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Summary of Significant Accounting Policies | 9 Months Ended
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Sep. 30, 2021
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, 2020 consolidated balance sheet presented in this report has been derived from Farmer Mac's audited 2020 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 2020 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, 2020, as filed with the SEC on 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, 2021. 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, 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. Table 1.1
| Consolidation of Variable Interest Entities
| As of September 30, 2021
| Farm & Ranch |  | USDA Guarantees |  |  |  |  |  | Corporate |  | Total
| (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 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, 2020
| Farm & Ranch |  | USDA Guarantees |  |  |  |  |  | Corporate |  | Total
| (in thousands)
On-Balance Sheet: |  |  |  |  |  |  |  |  |  |  |
Consolidated VIEs: |  |  |  |  |  |  |  |  |  |  |
Loans held for investment in consolidated trusts, at amortized cost | $ | 1,287,045 |  |  | $ | — |  |  |  |  |  |  | $ | — |  |  | $ | 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 $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. (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 and nine months ended September 30, 2021 and 2020: Table 1.2
| For the Three Months Ended
| September 30, 2021 |  | September 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, 2021 |  | September 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. Comprehensive IncomeComprehensive income represents all changes in stockholders' equity except those resulting from investments by or distributions to stockholders, and is comprised of net income and unrealized gains and losses on available-for-sale securities, certain held-to-maturity securities transferred from the available-for-sale classification, and cash flow hedges, net of related taxes. The following table presents the changes in accumulated other comprehensive income ("AOCI"), net of tax, by component for the three and nine months ended September 30, 2021 and 2020. Table 1.3
| As of September 30, 2021 |  | As of September 30, 2020
| 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 | $ | 8,954 |  |  | $ | 19,819 |  |  | $ | (12,040) |  |  | $ | 16,733 |  |  | $ | (88,261) |  |  | $ | 26,379 |  |  | $ | (29,615) |  |  | $ | (91,497) |
Other comprehensive income before reclassifications | 1,275 |  |  | — |  |  | 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 reclassifications | 25,734 |  |  | — |  |  | 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) |
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, 2021 and 2020: Table 1.4
| For the Three Months Ended
| September 30, 2021 |  | September 30, 2020
| 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 | $ | 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.
| For the Nine Months Ended
| September 30, 2021 |  | September 30, 2020
| Before Tax |  | Provision (Benefit) |  | After Tax |  | Before Tax |  | Provision (Benefit) |  | After Tax
| (in thousands)
Other comprehensive income: |  |  |  |  |  |  |  |  |  |  |
Available-for-sale-securities: |  |  |  |  |  |  |  |  |  |  |
Unrealized holding gains/(losses) on available-for-sale securities | $ | 32,574 |  |  | $ | 6,840 |  |  | $ | 25,734 |  |  | $ | (6,596) |  |  | $ | (1,386) |  |  | $ | (5,210) |
Less reclassification adjustments included in: |  |  |  |  |  |  |  |  |  |  |
Net interest income(1) | (2,333) |  |  | (490) |  |  | (1,843) |  |  | (2,916) |  |  | (612) |  |  | (2,304) |
Gains on sale of available-for-sale investment securities(2) | (253) |  |  | (53) |  |  | (200) |  |  | — |  |  | — |  |  | — |
Other income(3) | (22) |  |  | (4) |  |  | (18) |  |  | (42) |  |  | (8) |  |  | (34) |
Total | $ | 29,966 |  |  | $ | 6,293 |  |  | $ | 23,673 |  |  | $ | (9,554) |  |  | $ | (2,006) |  |  | $ | (7,548) |
Held-to-maturity securities: |  |  |  |  |  |  |  |  |  |  |
Less reclassification adjustments included in: |  |  |  |  |  |  |  |  |  |  |
Net interest income(4) | (6,195) |  |  | (1,301) |  |  | (4,894) |  |  | (10,707) |  |  | (2,248) |  |  | (8,459) |
Total | $ | (6,195) |  |  | $ | (1,301) |  |  | $ | (4,894) |  |  | $ | (10,707) |  |  | $ | (2,248) |  |  | $ | (8,459) |
Cash flow hedges |  |  |  |  |  |  |  |  |  |  |
Unrealized gains/(losses) on cash flow hedges | $ | 11,445 |  |  | $ | 2,404 |  |  | $ | 9,041 |  |  | $ | (31,246) |  |  | $ | (6,562) |  |  | $ | (24,684) |
Less reclassification adjustments included in: |  |  |  |  |  |  |  |  |  |  |
Net interest income(5) | 5,454 |  |  | 1,145 |  |  | 4,309 |  |  | 3,817 |  |  | 802 |  |  | 3,015 |
Total | $ | 16,899 |  |  | $ | 3,549 |  |  | $ | 13,350 |  |  | $ | (27,429) |  |  | $ | (5,760) |  |  | $ | (21,669) |
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. 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". New Accounting StandardsRecently Adopted Accounting Guidance
Standard | Description | Date of Adoption | Effect on Consolidated Financial Statements
ASU 2020-04 and 2021-01, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting | The amendments in this Update provide optional guidance for a limited period of time to ease the potential burden in accounting for reference rate reform on financial reporting. They provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. | January 1, 2020 | Farmer Mac 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.

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