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Fair Value Disclosures
 12 Months Ended
Dec. 31, 2020
Fair Value Disclosures [Abstract]  
FAIR VALUE DISCLOSURES FAIR VALUE DISCLOSURES
Fair Value Classification and Transfers

The following tables present information about Farmer Mac's assets and liabilities measured at fair value on a recurring basis as of December 31, 2020 and 2019, respectively, and indicate the fair value hierarchy of the valuation techniques used by Farmer Mac to determine such fair value:

Table 13.1
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 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 $— $29,892 
(1) Level 3 assets represent 29% of total assets and 65% of financial instruments measured at fair value.
Assets and Liabilities Measured at Fair Value as of December 31, 2019
 Level 1Level 2
Level 3(1)
Total
 (in thousands)
Recurring: 
Assets:    
Investment Securities:    
Available-for-sale:    
Floating rate auction-rate certificates backed by Government guaranteed student loans$— $— $18,912 $18,912 
Floating rate asset-backed securities— 11,085 — 11,085 
Floating rate Government/GSE guaranteed mortgage-backed securities— 1,632,583 — 1,632,583 
Fixed rate GSE guaranteed mortgage-backed securities— 340 — 340 
Fixed rate U.S. Treasuries1,296,923 — — 1,296,923 
Total available-for-sale1,296,923 1,644,008 18,912 2,959,843 
Farmer Mac Guaranteed Securities:    
Available-for-sale:    
AgVantage— — 7,143,025 7,143,025 
Total Farmer Mac Guaranteed Securities— — 7,143,025 7,143,025 
USDA Securities:    
Trading— — 8,913 8,913 
Total USDA Securities— — 8,913 8,913 
Financial derivatives— 10,519 — 10,519 
Total Assets at fair value$1,296,923 $1,654,527 $7,170,850 $10,122,300 
Liabilities:    
Financial derivatives$51 $26,991 $— $27,042 
Total Liabilities at fair value$51 $26,991 $— $27,042 
(1) Level 3 assets represent 33% of total assets and 71% 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 December 31, 2020 or December 31, 2019.

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 both 2020 and 2019, 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.
The following tables present additional information about assets and liabilities measured at fair value on a recurring basis for which Farmer Mac has used significant unobservable inputs to determine fair value. Net transfers in and/or out of Level 3 are based on the fair values of the assets and liabilities as of the beginning of the reporting period. There were no liabilities measured at fair value using significant unobservable inputs during the years ended December 31, 2020 and 2019.

Table 13.2

Level 3 Assets and Liabilities Measured at Fair Value for the Year Ended December 31, 2020
Beginning BalancePurchasesSalesSettlementsAllowance for LossesRealized and
unrealized gains included
in Income		Unrealized gains
included in Other
Comprehensive
Income		Ending Balance
(in thousands)
Recurring:
Assets:
Investment Securities:
Available-for-sale:
Floating rate auction-rate certificates backed by Government guaranteed student loans$18,912 $— $— $— $(36)$— $295 $19,171 
Total available-for-sale18,912 — — — (36)— 295 19,171 
Farmer Mac Guaranteed Securities:
Available-for-sale:
AgVantage7,143,025 974,237 — (1,397,861)(309)202,706 25,903 6,947,701 
Total available-for-sale7,143,025 974,237 — (1,397,861)(309)202,706 25,903 6,947,701 
USDA Securities:
Trading8,913 — — (2,269)— 51 — 6,695 
Total USDA Securities8,913 — — (2,269)51 — 6,695 
Total Assets at fair value$7,170,850 $974,237 $— $(1,400,130)$(345)$202,757 $26,198 $6,973,567 
Level 3 Assets and Liabilities Measured at Fair Value for the Year Ended December 31, 2019
  Beginning
Balance		PurchasesSalesSettlementsRealized and
unrealized gains included
in Income		Unrealized gains/(losses)
included in Other
Comprehensive
Income		Ending
Balance
 (in thousands)
Recurring: 
Assets:     
Investment Securities:     
Available-for-sale:     
Floating rate auction-rate certificates backed by Government guaranteed student loans$18,715 $— $— $— $— $197 $18,912 
Total available-for-sale18,715 — — — — 197 18,912 
Farmer Mac Guaranteed Securities:     
Available-for-sale:     
AgVantage5,974,497 2,033,713 — (1,020,294)181,144 (26,035)7,143,025 
Total available-for-sale5,974,497 2,033,713 — (1,020,294)181,144 (26,035)7,143,025 
USDA Securities:     
Available-for-sale— 57,853 (57,853)— — — — 
Trading9,999 — — (1,412)326 — 8,913 
Total USDA Securities9,999 57,853 (57,853)(1,412)326 — 8,913 
Total Assets at fair value$6,003,211 $2,091,566 $(57,853)$(1,021,706)$181,470 $(25,838)$7,170,850 

Level 3 Assets and Liabilities Measured at Fair Value for the Year Ended December 31, 2018
  Beginning
Balance		Cumulative Effect from Change in Hedge AccountingPurchasesSalesSettlementsRealized and
unrealized (losses)/gains included
in Income		Unrealized gains/(losses)
included in Other
Comprehensive
Income		Ending
Balance
 (in thousands)
Recurring: 
Assets:     
Investment Securities:     
Available-for-sale:     
Floating rate auction-rate certificates backed by Government guaranteed student loans$18,814 $— $— $— $— $— $(99)$18,715 
Fixed rate GSE guaranteed mortgage-backed securities4,333 — — — (2,137)(2,092)(104)— 
Total available-for-sale23,147 — — — (2,137)(2,092)(203)18,715 
Farmer Mac Guaranteed Securities:     
Available-for-sale:     
AgVantage5,471,914 487 2,177,546 — (1,670,402)21,459 (26,507)5,974,497 
Total available-for-sale5,471,914 487 2,177,546 — (1,670,402)21,459 (26,507)5,974,497 
USDA Securities:     
Available-for-sale— — 127,850 (127,850)— — — — 
Trading(1)
13,515 — — — (3,597)81 — 9,999 
Total USDA Securities13,515 — 127,850 (127,850)(3,597)81 — 9,999 
Total Assets at fair value$5,508,576 $487 $2,305,396 $(127,850)$(1,676,136)$19,448 $(26,710)$6,003,211 
(1) Includes unrealized gains of $0.1 million attributable to assets still held as of December 31, 2018 that are recorded in "Gains on trading securities."
The following tables present additional information about the significant unobservable inputs, such as discount rates and constant prepayment rates ("CPR"), used in the fair value measurements categorized in Level 3 of the fair value hierarchy as of December 31, 2020 and 2019:

Table 13.3
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 quotes
97.5% - 97.5% (97.5%)
Farmer Mac Guaranteed Securities:
AgVantage$6,947,701 Discounted cash flowDiscount rate
0.8% - 2.3% (1.3%)
USDA Securities$6,695 Discounted cash flowDiscount rate
0.9% - 1.9% (1.4%)
CPR
25% - 49% (44%)

As of December 31, 2019
Financial InstrumentsFair ValueValuation TechniqueUnobservable InputRange (Weighted-Average)
(in thousands)
Assets:
Investment securities:
Floating rate auction-rate certificates backed by Government guaranteed student loans$18,912 Indicative bidsRange of broker quotes
96.0% - 96.0% (96.0%)
Farmer Mac Guaranteed Securities:
AgVantage$7,143,025 Discounted cash flowDiscount rate
2.3% - 5.5% (2.6%)
USDA Securities$8,913 Discounted cash flowDiscount rate
2.3% - 2.6% (2.1%)
CPR
10% - 21% (19%)

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 don't prepay.

The significant unobservable inputs used in the fair value measurements of USDA Securities are the prepayment rate and discount rate commensurate with the risks involved. Typically, significant increases (decreases) in any of these inputs in isolation may result in materially lower (higher) fair value measurements. Generally, in a rising interest rate environment, Farmer Mac would expect average discount rates to increase and would likely expect a corresponding decrease in forecasted prepayment rates. Conversely, in a declining interest rate environment, Farmer Mac would expect average discount rates to decrease and would likely expect a corresponding increase in forecasted prepayment rates.
Disclosures on Fair Value of Financial Instruments

The following table sets forth the estimated fair values and carrying values for financial assets, liabilities, and guarantees and commitments as of December 31, 2020 and 2019:

Table 13.4
 As of December 31, 2020As of December 31, 2019
 Fair ValueCarrying
Amount		Fair ValueCarrying
Amount
 (in thousands)
Financial assets:    
Cash and cash equivalents$1,033,941 $1,033,941 $604,381 $604,381 
Investment securities3,899,925 3,898,724 3,005,828 3,004,875 
Farmer Mac Guaranteed Securities8,148,691 8,123,493 8,606,451 8,590,476 
USDA Securities2,637,509 2,480,321 2,294,671 2,241,073 
Loans9,167,525 8,535,146 7,317,091 6,981,440 
Financial derivatives17,468 17,468 10,519 10,519 
Guarantee and commitment fees receivable34,115 37,113 36,732 38,442 
Financial liabilities:
Notes payable22,130,263 21,848,917 19,234,079 19,098,648 
Debt securities of consolidated trusts held by third parties1,390,330 1,323,786 1,663,177 1,616,504 
Financial derivatives29,892 29,892 27,042 27,042 
Guarantee and commitment obligations32,537 35,535 34,990 36,700 

The carrying value of cash and cash equivalents is a reasonable estimate of their approximate fair value and is classified as Level 1. The fair value of investments in U.S. Treasuries are valued based on unadjusted quoted prices in active markets and are classified as Level 1. A significant portion of Farmer Mac's investment portfolio is valued using a reputable nationally recognized third-party pricing service. The prices obtained are non-binding and generally representative of recent market trades and are classified as Level 2. Farmer Mac internally models the fair value of its loan portfolio, including loans held for investment and loans held for investment in consolidated trusts, Farmer Mac Guaranteed Securities, and USDA Securities by discounting the projected cash flows of these instruments at projected interest rates. The fair values are based on the present value of expected cash flows using management's best estimate of certain key assumptions, which include prepayment speeds, forward yield curves and discount rates commensurate with the risks involved. These fair value measurements do not take into consideration the fair value of the underlying property and are classified as Level 3. Financial derivatives primarily are valued using unadjusted counterparty valuations and are classified as Level 2. The fair value of the guarantee fees receivable/obligation and debt securities of consolidated trusts are estimated based on the present value of expected future cash flows of the underlying mortgage assets using management's best estimate of certain key assumptions, which include prepayments speeds, forward yield curves, and discount rates commensurate with the risks involved and are classified as Level 3. Notes payable are valued by discounting the expected cash flows of these instruments using a yield curve derived from market prices observed for similar agency securities and are also classified as Level 3. Because the cash flows of Farmer Mac's financial instruments may be interest rate path dependent, estimated fair values and projected discount rates for Level 3 financial instruments are derived using a Monte Carlo simulation model. Different market assumptions and estimation methodologies could significantly affect estimated fair value amounts.