout required disclosure. Management, including Farmer Mac's Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of Farmer Mac's disclosure controls and procedures (as defined under Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of September 30, 2017.2021.
Farmer Mac carried out the evaluation of the effectiveness of its disclosure controls and procedures, required by paragraph (b) of Exchange Act Rules 13a-15 and 15d-15, under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer. Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that Farmer Mac's disclosure controls and procedures were effective as of September 30, 2017.2021.


Changes in Internal Control Over Financial Reporting. There were no changes in Farmer Mac's internal control over financial reporting during the three months ended September 30, 20172021 that have materially affected, or are reasonably likely to materially affect, Farmer Mac's internal control over financial reporting.





112




PART II


Item 1.Legal Proceedings

Item 1.Legal Proceedings
None.

Item 1A.Risk Factors


There were no material changes from theInformation about risk factors previously disclosedcan be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Forward-Looking Statements” in Part I, Item 2 of this Form 10-Q and in Part I, Item 1A of Farmer Mac'sMac’s 2020 Annual Report on Form 10-K for the year ended December 31, 2016 filed with the SEC on March 9, 2017.Report.




114


Item 2.Unregistered Sales of Equity Securities and Use of Proceeds


(a)Farmer Mac is a federally chartered instrumentality of the United States and itswhose debt and equity
securities are exempt from registration pursuant tounder Section 3(a)(2) of the Securities Act of 1933.
During third
quarter 2017,2021, the following transactions occurred related to Farmer Mac's equity securities that were not
registered under the Securities Act of 1933 and were not otherwise reported on a Current Report on
Form 8-K:


Class C Non-Voting Common Stock. Under Farmer Mac's policy that permits directors of Farmer Mac to
elect to receive shares of Class C Non-Voting Common Stocknon-voting common stock in lieu of their cash retainers, Farmer Mac
issued an aggregate of 50467 shares of its Class C Non-Voting Common Stock onnon-voting common stock in July 5, 20172021 to the three five
directors who elected to receive stock in lieu of their cash retainers. Farmer Mac calculated the number of
shares issued to the directors based on a price of $64.70$98.90 per share, which was the closing price of the Class C Non-Voting Common Stocknon-voting common stock on June 30, 2017,2021 (the last trading day of the previous quarter) as reported by the New York Stock Exchange.



(b)(b)     Not applicable.

(c)None.


(c)     None.

Item 3.Defaults Upon Senior Securities


(a) None.


(b) None.


Item 4.Mine Safety Disclosures

Item 4.Mine Safety Disclosures

Not applicable.


Item 5.Other Information

Item 5Other Information

(a) None.


(b) NoneNone.


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Item 6.Exhibits
Item 6.Exhibits and Financial Statement Schedules

(a)(1)           Financial Statements.

Refer to Part I Item 1 above.

(2)           Financial Statement Schedules.

All schedules are omitted since they are not applicable, not required, or the information required to be set forth therein is included in the consolidated financial statements or in notes thereto.


115


*3.1——
Title VIII of the Farm Credit Act of 1971, as most recently amended by the Food, Conservation and Energy Act of 2008on June 18, 2020 (Previously filed as Exhibit 3.1 to Form 10-Q filed August 12, 2008)10, 2020).
*3.2——
Amended and Restated By-Laws of the Registrant (Previously filed as Exhibit 3.1 to Form 8-K filed August 9, 2017)May 12, 2020).

*4.1——
Specimen Certificate for Farmer Mac Class A Voting Common Stock (Previously filed as Exhibit 4.1 to Form 10-Q filed May 15, 2003).
*4.2——
Specimen Certificate for Farmer Mac Class B Voting Common Stock (Previously filed as Exhibit 4.2 to Form 10-Q filed May 15, 2003).
*4.3——
Specimen Certificate for Farmer Mac Class C Non-Voting Common Stock (Previously filed as Exhibit 4.3 to Form 10-Q filed May 15, 2003).
*4.4——
Specimen Certificate for 5.875% Non-Cumulative Preferred Stock, Series A (Previously filed as Exhibit 4.4.1 to Form 10-Q filed May 9, 2013).
*
4.4.1
—
Certificate of Designation of Terms and Conditions of 5.875% Non-Cumulative Preferred Stock, Series A (Previously filed as Exhibit 4.1 to Form 8-A filed January 17, 2013).
*
4.5
—
Specimen Certificate for 6.875% Non-Cumulative Preferred Stock, Series B (Previously filed as Exhibit 4.5 to Form 10-Q filed May 12, 2014).
*
4.5.1
—
Certificate of Designation of Terms and Conditions of 6.875% Non-Cumulative Preferred Stock, Series B (Previously filed as Exhibit 4.1 to Form 8-A filed March 25, 2014).
*
4.6
—
Specimen Certificate for 6.000% Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series C (Previously filed as Exhibit 4.6 to Form 10-Q filed August 11, 2014).
*4.4.1——
Certificate of Designation of Terms and Conditions of 6.000% Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series C (Previously filed as Exhibit 4.1 to Form 8-A filed June 20, 2014).
**4.5——
AmendmentSpecimen Certificate for 5.700% Non-Cumulative Preferred Stock, Series D (Previously filed as Exhibit 4.7 to Sublease between Mayer Brown LLP and the Registrant, dated as ofForm 10-Q filed August 1, 2017.2019).

**4.5.1—
*—4.6—
*4.6.1—
*4.7—
*4.7.1—
*4.8—
*4.8.1
*4.9—
**31.1—
**31.2——
Certification of Registrant's principal financial officer relating to the Registrant's Quarterly Report on Form 10-Q for the quarter ended SeptemberSeptember 30, 2017,2021, pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
***32——
Certification of Registrant's principal executive officer and principal financial officer relating to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2017,2021, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
**101.INS—Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
**101.SCH—Inline XBRL Taxonomy Extension Schema
**101.CAL—Inline XBRL Taxonomy Extension Calculation
**101.DEF—Inline XBRL Taxonomy Extension Definition
**101.LAB—Inline XBRL Taxonomy Extension Label
**101.PRE—Inline XBRL Taxonomy Extension Presentation
**104—Cover Page Inline Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document included as Exhibit 101
*Incorporated by reference to the indicated prior filing.
**Filed with this report.
†***Furnished with this report.
#Portions of this exhibit have been omitted pursuant to a request for confidential treatment.
†Management contract or compensatory plan.








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SIGNATURES
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


FEDERAL AGRICULTURAL MORTGAGE CORPORATION

          /s/ Bradford T. NordholmNovember 8, 2021
By:Bradford T. NordholmDate
President and Chief Executive Officer
(Principal Executive Officer)
/s/ Aparna RameshNovember 8, 2021
By:Aparna RameshDate
Executive Vice President – Chief Financial
Officer
(Principal Financial Officer)
          /s/ Timothy L. BuzbyNovember 9, 2017
By:Timothy L. BuzbyDate
President and Chief Executive Officer
(Principal Executive Officer)

          /s/ R. Dale LynchNovember 9, 2017
By:R. Dale LynchDate
Executive Vice President – Chief Financial Officer and Treasurer
(Principal Financial Officer)






117115