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Summary of Significant Accounting Policies | 3 Months Ended
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Mar. 31, 2020
Accounting Policies [Abstract] |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 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, 2019 consolidated balance sheet presented in this report has been derived from Farmer Mac's audited 2019 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 2019 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, 2019, as filed with the SEC on February 25, 2020. 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 months ended March 31, 2020. Principles of Consolidation The consolidated financial statements include the accounts of Farmer Mac and its two subsidiaries during the 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. The consolidated financial statements also include the accounts of Variable Interest Entities ("VIEs") in which Farmer Mac determined itself to be the primary beneficiary. The following tables present, by line of business, details about the consolidation of VIEs: Table 1.1
| Consolidation of Variable Interest Entities |  |  |  |  |  |  |  |  |  |
| As of March 31, 2020 |  |  |  |  |  |  |  |  |  |
| Farm & Ranch |  | USDA Guarantees |  |  |  |  |  | Corporate |  | Total
| (in thousands) |  |  |  |  |  |  |  |  |  |
On-Balance Sheet: |  |  |  |  |  |  |  |  |  |  |
Consolidated VIEs: |  |  |  |  |  |  |  |  |  |  |
Loans held for investment in consolidated trusts, at amortized cost | $ | 1,540,689 |  |  | $ | — |  |  |  |  |  |  | $ | — |  |  | $ | 1,540,689 |
Debt securities of consolidated trusts held by third parties (1) | 1,549,527 |  |  | — |  |  |  |  |  |  | — |  |  | 1,549,527 |
Unconsolidated VIEs: |  |  |  |  |  |  |  |  |  |  |
Farmer Mac Guaranteed Securities: |  |  |  |  |  |  |  |  |  |  |
Carrying value (2) | — |  |  | 33,512 |  |  |  |  |  |  | — |  |  | 33,512 |
Maximum exposure to loss (3) | — |  |  | 33,440 |  |  |  |  |  |  | — |  |  | 33,440 |
Investment securities: |  |  |  |  |  |  |  |  |  |  |
Carrying value (4) | — |  |  | — |  |  |  |  |  |  | 1,291,950 |  |  | 1,291,950 |
Maximum exposure to loss (3) (4) | — |  |  | — |  |  |  |  |  |  | 1,302,410 |  |  | 1,302,410 |
Off-Balance Sheet: |  |  |  |  |  |  |  |  |  |  |
Unconsolidated VIEs: |  |  |  |  |  |  |  |  |  |  |
Farmer Mac Guaranteed Securities: |  |  |  |  |  |  |  |  |  |  |
Maximum exposure to loss (3) (5) | 97,302 |  |  | 370,903 |  |  |  |  |  |  | — |  |  | 468,205 |
(1)Includes borrower remittances of $8.8 million. The borrower remittances had not been passed through to third party investors as of March 31, 2020. (2)Includes $0.1 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.
| Consolidation of Variable Interest Entities |  |  |  |  |  |  |  |  |  |
| As of December 31, 2019 |  |  |  |  |  |  |  |  |  |
| Farm & Ranch |  | USDA Guarantees |  |  |  |  |  | Corporate |  | Total
| (in thousands) |  |  |  |  |  |  |  |  |  |
On-Balance Sheet: |  |  |  |  |  |  |  |  |  |  |
Consolidated VIEs: |  |  |  |  |  |  |  |  |  |  |
Loans held for investment in consolidated trusts, at amortized cost | $ | 1,600,917 |  |  | $ | — |  |  |  |  |  |  | $ | — |  |  | $ | 1,600,917 |
Debt securities of consolidated trusts held by third parties (1) | 1,616,504 |  |  | — |  |  |  |  |  |  | — |  |  | 1,616,504 |
Unconsolidated VIEs: |  |  |  |  |  |  |  |  |  |  |
Farmer Mac Guaranteed Securities: |  |  |  |  |  |  |  |  |  |  |
Carrying value (2) | — |  |  | 32,041 |  |  |  |  |  |  | — |  |  | 32,041 |
Maximum exposure to loss (3) | — |  |  | 31,887 |  |  |  |  |  |  | — |  |  | 31,887 |
Investment securities: |  |  |  |  |  |  |  |  |  |  |
Carrying value (4) | — |  |  | — |  |  |  |  |  |  | 1,117,203 |  |  | 1,117,203 |
Maximum exposure to loss (3) (4) | — |  |  | — |  |  |  |  |  |  | 1,120,765 |  |  | 1,120,765 |
Off-Balance Sheet: |  |  |  |  |  |  |  |  |  |  |
Unconsolidated VIEs: |  |  |  |  |  |  |  |  |  |  |
Farmer Mac Guaranteed Securities: |  |  |  |  |  |  |  |  |  |  |
Maximum exposure to loss (3) (5) | 107,322 |  |  | 389,216 |  |  |  |  |  |  | — |  |  | 496,538 |
(1)Includes borrower remittances of $15.6 million. The borrower remittances had not been passed through to third party investors as of December 31, 2019. (2)Includes $0.2 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. Earnings Per Common Share Basic earnings per common share ("EPS") is based on the daily weighted-average number of shares of common stock outstanding. Diluted earnings per common share is based on the daily weighted-average number of shares of common stock outstanding adjusted to include all potentially dilutive stock appreciation rights ("SARs") and unvested restricted stock awards. The following schedule reconciles basic and diluted EPS for the three months ended March 31, 2020 and 2019: Table 1.2
| For the Three Months Ended |  |  |  |  |  |  |  |  |  |
| March 31, 2020 |  |  |  |  |  | March 31, 2019 |  |  |  |
| 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 |  | $ | 9,399 |  |  | 10,712 |  |  | $ | 0.88 |  |  | $ | 21,874 |  |  | 10,670 |  |  | $ | 2.05 |
Effect of dilutive securities(1) |  |  |  |  |  |  |  |  |  |  |
SARs and restricted stock |  | — |  |  | 70 |  |  | (0.01) |  |  | — |  |  | 107 |  |  | (0.02) |
Diluted EPS |  | $ | 9,399 |  |  | 10,782 |  |  | $ | 0.87 |  |  | $ | 21,874 |  |  | 10,777 |  |  | $ | 2.03 |
(1)For the three months ended March 31, 2020 and 2019, SARs and restricted stock of 87,148 and 56,976, 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 March 31, 2020 and 2019, contingent shares of unvested restricted stock of 12,680 and 12,284, 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. Comprehensive Income Comprehensive income represents all changes in stockholders' equity except those resulting from investments by or distributions to stockholders, and is comprised of net income and unrealized gains and losses on available-for-sale securities, certain held-to-maturity securities transferred from the available-for-sale classification, and cash flow hedges, net of related taxes. The following table presents the changes in accumulated other comprehensive income ("AOCI"), net of tax, by component for the three months ended March 31, 2020 and 2019: Table 1.3
| As of March 31, 2020 |  |  |  |  |  |  |  | As of March 31, 2019 |  |  |  |  |  |
| 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 | $ | (43,397) |  |  | $ | 32,845 |  |  | $ | (5,609) |  |  | $ | (16,161) |  |  | $ | (25,360) |  |  | $ | 43,443 |  |  | $ | 6,873 |  |  | $ | 24,956 |
Other comprehensive (loss)/income before reclassifications | (77,685) |  |  |  | — |  |  |  | (22,668) |  |  | (100,353) |  |  | 3,318 |  |  |  | — |  |  |  | (4,095) |  |  | (777) |
Amounts reclassified from AOCI | (776) |  |  | (4,494) |  |  | 347 |  |  | (4,923) |  |  | (758) |  |  | (1,787) |  |  | (380) |  |  | (2,925) |
Net comprehensive (loss)/income | (78,461) |  |  | (4,494) |  |  | (22,321) |  |  | (105,276) |  |  | 2,560 |  |  | (1,787) |  |  | (4,475) |  |  | (3,702) |
Ending Balance | $ | (121,858) |  |  | $ | 28,351 |  |  | $ | (27,930) |  |  | $ | (121,437) |  |  | $ | (22,800) |  |  | $ | 41,656 |  |  | $ | 2,398 |  |  | $ | 21,254 |
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 months ended March 31, 2020 and 2019: Table 1.4
| For the Three Months Ended |  |  |  |  |  |  |  |  |  |
| March 31, 2020 |  |  |  |  |  | March 31, 2019 |  |  |  |
| Before Tax |  | Provision (Benefit) |  | After Tax |  | Before Tax |  | Provision (Benefit) |  | After Tax
| (in thousands) |  |  |  |  |  |  |  |  |  |
Other comprehensive income: |  |  |  |  |  |  |  |  |  |  |
Available-for-sale-securities: |  |  |  |  |  |  |  |  |  |  |
Unrealized holding (losses)/gains on available-for-sale securities | $ | (98,334) |  |  | $ | (20,649) |  |  | $ | (77,685) |  |  | $ | 4,200 |  |  | $ | 882 |  |  | $ | 3,318 |
Less reclassification adjustments included in: |  |  |  |  |  |  |  |  |  |  |
Net interest income(1) | (969) |  |  | (203) |  |  | (766) |  |  | (953) |  |  | (200) |  |  | (753) |
Other income(2) | (13) |  |  | (3) |  |  | (10) |  |  | (6) |  |  | (1) |  |  | (5) |
Total | $ | (99,316) |  |  | $ | (20,855) |  |  | $ | (78,461) |  |  | $ | 3,241 |  |  | $ | 681 |  |  | $ | 2,560 |
Held-to-maturity securities: |  |  |  |  |  |  |  |  |  |  |
Less reclassification adjustments included in: |  |  |  |  |  |  |  |  |  |  |
Net interest income(3) | (5,688) |  |  | (1,194) |  |  | (4,494) |  |  | (2,262) |  |  | (475) |  |  | (1,787) |
Total | $ | (5,688) |  |  | $ | (1,194) |  |  | $ | (4,494) |  |  | $ | (2,262) |  |  | $ | (475) |  |  | $ | (1,787) |
Cash flow hedges |  |  |  |  |  |  |  |  |  |  |
Unrealized (losses)/gains on cash flow hedges | $ | (28,695) |  |  | $ | (6,027) |  |  | $ | (22,668) |  |  | $ | (5,184) |  |  | $ | (1,089) |  |  | $ | (4,095) |
Less reclassification adjustments included in: |  |  |  |  |  |  |  |  |  |  |
Net interest income(4) | 439 |  |  | 92 |  |  | 347 |  |  | (481) |  |  | (101) |  |  | (380) |
Total | $ | (28,256) |  |  | $ | (5,935) |  |  | $ | (22,321) |  |  | $ | (5,665) |  |  | $ | (1,190) |  |  | $ | (4,475) |
Other comprehensive (loss)/income | $ | (133,260) |  |  | $ | (27,984) |  |  | $ | (105,276) |  |  | $ | (4,686) |  |  | $ | (984) |  |  | $ | (3,702) |
(1)Relates to the amortization of unrealized gains on hedged items prior to the application of fair value hedge accounting. (2)Represents amortization of deferred gains related to certain available-for-sale USDA Securities and Farmer Mac Guaranteed USDA Securities. (3)Relates to the amortization of unrealized gains or losses prior to the reclassification of these securities from available-for-sale to held-to-maturity. The amortization of unrealized gains or losses reported in AOCI for held-to-maturity securities will be offset by the amortization of the premium or discount created from the transfer into held-to-maturity securities, which occurred at fair value. These unrealized gains or losses will be recorded over the remaining life of the security with no impact on future net income. (4)Relates to the recognition of unrealized gains and losses on cash flow hedges recorded in AOCI. Allowance for Losses and Reserve for LossesOn January 1, 2020, Farmer Mac adopted Accounting Standards Update 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, ("CECL"). Under CECL, Farmer Mac's allowance for credit losses represents the difference between the carrying amount of the related financial instruments and the present value of their expected cash flows discounted at their effective interest rates, as of the respective balance sheet date. Under CECL, Farmer Mac's reserve for losses represents the difference between the outstanding amount of off-balance sheet credit exposures and the present value of their expected cash flows discounted at their effective interest rates. Farmer Mac maintains an allowance for losses to cover current expected credit losses as of the balance sheet date for on-balance sheet investment securities, loans held for investment, and Farmer Mac Guaranteed Securities (collectively referred to as "allowance for losses"). Additionally, Farmer Mac maintains a reserve for losses to cover current expected credit losses as of the balance sheet date for off-balance sheet loans underlying LTSPCs and off-balance sheet Farmer Mac Guaranteed Securities (collectively referred to as "reserve for losses"). Both the allowance for losses and reserve for losses are based on historical information and reasonable and supportable forecasts. Farmer Mac has never experienced a credit loss in its Rural Utilities line of business. Upon the adoption of CECL, Farmer Mac is now required to measure its expected credit losses for the expected life of all financial instruments, including its Rural Utilities loans. To estimate expected credit losses on these loans, Farmer Mac relies upon industry historical credit loss data from ratings agencies and publicly available information as disclosed in the securities filings of other major lenders who serve the utilities industry. The allowance for losses increases through periodic provisions for loan losses that are charged against net interest income and the reserve for losses increases through provisions for losses that are charged to non-interest expense. Both the allowance for losses and reserve for losses are decreased by charge-offs for realized losses, net of recoveries. Releases from the allowance for losses or reserve for losses occur when the estimate of expected credit losses as of the end of a period is less than the estimate at the beginning of the period. The total allowance for losses consists of the allowance for losses and the reserve for losses. Charge-offs Farmer Mac records a charge-off against the allowance for losses principally when a loss has been confirmed through the receipt of assets, generally the underlying collateral, in full satisfaction of the loan. The loss equals the excess of the recorded investment in the loan over the fair value of the collateral less estimated selling costs. Estimation Methodology Farmer Mac bases its methodology for determining its current estimate of expected losses on a statistical model, which incorporates credit loss history and reasonable and supportable forecasts. Farmer Mac's estimation methodology is comprised of the following key components: •An economic model for each of our portfolios, including Farm & Ranch, Rural Utilities, and Institutional Credit; •A migration matrix for each portfolio that reasonably predicts the movement of each financial asset among various risk categories over the course of each asset's expected life. The migration matrix forms the basis for our estimate of the probability of default of each financial asset; •A loss-given-default ("LGD") model that reasonably predicts the amount of loss that Farmer Mac would incur upon the default of each financial asset; •An economic factor forecast that updates the migration matrix model and the LGD model with current assumptions for the economic indicators that Farmer Mac has determined are most correlated with or relevant to the performance of each portfolio of assets; including Gross Domestic Product ("GDP"), credit spreads, unemployment rates, land values, and commodity prices; and •A discounted cash flow analysis, which relies upon each of the above model outputs, plus the contractual terms of each financial asset, and the effective interest rate of each financial asset. Management evaluates these assumptions by considering many relevant factors, including: •economic conditions; •geographic and agricultural commodity/product concentrations in the portfolio; •the credit profile of the portfolio, including risk ratings and financial metrics; •delinquency trends of the portfolio; •historical charge-off and recovery activities of the portfolio; and •other factors to capture current portfolio trends and characteristics that differ from historical experience. Management believes that its methodology produces a reasonable estimate of expected credit losses, as of the balance sheet date, for the expected life of all of its financial assets. Allowance for Loss on Available-for-Sale (AFS) Securities To measure current expected credit losses on impaired AFS securities, Farmer Mac first considers those impaired securities that: 1) Farmer Mac does not intend to sell, and 2) it is not more likely than not that Farmer Mac will be required to sell before recovering its amortized cost basis. In assessing whether a credit loss exists, Farmer Mac compares the present value, discounted at the security's effective interest rate, of cash flows expected to be collected from an impaired AFS debt security to its amortized cost basis. If the present value of cash flows expected to be collected is less than the amortized cost basis of the impaired security, a credit loss exists and Farmer Mac records an allowance for loss for that credit loss. However, the amount of that allowance is limited by the amount that the security’s fair value is less than its amortized cost basis. Accrued interest receivable is recorded separately on the Consolidated Balance Sheet, and the allowance for credit losses excludes uncollectible accrued interest receivable. Collateral Dependent Assets ("CDAs") CDAs are loans, loans underlying LTSPCs, or off-balance sheet credit exposures in which the borrower is either in foreclosure or is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral by Farmer Mac. Farmer Mac estimates the current expected credit loss on CDAs based upon the appraised value of the collateral, the costs to sell it, and any applicable credit protection such as a guarantee. New Accounting Standards Recently Adopted Accounting Guidance
Standard | Description | Date of Adoption | Effect on Consolidated Financial Statements
ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments | This Update required entities to measure all expected credit losses for financial assets held at amortized cost at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts, as well as requiring entities to use forward-looking information to form their credit loss estimates. | January 1, 2020 | In first quarter 2020 Farmer Mac adopted the new guidance. The cumulative-effect adjustment to retained earnings as of January 1, 2020 reflected application of the new guidance and did not have a material effect on Farmer Mac's financial position, results of operations, or cash flows. For more information on the transition adjustment see Table 1.5 below.
ASU 2017-08, Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities | The amendments in this Update shorten the amortization period for certain callable debt securities held at a premium by requiring the premium to be amortized to the earliest call date. There is no required accounting change for securities held at a discount in this Update. | January 1, 2020 | The adoption of this Update did not have a material effect on Farmer Mac's financial position, results of operations, or cash flows.
ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement | The amendments in this Update modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurements, including the consideration of costs and benefits. Certain disclosure requirements were either removed, modified, or added. | January 1, 2020 | The adoption of this Update did not have a material effect on Farmer Mac's financial position, results of operations, or cash flows.
The following table presents the impact of adopting CECL on January 1, 2020 on our allowance and retained earnings: Table 1.5
|  | December 31, 2019 |  | Transition Adjustment |  | January 1, 2020
|  | (in thousands) |  |  |  |
Allowance: |  |  |  |  |  |
Farm & Ranch: |  |  |  |  |  |
Loans |  | $ | 10,454 |  |  | $ | (3,909) |  |  | $ | 6,545 |
Long-term standby purchase commitments and guarantees |  | 2,164 |  |  | (148) |  |  | 2,016 |
Rural Utilities: |  |  |  |  |  |
Loans |  | — |  |  | 5,378 |  |  | 5,378 |
Long-term standby purchase commitments |  | — |  |  | 1,011 |  |  | 1,011 |
Farmer Mac Guaranteed Securities: |  |  |  |  |  |
AgVantage |  | — |  |  | 315 |  |  | 315 |
Investment Securities |  | — |  |  | 9 |  |  | 9 |
Total Allowance |  | $ | 12,618 |  |  | $ | 2,656 |  |  | $ | 15,274 |
Retained Earnings |  | $ | 457,047 |  |  | $ | (2,099) |  |  | $ | 454,948 |
Recently Issued Accounting Guidance, Not Yet Adopted Within Our Consolidated Financial Statements
Standard | Description | Date of Planned Adoption | Effect on Consolidated Financial Statements
ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting | The amendments in this Update provide optional guidance for a limited period of time to ease the potential burden in accounting for reference rate reform on financial reporting. They provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. | The amendments in this update are effective for all entities as of March 12, 2020 through December 31, 2022. | Farmer Mac is currently evaluating the impact of the discontinuation of LIBOR on the consolidated financial statements and the applicability of the optional guidance provided by this ASU.
ReclassificationsCertain reclassifications of prior period information were made to conform to the current period presentation.

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