XML 71 R12.htm IDEA: XBRL DOCUMENT
v3.24.1.u1

FINANCIAL DERIVATIVES | 3 Months Ended
--- | ---
Mar. 31, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
FINANCIAL DERIVATIVES | FINANCIAL DERIVATIVES Farmer Mac enters into financial derivative transactions 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. Certain financial derivatives are designated as fair value hedges of fixed rate assets, classified as available-for-sale, to protect against fair value changes in the assets related to changes in a benchmark interest rate (e.g., SOFR). Certain other financial derivatives are designated as cash flow hedges to mitigate the volatility of future interest rate payments on floating rate debt. Certain financial derivatives are not designated in hedge accounting relationships. Farmer Mac manages the interest rate risk related to loans it has committed to acquire, but has not yet permanently funded, primarily through the use of futures contracts involving U.S. Treasury securities. Farmer Mac aims to achieve a duration-matched hedge ratio between the hedged item and the hedge instrument. Gains or losses generated by these hedge transactions are expected to offset changes in funding costs. All financial derivatives are recorded on the balance sheet at fair value as a freestanding asset or liability. The following tables summarize information related to Farmer Mac's financial derivatives on a gross basis without giving consideration to master netting arrangements. The table below includes accrued interest on cleared swaps, but excludes $17.6 million and $16.4 million of accrued interest receivable and $6.2 million and $6.5 million of accrued interest payable on uncleared swaps as of March 31, 2024 and December 31, 2023, respectively. The aforementioned accrued interest on uncleared swaps is included within Accrued Interest Receivable and Accrued Interest Payable on the consolidated balance sheets. Table 4.1
| As of March 31, 2024
|  |  | Fair Value |  | Weighted- Average Pay Rate |  | Weighted- Average Receive Rate |  | Weighted- Average Forward Price |  | Weighted- Average Remaining Term (in years)
| Notional Amount |  | Asset |  | (Liability) |  |  |  |
| (dollars in thousands)
Fair value hedges: |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps: |  |  |  |  |  |  |  |  |  |  |  |  |
Receive fixed non-callable | $ | 9,705,185 |  |  | $ | 230 |  |  | $ | (25,315) |  |  | 5.54% |  | 3.03% |  |  |  | 1.70
Pay fixed non-callable | 9,226,082 |  |  | 7,675 |  |  | (68) |  |  | 2.52% |  | 5.43% |  |  |  | 9.37
Receive fixed callable | 3,963,827 |  |  | 2,892 |  |  | (105,971) |  |  | 5.36% |  | 3.46% |  |  |  | 2.56
Cash flow hedges: |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps: |  |  |  |  |  |  |  |  |  |  |  |  |
Pay fixed non-callable | 552,000 |  |  | 22,270 |  |  | — |  |  | 1.93% |  | 5.80% |  |  |  | 4.09
No hedge designation: |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps: |  |  |  |  |  |  |  |  |  |  |  |  |
Pay fixed non-callable | 157,933 |  |  | 992 |  |  | — |  |  | 2.92% |  | 5.60% |  |  |  | 4.15
Receive fixed non-callable | 1,638,958 |  |  | 34 |  |  | (9) |  |  | 5.38% |  | 5.11% |  |  |  | 0.47
Basis swaps | 850,384 |  |  | 15 |  |  | (522) |  |  | 5.49% |  | 5.47% |  |  |  | 3.58
Treasury futures | 125 |  |  | 680 |  |  | — |  |  |  |  |  |  | 110.25 |  |
Netting adjustments(1) |  |  | (3,355) |  |  | 3,355 |  |  |  |  |  |  |  |  |
Total financial derivatives | $ | 26,094,494 |  |  | $ | 31,433 |  |  | $ | (128,530) |  |  |  |  |  |  |  |  |
(1)Amounts represent the application of the netting requirements that allow Farmer Mac to settle positive and negative positions, including accrued interest, held or placed with the same clearing agent.
| As of December 31, 2023
|  |  | Fair Value |  | Weighted- Average Pay Rate |  | Weighted- Average Receive Rate |  | Weighted- Average Forward Price |  | Weighted- Average Remaining Term (in years)
| Notional Amount |  | Asset |  | (Liability) |  |  |  |
| (dollars in thousands)
Fair value hedges: |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps: |  |  |  |  |  |  |  |  |  |  |  |  |
Receive fixed non-callable | $ | 9,776,685 |  |  | $ | 2,350 |  |  | $ | (20,390) |  |  | 5.57% |  | 2.94% |  |  |  | 1.78
Pay fixed non-callable | 9,174,253 |  |  | 7,767 |  |  | (1,081) |  |  | 2.50% |  | 5.47% |  |  |  | 9.57
Receive fixed callable | 3,879,827 |  |  | 7,374 |  |  | (95,984) |  |  | 5.40% |  | 3.40% |  |  |  | 2.48
Cash flow hedges: |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps: |  |  |  |  |  |  |  |  |  |  |  |  |
Pay fixed non-callable | 558,000 |  |  | 20,234 |  |  | (43) |  |  | 1.94% |  | 5.82% |  |  |  | 4.30
No hedge designation: |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps: |  |  |  |  |  |  |  |  |  |  |  |  |
Pay fixed non-callable | 160,623 |  |  | 676 |  |  | (29) |  |  | 2.92% |  | 5.64% |  |  |  | 4.34
Receive fixed non-callable | 1,358,396 |  |  | 263 |  |  | (3) |  |  | 5.44% |  | 4.87% |  |  |  | 0.64
Basis swaps | 850,384 |  |  | 39 |  |  | (746) |  |  | 5.52% |  | 5.48% |  |  |  | 3.83
Treasury futures | 21,300 |  |  | 11 |  |  | (91) |  |  |  |  |  |  | 112.51 |  |  |
Netting adjustments(1) |  |  | (1,236) |  |  | 1,236 |  |  |  |  |  |  |  |  |
Total financial derivatives | $ | 25,779,468 |  |  | $ | 37,478 |  |  | $ | (117,131) |  |  |  |  |  |  |  |  |
(1)Amounts represent the application of the netting requirements that allow Farmer Mac to settle positive and negative positions, including accrued interest, held or placed with the same clearing agent. As of March 31, 2024, Farmer Mac expects to reclassify $14.5 million after-tax from accumulated other comprehensive income to earnings over the next twelve months related to cash flow hedges. This amount could differ from amounts actually recognized due to changes in interest rates, hedge de-designations, and the addition of other hedges after March 31, 2024. During the three months ended March 31, 2024 and 2023, there were no gains or losses from interest rate swaps designated as cash flow hedges reclassified to earnings because it was probable that the originally forecasted transactions would occur. The following tables summarize the net income/(expense) recognized in the consolidated statements of operations related to derivatives for the three months ended March 31, 2024 and 2023: Table 4.2
| For the Three Months Ended March 31, 2024
| Net Income/(Expense) Recognized in Consolidated Statement of Operations on Derivatives
| Net Interest Income |  | Non-Interest Income |  | Total
| Interest Income Investments and Cash Equivalents |  | Interest Income Farmer Mac Guaranteed Securities and USDA Securities |  | Interest Income Loans |  | Total Interest Expense |  | Gains on financial derivatives |
| (in thousands)
Total amounts presented in the consolidated statement of operations | $ | 84,924 |  |  | $ | 166,813 |  |  | $ | 144,580 |  |  | $ | (309,949) |  |  | $ | 2,079 |  |  | $ | 88,447 |
Income/(expense) related to interest settlements on fair value hedging relationships: |  |  |  |  |  |  |  |  |  |  |
Recognized on derivatives | 10,297 |  |  | 40,332 |  |  | 17,849 |  |  | (83,551) |  |  | — |  |  | (15,073) |
Recognized on hedged items | 9,948 |  |  | 51,705 |  |  | 16,598 |  |  | (106,433) |  |  | — |  |  | (28,182) |
Premium/discount amortization recognized on hedged items | 445 |  |  | — |  |  | — |  |  | (747) |  |  | — |  |  | (302) |
Income/(expense) related to interest settlements on fair value hedging relationships | $ | 20,690 |  |  | $ | 92,037 |  |  | $ | 34,447 |  |  | $ | (190,731) |  |  | $ | — |  |  | $ | (43,557) |
Gains/(losses) on fair value hedging relationships: |  |  |  |  |  |  |  |  |  |  |
Recognized on derivatives | $ | 27,789 |  |  | $ | 81,586 |  |  | $ | 48,180 |  |  | $ | (54,717) |  |  | $ | — |  |  | $ | 102,838 |
Recognized on hedged items | (27,521) |  |  | (80,743) |  |  | (47,061) |  |  | 55,489 |  |  | — |  |  | (99,836) |
Gains/(losses) on fair value hedging relationships | $ | 268 |  |  | $ | 843 |  |  | $ | 1,119 |  |  | $ | 772 |  |  | $ | — |  |  | $ | 3,002 |
Expense related to interest settlements on cash flow hedging relationships: |  |  |  |  |  |  |  |  |  |  |
Interest settlements reclassified from AOCI into net income on derivatives | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 5,431 |  |  | $ | — |  |  | $ | 5,431 |
Recognized on hedged items | — |  |  | — |  |  | — |  |  | (8,091) |  |  | — |  |  | (8,091) |
Discount amortization recognized on hedged items | — |  |  | — |  |  | — |  |  | (14) |  |  | — |  |  | (14) |
Expense recognized on cash flow hedges | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | (2,674) |  |  | $ | — |  |  | $ | (2,674) |
Gains on financial derivatives not designated in hedging relationships: |  |  |  |  |  |  |  |  |  |  |
Gains on interest rate swaps | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 754 |  |  | $ | 754 |
Interest expense on interest rate swaps | — |  |  | — |  |  | — |  |  | — |  |  | (34) |  |  | (34) |
Treasury futures | — |  |  | — |  |  | — |  |  | — |  |  | 1,359 |  |  | 1,359 |
Gains on financial derivatives not designated in hedge relationships | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 2,079 |  |  | $ | 2,079 |
| For the Three Months Ended March 31, 2023
| Net Income/(Expense) Recognized in Consolidated Statement of Operations on Derivatives
| Net Interest Income |  | Non-Interest Income |  | Total
| Interest Income Investments and Cash Equivalents |  | Interest Income Farmer Mac Guaranteed Securities and USDA Securities |  | Interest Income Loans |  | Total Interest Expense |  | Gains on financial derivatives |
| (in thousands)
Total amounts presented in the consolidated statement of operations: | $ | 59,703 |  |  | $ | 136,537 |  |  | $ | 119,032 |  |  | $ | (236,214) |  |  | $ | 399 |  |  | $ | 79,457 |
Income/(expense) related to interest settlements on fair value hedging relationships: |  |  |  |  |  |  |  |  |  |  |
Recognized on derivatives | 6,549 |  |  | 28,909 |  |  | 13,180 |  |  | (77,467) |  |  | — |  |  | (28,829) |
Recognized on hedged items | 6,961 |  |  | 41,971 |  |  | 15,208 |  |  | (70,975) |  |  | — |  |  | (6,835) |
Premium/discount amortization recognized on hedged items | 268 |  |  | — |  |  | — |  |  | (691) |  |  | — |  |  | (423) |
Income/(expense) related to interest settlements on fair value hedging relationships | $ | 13,778 |  |  | $ | 70,880 |  |  | $ | 28,388 |  |  | $ | (149,133) |  |  | $ | — |  |  | $ | (36,087) |
Gains/(losses) on fair value hedging relationships: |  |  |  |  |  |  |  |  |  |  |
Recognized on derivatives | $ | (27,153) |  |  | $ | (93,792) |  |  | $ | (56,681) |  |  | $ | 122,540 |  |  | $ | — |  |  | $ | (55,086) |
Recognized on hedged items | 27,428 |  |  | 93,295 |  |  | 56,957 |  |  | (122,699) |  |  | — |  |  | 54,981 |
Gains/(losses) on fair value hedging relationships | $ | 275 |  |  | $ | (497) |  |  | $ | 276 |  |  | $ | (159) |  |  | $ | — |  |  | $ | (105) |
Expense related to interest settlements on cash flow hedging relationships: |  |  |  |  |  |  |  |  |  |  |
Interest settlements reclassified from AOCI into net income on derivatives | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 4,391 |  |  | $ | — |  |  | $ | 4,391 |
Recognized on hedged items | — |  |  | — |  |  | — |  |  | (7,190) |  |  | — |  |  | (7,190) |
Discount amortization recognized on hedged items | — |  |  | — |  |  | — |  |  | (14) |  |  | — |  |  | (14) |
Expense recognized on cash flow hedges | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | (2,813) |  |  | $ | — |  |  | $ | (2,813) |
Gains on financial derivatives not designated in hedge relationships: |  |  |  |  |  |  |  |  |  |  |
Gains on interest rate swaps | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 33 |  |  | $ | 33 |
Interest expense on interest rate swaps | — |  |  | — |  |  | — |  |  | — |  |  | (1,625) |  |  | (1,625) |
Treasury futures | — |  |  | — |  |  | — |  |  | — |  |  | 1,991 |  |  | 1,991 |
Gains on financial derivatives not designated in hedge relationships | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 399 |  |  | $ | 399 |
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 March 31, 2024 and December 31, 2023: 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)
| March 31, 2024 |  | December 31, 2023 |  | March 31, 2024 |  | December 31, 2023
| (in thousands)
Investment securities, Available-for-Sale, at fair value | $ | 1,261,144 |  |  | $ | 1,251,386 |  |  | $ | (116,156) |  |  | $ | (88,635) |
Farmer Mac Guaranteed Securities, Available-for-Sale, at fair value | 5,432,676 |  |  | 5,497,948 |  |  | (338,180) |  |  | (257,436) |
Loans held for investment, at amortized cost | 1,692,131 |  |  | 1,699,361 |  |  | (352,653) |  |  | (305,592) |
Notes Payable(1) | (13,327,828) |  |  | (13,350,111) |  |  | 305,907 |  |  | 250,418 |
(1)Carrying amount represents amortized cost. The following tables present the fair value of financial assets and liabilities, based on the terms of Farmer Mac's master netting arrangements as of March 31, 2024 and December 31, 2023: Table 4.4
| March 31, 2024
| Gross Amount Recognized |  | Gross Amounts offset in the Consolidated Balance Sheet |  | Net Amount Presented in the Consolidated Balance Sheet(1) |  | Gross Amounts Not Offset in the Consolidated Balance Sheet
|  |  |  | Netting Adjustments |  | Financial instruments pledged |  | Cash Collateral(2) |  | Net Amount(3)
| (in thousands)
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |
Uncleared derivatives | $ | 25,354 |  |  | $ | — |  |  | $ | 25,354 |  |  | $ | (24,674) |  |  | $ | — |  |  | $ | — |  |  | $ | 680 |
Cleared derivatives | 8,240 |  |  | (3,355) |  |  | 4,885 |  |  | — |  |  | — |  |  | — |  |  | 4,885 |
Total | $ | 33,594 |  |  | $ | (3,355) |  |  | $ | 30,239 |  |  | $ | (24,674) |  |  | $ | — |  |  | $ | — |  |  | $ | 5,565 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |
Uncleared derivatives | $ | (106,733) |  |  | $ | — |  |  | $ | (106,733) |  |  | $ | 24,674 |  |  | $ | — |  |  | $ | 76,472 |  |  | $ | (5,587) |
Cleared derivatives | (3,355) |  |  | 3,355 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total | $ | (110,088) |  |  | $ | 3,355 |  |  | $ | (106,733) |  |  | $ | 24,674 |  |  | $ | — |  |  | $ | 76,472 |  |  | $ | (5,587) |
(1)Amounts presented may not agree to the consolidated balance sheet related to counterparties not subject to master netting agreements. (2)Cash collateral excludes $15.6 million of collateral posted and $0.0 million of collateral received related to counterparties not subject to master netting agreements. (3)Any over-collateralization at an individual clearing agent and/or counterparty level is not included in the determination of the net amount. As of March 31, 2024, Farmer Mac had additional net exposure of $197.9 million due to instances where Farmer Mac's collateral to a counterparty exceeded the net derivative position.
| December 31, 2023
| Gross Amount Recognized |  | Gross Amounts offset in the Consolidated Balance Sheet |  | Net Amount Presented in the Consolidated Balance Sheet(1) |  | Gross Amounts Not Offset in the Consolidated Balance Sheet
|  |  |  | Netting Adjustments |  | Financial instruments pledged |  | Cash Collateral(2) |  | Net Amount(3)
| (in thousands)
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |
Uncleared derivatives | $ | 25,751 |  |  | $ | — |  |  | $ | 25,751 |  |  | $ | (25,727) |  |  | $ | — |  |  | $ | — |  |  | $ | 24 |
Cleared derivatives | 10,388 |  |  | (1,236) |  |  | 9,152 |  |  | — |  |  | — |  |  | — |  |  | 9,152 |
Total | $ | 36,139 |  |  | $ | (1,236) |  |  | $ | 34,903 |  |  | $ | (25,727) |  |  | $ | — |  |  | $ | — |  |  | $ | 9,176 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |
Uncleared derivatives | $ | (100,114) |  |  | $ | — |  |  | $ | (100,114) |  |  | $ | 25,727 |  |  | $ | — |  |  | $ | 69,360 |  |  | $ | (5,027) |
Cleared derivatives | (1,236) |  |  | 1,236 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total | $ | (101,350) |  |  | $ | 1,236 |  |  | $ | (100,114) |  |  | $ | 25,727 |  |  | $ | — |  |  | $ | 69,360 |  |  | $ | (5,027) |
(1)Amounts presented may not agree to the consolidated balance sheet related to counterparties not subject to master netting agreements. (2)Cash collateral excludes $15.2 million of collateral posted and $2.0 million of collateral received related to counterparties not subject to master netting agreements. (3)Any over-collateralization at an individual clearing agent and/or counterparty level is not included in the determination of the net amount. As of December 31, 2023, Farmer Mac had additional net exposure of $207.2 million due to instances where Farmer Mac's collateral to a counterparty exceeded the net derivative position. 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 March 31, 2024 or December 31, 2023, it could have been required to settle its obligations under the agreements, but would not have been required to post additional collateral. As of March 31, 2024 and December 31, 2023, there were no financial derivatives in a net payable position where Farmer Mac was required to pledge collateral which the counterparty had the right to sell or repledge. Of Farmer Mac's $26.1 billion notional amount of interest rate swaps outstanding as of March 31, 2024, $20.8 billion were cleared through the swap clearinghouse, the Chicago Mercantile Exchange ("CME"). Of Farmer Mac's $25.8 billion notional amount of interest rate swaps outstanding as of December 31, 2023, $20.5 billion were cleared through the CME.

X
- References No definition available. + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480237/815-40-50-5 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 5C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480434/815-10-50-5C Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 815 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//815/tableOfContent + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration